2020
FINANCIAL STATEMENTS
Content
Report of the Board of Directors 2020 .................................................................................................................................... 3
Financial indicators of the group ................................................................................................................................................. 25
Calculation of key figures ................................................................................................................................................................. 26
Shares and Shareholders ................................................................................................................................................................28
Consolidated Financial Statements, IFRS ............................................................................................................................. 29
Statement Of Comprehensive Income .................................................................................................................................. 29
Consolidated Balance Sheet .........................................................................................................................................................30
Consolidated cash flow statement ............................................................................................................................................. 31
Consolidated statement of changes in equity .................................................................................................................... 32
Notes to the consolidated Financial statements ..............................................................................................................33
Parent Company's Financial Statements, FAS ..................................................................................................................68
Income statement of the Parent Company and Balance sheet of the Parent Company ........................68
Cash flow statement of the parent company ...................................................................................................................... 69
Notes to parent company financial statements ................................................................................................................ 70
Signatures to the Financial Statements and Report of the Board of Directors, auditor´s note .......... 77
Auditor’s Report (Translation of the Finnish Original) .................................................................................................... 78
Group and Segment information by quarter ....................................................................................................................... 82
Information for shareholders .........................................................................................................................................................84
Board of Directors’ report
Financial statements
Report of the Board of Directors 2020
FINANCIAL YEAR 1 JANUARY31 DECEMBER 2020 IN BRIEF:
The Group’s revenue declined by 8.1 per cent to EUR 975.5 million (1,060.9 1−12/2019). Revenue de-
clined mainly because fewer developer-contracted housing units were recognised as income than in
the comparison period, a total of 515 (833).
The Group’s operative operating profit amounted to EUR 5.8 (-96.8) million. Operative operating
profit was improved particularly by construction sites’ favourable earnings trends. Operative operat-
ing profit was significantly negatively impacted by changes in the valuation of balance sheet items in
the Investments segment, which had a combined impact of around EUR -12.3 million. The decrease in
rental income from shopping centres due to the coronavirus pandemic also had a negative impact on
operative operating profit. Operative operating profit for the comparison period was burdened by im-
pairments of EUR 96.5 million, the weakening of margins by EUR 11 million and other exceptional items
amounting to EUR 7.9 million.
The Group’s operating profit was EUR 1.5 (-93.0) million. Operating profit was influenced by the
change in the exchange rate of the rouble, which had a net impact of EUR -4.4 (3.8) million. The ex-
change rate impact, which largely had no effect on cash flow, was caused by the valuation of the eu-
ro-denominated loans of associated companies in roubles, hedging expenses and changes in the
market value of hedges.
Construction sites’ favourable earnings trends contributed to the Construction business’s operat-
ing profit of EUR 27.4 million. The EUR -22.4 million operating profit of the Investments business was
affected particularly by revaluations and the restrictions imposed by the Russian authorities on shop-
ping centre operations and the effect of exchange rates.
At period-end, the Group’s order backlog stood at EUR 1,153.4 (1,344.2) million. New agreements
valued at EUR 707.1 (487.6) million were signed in January–December, a year-on-year increase of 45.0
per cent. The sold share of the order backlog was 86.4 (80.5) per cent.
Financial income and expenses amounted to EUR -29.4 (-29.3) million. Net financial expenses
included EUR 3.7 (4.1) million in dividend and interest income, exchange rate differences amounting to
EUR -8.2 (4.3) million arising from the conversion of subsidiary and associated company loans, which
did not have an impact on cash flow, interest paid on derivatives and fair value changes amounting to
EUR -1.9 (-3.7) million and interest expenses of EUR -12.3 (-13.1) million, of which EUR 0.5 (0.7) million
was capitalised in accordance with IAS 23 as from the beginning of the year. In addition, financial ex-
penses included EUR -5.7 (-6.5) million in interest under IFRS 16 and EUR -1.5 (-10.8) million in impair-
ments, and EUR -4.1 (-4.2) million in other financial expenses, including expenses related to financing
arrangements.
The Group's profit before taxes totalled EUR -28.0 (-122.4) million. This includes currency exchange
rate losses with no cash flow impact of EUR -18.0 million (exchange rate gains of 11.9). In addition, the
result includes a total of EUR -13.8 million in revaluations with no cash flow impact.
The Group's earnings per share were EUR -0.15 (-1.52). The comparison figure has been adjust-
ed for share issues.
During the first half of the year, the company carried out a significant number of measures to im-
prove its balance sheet and liquidity as part of its recovery programme. These measures improved
both the equity ratio and gearing. Rouble exchange rate movements and revaluations in turn weak-
ened the equity ratio and gearing. The equity ratio was 22.6 (21.2) per cent and gearing was 159.7
(240.3) per cent. Excluding the impact of IFRS 16, equity ratio was 27.8 (26.4) per cent and gearing
was 82.1 (151.2). Equity ratio in accordance with the loan covenant calculation was 28.7 per cent. The
equity ratio level was affected by the high amount of cash and cash equivalents on the balance sheet
date, EUR 96.7 million. The company can improve its equity ratio by using cash and cash equivalents to
repay debts.
In spite of the effects of the coronavirus pandemic, we have been able to keep our construction
sites in operation and the sites have for the most part continued to operate as planned. That said,
precautionary measures against the pandemic have caused additional costs. The pandemic slowed
down housing sales in the second quarter, but sales recovered towards the end of the year. The re-
strictions imposed by the Russian authorities on shopping centre operations impacted on the result
for the review period.
The company publishes alternative key figures that have been adjusted to remove the impact of IFRS 16 Leases on the balance
sheet and result. The company also discloses its operative operating profit, which is determined by deducting the calculated
rouble exchange differences included in financial items and their potential hedging impacts from operating profit.
SRV I THE BOARD OF DIRECTORS' REPORT 2020
GROUP KEY FIGURES
IFRS, EUR million / / Change Change,
Revenue - -
Operative operating profit
-
Operative operating profit, -
Operating profit* -
Operating profit, -
Operating profit, excl. IFRS
* - -
Operating profit, , excl. IFRS
- -
Financial income and expenses, total** - - -
Profit before taxes - -
Net profit for the period - -
Net profit for the period, - -
Order backlog (unrecognised)
- -
New agreements
* net effect of currency exchange fluctuations - -
** derivatives included in financial income and expenses - -
Operative operating profit for is determined by deducting the calculated rouble exchange differences included in
financial items and their potential hedging impacts from operating profit. Net exchange rate differences during the review
period amounted to EUR - () million, of which the effect of currency hedging was EUR (-) million.
The figure has been adjusted to remove the impacts of IFRS .
The Group’s order backlog consists of the Construction business.
GROUP KEY FIGURES
IFRS, EUR million / / Change Change,
Equity ratio,
Equity ratio, , excl. IFRS
Net interest-bearing debt - -
Net interest-bearing debt, excl. IFRS
- -
Net gearing ratio,
Net gearing ratio, , excl. IFRS
Return on investment, - -
Return on investment, , excl. IFRS
- -
Capital employed - -
Capital employed, excl. IFRS
- -
Return on equity, - -
Earnings per share, EUR
- -
Equity per share (without hybrid bond), EUR
- -
Share price at end of period, EUR
- -
Weighted average number of shares outstanding, millions
The figure has been adjusted to remove the impacts of IFRS .
The comparison figures have been adjusted to reflect share issues.
The comparison figures have not been adjusted to reflect share issues.
OVERALL REVIEW
SRV I THE BOARD OF DIRECTORS' REPORT 2020
REVENUE
EUR million –/ –/ Change Change,
Construction - -
Investments - -
Other operations and eliminations -
Group, total - -
OPERATIVE OPERATING PROFIT
EUR million –/ –/ Change Change,
Construction
Investments
- -
Other operations and eliminations
- -
Group, total
-
OPERATIVE OPERATING PROFIT
–/ –/
Construction
Investments - -
Group -
OPERATING PROFIT
EUR million –/ –/ Change Change,
Construction
Investments* - -
Other operations and eliminations - -
Group, total* -
* Effect of currency exchange fluctuations - -
OPERATING PROFIT
–/ –/
Construction
Investments - -
Group -
CAPITAL EMPLOYED
1
EUR million –/ –/ Change Change,
Construction
Investments - -
Other operations and eliminations
Group - -
RETURN ON INVESTMENT
–/ –/
Construction
Investments - -
Group - -
RECOVERY PROGRAMME MEASURES H12020:
>
On 31 October 2019, SRV announced the commencement of a recovery programme. The short-term tar-
get was to ensure that operative operating profit and cash flow in 2020 would be in the black and to
return operative operating profit for 2021 to its 2017 level. The recovery programme focused on renew-
ing the organisation and operating culture, lightening the balance sheet, strengthening cash flow and
achieving cost-savings.
>
In February, SRV divested its holding in the REDI project to its co-investors as part of its recovery pro-
gramme. The company also sold five-sixths of its holding in the Ranta-Tampella housing project (which
is part of the Tampere Deck and Arena project), and three-fourths of its shares and partnership inter-
ests in the Tampere Deck and Arena project. After these transactions, SRV was left with an approxi-
mately 8.33 per cent holding in the Tampere Deck and Arena project.
>
In February, as part of its recovery programme, the company agreed on the replacement of its EUR 100
million revolving credit facility with the banks that had granted it. The facility was replaced with two
separate revolving credit facilities, one of EUR 60 million and one of EUR 40 million. The latter facility
will be used to finance construction projects. At the end of June, the company made an agreement with
the banks that granted the credit facility whereby the undrawn portion of the EUR 60 million credit facil-
ity would be terminated. The remaining amount of the facility was EUR 51 million.
>
At the end of May, SRV carried out written procedures to extend the one-year tenor of its EUR 100 mil-
lion (of which EUR 62.1 million is outstanding) senior unsecured callable fixed-rate notes due 23 March
2021 and the one-and-a-half-year tenor of its EUR 75 million senior unsecured callable fixed-rate notes
due 27 March 2022 as well as to amend certain terms and conditions of these notes.
>
In May, the company organised a directed share issue for hybrid holders. In the issue, about EUR 75
million of the EUR 92 million principal of the hybrid bonds and accrued interest was converted into
shares. As a result of the implementation of the share issue, the total outstanding principal of the 2016
hybrid bonds is approximately EUR 11.8 million and the outstanding principal of the 2019 hybrid bonds is
approximately EUR 3.6 million. The share issue increased the total number of SRV shares by 71,468,395
to 131,967,970. The new shares were entered in the Trade Register on 19 May 2020.
>
The company held a rights issue in June. The rights issue yielded gross proceeds of about EUR 50 million
for the company. Due to the share issue, SRV’s number of shares rose by 131,049,371 from 131,967,970
to a total of 263,017,341 shares. The new shares were entered in the Trade Register on 18 June 2020.
>
At the end of June, the company terminated the undrawn portion, amounting to EUR 9 million, of its EUR
60 million credit facility. The remaining credit facility will be repaid in the amount of EUR 11 million in
December 2021 and EUR 40 million in January 2022.
SRV I THE BOARD OF DIRECTORS' REPORT 2020
OUTLOOK FOR 2021
SRV Group Plc’s new strategy and long-term financial objectives for 2021–2024 aim to develop long-
term competitive advantage, provide an excellent customer experience, tap into opportunities for
lifecycle services, improve profitability and reduce indebtedness. The company’s objective is to cre-
ate a new lifecycle-wise reality, where decisions related to construction ensure well-being, value and
profitability – for years and generations to come.
During 2021, SRV's revenue and result will be affected by several factors in addition to general
economic trends, such as: the timing and amount of income recognition for SRV's own projects,
which are recognised as income upon delivery; the part of the order backlog that is recognised as
income over time mainly consists of contracting; trends in the order backlog's profit margins; the
start-up of new contracts and development projects; and the rouble exchange rate and the devel-
opment of the Russian economy. To date, the impacts of the pandemic have been moderate on
the whole, but its effects on the construction market are unclear and cause uncertainty regarding
the outlook for the future. The result for 2021 is also affected by the fact that the company has not
been able to start up developer-contracted housing projects in line with the target schedule of the
recovery programme. In 2021, the company will continue to focus on reducing indebtedness and
seeks strong cash flow.
SRV will revise the definition of operative operating profit in order to improve comparability and
transparency in reporting in 2021. The old definition of operative operating profit has been used in
this financial statements, with the exception of the outlook for 2021:
•
Consolidated revenue for 2021 is expected to amount to EUR 900–1,050 million (revenue in
2020: EUR 975.5 million).
• Operative operating profit is expected to improve on 2020 and to amount to EUR 16–26 million
(operative operating profit for 2020 in accordance with the new definition: EUR 15.8 million).
The new definition of operative operating profit also adjusts items affecting comparability. The new
definition used in providing the outlook for 2021 is:
Operative operating profit = Operating profit +/- exchange rate gains and losses of associated
companies and joint ventures as well as income and expenses from currency hedging +/- items af-
fecting comparability
Items affecting comparability = Impairments of asset items and their reversal, gains and losses from
exceptional handovers of asset items, and income and expenses due to changes in the Group structure
RECONCILIATION OF OPERATIVE OPERATING PROFIT
IFRS, EUR million –/
Operative operating profit in accordance with the new definition
/- exhange rate gains and losses of associated companies and joint ventures and
/- income and expenses from currency hedging -
/- Items affecting comparability
/- Impairments of assets items and their reversal -
/- gains and losses from exeptional handovers of asset items
/- income and expcenses due to changes in the Group structure
/- Items affecting comparability in total -
Operating profit
SRV I THE BOARD OF DIRECTORS' REPORT 2020
EARNINGS TRENDS
FOR THE SEGMENTS
The Construction segment covers all of SRV’s con-
struction activities, including the capital and plots
required for developer-contracted housing pro-
duction. It is SRV’s intention to develop, build
and sell these plots to a faster schedule than
those we report on in the Investments segment.
Construction encompasses housing construc-
tion, business construction, infrastructure con-
struction, project development, technical units
and procurement, as well as internal services in
Finland and Russia. Operationally, Construction
is divided into four business units: 1) Regional
Units, 2) Housing, Helsinki Metropolitan Area, 3)
Business Premises, Helsinki Metropolitan Area
and 4) construction within Operations in Russia
and Estonia.
Investments encompasses both complete and
incomplete sites in which the company is a long-
term investor. Plots that SRV will develop itself,
and whose expected profits will be generated
through development and long-term ownership,
are also reported on under Investments. The
Investments segment focuses on the manage-
ment and realisation of the Group’s real estate
investments; the creation and ownership of new
joint investment structures; and the operation
of properties.
Other operations and eliminations includes the par-
ent company’s (SRV Group Plc) strategic project
development, finance and financing, communica-
tions and marketing, information management,
and business development. Group eliminations
are also included in this unit.
VALUE CREATION
For executive management, sustainable busi-
ness means creating added value for business
through sustainability. Management must read
the changes in the operating environment and
ensure that their company’s product and service
portfolio meets the future demands of strong
changes in the operating environment and that
it will remain competitive.
Sustainability programme
SRV seeks to ensure that, in addition to consid-
ering business sustainability and environmental
perspectives, we also operate in a socially and
ethically sustainable manner. Certified manage-
ment systems – ISO9001 (quality), ISO14001 (en-
vironmental) and ISO45001 (occupational health
and safety) – ensure compliance and create a
credible base for our sustainability efforts. The
sustainability programme is part of these efforts.
The themes of SRV’s sustainability pro-
gramme have been built around value creation.
Our goal is to ensure that the sustainability pro-
gramme’s themes support business development
and the attainment of SRV’s strategic targets in
the best possible way. During 2021, we will go
through the sustainability programme and up-
date its targets to align with our new strategy.
Moderate progress was made towards our ob-
jectives in 2020. The Compliance Team started
its work in autumn 2020. An SDG analysis has
been performed and its results are summarised
on SRV’s website. We continued our efforts to
improve overall quality by, for example, intro-
ducing a new audit form and on-site HSEQ kick-
off meetings.
We have continued to take a strict approach
towards safety, even though the coronavirus
has caused a great deal of extra work and has
required special arrangements on construction
sites. Management is highly committed and has
allocated more resources to safety. The declining
trend in job satisfaction has ended: we achieved
an AA PeoplePower rating and SRV was recog-
nised as one of Finland’s Most Inspiring Work-
places in Eezy Spirit’s comparison.
Environmental perspectives and other sus-
tainability topics have been added to the sup-
plier questionnaire, which suppliers fill in at the
registration. We have continued our discussions
with suppliers on preventing labour exploitation
during indirect procurement. Carbon footprints
have been calculated for several properties and
another tool has been introduced in the form of
RTS environmental classification. A performance
target has been set for SRV’s environmental ac-
tivities and it will be updated as our new strategy
is put into practice.
MARKETS
The second wave of the coronavirus pandem-
ic put the brakes on economic growth towards
the end of 2020. Finland’s GDP is expected to
contract by 3.3 per cent in 2020. Economic de-
cision-makers are more bullish about the future
thanks to the rollout of vaccines in the spring.
The Finnish economy is expected to recover in
2021 and GDP to swing to growth of 2.5 per cent.
Efforts to manage the pandemic and support
measures will maintain public expenditure at a
high level, and the general government deficit
will remain large. (Source: Ministry of Finance)
Urbanisation continues in Finland and the
population shift maintains demand for both
housing and business construction, especially
in growth centres, which are SRV’s strategic fo-
cal points. Although the measures taken to com-
bat the pandemic restricted economic activity
in many sectors, construction activity outper-
formed expectations in 2020 and was almost
as high as in the previous year. However, a de-
cline in the number of permits and tighter financ-
ing indicate that the contraction will accelerate,
and the Confederation of Finnish Construction
Industries predicts that construction will fall by
4 per cent in 2021. As financing becomes tight-
er, construction will increasingly focus on large
cities. (Source: Confederation of Finnish Con-
struction Industries RT)
Thus far, housing construction has withstood
the impacts of the pandemic better than ex-
pected and the volume of housing construction
remained relatively high in 2020 (about 35,000
housing start-ups). The tighter financing for
housing production and general uncertainty
will reduce production this year and the num-
ber of housing start-ups is expected to decline
to 31,000 units. However, low interest rates and
consumers’ desire to buy homes will maintain de-
mand at a good level. (Source: Confederation of
Finnish Construction Industries RT)
The slowdown in business construction is felt
particularly outside large cities. The volume of
public construction is continuing to decline to 4.9
million cubic metres. Public construction is sup-
ported by urbanisation and the ageing of both the
building stock and the population. Retail and of-
fice construction will remain at a historical low of
4.1 million cubic metres and the outlook is weak-
ened by the uncertainty surrounding demand for
premises due to the pandemic. The strong drop
in industrial construction in the previous year will
level off and in 2021 the volume of start-ups will
remain at the 2020 level of 8.7 million cubic me-
tres. The implementation of planned large-scale
projects complicates forecasting. (Source: Con-
federation of Finnish Construction Industries RT)
The coronavirus crisis muted the investment
market in spring 2020. However, interest among
foreign and Finnish investors in properties locat-
ed in Finnish growth centres has strengthened
– these properties represent an attractive in
-
vestment category for capital looking for stable
returns. The coronavirus crisis has impacted dif-
ferent real-estate sectors in different ways. Due
to the crisis, investor demand has increasingly
focused on rental apartments in large cities and
this demand is expected to remain strong in the
years ahead, too. Investors are also interested in
logistics, public services premises, good offices
SRV I THE BOARD OF DIRECTORS' REPORT 2020
and grocery store properties. On the other hand,
the crisis has weakened the outlook for shopping
centre properties. Interest in hotel properties is
currently low, too, but this sector is expected to
recover quickly. (Source: KTI & Newsec)
The Russian economy was severely impacted
by the plunging oil market and the coronavirus
pandemic in 2020. Service sectors such as hos-
pitality and restaurants have suffered from the
measures taken to limit the pandemic. Russia’s
GDP is estimated to have contracted by around
4 per cent in 2020, but it is expected that con-
sumer and corporate confidence will improve this
year due to the introduction of coronavirus vac-
cines. Moderate growth of 2–3 per cent is fore-
cast for 2021–2022. (Source: Bofit & East Office)
CONSTRUCTION
SRV provides efficient, top-quality and end-to-
end project management contracting and con-
struction services for both its own and its cus-
tomers’ development projects. This segment
focuses on housing, business and infrastructure
construction in selected urban growth centres,
as per the company’s strategy. It is also respon-
sible for housing sales, services for residents,
and the lifecycle maintenance of commercial
properties.
One of Construction’s main objectives is to
enhance the profitability of SRV’s business and
provide an excellent customer experience as a
professional in project management and pro-
duction implementation. It takes the SRV Ap-
proach, which is based on understanding cus-
tomer needs and the effective implementation
of projects in collaboration with our extensive
network of professional partners.
Revenue from Construction decreased to EUR
970.0 million (1,057.7 1–12/2019) in the January–De-
cember period. Revenue from housing construc-
tion was down 23.4 per cent. Revenue declined
mainly because fewer developer-contracted
housing units were recognised as income than
in the comparison period, a total of 515 (833).
CONSTRUCTION
EUR million –/ –/ Change Change,
Revenue - -
- business construction
- housing construction - -
Operating profit
Operating profit,
Capital employed
Return on investment,
Order backlog
- -
- business construction - -
- housing construction - -
Group, total
- -
- sold order backlog - -
- unsold order backlog - -
- sold order backlog,
- unsold order backlog,
The Group’s order backlog consists of the Construction business.
The allocation of deferred tax assets and liabilities has been changed. They are now fully allocated to the Other opera-
tions and eliminations unit. The key figure also includes assets designated as held for sale in the balance sheet.
Construction’s operating profit rose to EUR 27.4
(7.0) million. Operating profit was improved par-
ticularly by construction sites’ favourable earn-
ings trends. The profitability trend was particu-
larly favourable in business construction. On the
other hand, fewer apartments were completed
and recognised as income than in the compari-
son period, which had a negative impact on op-
erating profit. Operating profit for the compar-
ison period was burdened by the weakening of
margins by EUR 11 million and other exceptional
items amounting to EUR 7.9 million.
Construction’s order backlog stood at EUR
1,153.4 (1,344.2) million. Several of the new pro-
jects entered into the order backlog during the
January–December period were for investors
and public-sector organisations of good financial
standing, and none of SRV’s capital will be tied up
in these projects. The company has enhanced
its project selection process in the manner de-
scribed in the recovery programme. Although
the order backlog has declined, it remains at a
good level, and 86.4 (80.5) per cent of the order
backlog has been sold. New agreements valued
at EUR 707.1 (487.6) million were recognised in the
order backlog in January–December.
The most significant projects recorded in the
order backlog in the fourth quarter of the year
were a school project in Helsinki, three rental
housing projects in Tampere, an office and re-
tail premises project in Tikkurila and the Kuhan-
koski hydroelectric power plant. Projects en-
tered into the order backlog in the third quarter
included premises for the Finnish Security and
Intelligence Service, a design contract for the
Uusikaupunki education and wellness campus,
and a housing project with 47 units for Tamper-
een Vuokra-asunnot. Major projects recognised
in the second quarter were the basic renova-
tion of operating theatres at HUS Jorvi Hospi-
tal, the Siuntio education and wellness campus,
which will be implemented as a lifecycle project,
the Jousenkaari school in Espoo, the Hovirinta
school in Kaarina, the Ojanko bus depot in Vantaa
and the residential buildings Lumo One and Piis-
panristi for Kojamo. The basic renovation project
for the Finnish National Theatre was recognised
in the first quarter. Work on the basic renovation
project of the Finnish National Theatre has begun
in phases. The renovation of the section complet
-
ed in the 1950s is ongoing. Due to a complaint
lodged with the Administrative Court about the
deviation decision concerning the building permit
of the project, the startup of work on the section
completed in the 1930s has been postponed un-
til the complaint has been resolved.
Construction’s capital employed totalled EUR
368.8 (372.9) million.
HOUSING CONSTRUCTION
Revenue from housing construction declined to
EUR 289.3 million (377.9 1–12/2019) in the January–
December period. Revenue declined mainly because
fewer developer-contracted housing units were
recognised as income than in the comparison pe-
riod, a total of 515 (833). The order backlog in housing
construction was EUR 435.2 (482.7) million.
Housing under construction
SRV’s strategic focus in housing production has
shifted from developer contracting projects to
development projects in growth centres with
good transport connections. For some time
now, SRV has been one of the largest hous
-
ing constructors in the Helsinki metropolitan
area. At the end of December, SRV had a total
of 2,127 (2,142 housing units under construction
in Finland, mostly in growth centres. No housing
units were under construction in Russia.
SRV is currently building housing as devel-
oper-contracted, development, and contract-
ed projects. A developer-contracted residen
-
tial project is a project that is developed by SRV
and which has not been sold when construction
SRV I THE BOARD OF DIRECTORS' REPORT 2020
begins. SRV bears the risks involved in both the
sale and construction of such projects, which
are recognised as income when the project has
been completed and as the units are sold. A res-
idential development project is a project that is
developed by SRV, but which is sold to an inves-
tor before construction begins. SRV bears the
construction risks in such projects, which are
recognised as income according to the percent
-
age of completion. Construction contracts are
construction projects that are launched by other
parties but implemented by SRV. They are rec-
ognised as revenue on the basis of the percent-
age of completion or as set out in the agreement.
There were 383 (835) developer-contracted
housing units under construction at the end of
December. The number of developer-contract
-
ed units currently under construction will af-
fect SRV’s result in the future when the units are
sold. The average construction period is about
18 months. The company has decided to initi-
ate developer-contracted projects for housing
in Louhela (Vantaa) and Toppila (Oulu). RS sale
readiness has not been achieved yet for these
projects and they are not included in the order
backlog. In December, one developer-contracted
housing construction project was started in Pitä-
jänmäki, Helsinki after being on hold for 1.5 years.
The Kalasatama towers being built in Kalasa-
tama, Helsinki comprise the largest construction
project in SRV’s history. By the end of Decem-
ber, a total of 181 housing units in the second res-
idential tower, Loisto, had been either sold or re-
served. Loisto will rise to a height of 124 metres
above sea level. Its 249 apartments are located
on top of the REDI shopping centre, on floors
6–32. Construction is proceeding according
to plan and Loisto is scheduled for completion
in autumn 2021. Residents moved into the first
tower, Majakka, during November and Decem-
ber 2019. The construction of the third residential
tower, Lumo One (previously called Kompassi),
began in April 2020 for Kojamo.
At the end of December, a total of 1,375 (1,032)
units were under construction for investors,
mainly in Helsinki, Espoo, Vantaa and Tampere.
In March 2020, SRV and Kojamo Oyj signed a
cooperation agreement valued at about EUR 197
million to build rental housing in Helsinki and Es-
poo. The agreement is for six housing construc-
tion projects with a total of 676 units, to be built
as development projects. The units are primarily
studio flats and one-room flats with a living room.
The construction of four of these projects, with
547 housing units, has begun. Three of these
projects were recorded in the order backlog in
March and the fourth in April. The realisation of
the individual projects included in the agreement
requires the fulfilment of customary contractual
terms and conditions.
The agreement signed in March is a contin-
uation of the cooperation agreement signed in
August 2019, which is valued at about EUR 120
million and covers the construction of rental
HOUSING CONSTRUCTION, GROUP
Units
– /
–/
Change,
units
Units sold, total
- developer contracting -
- investor sales
Developer contracting
- start-ups -
- completed -
- recognised as income -
- completed and unsold
Under construction, total -
- contracts -
- negotiated contracts
- sold to investors
- developer contracting -
- sold -
- unsold -
- sold,
- unsold,
ORDER BACKLOG, HOUSING CONSTRUCTION
EUR million / / Change
Contracts and negotiated contracts
Under construction, sold developer contracting -
Under construction, unsold developer contracting -
Completed and unsold developer contracting -
Housing construction, total -
THE GROUP’S LARGEST DEVELOPERCONTRACTED HOUSING PROJECTS UNDER CONSTRUCTION IN FINLAND
Project name Location
SRV,
contract
value,
EUR million
Completion
date (esti
-
mated)* Units Sold* For sale*
REDI Loisto Helsinki Q/
Väinämöisenrinne Helsinki Q/
Ilmarisenpuisto Helsinki Q/
Total value of projects approx. EUR million
* Situation at December .
THE LARGEST ONGOING HOUSING PROJECTS IN FINLAND, INVESTOR PROJECTS AND HOUSING CONTRACTING
Project name Location Developer
Completion
level,
*
Completion
date
(estimated)*
Tikkurila Central Block Vantaa NREP Q/
Louhenlinna Helsinki LocalTapiola Q/
Tammelan Kustaa Tampere OP Q/
Kullervonkoti Helsinki Kojamo Q/
Runoratsunkatu Espoo Kojamo Q/
Joukahaisenpiha Helsinki Kojamo Q/
Kannen Opaali Tampere Tampere
Towers
Q/
Piispanristi Espoo Kojamo Q/
Lumo One Helsinki Kojamo Q/
Tammelan Engel Tampere Taaleri Q/
Total value of projects approx. EUR million
* Situation at December .
SRV I THE BOARD OF DIRECTORS' REPORT 2020
housing in Helsinki, Espoo, Vantaa and Kerava.
The agreement is for six housing construction
projects with a total of 527 units, to be built as
development projects. The units are primari-
ly studio flats and one-room flats with a living
room. The realisation of the individual projects
included in the agreement requires the fulfilment
of customary contractual terms and conditions.
The first project was completed in Kerava in au-
tumn 2019. A contractor agreement for the sec-
ond project, comprising 95 housing units, was
signed in June. Its construction in Matinkylä,
Espoo began in July.
The most significant housing
construction projects under
development
Kivenlahti
In January 2016, the Trade and Competitiveness
Division of the Espoo City Board reserved an
area for SRV and VVO Group Plc, the current
Kojamo Oy, to design the Kivenlahti Metro
Centre. The plans for the area comprise about
1,300 housing units and about 35,000 square
metres of commercial, office and service
premises, plus park-and-ride spaces. Espoo
City Council approved the city plan for the
area on 29 April 2019, but a complaint was
lodged against the area’s parking solutions.
The Administrative Court rejected this com-
plaint and the Supreme Administrative Court
did not grant permission to appeal. The city plan
is thus now in force in all respects. Construction
will begin once the plot conveyance has been
completed (current estimate 2021). The Metro
Centre is scheduled for completion in conjunc-
tion with the opening of the Western Metro ex-
tension.
Espoonlahti
Apartments covering approximately 100,000
square metres of floor area will be built next
to the future Espoonlahti metro station
(Espoonlahden keskus/Mårtensbro).
SRV is seeking a holding of around 30 per
cent. The plan for the Espoonlahti Centre came
into force in March 2017.
The City of Espoo has leased the plot to serve
as provisional premises for the Lippulaiva shop-
ping centre until 2022, which means construction
can begin only when Pikkulaiva has been moved
out of the way.
Keilaniemi
SRV is continuing the preparation of its residen-
tial tower project in Keilaniemi, Espoo. A total of
four residential towers – two of them SRV’s –
and a parking facility are planned for Keilaniemi.
The area’s city plan is in force, and the project
hinges on tunnelling for Ring Road I. The tunnel
was opened to traffic in June 2019, and the fin-
ishing works on the park deck were completed
at the end of 2019.
As part of the overall implementation of the
project, SRV bought together with Hypo the plots
for two residential towers from the City of Espoo
on 29 October 2019. SRV has not as yet made a
final decision on the construction of the towers.
Construction begins no earlier than in 2022. The
final construction decision will be based on the
market situation. If realised, the Keilaniemi res-
idential towers would be the tallest residential
buildings in Finland, with the tallest soaring to a
height of almost 145 metres.
Vermonniitty and Säteri along the
Raide-Jokeri rapid tramline
Raide-Jokeri is a rapid tramline that will link
Itäkeskus in Helsinki to Keilaniemi in Espoo. It
will also enable numerous residential sites to be
built along the line. For instance, SRV is plan-
ning to build housing in the vicinity of the future
Vermonniitty station in cooperation with SATO
and Ilmarinen. It will have a total of almost 2,000
housing units.
Processing of the city plan for Säterinkal-
lionkulma in Leppävaara is in progress. The city is
planning housing for about 800 people in Säter-
inkulma. A complaint on the city plan has been
lodged with the administrative court.
Lapinmäentie
The Lapinmäentie project in Munkkivuori,
Helsinki, is progressing well. SRV is continuing
to develop the area in accordance with the city
plan approved in August 2016. Seven new resi-
dential towers are planned for the area in addi
-
tion to the existing Tower A, which will remain.
Plans for wellness and health services are being
developed for Tower A, and negotiations with
the tenants are under way. Tower A may contain
shops, care services, premises for other services,
and office space. In December 2019, the project
was granted a deviation decision in the city plan,
which permits care and assisted living facilities
to be located in Tower A.
The demolition of the Pohjola Building has
been completed and the first apartment build-
ing for LocalTapiola was completed in August.
Construction of the second apartment building
sold to LocalTapiola is under way. Construction
of the third apartment building for Kojamo was
launched in March. 800 apartments have been
planned for the area.
Completed housing units
A total of 520 (808) developer-contract-
ed housing units were completed in January-
December. The number of unsold housing units
has remained low. At the end of December, there
were 92 (87) unsold completed housing units, 92
(76) in Finland. All the remaining units in Russia
were sold during the year and no new housing
projects were started up. Housing sales slowed
in April as a result of the pandemic-related re-
strictions placed on meetings and public view-
ings. Housing sales showed signs of picking up
in May-June. During the summer and autumn,
sales returned to almost normal levels, and the
rest of the year went well. Demand from private
housing investors has declined compared with
the previous year. Demand is currently focusing
on small apartments in good locations. A total of
354 (649) developer-contracted housing units
were sold during January–December.
Housing units recognised as income
In January-December, 515 (833) developer-con-
tracted housing units were recognised as income,
generating total revenue of EUR 107.2 million. A
developer-contracted residential project is a pro-
ject that is developed by SRV and which has not
been sold when construction begins. SRV bears
the risks involved in both the sale and construc
-
tion of such projects, which are recognised as
income when the project has been completed
and as the units are sold.
BUSINESS AND INFRASTRUCTURE
CONSTRUCTION
Revenue from business construction rose slightly
to EUR 680.7 million (679.7 1–12/2019) and the
order backlog contracted by 16.6 per cent to EUR
718.2 (861.5) million.
SRV is currently building several public con-
struction projects, such as hospitals and schools,
and underground premises, such as the Espoon-
lahti Metro Station. These are primarily imple-
mented as alliance projects or project man-
agement contracts. Alliance projects offer the
potential for extra earnings in addition to the ba-
sic profit margin if the project is completed un-
der budget or ahead of schedule, or if the quality
criteria are met. Project management contracts
are based either on a target price and guaran-
teed maximum price or a target budget. Like
alliance projects, they offer the potential for ex-
tra earnings.
SRV I THE BOARD OF DIRECTORS' REPORT 2020
Major ongoing business and
infrastructure construction projects
Siltasairaala Hospital
Construction work on HUS Bridge Hospital,
SRV’s most significant ongoing hospital project,
has been carried out on schedule as planned.
SRV’s share of this cooperative project man-
agement contract being implemented under a
target budget is around EUR 245 million. Interior
construction and building system installation
are ongoing on the site. According to the target
schedule, they will be completed in June 2022,
making it possible to open the hospital in 2023.
Basic renovation and modernisation of
Siltasaari 10
Real estate investment company Antilooppi Oy’s
development project, Siltasaari 10, will combine
three properties with a total of 36,075 gross
square metres into a unique complex to serve
urban residents and employees. SRV will be the
main contractor in accordance with the project
management contract signed with Antilooppi.
The project was entered into SRV’s order back-
log in November 2019.
Expansion of Helsinki Airport and renovation
of Terminal 2
Helsinki Airport’s Terminal 2 extension project
involves building a new section for check-in, se-
curity control, baggage drop and greeting pas-
sengers, as well as a travel centre combining
different forms of transport and a parking fa-
cility. The current departure and arrival halls of
Terminal 2 will be transformed into a gate area.
The Terminal 2 extension project was entered
into SRV’s order backlog in November 2018 and
the total cost of the first phase is estimated to
be around EUR 260 million. The actual contract
for the implementation phase of the project was
signed in June 2019. The terminal extension sec-
tion has progressed to the interior construction
stage, and the first section – a new parking fa-
cility next to the existing P5 facility – was com-
pleted in summer 2020. In January 2021, Finavia
also decided to gradually start alteration works
on Terminal 2, which are included in SRV’s con-
tract package, ahead of schedule. This involves
the complete refurbishment of the arrival and
departure halls, measuring 35,000 m2, and their
integration into the flight gate area and central-
ised baggage hall.
Espoonlahti Metro Station
Construction of the Espoonlahti Metro Station
and bus terminal is progressing as planned.
The project was recognised in SRV’s order back-
log in November 2018 and it is valued at around
EUR 48 million. The station will be implement-
ed as a project management contract. Work on
Espoonlahti Metro Station began in December
2018 and will continue as per the schedule
agreed on with the client, the Western Metro.
Construction will end and commissioning begin
in summer 2022.
Tampere Deck and Arena
In February, SRV sold approximately 75 per cent
of its holding in the Deck and Arena to its co-in-
vestors. These co-investors also acquired five-
sixths of the Ranta-Tampella housing project.
After the transaction, SRV's holding in the project
is 8.3 per cent. SRV's role as a project contractor
has not changed. SRV recognised an earlier prof-
it margin elimination equivalent to this holding
during the review period, and from now on the
construction project margin will be recognised
as income as the project is completed.
The Deck and Arena project will be built in the
heart of Tampere on top of the railway station. It
includes a multipurpose arena, residential tow-
ers, office and business premises, and a hotel.
Topaasi ja Kruunu – to be built on the Tampere
Deck – is a hybrid building. A residential tower
with 105 housing units will be built on top of its
office section. The sale of Topaasi apartments
is under way. At the end of December, 63 per
cent had been either reserved or sold. Opaa-
li, the second tower to be built on the Tampere
Deck, will be a modern 16-storey building with
148 apartments. The sale of Opaali apartments
is under way.
The total value of the project is approximate-
ly EUR 550 million, and the Phase I agreements
recognised in SRV’s order backlog in 2017-2019
amount to about EUR 317 million of this.
Wood City
For many years, SRV has been developing Wood
City in the Jätkäsaari neighbourhood of Helsinki.
Wood City will comprise an office building, hotel,
and two apartment buildings for HEKA. In addi-
tion, a shared-use multi-storey car park has been
completed for the quarter. Housing Production’s
apartments were completed in February 2019. At
the beginning of the fourth quarter, SRV hand-
ed over the completed multi-storey car park
and Supercell office building on schedule. SRV
THE LARGEST ONGOING BUSINESS CONSTRUCTION PROJECTS
Project Location
SRV total
contract
value,
EUR million
Project
type
Completion
level,
Completion
(estimate)
DEVELOPMENT PROJECTS
Deck, southern deck and infra** Tampere *
Infrastruc
-
ture Q/
Deck, multipurpose arena** Tampere * Retail Q/
Deck, arena hotel** Tampere * Retail Q/
Topaasi ja Kruunu** Tampere * Hybrid Q/
Vantaan Lumijälki Vantaa * Logistics Q/
BUSINESS PREMISES
Monikko Learning Centre Espoo Public sector Q/
Finnish-Russian School Helsinki Public sector Q/
Espoonlahti Metro Station Espoo Public sector Q/
Siltasaari Helsinki Retail Q/
T Alliance, phase Vantaa Public sector Q/
Kirkkonummi Wellbeing Centre Kirkkonummi Public sector Q/
Siuntio education and wellness campus Siuntio Public sector Q/
Open Innovation House Espoo Public sector Q/
Oulu Market Square Hotel Oulu * Retail Q/
HUS Bridge Hospital Helsinki Public sector Q/
STUK commercial premises Vantaa Public sector Q/
HUS Jorvi, basic renovation of operating theatres Espoo Public sector Q/
Basic renovation of the Finnish National Theatre Helsinki Public sector Q/
Helsinki Upper Secondary School of Languages
and Upper Secondary School for Adults Helsinki Public sector Q/
Situation at December .
*The value of individual contracts has not been made public
**The total value of the Tampere Deck and Arena project is EUR million, of which EUR million has been entered
into SRV’s order backlog to date.
SRV I THE BOARD OF DIRECTORS' REPORT 2020
related negotiations on SRV’s role are ongoing, and
their content and schedule will be specified later.
In April 2020, Fennovoima announced that con-
struction will start in 2021. No building permit has
been granted yet and therefore no decision on the
startup of construction has been made thus far.
INVESTMENTS
SRV’s investments focus on the management
and realisation of the Group’s real estate invest-
ments; the creation and ownership of new joint
investment structures; and the operation of se-
lected properties. Investments’ key objectives
are to increase SRV’s financing capacity with
the aid of joint financing structures; harness the
value chains created by projects more exten-
sively through longer-term ownership; diversi-
fy capital risk; and generate positive cash flow.
SRV’s investment strategy revolves around the
Group’s strategy of building urban centres and
harnessing the key megatrends that are affecting
the built environment. “Building urban centres”
primarily means the construction and ownership
of central urban premises, such as housing, of-
fices and retail premises.
Investments’ revenue totalled EUR 4.8 million in
the January–December period (5.9 1–12/2019). It
mainly consists of revenue from shopping centre
management. In accordance with SRV’s operat-
ing model, revenue from associated companies’
projects and joint ventures is reported under the
Construction segment.
The operative operating profit totalled EUR -18.0
(-96.3) million. In addition to SRV’s Group com-
panies, the result contains shares of the results
of the associated companies that own the Okhta
Mall and Pearl Plaza shopping centres, including
not only their operating margin, but also depre-
ciation, financial expenses and taxes. Operative
operating profit was significantly negatively im-
pacted by changes in the valuation of balance
sheet items in the Investments segment, which
had a combined impact of around EUR -12.3 mil
-
lion. Pearl Plaza was reclassified as a holding in
associated companies and joint ventures during
the fourth quarter when sales negotiations ended
without reaching an agreement. Due to this re-
classification, an impairment recognised in 2019
was reversed, with a positive impact of about
EUR 6.9 million on operative operating profit
for 2020. The value of the additional sales price
of the REDI shopping centre was decreased by
EUR 13.0 million during the fourth quarter on the
basis of an updated cash flow-based forecast. In
addition, a write-down of about EUR 5.4 million
for SRV’s holding in Okhta Mall and a write-down
intended to start building the hotel planned for
the Wood City quarter in spring 2020, but in-
vestor negotiations had to be halted due to the
coronavirus pandemic. The outlook for the hotel
market currently still looks uncertain. If the out-
look improves, the project can be started up on
a rapid schedule in 2021.
The most significant business and
infrastructure construction projects
under development
Bunkkeri in Jätkäsaari
SRV is highly involved in revitalising the
Jätkäsaari district of Helsinki. It is intended
that Bunkkeri will be a 13-storey landmark in
Jätkäsaari, featuring a wide range of fitness fa-
cilities, a swimming hall, and about 300 housing
units. The development of Bunkkeri was delayed
in autumn 2017, when the Administrative Court
of Helsinki overturned an acquisition decision
that had been made in April 2016 concerning
the sale of Bunkkeri to SRV. The Administrative
Court held that the deal did not constitute a pub-
lic procurement, but a real estate transaction.
After this ruling, the City of Helsinki resumed its
preparatory work. On 11 April 2018, the Helsinki
City Council decided to sell the plot to SRV. SRV
and the City of Helsinki signed the implementa-
tion agreement in October 2018.
A complaint has been lodged with the Ad-
ministrative Court of Helsinki on the decision of
the City Council to sell Plot 5 in Block 20811 in
District 20 (Länsisatama) of the City of Helsinki
and the Bunkkeri building located there as well as
the related implementation of the decision. With
its decision on 15 June 2018, the Administrative
Court rejected the complainant’s demand to for-
bid and halt the execution of the sale decision.
With its decision on 5 October 2018, the Supreme
Administrative Court upheld the decision of the
Administrative Court and did not forbid the ex-
ecution of the sale decision. The complaint on
the sale decision of the City Council was reject-
ed by the Administrative Court in June 2020.
Permission to appeal has been sought from the
Supreme Administrative Court.
New projects
The most significant new business construc-
tion contracts entered into the order backlog
in January–December were: in the fourth quar-
ter, the Helsinki Upper Secondary School of
Languages and Upper Secondary School for
Adults as well as business premises for Sponda
in Vantaa; in the third quarter, premises for the
Finnish Security and Intelligence Service, a
design contract for the Uusikaupunki educa
-
tion and wellness campus, and the start of the
implementation phase of the Market Square
Hotel in Oulu; in the second quarter, the basic
renovation of operating theatres at HUS Jorvi
Hospital, the Siuntio education and wellness
campus, which will be implemented as a lifecy-
cle project, the Jousenkaari school in Espoo, the
Hovirinta school in Kaarina and the Ojanko bus
depot in Vantaa; and in the first quarter, the ba-
sic renovation contract for the Finnish National
Theatre, new STUK business premises being
built for Senate Properties, and the Lumijälki 2
logistics premises for Sagax in Vantaa.
Hanhikivi-1 nuclear power plant project
In 2015, SRV announced its participation in the
Hanhikivi-1 nuclear power plant construction pro-
ject as both an investor and project manager. SRV
has made a financing commitment equating to a
1.8 per cent holding in the project to Fennovoima’s
main owner, Voimaosakeyhtiö SF. SRV will
have the same rights and obligations as other
Voimaosakeyhtiö SF shareholders. SRV has also
signed a co-operation agreement with Rusatom
Group and the main contractor Titan-2. SRV will
act as the project manager, and the exact nature
of its activities will be confirmed at a later date. The
INVESTMENTS SEGMENT
EUR million
– /
–/
Change
Change,
Revenue - -
Percentage of associated companies' profits - -
- of which exchange rate gains/losses - -
Currency hedging, net -
Operative operating profit - -
Operating profit* - -
Capital employed - -
Return on investment, - -
* Net effect of currency exchange fluctuations - -
SRV I THE BOARD OF DIRECTORS' REPORT 2020
of EUR 0.8 million for the Ratsumestarinkatu 6
commercial property in Porvoo were recognised
in operative operating profit. The company also
recognised EUR 0.5 million in income with a cash
flow impact due to the final dissolution of the
investment in the VTBC fund. The decrease in
rental income from shopping centres due to the
coronavirus pandemic also had a negative im-
pact on operative operating profit.
In the case of the Russian subsidiary, a EUR
3.1 million provision for expenses that was rec-
ognised in the second quarter of the year was
dissolved in the third quarter when the court of
the second instance overturned the ruling on
compensation by the court of the first instance.
The dissolution of the provision had an impact
of EUR 2.7 million at the September exchange
rate, and thus the euro-denominated result for
the review period is burdened by expenses of
EUR 0.4 million. The applicant appealed to the
third instance and the proceedings had not yet
been initiated at the balance sheet date. How-
ever, in February 2021, the third instance had
already dismissed the plaintiff's appeal. The
plaintiff still has the right to appeal to the Su-
preme Court. The lawsuit concerned an agree-
ment for an electrical connection that was never
implemented.
The coronavirus pandemic that began at the
end of the first quarter of 2020 has negatively
impacted shopping centre operations by un-
dermining tenants’ ability to do business. The
authorities restricted the opening of stores in
March–August, which weakened the operation-
al capabilities of shopping centres and reduced
their rental income. Shopping centres opened
gradually in the third quarter, which was reflect-
ed in the rising visitor numbers and sales in Au-
gust to September. Shopping centres remained
open in October-December, but the coronavirus
restrictions continued to have an impact on the
business of some of the tenants. The decline in
rental income has short-term impacts on the
liquidity and loan management capabilities of
shopping centres. SRV has agreed on arrange-
ments with banks and co-investors in the shop-
ping centres to secure financing for the shopping
centres during the period in which the restric-
tions set by the authorities are in effect.
The coronavirus restrictions imposed in Rus-
sia vary from city to city. In St Petersburg, most
of the tenants in the shopping centres managed
by SRV closed their doors on 28 March, in com-
pliance with official regulations, and only essen-
tial services such as pharmacies and grocery
stores remained open. Most of the shops could
be opened again in July-August. In Moscow,
shopping centres closed their doors about one
week earlier than in St Petersburg, and the op-
erations of tenants there returned closer to nor-
mal earlier than in St Petersburg as restrictions
were gradually lifted.
Investments’ operating profit was EUR -22.4
(-92.5) million. The net effect of currency ex-
change fluctuations was EUR -4.4 (3.8) million,
which arose from valuation of the euro-denom-
inated loans of associated companies in rou-
bles and the net impact of currency hedging.
Exchange rate differences with no impact on
cash flow vary in each interim report in line with
fluctuations in the exchange rate of the rouble.
Capital employed totalled EUR 171.9 million
(245.7 12/2019). Capital employed was reduced
by the divestment of SRV’s holding in REDI and
a change in the value of its additional sales price
receivable in the last quarter, as well as a de-
crease in the company’s holding in the Tampere
Deck and Arena project in the first quarter. In ad-
dition, a capital return of about EUR 7 million from
Pearl Plaza in the first quarter reduced capital
employed. However, the reclassification of Pearl
Plaza in the fourth quarter increased capital em-
ployed by around EUR 7 million compared with
the previous year. Capital employed was reduced
by write-downs of two properties and increased
by investments in the Okhta Mall parking facility
and Voimaosakeyhtiö SF. In addition, the weak-
ening of the rouble exchange rate also affected
capital employed. Capital employed was reduced
by a net exchange rate impact of EUR -4.4 mil-
lion included in operating profit and exchange
rate losses on financial expenses amounting to
EUR -8.2 million. Translation differences had a
total impact of EUR -18.6 million on capital em-
ployed. Total capital employed decreased by
about EUR 73.8 million compared with the be-
ginning of the year.
The return on investment was -14.3 (-32.6) per
cent. When calculating the return on investment,
the income from interest on loans granted to as-
sociated companies and changes in the value of
loans are also taken into consideration.
SRV is a co-investor in three shopping cen-
tre projects through its associated companies.
SRV is also responsible for leasing, marketing
and managing premises in completed shopping
centres. SRV intends to sell its holdings once
stable rental income has been achieved or the
market situation allows. Stable rental income is
usually reached 3–4 years after opening. The
coronavirus pandemic that began during the first
quarter of 2020 has negatively impacted shop-
ping centre operations by undermining tenants’
ability to do business. This has temporary nega-
tive impacts on shopping centres’ rental income.
However, as mentioned in the risk section, due
to the coronavirus pandemic and economic un
-
certainty in Russia, it is possible that the sale of
Russian shopping centres may be postponed.
Shopping centres
REDI, Helsinki
The company sold its holding of about 40 per
cent in the REDI shopping centre in February
2020 and recorded a EUR 13.5 million sales price
receivable related to the possible additional fu-
ture sales price of EUR 50 million agreed in con-
nection with the transaction. Due to the updated
cash flow-based forecast for the REDI shopping
centre, SRV has booked a change in the value of
the additional sales price receivable, which has
a negative impact of about EUR 13 million on op-
erative operating profit for 2020.
The business operations of SRV REAM Oy,
which was responsible for operating the REDI
shopping centre, were sold to CBRE Finland on
25 June 2020. Its employees, a total of eight per-
sons, transferred to the employ of CBRE Finland
on 1 September 2020 under their existing terms
of employment. The transaction had a very mi-
nor impact on the company’s income statement
and balance sheet.
CAPITAL EMPLOYED
EUR million December December
Okhta Mall, shopping centre
Pearl Plaza, shopping centre
Tampere Deck and Arena
Daily, shopping centre
REDI, shopping centre and parking facility
Plots and other holdings
Total
Capital employed largely consists of investments in subsidiaries, joint ventures and associated companies; loans issued;
accrued income from associated companies; and their impairment and expense entries. Capital employed also includes as
-
sets designated as held for sale. Fluctuations in the rouble exchange rate also affect the amount of capital employed.
SRV I THE BOARD OF DIRECTORS' REPORT 2020
Pearl Plaza, St Petersburg
This shopping and entertainment centre in St
Petersburg is fully leased. Visitor numbers fell by
29 per cent year-on-year during the January–
December period as a result of the coronavirus
pandemic that began in March. Sales in roubles
saw a decline of 23.0 per cent compared with the
corresponding period of the previous year. Visitor
numbers and sales grew in the first quarter, but
when the coronavirus restrictions came into force
in the second quarter, both visitor numbers and
sales plummeted. Strong recovery was seen in
August-September and it continued in October-
December, especially in sales figures, which re-
bounded to almost the same level as a year earlier.
On 31 December 2019, SRV’s holding in the
Pearl Plaza shopping centre was designated as
an asset held for sale and measured at its prob-
able selling price less costs of sale, as its sale
during the next 12 months was considered likely.
Negotiations on the sale of Pearl Plaza pro-
gressed well in early 2020, when it was consid-
ered highly likely that a deal would be made. The
coronavirus pandemic slowed down the negoti-
ations. The second wave of the pandemic was
ultimately the major reason why the sales nego-
tiations ended without reaching an agreement.
The property was reclassified as a holding in
associated companies and joint ventures. In line
with its strategy, SRV will continue to develop the
property and intends to sell its holding when the
market situation allows.
Okhta Mall, St Petersburg
The Okhta Mall in downtown St Petersburg
opened its doors in August 2016. SRV owns 45
per cent of the Okhta Mall directly, and another
15 per cent indirectly through the property in-
vestment company Russia Invest. Leasing has
progressed according to plan. The shopping
centre’s occupancy rate stood at about 95.8
per cent at the end of December. About 91 per
cent of its stores were open in December. Sales
decreased by 22 per cent in January–December
and visitor numbers fell by 35 per cent as a re-
sult of the coronavirus pandemic that began in
March. Visitor numbers and sales grew in the
first quarter, but when the coronavirus restric-
tions came into force in the second quarter, both
visitor numbers and sales plummeted. Strong
recovery was seen in August-September and it
continued towards the end of the year, especially
in sales figures, which rebounded to almost the
same level as a year earlier.
Okhta Mall’s parking facility is under construc-
tion and it will be completed in the first quarter
of 2021. Its construction is valued at about EUR
20 million. SRV also owns the Okhta City plot – a
major future development project – next to the
Okhta Mall. The majority of the Okhta City plot is
currently being used as a car park for the Okhta
Mall, but the construction of the multi-storey car
park will free up the plot for further development.
4Daily, Moscow
The 4Daily shopping centre in the Moscow re-
gion opened its doors in April 2017. SRV owns
19 per cent of the shopping centre. By the end
of December, about 86 per cent of the centre’s
premises were leased. In December, 73 per
cent of its stores were open. In the January–
December period, sales rose by 31 per cent and
visitor numbers by 2 per cent on the comparison
period. Visitor numbers and sales grew in the first
quarter, but when the coronavirus restrictions
came into force in the second quarter, both visi-
tor numbers and sales plummeted. The recovery
that began in the third quarter remained strong
during the rest of the year.
Although the shopping centre’s occupancy
rate, and therefore its profitability, are still at an
insufficient level, the change in the tenant struc-
ture and growing visitor numbers are creating a
foundation for increasing the occupancy rate.
SRV also owns the Mira-II plots next to 4Daily.
The plots will enable further development in the
area when premises demand permits. SRV has
an agreement with the international sports store
giant Decathlon for the construction of a store
building and the sale of part of the Mira-II plot.
Construction of the Decathlon store building has
been started up. The value of the contract was
recognised in SRV’s order backlog in December.
Other projects
On 7 February 2020, SRV sold five-sixths of its
holding in the Ranta-Tampella housing project
(which is part of the Tampere Deck and Arena
project) to its co-investors, as well as three-
fourths of its shares and partnership interests
in the Tampere Deck and Arena project. After
these transactions, SRV was left with an approx-
imately 8.33 per cent holding in the Tampere
Deck and Arena project.
SRV owns 50 per cent of the Etmia II office
project in downtown Moscow. Bankruptcy pro-
ceedings have been started for the company.
The financing bank will realise the property held
as collateral for its loan receivables. The bank-
ruptcy proceedings will not have an impact on
SRV’s result.
Plots held for future development in Russia in-
clude the previously mentioned Okhta City plot
next to the Okhta Mall in St Petersburg, the Mira-
II plots in Mytishchi, and a 51 per cent holding in
the Eurograd plot in St Petersburg.
LAND RESERVES
December
Business
construction
Housing
construction Investments Total
Unbuilt land areas, land acquisition commitments
and rented plots
Building rights
, m²
Land development agreements
Building rights
, m²
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.
MOST SIGNIFICANT COMPLETED INVESTMENT PROJECTS, 31 DECEMBER 2020
Project Holding, Opened Floor area (m
)
Occupancy rate
/,
Target sales
date**
Pearl Plaza,
shopping centre,
St Petersburg
SRV
Shanghai Industrial
Investment
Company
August
Gross floor area
Leasable area
Binding lease
agreements
–
Okhta Mall, shop
-
ping centre,
St Petersburg
SRV
Russia Invest **
August
Gross floor area
Leasable area
Binding lease
agreements
–
Daily, shopping
centre,
Moscow
Vicus
SRV
Blagosostoyanie
April
Gross floor area
Leasable area
Binding lease
agreements
–
* Russia Invest’s shareholders are Finnish institutional investors. Ilmarinen owns a per cent stake in Russia Invest,
Sponda and SRV have per cent holdings, and Conficap owns six per cent.
** Due to the coronavirus pandemic and economic uncertainty in Russia, it is possible that the sale of Russian shopping
centres may be postponed.
SRV I THE BOARD OF DIRECTORS' REPORT 2020
In addition, SRV owns a commercial property
in Porvoo (Ratsumestarinkatu 6), and has a 1.8
per cent holding in Voimaosakeyhtiö SF and a
6.4 per cent holding in Vicus Oy.
FINANCING AND FINANCIAL
POSITION
In February 2020, the company agreed on the
replacement of its EUR 100 million liquidity fa-
cility with the syndicate banks; the facility was
replaced with two separate facilities, one of EUR
60 million and one of EUR 40 million. At the end
of June, the company made an agreement with
the syndicate banks whereby the undrawn por-
tion of the facility, amounting to EUR 9 million,
of the EUR 60 million facility will be terminated.
The remaining amount of the facility was EUR 51
million. According to the repayment plan updat-
ed in April, the amount remaining of the facility
on 31 December 2020, EUR 51 million, will be
repaid in December 2021 by an amount of EUR
11 million and in January 2022 by an amount of
EUR 40 million. The liquidity facility of EUR 40
million will be used to finance future construction
projects. It falls due in January 2022 or within
another repayment period agreed for separate
construction projects. At the end of December,
EUR 30.5 million of the EUR 40 million liquidity
facility remained unused.
As part of its recovery programme, the com-
pany implemented many measures in April-June
to improve its balance sheet position, finance
ability and liquidity. In April and June, the com-
pany agreed on changes to the payment sched-
ule of two liquidity facilities with the syndicate
banks and agreed to halve the minimum operat-
ing margin levels contained in their agreements,
as a precautionary measure against potentially
weakened profit margins resulting from the coro-
navirus pandemic.
In May, the company organised a directed
share issue for the holders of the two outstand-
ing hybrid bonds. In the issue, about EUR 75 mil-
lion of the EUR 92 million principal of the hybrid
bonds and accrued interest was converted into
shares. As a result of the implementation of the
share issue, the total outstanding principal of
the 2016 hybrid bonds is approximately EUR 11.8
million and the outstanding principal of the 2019
hybrid bonds is approximately EUR 3.6 million.
The share issue increased the total number of
SRV shares by 71,468,395 to 131,967,970. The
new shares were entered in the Trade Register
on 19 May 2020.
At the end of May, SRV carried out written
procedures to extend the one-year tenor of its
EUR 100 million (of which EUR 62.1 million is out-
standing) senior unsecured callable fixed-rate
notes due 23 March 2021 and the one-and-a-
half-year tenor of its EUR 75 million senior un-
secured callable fixed-rate notes due 27 March
2022 as well as to amend certain terms and con-
ditions of these notes. The new due dates are 23
March 2022 for the EUR 100 million senior unse-
cured callable fixed-rate notes (whose outstand-
ing principal amounts to EUR 62.1 million) and 27
September 2023 for the EUR 75 million senior
unsecured callable fixed-rate notes.
In June, the company organised a rights issue
in which SRV received gross income of approx-
imately EUR 50 million. Due to the share issue,
SRV’s number of shares rose by 131,049,371 from
131,967,970 to a total of 263,017,341 shares. The
new shares were entered in the Trade Register
on 18 June 2020. The capital loan of EUR 9 mil-
lion drawn on 30 March was used for payment
in accordance with its terms and conditions, and
was converted into equity.
Thanks to the abovementioned arrangements
and the positive development of cash flow, the
company’s balance sheet position and liquidity
improved substantially. That said, impairments
of investments and the additional sales price re-
ceivable of REDI weakened the balance sheet
position and key figures, but did not impact on
cash flow and liquidity. At the end of the period,
the Group’s financing reserves totalled EUR 116.8
million (40.0 12/2019), consisting of unused pro-
ject loans (EUR 20.0 million) and cash and cash
equivalents (EUR 96.7 million). At the end of De-
cember, the company’s equity ratio (excluding
the impact of IFRS 16) was 27.8 per cent (26.4
1-12/2019) and gearing (excluding the impact
of IFRS 16) was 82.1 per cent. The equity ratio
calculated as per the covenants of financing
agreements was 28.7 per cent, as the covenant
calculation took into account the recognition of
income from developer-contracted projects on
the basis of percentage of completion. The equi-
ty ratio level was affected by the high amount of
cash and cash equivalents on the balance sheet
date. The company can manage the equity ratio
level by repaying its debts.
The financial covenants of SRV’s financing
agreements are equity ratio, net gearing, mini-
mum operating margin, minimum cash, the in-
terest coverage ratio and certain other restric-
tions. The interest coverage ratio is the ratio of
the Group’s operating margin (EBITDA) to its
net financial expenses. The interest cover ratio
is tested only if and when new loan financing is
withdrawn; the covenant does not prevent the
refinancing of existing sources of financing. The
main covenants of the financing agreements are
presented in note 29 to the financial statements.
The covenant levels of these financing agree-
ments are determined on the basis of the ac-
counting principles in force when the loan agree-
ments were signed. Recognition of income on the
basis of percentage of completion in developer
contracting projects and the inclusion of capital
loans into equity are taken into consideration in
the calculation of the equity ratio covenant. The
loan agreements also contain some other devia-
tions from traditional covenant calculation meth-
ods. The covenants for all loan agreements were
met on 31 December 2020.
Net interest-bearing debt totalled EUR 289.1
(422.0) million at the end of the review period. Net
interest-bearing debt saw a year-on-year decrease
of EUR 132.9 million. Excluding the impact of IFRS
16, net interest-bearing debt totalled EUR 152.9
million, representing a fall of EUR 119.0 million on
the comparison period. Housing corporation loans
account for EUR 40.7 (50.4) million of the inter-
est-bearing debt. Cash flow from operating ac-
tivities was EUR 46.3 (-10.7) million and cash flow
from investing activities was EUR 26.6 (-5.9) million.
IFRS
EUR million December December Change,
Equity ratio,
Equity ratio, , excl. IFRS
Net gearing ratio, -
Net gearing ratio, , excl. IFRS
-
Shareholders’ equity
Capital employed -
Net interest-bearing debt -
Net interest-bearing debt, excl. IFRS
-
Interest-bearing debt -
- of which short-term -
- of which long-term -
Interest-bearing debt, excl. IFRS
-
Cash and cash equivalents
Unused binding liquidity limits and account limit agreements -
Unused project loans that can be drawn immediately
The figure has been adjusted to remove the impacts of IFRS .
SRV I THE BOARD OF DIRECTORS' REPORT 2020
Cash flow from operating activities was boosted
by capital released due to the sale of contract sites
to investors and the handover of developer-con-
tracted housing in the latter part of the year and
negatively impacted by the acquisition of new
plots. VAT payment arrangements agreed upon
with the tax authorities also had a positive impact,
while the significant decrease in factoring had a
negative impact on cash flow. The cash flow from
investments was positively affected by the sale
of holdings in REDI and Tampere Deck and Are-
na. The cash flow impact of share issues, after
expenses, was EUR 46.4 million during the review
period, including the EUR 9 million capital loan
converted into shares.
Net financial expenses since the beginning of
the year totalled EUR -29.4 (-29.3) million. Net fi-
nancial expenses included EUR 3.7 (4.1) million
in dividend and interest income, exchange rate
differences amounting to EUR -8.2 (4.3) million
arising from the conversion of subsidiary and
associated company loans, which did not have
an impact on cash flow, interest paid on deriva-
tives and fair value changes amounting to EUR
-1.9 (-3.7) million and interest expenses of EUR
-12.3 (-13.1) million, of which EUR 0.5 (0.7) million
was capitalised in accordance with IAS 23 as
from the beginning of the year. In addition, finan-
cial expenses included EUR -5.7 (-6.5) million in
interest under IFRS 16, EUR -1.5 (-10.8) million in
impairments, and EUR -4.1 (-4.2) million in other
financial expenses, including expenses related
to financing arrangements.
SRV's investment commitments totalled EUR
26.4 (51.7) million at the end of December, and
mainly consisted of investments in Fennovoima’s
Hanhikivi-1 nuclear power plant project and the
Tampere Deck and Arena project.
SRV is exposed to changes in the exchange
rate of the rouble through its Russian subsidiar-
ies, associated companies and joint ventures.
The weakening rouble led to translation differ-
ences of EUR -18.6 (11.5) million, which impacted
both shareholders' equity and the comprehen-
sive result for the period. In addition to currency
exchange rate losses with no cash flow impact
amounting to EUR -8.2 (4.3) million in financial
income and expenses, the Group also entered
similarly derived currency exchange rate loss-
es of EUR -9.8 (7.6) million with no cash flow im-
pact under the profit accounted for by associ-
ated companies, which are due primarily to the
conversion of currency-denominated loans to
roubles and the weaker rouble exchange rate.
Currency exchange rate losses were reduced by
EUR 5.5 (-3.8) million in net hedging returns. The
total impact on shareholders’ equity was EUR
-31.1 million. The exchange rate risk position is
presented in note 29 to the financial statements.
HR ISSUES, SOCIAL
RESPONSIBILITY AND HUMAN
RIGHTS
SRV employed an average of 991 people in
January–December (1,080 1–12/2019). On av-
erage, 810 (867) people worked in Construction
and 124 (139) people worked in Investments. 56
(74) people worked in Group operations.
During the second quarter, the company start-
ed up numerous new sites and carried out a re-
cruiting campaign that led to the hiring of more
employees, especially for site supervision tasks.
The company continued its recruitment cam-
paign in the third quarter and hired employees
for expert roles and on-site managerial positions.
In April, SRV reached, for the first time, the
highest safety level in the annual classification
carried out by the Vision Zero Forum of the Finn-
ish Institute of Occupational Health: I – World
Class Achievement. A total of 29 companies
reached the highest level in this nationwide clas-
sification of occupational safety. SRV was the
only construction company among them. The
company’s aim is zero accidents at every site.
Training and internal communication
At SRV, the impacts of the coronavirus pandem-
ic were reflected as a decrease in training and
events for personnel in 2020. The number of
training days per person in Finland was 1.0 (2.1).
Face-to-face training was possible for some in-
ternal training sessions with a low number of
participants, but otherwise training and events
were held using a variety of distance learning
solutions. In August, we released three new SRV
Approach e-courses on the topics of financial
control, schedule management and environmen-
tal activities. Online study has not been included
in the calculation of the number of training days.
A two-part online coaching course was ar-
ranged for all supervisors on team development
and support for wellbeing and coping at work.
This training began in December and continued
into 2021. The SRV Trainee programme contin-
ued, and a total of about 80 construction stu-
dents worked under this programme during sum-
mer 2020. At the end of the year, we launched
an extensive campaign to support wellbeing in
collaboration with Firstbeat Technologies Oy.
Wellbeing webinars were held and the Firstbeat
Life measurement solution was offered to all SRV
personnel for 3 months.
Topics covered by SRV’s internal communi-
cations during the first half of the year included
the recovery programme. Change projects – and
an associated results-hungry culture – were cov-
ered during the latter half of the year. The coro-
navirus pandemic dominated internal commu-
nications from the spring onward. Guidelines
and templates were created for changing cir-
cumstances. Efforts were also made to support
personnel and, above all, ensure they were able
to work safely. A variety of virtual events helped
to brighten up everyone’s daily lives.
Performance management and the develop-
ment of a results-hungry culture are key themes
for 2021. The development of the employer im-
age and measures to enhance the attractive-
ness of the industry in turn ensure long-term
competitiveness.
Occupational health and safety
SRV’s safety activities are always based on ex-
ceeding legal requirements and being a safety
pioneer in the construction industry. We also
require the same standard of operations from
our subcontractors and other partners. In oc-
cupational safety, SRV’s operations are steered
by the Group’s health and safety policy and our
certified occupational health and safety man-
agement system (ISO 45001).
In 2020, a total of 40,348 (30,438) access
rights were granted to 27,697 individuals for SRV
construction sites in Finland. More than 20,000
digital induction courses were carried out via
distance learning. In 2020, the digital induction
materials were updated and 79 (39) corporate
executive safety inspections were carried out
at different sites.
In 2020, the themes of our occupational safe-
ty efforts were developing our safety culture and
the activities of the Safety Support Group, updat-
ing and further developing tools and operating
instructions, internal audits in accordance with
ISO 45001 and updates to orientation materials.
The special themes in TTT reviews (occupa-
tional health and safety reviews) were content
HR ISSUES, SOCIAL RESPONSIBILITY AND HUMAN RIGHTS
Personnel by segment at end of period
December
December
Percentage of
Group personnel,
Dec
Construction
Investments
Other operations
Group, total
SRV I THE BOARD OF DIRECTORS' REPORT 2020
gion, nationality or ethnic origin, opinions, fam-
ily relations, age, union or political affiliations,
and health. Discrimination or harassment is not
tolerated under any circumstances. The equal-
ity plan is part of our HR plan, which is updated
annually.
SRV has been assessing human rights im-
pacts since 2018. In conjunction with this, we
went through human rights norms, partially link-
ing them together and also adding examples of
the human rights impacts of SRV’s operations.
In 2020, we revised our list of the most impor-
tant human rights. We continued our discussions
with labour hire agencies on the issue of pre-
venting labour exploitation, and the feedback
from these discussions has been constructive.
SRV’s human rights work has been presented to
external stakeholders at seminars arranged by,
among others, HEUNI and the Finland Chamber
of Commerce. In the report published by the SI-
HTI (Status of Human Rights Performance of
Finnish Companies) project in January 2021,
SRV was assessed as being well above aver
-
age. The SIHTI project examined how Finnish
companies are fulfilling their human rights re-
sponsibilities in relation to expectations set out
in the UN Guiding Principles on Business and
Human Rights.
The goal for 2021 is to assess the experienc-
es of our own staff and all those working on con-
struction sites in relation to possible discrimina-
tion and harassment, and for the supply chain
to further identify the risks associated with the
realisation of direct purchase human rights for
some significant categories.
Supervision of the supply chain
SRV has to ensure that its subcontractors and
suppliers meet these requirements and do not
cause an increased risk to projects. We use
contractual means, such as the Construction
Contract Programme, to ensure the commitment
of our suppliers and subcontractors.
SRV’s Supplier Code of Conduct supplements
the requirements of the Construction Contract
Programme. When it comes to the role that pro-
curement plays as an enabler of sustainable
operation, closer cooperation with suppliers,
competence development and increased un-
derstanding are all important targets. In 2020,
we finished some additional questions for our
supplier registration process, which ask suppli-
ers to provide information about themselves and
responsibility themes. In other words, companies
are asked to provide this information as soon as
they register as SRV partners.
This information is used to assess suppliers,
who may be asked to provide additional infor-
mation later on, either in connection with a com-
petitive tender or if SRV is considering them as
a new partner. This work will continue into 2021
with the goal of making sustainability themes
an integral part of our supplier path all the way
from initial registration to post-work/contract
assessments.
During 2020, we focused on preventing la-
bour exploitation in the supply chain and held
meetings with our year-round labour hire part-
ners. Meetings with these labour hire agencies
covered both the development measures being
implemented by our partners and the current
situation, mainly in relation to the challenges
posed by foreign workers and vulnerable groups.
This work will continue as part of our standard
cooperation with partners, and the answers we
have received will also be utilised in our com-
petitive tendering for labour hire agencies in
spring 2021.
One of our longer-term objectives is to con-
tinuously (and verifiably) improve the level of
sustainability in our partner network and to in-
tegrate the management of contractual partner
risks into our normal process, also with respect
to sustainability. This will also support our aim of
increasing awareness of sustainable operations
in SRV’s partner network.
quality and conducting work risk assessments
(WRAs). Audits also examined safety plans and
the number of safety observations entered into
SRV Safety.
SRV’s long-term target is to reach a level of
zero accidents. The short-term target is to re-
duce the accident frequency by 10 per cent every
year. In our own operations, we have committed
to practices that are in line with these targets.
Level of occupational safety
In 2020, the accident frequency rate at SRV
sites was better than in the previous year. For
SRV’s own employees, the accident frequen-
cy rate was 4.8/million hours worked (8.9). For
contractors, the accident frequency rate was
17.9/million hours worked (16.6), which is roughly
the same as in 2019. SRV has firmly established
a culture of making safety observations. A total
of 17,178 (17,765) safety observations were made
in 2020. SRV’s observation frequency rate for
2020 was 2,445 safety observations per million
hours worked (the industry average is circa 1,000
safety observations per million hours worked).
A total of 123 accidents leading to absence
occurred on SRV construction sites during 2020,
10 of which were serious (+30 days’ absence).
96.0 per cent was SRV’s 2020 goal for the TR
measurements taken during the statutory weekly
safety inspection required on building construc-
tion sites. The company fell short of this target
by a fraction, with an average TR measurement
of 95.97 per cent in 2020. Our systematic and
ambitious safety efforts will continue in line with
our updated 2021 guidelines towards our goal of
zero accidents.
The most important safety objectives for 2021
concern further strengthening management's
commitment, enhancing the quality of accident
investigation, developing safety management,
clarifying the overview as well as improving op-
erational transparency and responsible procure-
ment in our anti-grey economy efforts.
Equality and human rights
In accordance with its Code of Conduct, SRV is
committed to respecting human rights. Human
rights are best promoted by example and
through supervision in the supply chain. A com-
pany’s human rights impact and risks strongly
depend on its sector and products. From the
perspective of SRV and the entire construction
industry, the most significant are the right to life
and the right to health.
Compared to other sectors, construction work
carries a higher-than-average risk, and this poses
a threat to the life and health of employees. Lo-
cal residents’ right to life and health must also be
ensured with regard to, for example, dust man-
agement, noise management and site traffic. For
our customers, product responsibility is another
aspect of protecting human rights.
Bans on slave labour and forced labour are
also fundamental human rights. Labour exploita-
tion can also be encountered in Finland.
The protection of personal security protects
people from physical or mental threats against
their person. For example, bullying and harass-
ment (including sexual harassment/abuse) in
the workplace, or threats and harassment to-
wards minorities.
The right to just and favourable working con-
ditions covers things such as appropriate work-
ing conditions and appropriate terms and con-
ditions of employment. Risks in this area include
life- or safety-threatening working conditions or
employees not being properly paid for their work.
Principles of equality and non-discrimination
run through all human rights norms. These prin-
ciples require that human rights are ensured for
everyone regardless of their personal character-
istics (such as gender, ethnic background, religion,
etc.). Examples of situations relating to these
principles include discrimination in recruitment,
compensation, promotion or customer service.
Everyone at SRV is treated equally regard-
less of gender or gender identity, language, reli-
SRV I THE BOARD OF DIRECTORS' REPORT 2020
CODE OF CONDUCT
Ethical operations based on transparency
SRV’s values – sustainability, enthusiasm, profit-
ability, bold in development and open in co-oper-
ation – will continue to create a firm foundation
for further development. Our Code of Conduct
creates a sustainable foundation for everything
we do. All of SRV’s companies, Board members,
management and employees are obligated to
comply with the Code of Conduct regardless of
their station. SRV also seeks to get third parties,
such as subcontractors and other cooperation
partners, to commit to the Code of Conduct.
SRV has an Ethics Channel through which an-
yone can anonymously report observed or sus-
pected behaviour that contravenes the Code
of Conduct. We received three reports via the
Ethics Channel in 2020. Three reports were re-
ceived through other channels. In addition, the
Ethics Channel received some safety observa-
tions, which were addressed in SRV Turva. All
reports were investigated in accordance with
the agreed process.
In 2020, SRV established a Compliance Team
to enhance compliance. The Compliance Team
seeks to enhance awareness of compliance is-
sues and their importance in the Group as well
as to improve the flow of information and coor-
dination on the issues between units. It also aims
to increase knowledge of existing compliance
guidelines and assess the need for new instruc-
tions and training. The Team can also review re-
ported cases of misconduct and internal audit
findings, and use these to develop compliance
functions.
Prevention of bribery and corruption
SRV complies with legislation and official reg-
ulations in all of its operations and requires the
same of its employees, subcontractors and other
partners. The company only works with reliable
and reputable partners. We check the back-
grounds of subcontractors and other partners
before engaging in any cooperation.
As set out in the Code of Conduct, no one
at SRV accepts or gives gifts that could impact
business-related decision-making. Business-re-
lated hospitality should be moderate and of min-
imal value. Anti-corruption practices are an un-
conditional requirement of SRV’s operations,
and subcontractors and other partners are also
required to have zero tolerance for corruption.
Combatting the grey economy
SRV is committed to the prevention of econom-
ic crime, and is continually developing its op-
erating methods and new tools to improve the
transparency, legality and controllability of the
entire operating chain. The company’s efforts are
based on both long-term cooperation with the
authorities and considerable investments in the
development of its own processes. Preventing
economic crime is a natural part of overall con-
struction quality and project management.
Construction site orientation and advance
checks of partners’ social obligations are impor-
tant tools in the fight against the grey economy.
In addition to the above, the company also has
the SRV Network Register (which SRV developed
for official reporting) and an electronically man-
aged process for compliance with the Act on the
Contractor’s Obligations and Liability.
On Anti-Grey Economy Days, we highlight
problematic areas and provide guidance for per-
sonnel. Four Anti-Grey Economy Days were held
in 2020. On these days, construction sites in-
spected the documents required by contractors
and their subcontractors under the Act on the
Contractor’s Obligations and Liability.
The sites also inspected the personal IDs of
all those working on site, determined their em-
ployers and tax numbers, and ensured they had
received proper orientation.
The results of the Anti-Grey Economy Days
showed that the challenges we face are still em-
ployees not clocking in to construction sites and
employees without personal IDs and orientation
stickers. The clocking-in rate is being improved
by, for example, better fencing around construc-
tion sites, the use of turnstiles, and more effec-
tive management of SRV Network Register ac-
cess permits.
A good level has been attained with regard to
subcontractors and issues relating to the Act on
Contractor’s Obligations and Liability. No tempo-
rary prohibitions or other sanctions were issued
by the authorities during inspections relating
to occupational safety, foreigners and the Act
on the Contractor’s Obligations and Liability on
SRV’s construction sites in 2020.
In 2020, we finished some additional ques-
tions for our supplier registration process, which
ask suppliers to provide information about them-
selves and responsibility themes. The information
about suppliers in particular will be used to further
strengthen our fight against the grey economy.
SRV adheres to official procurement proce-
dures in the management of all new suppliers
and existing supplier relationships, and the SRV
Network Register is an element of this. The Net-
work Register is an IT system that helps SRV to
combat the grey economy, promote co-opera-
tion with the authorities, increase construction
site safety, and ensure a continuous overall pic-
ture of large projects.
The Network Register is continually updat-
ed to meet both the practical needs of SRV’s
work and authorities’ requirements and wishes.
In 2020, we further developed the SRV Network
Register with regard to features such as digital
time cards and integrations with Power BI sys-
tems that will facilitate security status reporting.
ENVIRONMENT
The concrete consequences of climate change
on both individuals and companies can be seen
in stakeholders’ growing interest in environmen-
tal issues. SRV’s responds to these requirements
with legislative compliance, environmental pro-
tection, operational development, and continu-
ous improvement with the aid of the ISO 14001
environmental system. We also require our sub-
contractors and partners to follow the same prin-
ciples.
In accordance with our environmental policy,
the goals of SRV’s environmental activities are
developing material efficiency and waste man-
agement on sites, reducing the energy consump-
tion of sites, implementing projects and buildings
that place a smaller burden on the environment,
and encouraging partners to develop more sus-
tainable operating methods.
Environmental impacts
The environmental impacts of construction sites
are mainly caused by construction waste, dis-
turbances to the surrounding area, transpor-
tation, and the consumption of energy, water
and materials. The management of storm water,
trench water and chemicals is of key importance
in preventing environmental contamination. At
SRV’s sites in Finland, environmental activities
are based on the environmental plan, waste man-
agement plan, and other plans drafted to address
the special characteristics of the site. The envi-
ronmental risks of subcontractors and means of
preventing them are reviewed during contract
negotiations, weekly site meetings and the risk
assessments of each work phase.
We seek to minimise impacts on the surround-
ing environment when planning construction
sites. Impacts arise from factors such as dust,
noise, vibration, traffic arrangements, and chang-
es in the ecosystem. Both the authorities and
those in the surrounding area are kept informed
about the impacts and timetables of construction
sites. Special natural features, such as protected
habitats and species, are taken into considera-
tion when planning construction.
SRV I THE BOARD OF DIRECTORS' REPORT 2020
Environmental objectives
When on-site operations begin, an HSEQ kick-
off meeting is held and an environmental officer
is appointed for each site. In our own construc-
tion projects, we define project-specific envi-
ronmental targets together with our customers.
The aim is to provide customers with enough
information on factors with a significant bearing
on environmental impacts for use in their deci-
sion-making, starting from the design phase.
Environmental indicators are monitored with a
browser-based system into which information on
waste volumes and energy and water consump-
tion is entered. Statistics on the previous year
are compiled and analysed at the beginning of
the year for annual reporting and management
reviews. Management reviews specify the ob-
jectives of environmental system development
and the measures to be taken.
Material efficiency and minimising the amount
of waste are two of the main objectives of SRV’s
environmental activities. By steering both pro-
jects and design, we are able to influence mate-
rial choices and technical solutions. Good design,
in particular, can enable successful procure-
ment. A waste management plan is drawn up
on every construction site in cooperation with
the waste management contractor, and this
helps to ensure that the sorting of site waste at
its source is properly planned and implemented.
Since 2016, new projects have been covered by
targets for the specific waste volume and sort-
ing-at-source rate, which are set by the type of
building.
Sites use a great deal of energy in different
forms. Due to climate conditions in the north, the
greatest amount of energy is used on heating.
SRV is seeking to improve energy efficiency in a
variety of ways, such as optimising and modern-
ising equipment, and naturally by choosing the
heating system that best suits the situation. En-
ergy needs can also be impacted by the careful
implementation of through-holes, the covering
of holes, and weather protection. Energy con-
sumption is monitored in every project. Envi-
ronmental deviations are monitored not only
with regular TR measurements, but also with an
observation tool that studies both accidents at
work and environmental damage.
The waste targets for 2020 were as follows:
recovery rate 92%, sorting rate 45-70% and spe-
cific waste volumes 2.5-14 kg / rm3 depending on
the type of site. When SRV’s operations are ex-
amined as a whole, waste targets were achieved
in 2020, even though certain targets were not
achieved on some sites. There is still some vari-
ation between sites when it comes to waste indi-
cators, although this is expected to decrease in
the future through enhanced operational quali-
ty. However, SRV has a broad spectrum of pro-
jects and there are regional differences in waste
management services. It is therefore important
for management reviews to run through the rea-
sons for our successes and challenges – and for
us to learn from them. Promoting these targets
has been facilitated by our partners and the en-
tire chain that utilises raw materials.
No major damage occurred in 2020. The most
common deviations related to oil and fuel leaks,
which were most often caused by subcontrac-
tors’ machinery. As a consequence, we have fur-
ther emphasised the importance of proper main-
tenance and inspection for machinery, and have
also urged our subcontractors to keep absorp-
tion agents near machinery to aid in the speedy
clean-up of any damage. Changing climatic con-
ditions, such as increased precipitation and mild-
er winters, are also affecting construction. Wind-
storm damage was also reported in 2020.
The 2020 objective of carrying out a broader
analysis of climate risks and reporting on them
in greater detail has been postponed to 2021. In
addition, SRV will update its long-term environ-
mental objectives in line with its strategy, which
is heavily focused on sustainability.
CHANGES IN THE CORPORATE
EXECUTIVE TEAM
Changes occurred in both the Team’s composi-
tion and areas of responsibility on 3 December
2020, when Henri Sulankivi was appointed to
the Team with responsibility for Regional Units.
At the same time, Juha Toimela’s area of respon-
sibility changed to Business Premises, Helsinki
Metropolitan Area (formerly Business Premises,
Regional Units and Infrastructure) and Kimmo
Kurki took responsibility for Internal Services and
Infrastructure (formerly Internal Services). The
Group’s Corporate Executive Team saw further
changes on 1 January 2021, when Jarkko Rantala
was appointed CFO in addition to his previous
area of responsibility. Miia Eloranta was appoint-
ed Senior Vice President, Communications and
Marketing as of 4 January 2021, and Kristiina
Sotka Senior Vice President, Human Resources
as of 1 February 2021.
The members of SRV’s Corporate Execu-
tive Team are
• Saku Sipola, President and CEO
•
Timo Nieminen, Executive Vice President,
Deputy CEO, Senior Vice President, Strategic
Project Development
•
Jarkko Rantala, CFO (as from 1 January 2021)
•
Kim Jolkkonen, Senior Vice President, Hous-
ing, Helsinki Metropolitan Area
•
Henri Sulankivi, Senior Vice President,
Regional Units (as from 3 December 2020)
•
Jussi Tuisku, Senior Vice President, Russia
and Estonia
•
Miia Eloranta, Senior Vice President, Commu-
nications and Marketing (as from 4 January
2021)
•
Kristiina Sotka, Senior Vice President, Human
Resources (as from 1 February 2021)
•
Johanna Metsä-Tokila, Senior Vice President,
General Counsel
•
Antti Nummi, Senior Vice President, Business
Development
•
Kimmo Kurki, Senior Vice President, Internal
Services and Infrastructure
• Jouni Forsman, Senior Vice President, Busi-
ness Premises, Helsinki Metropolitan Area
(as from 15 March 2021)
Maija Karhusaari left the Group and the
Corporate Executive Team on 4 January 2021,
Ilkka Pitkänen resigned from the employ of
the Group on 31 January 2021 and stepped
down from the Corporate Executive Team on
31 December 2020, and Juha Toimela left the
Group and the Corporate Executive Team on
1 March 2021.
The changes have no impact on reporting.
RISKS, RISK MANAGEMENT AND
CORPORATE GOVERNANCE
SRV has published a separate Corporate
Governance Statement in its Annual Review and
on the company's website. More detailed infor-
mation about the company's financial risks and
financial risk management has been provided in
Note 29 to the Financial Statements.
The most significant risks concern negative
changes in SRV’s and its customers’ operating
environment and currently the coronavirus pan-
demic in particular, capital employed in major
projects, SRV’s earnings trend, availability of
financing for SRV and its projects, the develop-
ment of the situation in Russia, the rouble ex-
change rate and key project implementation
risks.
Demand for SRV’s products and services
might be weakened by negative changes in, for
instance, general economic development, the
business environment of SRV and its custom-
ers, the functionality of financial markets and the
political operating environment. SRV’s business
SRV I THE BOARD OF DIRECTORS' REPORT 2020
opportunities would be weakened by the deteri-
oration of the operating conditions of business
premises customers, the weakening of corpo-
rate and consumer confidence and purchasing
power, an increase in interest rates, more diffi-
cult availability of financing or financial problems
in public administration. In particular, a decline
in the need for business premises, growth in the
yield requirements of investors, tighter invest-
ment criteria, a decrease in the demand for and
prices of apartments, and the weakening of in-
vestment opportunities in public administration
may pose a substantial risk to the company’s fi-
nancial position and profitability.
The main risk is currently posed by the coro-
navirus pandemic and its impact not only on
the operating conditions and business of SRV,
its customers and other partners, but also its
broader effects on general economic develop-
ment. Any cases of illness, quarantines and the
restrictions imposed by countries have a nega-
tive impact on the business performance of vari-
ous parties because they weaken or prevent ac-
cess to personnel resources and materials. The
uncertainty caused by this situation also weak-
ens the confidence of companies and private
individuals and their outlook for the future. This
reduces investments and consumption, and tem-
porarily puts economic development in reverse.
Many countries started to lift restrictions in
the early summer 2020, but had to tighten them
again in the latter part of the year as the pandem-
ic took a turn for the worse. The seriousness of
the situation will be significantly impacted if the
pandemic is prolonged further. The scheduling
and effectiveness of Covid-19 vaccinations will
be decisive. In spite of the pandemic, construc-
tion activity in Finland remained at a higher level
than expected in 2020. However, the Confedera-
tion of Finnish Construction Industries estimates
that construction will decline by about 4 per cent
in 2021. Thus far, the coronavirus pandemic has
only caused relatively minor problems to SRV’s
construction operations in Finland. SRV is close-
ly assessing the developing impacts of the pan-
demic and is proactively taking the necessary
measures to maintain health and wellbeing, pre-
vent the spread of the pandemic and ensure
business continuity. Over the longer term, the
population shift into SRV’s main business are-
as in Finland’s key growth centres will continue,
laying down a good foundation for operations
when the situation returns to normal. The afore-
mentioned risks have been addressed in the ac-
counting principles of the financial statements.
SRV’s ongoing major projects and completed
shopping centre projects are tying up a great deal
of capital, as does developer-contracted con-
struction. The availability and price of financing
are critical to the company's business. As part of
its previously announced recovery programme,
the company carried out numerous measures,
such as divestments of assets, refinancing and
two share issues during the first part of 2020.
As a result, the company’s balance sheet and
financing position and liquidity improved signif-
icantly by the end of the second quarter. How-
ever, availability of financing for developer con-
tracting projects and certain guarantees remains
challenging.
Financing for developer-contracted projects
is ensured with sales of projects, project-specif-
ic credit and the use of the company’s general
financing reserves. The company only starts up
projects for which financing has been secured.
The implementation of new orders recognised
in the order backlog in 2020 will not require any
financing from SRV, with the exception of devel-
oper-contracted housing projects. The company
will only consider launching other new projects
if there is sufficient demand and the necessary
financing can be assured with the aid of the com-
pany’s general financing reserves and the sale
of project-specific receivables to financial in-
stitutions and project-specific loans negotiated
separately before the start-up of the project in
question. Receivables can be sold for the pur-
pose of liquidity management only within the
limits allowed.
Net rental income from SRV’s shopping cen-
tre investments typically reaches its target lev-
el about 3–5 years after opening. Once this oc-
curs, it is SRV’s strategy to sell the investment.
Developments in rental income are impacted by
factors such as general economic trends, con-
sumer behaviour, successful shopping centre
management, the shopping centre’s reputation
and, in Russia, also the rouble exchange rate.
Weaker-than-planned developments in different
factors and the assumptions made, both when
starting up shopping centres and on the sched-
uled sale date, may result in a need to lower the
shopping centre’s value in the balance sheet. The
prolongation of the coronavirus pandemic and
economic uncertainty in Russia might mean that
the sale of Russian shopping centres will be post-
poned. SRV’s investments in shopping centres
are minority interests in associated companies.
The initiation of their sale or the timing of the sale
are agreed upon in the shareholder agreement
of each investment. That is, SRV cannot decide
on the sale of projects or their date of sale on its
own. If, on the other hand, the shareholder agree-
ment permits the other shareholders to sell the
property before it reaches its optimal financial
value, and they decide to do so, this may lead to
the need to reduce the balance sheet value of
the shopping centre.
Negotiations on the sale of the Pearl Plaza
shopping centre ended without reaching an
agreement during the review period. In line with
its strategy, SRV still intends to divest the shop-
ping centre, but it is not possible to predict when
exactly it will do so.
SRV has made a financing commitment
equating to a 1.8 per cent holding in the Han
-
hikivi-1 nuclear power plant project to Fennovo-
ima’s main owner, Voimaosakeyhtiö SF. SRV has
the same rights and obligations as other Voima-
osakeyhtiö SF shareholders. In April 2020, Fen-
novoima announced that construction will start
in 2021. The balance sheet value of the invest-
ment is EUR 10.7 million, which corresponds to
the amount that SRV has invested in the pro-
ject. The current and future value of the invest-
ment involves risks, particularly with regard to
the longer-term price of electricity.
In its Russian business, fluctuations in the rou-
ble exchange rate expose SRV to translation
and transaction risks. A ten per cent weakening
of the rouble against the euro on the reporting
date would have had an impact of about EUR -6.3
million on the Group’s equity translation differ-
ences. A ten per cent weakening in the exchange
rate would correspondingly have an impact of
about EUR -4.9 million on SRV’s earnings if the
effect of currency hedging were not taken into
account. The exact rouble hedging rate varies
over time. SRV’s transaction risk largely com-
prises the euro-denominated loans of associ-
ated companies that are partly owned by SRV.
The remaining exchange rate risk is hedged in
accordance with the hedging policy approved
by the Board of Directors.
SRV Group Plc's Russian subsidiary, of which
SRV Group Plc indirectly owns 51 per cent, is in-
volved in legal proceedings in Russia. A court of
first instance ruled that SRV’s subsidiary must
pay EUR 3.1 million in compensation to a counter-
party. This sum was recognised in full as a pro-
vision for expenses in the second quarter. In the
third quarter the court of second instance over-
turned the ruling of the court of first instance. The
dissolution of the provision had an impact of EUR
2.7 million at the September exchange rate, and
thus the euro-denominated result for the review
period is burdened by expenses of EUR 0.4 mil-
lion. The applicant appealed to the third instance
and the proceedings had not yet been initiated
at the balance sheet date. However,in February
2021, the third instance had already dismissed
the plaintiff's appeal. The plaintiff still has the
SRV I THE BOARD OF DIRECTORS' REPORT 2020
right to appeal to the Supreme Court. The law-
suit concerned an agreement for an electrical
connection that was never implemented.
To increase the comparability of operations,
the company reports operative operating profit in
addition to operating profit. Operative operating
profit differs from the IFRS definition of operat-
ing profit in that it eliminates the calculated cur-
rency exchange differences included in financial
items in Russian operations and their potential
hedging impacts. SRV also reports certain key
figures without the impact of IFRS 16.
Competitive project operations with products
and services comprise a critical success factor
for SRV’s business and may be subject to signif-
icant risks. SRV seeks to implement profitable
contracting projects for developers and to de-
velop profitable developer contracting projects
and property projects together with its partners.
A key challenge is to ensure that the portfolio
consists of viable projects in each economic
cycle and market situation.
The company continuously monitors the
needs of customers and the market situation,
and seeks to react rapidly to changes. Large de-
velopment projects that tie up a great amount
of capital are especially vulnerable to fluctu-
ations and risks. In its own development pro-
jects, the company is currently pursuing more
projects carried out with partners, and in con-
tracting it seeks to utilise cost-flexible means
of implementation that do not require financ
-
ing from the company. The company might also
lose markets to new or growing competitors or
business models. SRV seeks to manage these
risks by retaining its position as one of the top
companies in its field by investing in the devel-
opment of its systems and own customer-fo-
cused, flexible and networked operating model
(SRV Approach).
Retention of skilled employees, hiring of com-
petent new employees and maintaining a part-
ner network for professional implementation
also pose risks to operations. The company
takes care of the health and safety of its em-
ployees with well-run health services, system-
atic guidelines and monitoring. In addition, the
company continuously offers its personnel op-
portunities to engage in training, development
and communal activities. Efficient and commit-
ted action to achieve the company’s objectives
also reduces the likelihood that various risks will
materialise.
Success in project planning and implemen-
tation and the management of the partner net-
work also involve risks related to issues such as
operational quality, costs, scheduling, safety, the
shadow economy and the environment. The op-
erations system that guides SRV’s functions in-
corporates ISO-certified quality, environmental,
occupational health and safety systems as well
as a procurement system and the SRV Network
Register. Project operations are developed pro-
actively. The key perspectives include not only
costs, quality and customer service, but also re-
sponsibility and harnessing digitalisation.
Sustainability risks
Identified risks relate to issues such as serious
accidents, the grey economy, labour exploitation,
working conditions in the supply chain, adapting
to climate change, climate risks, meeting inves-
tors’ requirements, and our reputation through
stakeholders’ eyes. The coronavirus has brought
new risks, not only in the form of a physical threat
but also to coping and satisfaction at work. These
risks are different in on-site and office work.
The physical effects of climate change, such
as extreme weather phenomena, may hinder
construction and property maintenance. Cli-
mate impacts are increasingly being consid-
ered in financing decisions as well. Integrating
climate risks into financing costs is an effective
means of encouraging companies to act in the
best interests of the environment. Green tax-
onomy is part of the EU’s sustainable finance
Subarea Major risks identified Risk identification and management
All subareas • Code of Conduct
• Supplier Code of Conduct
• Ethics Channel
• Internal audit
• Compliance Team
• Construction Contract Programme
HR issues, social respon
-
sibility and human rights
• Accidents at work
• Work exhaustion due to heavy work load
• Negligence of terms of employment or
working conditions
• Work-related discrimination and harass
-
ment
• Labour exploitation in supply chain
• Negligence of societal obligations
• Health and safety of local communities
• Product responsibility to customer cus
-
tomers
• ISO occupational safety manage
-
ment system
• ISO quality system
• Audits and management reviews
• Corporate executive safety inspections at
sites
• External audits
• Internal cross-audits
• HSEQ kick-off meetings at sites
• TTT reviews
• Safety Support Groups
• SRV Safety system
• -minute safety information sessions
• Safety observations
• TR measurements
• Personnel survey
• SRV Network Register
• Operating process and guidelines for har
-
assment or discrimination incidents
• Responsible Procurement Steering Group
• Supplier cooperation
• Collecting and processing customer feed
-
back
Environmental issues • Environmental damage and accidents
• Physical climate risks
• ISO environmental management
system
• External audits
• Project risk management process
• Process risk identification and manage
-
ment
• Environmental plan
• HSEQ kick-off meetings at sites
• Site guidance
• Internal audits
Adaptation to climate
change
• Statutory requirements and increased reg
-
ulation
• Business requirements set by customers,
investors and financiers
• Energy and lifecycle services
• Carbon footprint, lifecycle calculation
• RTS environmental classification tool
• Development of ESG reporting
• Solutions and concepts in line with the
new strategy
Prevention of bribery and
corruption
• Illegal or inappropriate activities
• Neglect of social responsibilities
• Compliance training
• Information to be collected in the supplier
register
• Anti-Grey Economy Day
• Responsible Procurement Steering Group
• SRV Network Register
• Background studies on procurements
Risks related to HR issues, social responsibility, human rights,
climate and environmental issues, and the prevention of bribery and corruption
SRV I THE BOARD OF DIRECTORS' REPORT 2020
action plan, and it provides the financial sector
with tools for assessing the sustainability of po-
tential investments.
In recent years, labour exploitation has also
been exposed in supply chains in Finland. Due
to workforce mobility and the complex nature of
supply chains, it is important that all parties are
aware of their rights and obligations. Companies
influence human rights on a daily basis through
their subcontractors, partners, customers and
other stakeholders.
Together with the Sustainability Director,
SRV’s senior management and risk manage
-
ment organisation are responsible for identi-
fying and reporting sustainability risks, and for
implementing risk management measures. We
are continually working to control and reduce
risks in both our own operations and our sub-
contractor network.
SRV’s Code of Conduct for its own per-
sonnel and suppliers creates a foundation for
compliance. The SRV Construction Contract
Programme defines the basic sustainability re-
quirements for our partners and subcontractors.
For example, subcontractor chaining is limited to
two tiers. Certified management systems create
a strict framework for operation and require con-
tinual improvement and development, includ-
ing risk management. Risk management is also
enhanced by SRV’s internal Compliance Team,
which was established in autumn 2020.
SRV’s new strategy, which was published in
February 2021, takes a firm stand on the role that
business plays in combating climate change and
adapting to a changing business environment.
SRV is launching a spearhead programme, which
incorporates lifecycle wisdom with all construc-
tion and cooperation from the selection of con-
struction sites to maintenance and services.
Thanks to this new strategy, the physical
threats and business opportunities and risks
associated with climate change will be analysed
more comprehensively. We will continue to as-
sess human rights impacts in 2021, so that we
can use this information to implement practical
measures in both our own operations and our
supply chain.
The adjacent table presents the identified
risks and the measures taken to manage them.
CORPORATE GOVERNANCE AND
THE DECISIONS OF THE ANNUAL
GENERAL MEETING
SRV Group Plc’s Annual General Meeting (AGM)
was held on Thursday, 26 March 2020. The
meeting adopted the financial statements and
remuneration policy for governing bodies as well
as discharged the Board of Directors and the
President & CEO from liability for the financial
period 1 January–31 December 2019.
Dividend payment
Based on the adopted balance sheet and the
Board of Directors’ proposal, the Annual General
Meeting decided that no dividend will be distrib-
uted for the financial year ending 31 December
2019.
The Members and Chair of the Board of
Directors and remuneration
The number of members of the Board of
Directors was confirmed to be six (6). Minna
Alitalo, M.Sc. (Econ.), Olli-Pekka Kallasvuo,
Master of Laws, LL.D.h.c., Timo Kokkila, M.Sc.
(Tech.) and Tomi Yli-Kyyny, M.Sc. (Tech.) were
re-elected to the Board of Directors. Hannu
Leinonen, M.Sc. (Tech.) and Heikki Leppänen
Lic.Sc. (Tech.) were elected as new members to
the Board of Directors. Tomi Yli-Kyyny was elect-
ed as the Chairman of the Board of Directors.
The term of office of members of the Board of
Directors will end at the close of the 2021 Annual
General Meeting.
The Annual General Meeting resolved that the
remuneration for the members of the Board of
Directors shall be EUR 5,000 per month for the
Chairman, EUR 4,000 per month for the Vice
Chairman and EUR 3,000 per month per mem-
ber as well as a EUR 700 fee per member per
Board and committee meeting. In addition, travel
expenses arising from work for the Board of Di-
rectors shall be reimbursed in accordance with
the company’s travel policy.
Auditor and remuneration
PricewaterhouseCoopers Oy, a firm of
authorised public accountants, was elect-
ed as auditor of the company for a term
until the close of the Annual General Meeting
of 2021. PricewaterhouseCoopers Oy has
announced that Samuli Perälä, Authorised
Public Accountant, will serve as the responsible
auditor. The auditors’ remuneration was con-
firmed as payable on the basis of an approved
invoice.
Amendment of the Articles of Association
The Board of Directors resolved that article 4 of
the Articles of Association is amended as follows:
4 § The Board of Directors of the company
consists of the minimum of five (5) and the max-
imum of eight (8) ordinary members. The Board
of Directors shall elect a Vice Chair from among
its members. The term of office of the Board
members expires upon the closing of the first
Annual General Meeting of Shareholders fol-
lowing the election.
The General Meeting of Shareholders shall
elect a chairman for the same term of office.
Financing arrangement and related
authorisations to issue shares
Relating to the planned financing arrangement,
the Annual General Meeting resolved on an au-
thorisation to issue shares as proposed by the
Board of Directors.
Authorisation for directed share issue
The Annual General Meeting authorised the
Board of Directors to resolve on a directed share
issue as follows:
The shares to be issued under the authorisa-
tion are new shares. Under the authorisation, a
maximum of 100,000,000 shares can be issued.
Under the authorisation, new shares would
be issued in a directed share issue, i.e. in de-
viation from the shareholders' pre-emptive
rights, to the holders of the hybrid notes issued
by the company on 22 March 2016 (ISIN code
FI4000198114) and holders of the hybrid notes
issued by the company on 23 May 2019 (ISIN
code FI4000384185). Subscriptions would be
paid by setting off hybrid bonds against their
nominal value and accrued interest. A directed
share issue always requires a weighty financial
reason for the company.
The Board of Directors was authorised to re-
solve on all other terms and conditions of the
share issue.
The authorisation is valid until 30 Septem-
ber 2020.
The authorisation revokes prior unused au-
thorisations granted by the General Meeting to
the Board of Directors to resolve on share issues,
transfers of shares held by the company and/or
the granting of special rights entitling to shares
as referred to in Chapter 10, Section 1 of the Finn
-
ish Companies Act. The authorisation shall not,
however, revoke any other share issue authorisa-
tions to be passed at the same General Meeting.
Authorisation for rights issue
The Annual General Meeting authorised the
Board of Directors to resolve on a share issue
as follows:
The shares to be issued under the authorisa-
tion are new shares. Under the authorisation, a
maximum of 500,000,000 shares can be issued.
The shareholders have a pre-emptive right to
the new shares in the same proportion as they
SRV I THE BOARD OF DIRECTORS' REPORT 2020
already hold shares in the company. Howev-
er, shares not subscribed by shareholders may
be offered on a secondary basis for subscrip-
tion by other shareholders or by other persons.
The Board of Directors is entitled to decide to
whom the shares that remain unsubscribed
will be offered. Subscriptions would be paid
in cash.
The Board of Directors was authorised to
resolve on all other terms and conditions of the
share issue.
The authorisation is valid until 30 Septem-
ber 2020.
The authorisation revokes prior unused au-
thorisations granted by the General Meeting to
the Board of Directors to resolve on share is-
sues, transfers of shares held by the company
and/or the granting of special rights entitling to
shares as referred to in Chapter 10, Section 1 of
the Finnish Companies Act. The authorisation
shall not, however, revoke any other share issue
authorisations to be passed at the same General
Meeting.
Authorisation to decide on the acquisition
of the company's own shares
The Annual General Meeting authorised the
Board of Directors to resolve on the acquisition
of the company’s own shares using the compa-
ny’s unrestricted equity as follows:
The Board of Directors is authorised to ac-
quire a maximum of 5,000,000 shares in the
company so that the number of shares acquired
on the basis of the authorisation, when combined
with the shares already owned by the company
and its subsidiaries, does not at any given time
exceed a total of 10 per cent of all shares in the
company.
Shares may be acquired in public trading ar-
ranged by Nasdaq Helsinki Ltd at the market
price at the moment of acquisition. Own shares
may be acquired otherwise than in proportion to
the existing holdings of the shareholders. Shares
may be acquired in one or several instalments.
Treasury shares can be acquired for use 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 Board of Directors is authorised to re-
solve on all other terms and conditions of the
acquisition of the shares.
The authorisation is valid for 18 months from
the date of the decision of the General Meeting.
It revokes the authorisation granted to the Board
of Directors at the Annual General Meeting on 19
March 2019 to decide on the repurchase of the
company's own shares.
Authorisation to decide on a share issue
and on the issue of special rights
The Annual General Meeting authorised the
Board of Directors to resolve on a share issue
and granting of special rights as follows:
The Board of Directors may decide on the is-
suance of new shares or the reissuance of shares
held by the company and/or granting of other
special rights entitling to shares as referred to in
Chapter 10, Section 1 of the Finnish Companies
Act either for consideration or free of consider-
ation in one or several instalments.
Under the authorisation, the number of shares
to be issued or the number of reissued shares
held by the company, including the shares issued
on the basis of the special rights, shall not exceed
12,000,000 shares. Any shares issued on the
basis of special rights entitling to shares are in-
cluded in the aforementioned aggregate amount.
New shares may be issued, the company's
own shares held by the company reissued and/
or other special rights entitling to shares pursu-
ant to Chapter 10, Section 1 of the Finnish Com-
panies Act may be granted in deviation from the
pre-emption rights of shareholders only if there
exists a weighty financial reason for the compa-
ny. A directed share issue may be free of consid-
eration only if there exists, for the company and
taking into account the interests of all its share-
holders, a particularly weighty financial reason.
The authorisation may be used inter alia when
issuing new shares or conveying shares as con-
sideration in corporate acquisitions, when the
company acquires assets relating to its busi-
ness, in order to strengthen the company's cap-
ital structure and for implementing incentive
schemes. However, the authorisation may not be
used in connection with the financing arrange-
ment pursuant to Section 17 of the notice to the
Annual General Meeting ("Approval of a planned
financing arrangement and related authorisa-
tions to issue shares").
The Board of Directors was authorised to re-
solve on all other terms and conditions of the
share issue.
The authorisation shall be in force for 18
months from the decision of General Meeting.
The authorisation revokes prior unused author-
isations granted by the General Meeting to the
Board of Directors to resolve on share issues
or the granting of share options and other spe-
cial rights entitling to shares. The authorisation
shall not, however, revoke any other share issue
authorisations to be passed at the same Gen-
eral Meeting.
Establishment of a Shareholders’
Nomination Board
The Annual General Meeting resolved to estab
-
lish a Shareholders’ Nomination Board whose
task is to prepare proposals concerning the
composition and remuneration of the Board of
Directors to the Annual General Meeting.
The Shareholders’ Nomination Board com-
prises of four (4) members. The three largest
shareholders of the company are each entitled
to nominate one member. The Chairman of the
Board of Directors serves as the fourth member
of the Nomination Board.
The right to appoint a member lies with those
three shareholders whose share of the votes of
all shares in the company is largest, based on the
company’s shareholders’ register held by Euro-
clear Finland Ltd as of August 31 of the preced-
ing calendar year of the Annual General Meeting.
In the event that a shareholder who has an ob-
ligation in accordance with the Securities Market
Act to make notifications regarding changes in
ownership (shareholder subject to flagging no-
tification) notifies the Chairman of the Board of
Directors of the matter in writing at the latest
on 30 August of the preceding calendar year of
the Annual General Meeting, the shareholdings
of such a shareholder divided between sever-
al funds or registers shall be counted as one. In
the event that a shareholder does not wish to
use his/her right to appoint a member, the right
to appoint shall be transferred to the next larg-
est shareholder.
The Annual General Meeting confirmed the
Charter for the Shareholders’ Nomination Board.
The Company’s Charter for the Shareholders’
Nomination Board is available on SRV Group
Plc’s website at www.srv.fi/agm
THE ORGANISATION OF
SRV GROUP PLC’S BOARD
OF DIRECTORS AND THE
COMPOSITION OF ITS
COMMITTEES
SRV Group Plc's Board of Directors held its or-
ganisational meeting on 26 March 2020. The
Board of Directors elected a Vice Chair and the
members of its Board Committees for a term
ending at the closing of the Annual General
Meeting in 2021. Olli-Pekka Kallasvuo was se-
lected as Vice Chair of the Board of Directors.
SRV I THE BOARD OF DIRECTORS' REPORT 2020
Minna Alitalo was elected as Chair and Hannu
Leinonen and Timo Kokkila as members of the
Audit Committee. Tomi Yli-Kyyny was elected
as Chair and Olli-Pekka Kallasvuo and Heikki
Leppänen as members of the HR and Nomina-
tion Committee.
CHANGES TO THE MULTIYEAR
INCENTIVE SCHEME OF THE
PRESIDENT AND CEO
On 17 December 2020, the Board of Directors
of SRV Group Plc decided on changes to the
share-based incentive scheme of President and
CEO Saku Sipola. The changes concern the num-
ber of acquisition rights, the subscription price
of the acquisition rights and the periods during
which the acquisition rights can be exercised.
The purpose of the changes is to ensure that the
incentive effect of the scheme remains at its pre-
vious level by taking into account the changes in
the number of the company’s shares caused by
SRV’s 2020 rights issues. The incentive effect
of the scheme is based on the value increase of
SRV Group Plc’s shares.
As a result of the changes, Sipola has the
right to acquire 1,000,000 shares at a subscrip-
tion price of EUR 0.55 per share. The basis for
determining the subscription price is the vol-
ume-weighted average price of SRV’s share on
Nasdaq Helsinki in continuous trading from 1 Au-
gust to 30 November 2020. After the changes,
the acquisition rights can be exercised in the fol-
lowing three periods: the first begins on 1 March
2022 and ends on 28 February 2023, the second
begins on 1 March 2023 and ends on 31 August
2024, and the third begins on 1 September 2024
and ends on 31 August 2026. During the first and
second exercise periods, the acquisition rights
holder is entitled to exercise 300,000 acquisi-
tion rights and during the third period 400,000
acquisition rights.
The share-based incentive scheme has been
described in Note 7.
SHARES AND SHAREHOLDERS
SRV Group Plc’s share capital is EUR 3.1 million.
The share has no nominal value and the number
of shares outstanding is 263,017,341. The com-
pany has one class of shares.
Before the two share issues organised in May
and June, the number of registered shares was
60,499,575.
In the directed share issue held in May, a total
of 71,468,395 new SRV shares were issued with
a subscription price of EUR 1.05 per share. The
subscriptions were paid by setting off hybrid
bonds issued by SRV and the interest accrued on
them up to 30 April 2020. The new shares were
registered on 19 May 2020 in the Trade Register
maintained by the Finnish Patent and Registra-
tion Office. Trading in the new shares began on
20 May 2020 on the stock exchange list main-
tained by Nasdaq Helsinki Ltd.
A total of 131,049,371 new shares were sub-
scribed for in the rights issue in June. The sub-
scription price of the shares was EUR 0.38 per
share. The shares were registered on 18 June
2020 in the Trade Register maintained by the
Finnish Patent and Registration Office. Trading
in the new shares began on 22 June 2020 on
the stock exchange list maintained by Nasdaq
Helsinki Ltd. As a result of the registration of the
new shares, the total number of shares issued by
SRV is 263,017,341.
On 6 July 2020, SRV announced that it had
assigned a total of 67,950 treasury shares to the
members of the company’s share-based incen-
tive plan. The earnings period for the scheme
was the calendar years 2017-2019. After the as-
signment, SRV Group Plc holds 850,649 treas-
ury shares (0.3 per cent of the total number of
shares and combined number of votes).
The closing price at Nasdaq Helsinki on 31
December 2020 was EUR 0.59 (EUR 1.00 on
31 December 2019, change -41.0%). The high-
est share price during the reporting period was
EUR 1.10 and the lowest EUR 0.45. The highest
and lowest prices quoted for the review period
and the price at the end of the previous year are
adjusted for share issues. At the end of the peri-
od, SRV's equity per share excluding the hybrid
bond was EUR 0.65. On 31 December 2020, SRV
had a market capitalisation of EUR 154.7 million,
excluding the Group’s treasury shares. 45.5 mil-
lion shares were traded during the review period
with a trade volume of EUR 28.8 million.
FINANCIAL OBJECTIVES
SRV’s strategy and all of its operations are guided
by the 2021–2024 strategic financial objectives
that were approved in February 2021:
• Operative operating profit: 6 per cent by the
end of the period.
•
Gearing excluding the impact of IFRS 16: 40-
60 per cent by the end of the period.
•
As the company gradually reduces its indebt-
edness, SRV expects that it will pay dividends
in accordance with its dividend policy no ear-
lier than for the 1 January–31 December 2023
financial year. The longer-term objective is to
distribute dividend of 30–50 per cent of the
annual result, taking into account the capital
needs of business operations.
The updated definition of operative operating
profit is used in these financial objectives (see
Outlook for 2021).
PROPOSAL FOR THE
DISTRIBUTION OF PROFITS
The parent company’s distributable funds on
31 December 2020 are EUR 262,165,834.13,
of which net profit for the financial year is
EUR -11,924,838.45. The Board of Directors pro-
poses to the General Meeting that no dividend
be paid for the 2020 financial year.
EVENTS AFTER THE PERIOD
•
SRV announced its new strategy and long-
term financial objectives for 2021-24 on
4 February 2021.
•
On 14 January 2021, SRV appointed Jouni
Forsman as Senior Vice President, Business
Premises in the Helsinki metropolitan area
and as a member of the Corporate Executive
Team.
•
On 13 January 2021, SRV specified its esti-
mate of operative operating profit for 2020
due to changes in the valuation of certain bal-
ance sheet items in the Investments segment.
GENERAL MEETING
The Annual General Meeting of SRV Group Plc is
scheduled for Monday 29 March 2021, starting at
4 pm. The Annual General Meeting will deal with
the matters specified in Article 11 of the Articles
of Association and any other Board proposals.
The Board of Directors will convene the Annual
General Meeting separately at a later date.
Espoo, 2 March 2021
Board of Directors
SRV I THE BOARD OF DIRECTORS' REPORT 2020
FINANCIAL INDICATORS OF THE GROUP
Revenue EUR million
Operative operating profit
EUR million - -
Operative operating profit, revenue - -
Operation profit EUR million - -
Operation profit, revenue - -
Operation profit, excl. IFRS
EUR million - - -
Operation profit, revenue excl. IFRS
- - -
Profit before taxes EUR million - - -
Profit before taxes, of revenue - - -
Net profit attributable to equity holders of
the parent company EUR million - - -
Return on equity, - - -
Return on investment, - - -
Return on investment excl. IFRS
- - -
Capital employed EUR million
Capital employed excl. IFRS
EUR million
Equity ratio
Equity ratio excl. IFRS,
Net interest-bearing debt EUR million
Net interest-bearing debt excl. IFRS
EUR million
Net gearing ratio,
Net gearing ratio excl. IFRS,
Order backlog
EUR million
New agreements EUR million
Personnel on average
Earnings per share
EUR - - -
Earnings per share (diluted)
EUR - - -
Equity per share
EUR
Equity per share (excluding hybrid bond)
EUR
Dividend per share
Dividend payout ratio,
neg. neg. neg.
Dividend yield,
Price per earnings ratio (P/E-ratio)
neg. neg. neg.
Share price development
Share price at the end of the period EUR
Average share price EUR
Lowest share price EUR
Highest share price EUR
Market capitalisation at the end of the period
EUR million
Trading volume
Trading volume,
Weighted average number of shares outstanding
Weighted average number of shares outstanding (diluted)
Number of shares outstanding at the end of the period
Effect of currency exchange fluctuations EUR million - - -
1
Alternative performance measures used in interim
reporting
The company discloses certain other widely used perfor-
mance measures that can for the most part be derived from
the income statement and balance sheet. The formulas for
these performance measures are provided in the next page.
In the company’s view, these measures clarify the result of
operations and financial position based on the income state-
ment and balance sheet
SRV presents key figures for operative operating profit
and operating profit margin in the interim report
The key figure for operative operating profit is considered to
provide a better picture of the Group’s operations when com-
paring the reported period to earlier periods. In accordance
with IFRS, the currency exchange rate gains and losses of
associated companies as well as income and expenses from
hedging are eliminated from operating profit. The currency
exchange rate gains and losses of associated companies are
included above operating profit on the line “share of results
of associated companies”. Income and expenses from cur-
rency hedging are included above operating profit on the line
“other operating expenses”
SRV presents key figures excluding effect of IFRS16
standard
The company publishes alternative key figures, that is, IFRS
16 key figures that have been adjusted to exclude the impact
of the IFRS 16 Leases standard on the balance sheet and re-
sult. SRV is applying a simplified approach to adopting this
standard, which is why the figures for the comparison peri-
od have not been adjusted to comply with the standard. The
figures are considered to provide a better comparability to
previous year figures.
2
At the end of the period
3
The Group's order backlog consists of the Construction
business.
4
The comparison figures have been adjusted to reflect
share issue.
CALCULATION OF KEY FIGURES
Return on equity, %
= 100 x
Total comprehensive income for the period
Total equity, average
Capital employed = Total assets – non-interest bearing debt – deferred tax liabilities – provisions
Capital employed, excl. IFRS16 =
Total assets – non-interest bearing debt – deferred tax liabilities – provisions – property, plant and equipment, right
-of-use asset – inventories, right-of-use asset
Return on investment, % = 100 x
Operating profit + interest and other financial income (incl. exchange rate gains and losses) + Financial receivables
write-down and sales loss
Invested capital, average
Return on investment, % excl. IFRS16 = 100 x
Operating profit + interest and other financial income (incl. exchange rate gains and losses)
Capital employed excl. IFRS16, average
Equity ratio, % = 100 x
Total equity
Total assets – advances received
Equity ratio,% excl. IFRS16 = 100 x
Total equity – IFRS16 depreciations, leases and interest and financial expenses recognised in income
statement - IFRS16 Retained earnings
Total assets – advances received – IFRS16 depreciations, leases and interest and financial expenses recognised in
income statement
Net interest-bearing debt = Interest-bearing debt – cash and cash equivalents
Net interest-bearing debt excl. IFRS16 = Interest-bearing debt - interest-bearing lease liabilities – cash and cash equivalents
Net gearing ratio, % = 100 x
Net interest-bearing debt
Total equity
Net gearing ratio,% excl. IFRS16 = 100 x
Interest-bearing debt - interest-bearing lease liabilities – cash and cash equivalents
Total equity – IFRS16 depreciations, leases, interest and financial expenses recognised in income statement
Earnings per share attributable to equity
holders of the parent company
=
Result for the period – non-controlling interest – hybrid bond interest, tax adjusted
Average number of shares
Earnings per share attributable to equity
holders of the parent company (diluted)
=
Result for the period – non-controlling interest – hybrid bond interest, tax adjusted
Average number of shares at end of period
Equity per share =
Shareholders' equity attributable to equity holders of the parent company
Average number of shares at end of period
Equity per share (without hybrid bond) =
Shareholders' equity attributable to equity holders of the parent company – hybrid bond
Average number of shares at end of period
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
Operative operating profit = Operating profit -/+ currency exchange rate gains and losses -/+ income and expenses from hedging
SHARES AND SHAREHOLDERS
Share price trend
and trading of shares
The shares of SRV Group Plc are quoted on the
Nasdaq Helsinki Exchange. The trading with SRV
Group Plc’s shares started on the Main list of
OMX on 15 June 2007. During 2020 the highest
price was EUR 1.10 and the lowest price EUR 0.45.
The average share price for 2020 was EUR 0.60
and the closing price EUR 0.59, giving the com-
pany a market capitalisation of EUR 154.7 million
as of 31 December 2020. 45.5 million shares were
traded in OMX which corresponds to 26.2 % of
the weighted average number of SRV shares
outstanding. The trading value of the shares was
EUR 28.8 million.
The authorisations
of the Board of Directors
The Annual General Meeting of SRV Group Plc
resolved on March 26, 2020, to authorise the
Board of Directors to decide on the repurchase
of company shares as proposed by the Board
of Directors. The authorisation of repurchase
of company shares is valid 18 months from the
decision of Annual General Meeting (note 25).
Management
shareholding
The Members of the Board of SRV Group
Plc as well as the President and CEO and the
Deputy CEO owned directly a total of 16,854,372
shares on 31 December 2020 which corre-
sponds to 6,4% of SRV shares and voting rights.
Timo Kokkila owns SRV shares through Havu
Capital Oy.
Shareholders on 31 December 2020
Shareholder
Number of
shares
Holding and
voting rights,
PONTOS CAPITAL AS
KESKINÄINEN ELÄKEVAKUUTUSYHTIÖ ILMARINEN
KOLPI INVESTMENTS OY
OP-HENKIVAKUUTUS OY
POHJOLA VAKUUTUS OY
HAVU CAPITAL OY
TIIVISTE-GROUP OY
LAREALE INVESTMENTS OY
TUNGELIN INVESTMENTS OY
KOKKILA LAURI TAPANI
KOKKILA TUOMAS TAPANI
VALTION ELÄKERAHASTO
NORDEA HENKIVAKUUTUS SUOMI OY
KESKINÄINEN TYÖELÄKEVAKUUTUSYHTIÖ VARMA
TELIAN ELÄKESÄÄTIÖ
SUOMEN MERIMIES-UNIONI SMU RY
SEFLO AB
AKSIDENSSI OY
SRV YHTIÖT OYJ
DREAM BROKER OY
largest shareholders
Nominee registration
Other
Total number of shares
Breakdown of share ownership on 31 December 2020
By number of shares owned
Number of shares
Number of
shareholders
of
shareholders
Number of
shares of shares
–
–
–
–
–
–
–
–
–
Total
of which nominee registrations
By shareholder category
of shares
Corporations
Financial and insurance institutions
Public institutions
Households
Non-profit organisations
Non-Finnish shareholders
Total
SRV I
FINANCIAL STATEMENTS 2020 29
Consolidated Financial Statements, IFRS
CONSOLIDATED INCOME STATEMENT
EUR 1,000
Note
2020
2019
Revenue
3
Other operating income
4
Change in inventories of finished goods and work in progress
-828
-79,800
Use of materials and services1
-868,172
-897,233
Employee benefit expenses
7
-69,427
-73,063
Share of profits of associated and joint venture companies
16
-13,562
Depreciations
6
-7,387
-8,705
Impairments
6
-11,487
-81,339
Other operating expenses1
5
-10,874
-13,421
Income and expenses on currency derivatives2
5
-3,847
Operating profit
-93,047
Financial income
9
Financial expenses
9
-33,136
-37,745
Financial income and expenses, total
-29,426
-29,304
Profit before taxes
-27,958
-122,351
Income taxes
10
Net profit for the financial year
-25,107
-103,608
Attributable to
Equity holders of the parent company
-22,807
-104,355
Non-Controlling interests
-2,301
Earnings per share attributable to equity holders of the parent company
11
-0.15
-1.52
Earnings per share attributable to equity holders of the parent company
(diluted)
11
-0.15
-1.52
1 The company has clarified the presentation between the lines.
2 The company has separated income and expenses on currency derivatives on its own row
from 1.1.2020 and restated the presentation for the year 2019.
STATEMENT OF COMPREHENSIVE INCOME
EUR 1,000
Note
2020
2019
Net profit for the financial year
-25,107
-103,608
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
-3,260
Share of other comprehensive income of associated companies and joint
ventures
16
-15,060
Other comprehensive income for the year, net of tax
-18,320
The share of comprehensive income attributable to equity holders of the par-
ent company
-18,569
Non-controlling interests in comprehensive income
Total comprehensive income for the year
-43,427
-92,071
Total comprehensive income attributable to:
Equity holders of the parent company
-41,375
-92,857
Non-Controlling interests
-2,052
SRV I
FINANCIAL STATEMENTS 2020 30
CONSOLIDATED BALANCE SHEET
EUR 1,000
Note
2020
2019
ASSETS
Non-current assets
Property, plant and equipment
13
Property, plant and equipment, Right-of-use asset1
13
Goodwill
14
Other intangible assets
14
Shares in associated and joint venture companies
16
Other financial assets
15, 17
Receivables
15, 18
Loan receivables from associated companies and joint ventures
15, 21
Deferred tax assets
19
Non-current assets, total
Current assets
Inventories
20
Inventories, Right-of-use asset1
20
Account and other receivables
15, 22
Loan receivables from associated companies and joint ventures
15, 21
Current tax receivables
Cash and cash equivalents
23
Assets classified as held for sale
24
Current assets, total
ASSETS TOTAL
EUR 1,000
Note
2020
2019
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent company
Share capital
25
Invested free equity fund
25
Translation differences
25
-19,953
-1,385
Hybrid Bond
25
Retained earnings
-78,183
-49,522
Equity attributable to equity holders of the parent company, total
Non-controlling interests
-4,016
-2,009
Equity, total
Non-current liabilities
Deferred tax liabilities
19
Provisions
26
Interest-bearing liabilities excluding lease liabilities
15, 27
Interest-bearing lease liabilities1
27
Other liabilities
15, 28
Non-current liabilities, total
Current liabilities
Account and other payables
15, 28
Current tax payable
Provisions
26
Interest-bearing liabilities excluding lease liabilities
15, 27
Interest-bearing lease liabilities1
27
Current liabilities, total
Liabilities, total
EQUITY AND LIABILITIES, TOTAL
1 Items related to IFRS 16 standard
SRV I
FINANCIAL STATEMENTS 2020 31
CONSOLIDATED CASH FLOW STATEMENT
EUR 1,000
2020
2019
Cash flows from operating activities
Cash receipts from customers
Cash receipts from other operating income
Cash paid to suppliers and employees
-888,665
-1,043,614
Net cash before interests and taxes
Interests received and other financial income
Interests paid and other expenses from financial costs
-29,560
-29,300
Income taxes paid and received
-542
Cash flow from operating activities
-10,727
Cash flows from investing activities
Purchase of tangible and intangible assets
-819
-1,957
Sale of tangible and intangible assets
Purchase of investments
-4,586
Proceeds from sale of investments
Investments in associated companies and joint ventures
-7,396
-15,971
Associated companies and joint ventures sold
Increase in loan receivable from associated companies and joint ventures
-2,742
-5,970
Decrease in loan receivable from associated companies and joint ventures
Loans granted
-177
-15,746
Proceeds from repayments of loans
Net cash used in investing activities
-5,948
Cash flows from operating and investing activities in total
-16,675
EUR 1,000
2020
2019
Cash flow from financing activities
Net cash from share issue
Share issue costs
-3,378
Proceeds from loans
Repayment of loans
-17,352
-41,735
Proceeds from Hybrid bond
Repayment of hybrid bond
-20,500
Hybrid bond costs
-1,136
Hybrid bond interests
-427
-4,240
Change in housing corporation loans
-9,705
-27,843
Net change in short-term loans
-18,500
-73,294
Dividends paid
-70
Repayment of lease liabilities
-2,609
-3,854
Net cash flow from financing activities
-2,243
-49,224
Net change in cash and cash equivalents
-65,899
Cash and cash equivalents at the beginning of period
Effect of exchange rate changes in cash and cash equivalents
-1,724
Cash and cash equivalents at the end of period
SRV I
FINANCIAL STATEMENTS 2020 32
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity attributable to equity holders of the parent company
Non-
Share
Invested free
Translation
Hybrid
Retained
controlling
Equity
EUR 1,000
capital
equity fund
differences
Bond
earnings
Total
interests
Total
Equity, total, 1 Jan 2020
-1,385
-49,522
-2,009
Net profit for the financial year
-22,807
-22,807
-2,301
-25,107
Other comprehensive income items (with the tax effect)
Foreign currency translation differences for foreign operations
-3,508
-3,508
-3,260
Share of other comprehensive income of associated companies and joint ventures
-15,060
-15,060
-15,060
Other financial assets
Other comprehensive income total
-18,569
-18,569
-18,320
Comprehensive income for the review period
-18,569
-22,807
-41,375
-2,051
-43,427
Transactions with the owners
-70
Dividends paid
-70
Share-based incentive plan
Right issue
Hybrid bond conversion, 2016
-12,700
-1,053
Hybrid bond conversion, 2019
-54,840
-4,948
Cost related to share issues excl. taxes
-2,703
-2,703
-2,703
Hybrid bond interests
-342
-342
-342
Other changes
Transactions with the owners, total
-67,540
-5,854
Equity, total, 31 Dec. 2020
-19,953
-78,183
-4,016
Equity, total, 1 Jan 2019
-12,884
-2,760
Net profit for the financial year
-104,355
-104,355
-103,608
Other comprehensive income items (with the tax effect)
Foreign currency translation differences for foreign operations
Share of other comprehensive income of associated companies and joint ventures
Other financial assets
Other comprehensive income total
Comprehensive income for the review period
-104,355
-92,857
-92,071
Transactions with the owners
-35
Dividends paid
-35
Share-based incentive plan
Sale of treasury shares
Purchase of treasury shares
Share issue
Tax cost related to share issue
Hybrid Bond, 2016
-20,500
-3,393
-23,893
-23,893
Hybrid Bond, 2019
-485
Other changes
Transactions with the owners, total
-3,815
-35
Equity, total, 31 Dec. 2019
-1,385
-49,522
-2,009
Description of operations
SRV Group Plc and its subsidiaries (SRV Group)
comprise one of Finland’s leading project man-
agement contractors that builds and develops
commercial and business premises, housing as
well as industrial and logistics projects in Finland,
Estonia and Russia.
In line with the Group’s strategy, business op-
erations are organised into two segments: Con-
struction and Investments. The main companies
are SRV Construction Ltd and SRV Russia Oy.
The Construction segment covers all of SRV’s
construction activities including the capital and
plots required for developer-contracted hous-
ing production. It is SRV’s intention to develop,
build and sell these plots to a faster schedule
than those we report on in the Investments seg-
ment. Construction encompasses housing con-
struction, business construction, technical units
and procurement, as well as internal services in
Finland and Russia.
The Investments segment encompasses both
complete and incomplete sites in which the com-
pany is a long-term investor. Plots that SRV will
develop itself, and whose expected profits will
be generated through development and longer-
term ownership, are also reported on under In-
vestments. The Investments segment focuses on
the management and realisation of the Group’s
real estate investments; the creation and own-
ership of new joint investment structures; and
the operation of selected properties.
Other operations and eliminations include
the group functions of the parent company, SRV
Group Plc, and the Project Development Unit’s
property and project development activities.
Group eliminations are also included in this unit.
Deferred tax assets and liabilities have been allo-
cated in full to Other operations and eliminations.
The Group’s parent company, SRV Group Plc
(the Company), is a Finnish public limited compa-
ny that is domiciled in Espoo, Finland. The Com-
pany’s registered address is Tarvonsalmenkatu
15, 02601 Espoo.
The Company’s Board of Directors approved
these consolidated financial statements on
2 March 2021.
Accounting policies
Basis of presentation
The consolidated financial statements have been
prepared on 31 December 2020 in accordance
with IFRS (International Financial Reporting
Standards). International Financial Reporting
Standards refer to the standards and their inter-
pretations issued and approved for application
within the EU in accordance with the procedure
prescribed in EU regulation (EC) 1606/2002. The
financial statements are presented in thousands
of euros unless otherwise stated.
The consolidated financial statements have
been prepared based on a historical cost basis,
except for financial assets and liabilities at fair
value through income statement, financial assets
and liabilities measured at fair value through in-
come statement and derivative contracts meas-
ured at fair value as well as share-based pay-
ments which are measured at fair value.
Following standards, interpretations and
amendments have been applied beginning from
1.1.2020:
Definition of Material - Amendments
to IAS 1 and IAS 8
The IASB has made amendments to IAS 1
Presentation of Financial Statements and IAS
8 Accounting Policies, Changes in Accounting
Estimates and Errors which use a consistent
definition of materiality throughout International
Financial Reporting Standards and the
Conceptual Framework for Financial Reporting,
clarify when information is material and incorpo-
rate some of the guidance in IAS 1 about imma-
terial information.
The Group has taken into account the defi-
nition of materiality when preparing the consol-
idated financial statements.
Definition of a Business –
Amendments to IFRS 3
According to the revised definition of a business,
the acquired activities and assets must consist
of inputs and a substantive process that must
together significantly contribute to creating out-
puts. The definition of “output” is amended such
that it focuses on providing goods and services
to customers, generating investment returns
and other income, and does not include returns
in the form of lower costs or other economic
benefits.
Due to the amendments, it is likely that more
acquisitions than before will be treated as acqui-
sitions of assets. The change has no significant
impact on the consolidated financial statements.
Revised Conceptual Framework for
Financial Reporting
Changes to the conceptual framework of IFRSs.
Key changes are following: increasing the promi-
nence of stewardship in the objective of financial
reporting, reinstating prudence as a component
of neutrality, defining a reporting entity, which
may be a legal entity, or a portion of an entity, re-
vising the definitions of an asset and a liability, re-
moving the probability threshold for recognition
and adding guidance on derecognition, adding
guidance on different measurement basis, and
stating that profit or loss is the primary perfor-
mance indicator and that, in principle, income
and expenses in other comprehensive income
should be recycled where this enhances the rel-
evance or faithful representation of the financial
statements. The change has no significant im-
pact on the consolidated financial statements.
Changes in IFRS 9, IAS 39 and
IFRS 7 standards
The amendments modify some specific hedge
accounting requirements to provide relief from
potential effects of the uncertainty caused by
the IBOR reform. In addition, the amendments
require companies to provide additional informa-
tion to investors about their hedging relationships
Notes to the consolidated financial statements
SRV I FINANCIAL STATEMENTS 2020
which are directly affected by these uncertain-
ties. The change has no significant impact on the
consolidated financial statements.
The following standards, amendments and
interpretations shall be applied as from the fi-
nancial period beginning on 1 January 2021 or
thereafter. The Group’s management is review-
ing the impact of future standards, amendments
and interpretations on the consolidated finan-
cial statements:
Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16 Interest
The IASB has issued amendments to IFRS 9, IAS
39, IFRS 7, IFRS 4 and IFRS 16 that address issues
arising during the reform of benchmark interest
rates including the replacement of one benchmark
rate with an alternative one. Given the pervasive
nature of IBOR-based contracts, the amendments
could affect companies in all industries.
The amendments cover:
•
Accounting for changes in the basis for de-
termining contractual cash flows as a result
of IBOR reform
•
Additional temporary exceptions from apply-
ing specific hedge accounting requirements
to avoid failure of hedge relationships solely
due to IBOR reform
•
Additional IFRS 7 disclosures related to IBOR
reform
Impacts of the coronavirus on SRV’s
financial reporting
SRV continuously assesses how the coronavirus
epidemic is developing and its potential impacts
on financial reporting.
As part of its previously announced recovery
programme, the company carried out numerous
measures, such as divestments of assets, refi-
nancing and two share issues during the first
part of the year.
SRV has made use of several stimulus meas-
ures introduced in response to the coronavirus
epidemic. The most significant of these are pay-
ment arrangements for VAT and compulsory em-
ployer contributions. The company is updating
its accounting principles to take these arrange-
ments into consideration. Trade and other pay-
ables related to ordinary operations that involve
the obligation to pay interest when payments
are delayed or when payment arrangements
have been instituted are classified as non-in
-
terest-bearing liabilities even after interest is
incurred. At the end of the financial period, oth-
er liabilities included EUR 47.4 million in tax lia-
bilities for which the tax authorities had granted
payment arrangements by the end of the peri-
od. In accordance with these payment arrange-
ments, the company must repay the tax liabilities
in even instalments such that they have been re-
paid in full in June 2022. Interest of 2.5 per cent
is paid on the liabilities covered by the payment
arrangement.
The potential risks arising from the coronavi-
rus pandemic that, if realised, could impact the
company’s result, balance sheet and cash flows
are described below. Other potential coronavi-
rus-related risks to SRV’s business have been de-
scribed in the section of the report of the Board
of Directors titled ‘Risks, risk management and
corporate governance’.
Potential financial risks associated
with the coronavirus pandemic
It is difficult to forecast the impacts of the coro-
navirus pandemic (including the timing, dura-
tion and extent of these impacts) on the global
economy, on the economy in SRV’s operating
countries, and on SRV’s business and that of
its subcontractors and customers, particularly
as both the situation and resulting government
measures are changing very rapidly.
The pandemic and its associated restrictions
are affecting both the company’s subcontrac-
tors and employees. Impacts on subcontrac-
tors may lead to a rise in material prices and
increased problems and disruptions in material
delivery logistics. Combined with sickness ab-
sences and restrictions on the movement of SRV
personnel, they could lead to delays or the sus-
pension of work on construction sites. This could
in turn have a negative impact on the amount of
revenue that can be recognised from projects
and when it can be recognised, and also on pro-
ject profit margins and the profitability of SRV’s
business.
An epidemic or pandemic may significant-
ly impact the financial position and financing
of SRV’s customers, which can in turn lead to
development projects being delayed, tempo-
rary shutdowns of construction sites, cancella-
tions of agreed orders, and the postponement of
start-ups. A deterioration in customers’ financial
positions may also lead to an increase in SRV’s
credit losses as trade receivables decrease in
value.
The coronavirus-related restrictions placed
on the business activities of shopping centre ten-
ants, including any potential rent reductions for
tenants have led and may lead to lower income
from the shopping centres operated by SRV in
Russia. They may have an impact on the value
of loan receivables, either those from the associ-
ated companies that own the Russian shopping
centres or those of SRV’s holdings in associat-
ed companies. Lower-than-expected rental in-
come could also affect the additional sale price
that may potentially be obtained from the sale
of the REDI Shopping Centre. The value of the
additional sales price of the REDI shopping cen-
tre was decreased by EUR 13.0 million during the
fourth quarter on the basis of an updated cash
flow-based forecast.
The pandemic could also affect demand for
SRV’s projects and services, such as commercial
premises and housing. Reduced demand could
have a negative impact on SRV’s future revenue,
cash flow, liquidity and, for example, whether SRV
will be able to meet the covenants for its financ-
ing agreements. The pandemic may also affect
the availability of project and working capital fi-
nancing. A protracted pandemic could also lead
to a reduction in the value of SRV’s financial as-
sets, deferred tax assets, unbuilt plots, and any
development projects classified as inventories. In
addition, the progress of the pandemic in Russia
may affect the exchange rate of the rouble and,
consequently, the valuation of SRV’s assets lo-
cated in Russia.
Use of estimates
The preparation of financial statements in accord-
ance with IFRS requires the Group’s management
to make certain estimates and exercise judgement
in applying accounting policies. The estimates and
assumptions have an effect on balance sheet as
-
sets and liabilities as well as on revenues, expens-
es and contingent liabilities for the reporting peri-
od. Estimates and assumptions have been used
for example in the impairment testing of goodwill,
property, plant and equipment and intangible as-
sets, in the revenue recognition of construction
contracts, in the measurement of current assets,
in the measurement of warranty and other provi-
sions, in the valuation of investments in associates
and joint ventures, in the recognition of current
income tax assets and liabilities, and the meas-
urement of assets held for sale.
This Financial statement has been prepared
on a going concern basis, as SRV’s management
considers that there are no material uncertain-
ties concerning the ability to continue as a going
concern. In addition to the coronavirus-related
risks detailed above, the future development of
the Group’s operations will be affected by factors
such as its earnings trend, availability of financ-
ing for projects that tie up capital, sufficiency
of liquidity, and the development of the situa-
SRV I FINANCIAL STATEMENTS 2020
tion in Russia and the rouble exchange rate. The
Group’s management has made estimates of the
future revenues, operating margins, investments,
financial position, the expected cash flows from
investments and loan receivables of associated
and joint ventures and working capital require-
ments of the companies.
Assets recognised as revenue over time are
controlled by the customer, and the revenue
and expenses of these customer projects are
recognised as revenue and expenses based on
percentage of completion, when the outcome of
the project can be reliably estimated. Percent-
age of completion is determined by calculating
for each project the share of expenses accrued
by the balance sheet date relative to total ex-
penses estimated for each project. The amount
corresponding to the percentage of completion
is recognised as revenue.
When it is probable that total costs necessary
to complete a project will exceed total revenue
obtained from the project, the expected loss is
recognised immediately as an expense.
Development and developer-contracted pro-
jects may includes variable considerations that
may result, for example, from delay penalties
and lease liabilities. Recognition of revenue is
deferred for the estimated rental liability and
this estimated share of project revenue is rec-
ognised as an advance received. Rental secu-
rity deposits reduce project-related advances
received. Uncertainties associated with signed
lease agreements are taken into account in rec-
ognition of revenue.
The Group carries out an annual impairment
testing of goodwill and intangible assets having an
indefinite useful life. The recoverable amounts of
cash-generating units have been defined on the
basis of value in use calculations. The preparation
of these calculations requires use of estimates.
Warranty provisions and 10-year warranty
provisions are recorded when the amount of the
provision can be estimated reliably. The record-
ed amount is the best estimate of the expected
cost that will be required to meet the claim as of
the balance sheet date. The estimate concerning
probability of costs is based on previous similar
events and previous experience and it requires
judgement from the Group management.
When preparing the financial statements the
Group estimates the net realisable value of cur-
rent assets and the possible consequent need
for write down. Estimates of net realisable value
are based on the most reliable evidence availa-
ble at the time the estimates are made as to the
amount the inventories are expected to realise.
Assessing the need for impairment of invento-
ry items may require management to make esti-
mates of matters such as the future costs of de-
velopment and construction, the future income
and expenses accruing from the item, the mar-
ket return requirement at the time of realisation
and the sale value of the item.
The Group’s relevant holdings in associat-
ed companies and joint ventures are invest-
ments in construction projects, particularly
shopping centres, together with other investors.
The Group assesses the value of these invest-
ments in connection with financial statements
and when there are indication of impairment.
Based on an assessment of the value of the as-
sociated companies and joint ventures that own
completed properties, a valuation calculation is
prepared for properties. For significant invest-
ments, the Group obtains external property as-
sessments, if necessary. The determination of
the present value of investments is subject to
assessment because present value calcula-
tions include, for example, future rental income,
rental discounts given, turn-over based rent
-
al income, occupancy rate, the running costs
of the property, the required return (yield) and,
with respect to shopping centres in Russia,
assumptions about changes in the currency
exchange rate.
When preparing the financial statements the
Group especially estimates if there is a need
for recognition of deferred taxes. The Group
prepares an estimate about the probability of
the profits of group companies against which
the unused tax losses or unused tax credits can
be used.
SRV has estimated the impacts of the risks
caused by the coronavirus epidemic on the Fi-
nancial Statement income statement and bal-
ance sheet. In particular, the company has as-
sessed whether there are indications of the
impairment of assets or the need to update pro-
visions or other accounting estimates.
On 31 December 2019, SRV’s holding in the
Pearl Plaza shopping centre was designated as
an asset held for sale and measured at its proba-
ble selling price less costs of sale, as its sale dur-
ing the next 12 months was considered likely. Ne-
gotiations on the sale of Pearl Plaza progressed
well in early 2020, when it was considered highly
likely that a deal would be made. The coronavi-
rus pandemic slowed down the negotiations. The
second wave of the pandemic was ultimately the
major reason why the sales negotiations ended
without reaching an agreement. Pearl Plaza was
reclassified as a holding in associated companies
and joint ventures during the fourth quarter when
the sales negotiations ended without reaching
an agreement. Due to this reclassification, an
impairment recognised in 2019 was reversed,
with a positive impact of about EUR 6.9 million
on operating profit for 2020 and combined ret-
rospectively its share of the joint venture result
for the financial year 2020.
In addition, a write-down of about EUR 5.4
million for SRV’s holding in Okhta Mall and a
write-down of EUR 0.8 million for the Ratsume-
starinkatu 6 commercial property in Porvoo
were recognised in operative operating profit.
The company also recognised EUR 0.5 million
in income with a cash flow impact due to the fi-
nal dissolution of the investment in the VTBC
fund.
Consolidated Financial Statements
Subsidiaries
The consolidated financial statements comprise
all such companies that belong to parent compa
-
ny SRV Yhtiöt Oy where the Group has author-
ity. The Group has authority in a company if the
Group, by being involved in it, is susceptible to or
entitled to its changing revenue, and is capable
of exerting an impact on the revenue concerned
by applying its authority in a manner that affects
the company concerned. The subsidiaries will
be combined within the consolidated financial
statements from the day that authority is trans-
ferred to the Group, and the combination will end
on the day when this authority ceases. The bal-
ance sheet items of self-sufficient construction
projects are comprised within the consolidated
financial statements.
The financial statements of the SRV Group
have been consolidated using the purchase
method. Acquisition cost is determined by tak-
ing into account funds given as consideration and
measured at fair value, and liabilities assumed,
as well as the direct costs of an acquisition. Ac-
quired and identifiable assets and liabilities are
measured at fair value at the acquisition date,
irrespective of the size of any non-controlling in-
terests. The amount by which the cost exceeds
the fair value of Group’s share of the net identi-
fiable assets acquired is recorded as goodwill.
If the acquisition cost is less than the fair val-
ue of the acquired subsidiary’s net assets, this
difference is recorded directly to the income
statement.
The accounting policies of subsidiaries have
been changed as necessary to correspond the
Group’s accounting policies. Intra-group trans-
actions, receivables and liabilities as well as un-
realised gains on intra-group transactions are
eliminated in the consolidated financial state-
ments. Unrealised losses are eliminated if the
loss is not caused by impairment.
SRV I FINANCIAL STATEMENTS 2020
The group recognizes non-controlling inter-
ests in an acquired entity either at fair value or at
the non-controlling interest’s proportionate share
of the acquired entity’s net identifiable assets.
Non-controlling interests have been present-
ed separately after Net profit for the period and
in Total equity. Losses applicable to non-con-
trolling interests in a subsidiary are allocated to
non-controlling interests, even if doing so caus-
es the non-controlling interests to have a nega-
tive balance.
Changes in the ownership share of the par-
ent company in the subsidiary that do not lead
to the loss of authority are treated as business
operations affecting equity. When the authority
of the Group ceases, the remaining ownership
share is valuated to the fair value of authority
on the loss date, and the change in book value
is entered as an effect on income. This fair value
functions as an original book value when the re-
maining share is later treated as an associated
company, joint venture or as financial assets. In
addition, amounts entered previously into other
comprehensive income-based items respective
to the enterprise concerned will be treated as if
the Group had directly transferred the assets
and liabilities connected with them. This may
mean that amounts entered previously into oth-
er comprehensive income-based items will be
transferred as effect on income.
Associated companies and Joint ventures
Associated companies are all enterprises in
which the Group has considerable influence,
but not authority. This is generally based on share
ownership that generates 20–50% of the vot-
ing rights.
A joint arrangement is an arrangement of
which two or more parties have joint control.
Joint control is the jointly agreed sharing of con-
trol of an arrangement, which exists only when
decisions about the relevant activities require the
unanimous consent of the parties sharing control.
A joint arrangement is either a joint operation or
a joint venture. A joint venture is an arrangement
whereby the parties that have joint control of the
arrangement have rights to the net assets of the
arrangement, whereas in a joint operation the
parties that have joint control of the arrangement
have rights to the assets, and obligations for the
liabilities, relating to arrangement.
The Group has applied the IFRS 11 stand-
ard to all joint arrangements from the outset of
2014 onwards. According to IFRS 11, the joint ar-
rangements are classified as joint operations or
joint ventures in compliance with the investors'
contractual rights and obligations. The Group
has assessed the character of its joint arrange-
ments and has determined that they are joint
ventures.
The associated companies and joint ventures
are combined in the consolidated financial state-
ments by using the capital share method. If the
Group's share of associated company and joint
venture losses exceeds the book value of the in-
vestment, the investment will be entered into the
balance sheet with a value of zero, and the losses
exceeding book value will be combined, unless the
Group is not obligated to fulfilling the obligations
of the associated company and joint venture. As-
sociated company and joint venture investment
contains the goodwill that has been generated
from its acquisition. Non-realized profits and loss-
es between the Group and associated companies
and joint ventures are eliminated in accordance
with the Group's ownership share. Non-realized
losses are not eliminated if the transaction sug-
gests a reduction in value of the transferred asset.
The Group’s ownership share from the share of
financial year results from an associated compa-
ny and joint venture is presented before business
profit. The Group’s share of the comprehensive
income items of associated companies and joint
ventures is presented, however, in consolidated
comprehensive income. These arise particularly
from the Group’s share of the translation differ-
ences of associated companies and joint ventures
operating in foreign currency.
The financial statement formulation princi-
ples observed by an associated company and
joint venture have been amended as required to
comply with the principles the Group observes.
In accordance with the Group’s accounting
principles, Group management judges the depre-
ciation period for the finished asset as beginning
after a period of two years, when the probability of
sale, occupancy rate and other important criteria
will be evaluated. Depreciation entries on asset
items must begin no later than three years after
the completion of the asset item.
Foreign currency transactions
Functional and presentation currency
Items of each group company included in the
consolidated financial statements are meas-
ured using the currency that best reflects the
economic substance of the underlying events
and circumstances relevant to Group Company
(the functional currency). The functional cur-
rency of a group company may therefore differ
from the currency used in its country of location.
The consolidated financial statements are pre-
sented in euros, which is the parent company's
functional currency.
Group companies
The income statements of those subsidiaries
whose functional currency is not Euro are trans-
lated into euros using the average monthly rate.
The balance sheets of subsidiaries are translated
into euros using the rates at the balance sheet
date. The translation differences arising from
the use of different exchange rates are record-
ed in Translation differences under equity. In so
far as the loans between the group companies
are considered part of net investment in foreign
subsidiaries, the currency exchange differences
are recorded in Translation differences. When a
foreign subsidiary is sold, the cumulative trans-
lation differences are recognised in the income
statement as part of the capital gain or loss.
Transactions and balance sheet items
Transactions denominated in foreign currency
are recorded using the exchange rate on the
date of the transaction. Monetary foreign cur-
rency items in the balance sheet are measured
using the exchange rate at the closing date. Non-
monetary items denominated in foreign currency
are measured using the exchange rate on date of
the transaction. Exchange rate gains and losses
on business operations are included in corre-
sponding items above operating profit. Exchange
rate differences of financing items are included
in financial income and expenses.
Income recognition
Construction contracts
Sales revenue is recognised when control over
goods or services is transferred to the customer.
The customer obtains control when it is able to
direct the use of goods or services and to obtain
the benefit from them.
The Group’s sales revenues consist of vari-
ous types of residential and commercial projects
as well as other sales. The revenue recognition
practice is described in more detail in Note 3.
A share equivalent to SRV’s own holding is
eliminated from the margin of construction car-
ried out for associated companies and joint ven-
tures. This elimination is recognised as a reduc-
tion in revenue and is entered into the balance
sheet under Advances received. The margin is
realised when the holding is sold to an exter-
nal party.
Order backlog
A construction project is included in the or-
der backlog when the construction contract of
SRV I FINANCIAL STATEMENTS 2020
the project has been signed or the decision to
start construction has been made, and the con-
tract agreement has been signed in developer
contracting projects. In developer-contracted
projects, the order backlog includes the plot in
addition to construction. Moreover, in own-de-
velopment projects, the order backlog may in-
clude the plot, and in revenue recognition it is
part of the project. The order backlog consists
of the share of the projects not yet recognised
as revenue (including the plot). The order back-
log also includes completed and unsold housing
and business properties. The value of the order
backlog is the expected amount of revenue to
be recognised for projects.
Borrowing costs
Borrowing costs in projects that are implemented
for clients outside the Group are recognised as
expenses in the period in which they are incurred.
In developer contracted housing projects, part
of interest on borrowing costs is activated dur-
ing the construction period (this is described in
the section of the accounting policies covering
inventories) and is recognised as an expense
when the project is sold. These interest expenses
are entered as project expenses above operat-
ing profit. In developer contracting of business
premises, interest expenses are activated on
the basis of management’s estimates, as the
sales prices of projects are not always known in
advance.
Research and development
expenditure
SRV Group does not have any actual research
and development expenses. The Group has busi-
ness-related project development costs, and the
treatment of these is described in the section
of the accounting policies covering inventories.
IFRS 16 Leases
According to the standard, all leases, except
those subject to special exemptions under the
standard, are recognised in the balance sheet.
For all leases, a right-of-use asset (the right to
use the leased asset) is recognised as an asset
in the balance sheet and a financial liability rep-
resenting the obligation to make lease payments
is recognised in liabilities. In the income state-
ment lease expenses are presented in depreci-
ation and in financial expenses line. In the cash
flow statement, lease payments are presented in
the item ‘interest paid and other expenses from
financial costs’ and the items ‘proceeds from
loans’ and ‘repayment of lease liabilities’ under
the cash flow from financing activities.
Group leasing activities and their
accounting treatment
Land leases form the most significant proportion
of the right-of-use assets on SRV Group’s bal-
ance sheet. Land leases are usually long-term
and are typically made on behalf of a real es-
tate company being established. When the real
estate company is sold and its management is
transferred to the buyer, the lease and its obli-
gations transfer to the buyer of the property. In
addition to land leases, other significant leases
include, for example, leases for the company’s
fixed operating locations, particularly in Finland
and Russia, and leases for site equipment and
vehicles. Leases for offices are generally made
initially for a fixed term. The duration of the fixed
term is generally 5 to 10 years, after which the
lease continues for an indefinite period with 6-12
months’ notice of termination. Leases for site
equipment are generally made for an indefinite
period with no specific notice of termination.
Equipment is typically leased for 1 month to 12
months. Leases for vehicles are made for fixed
terms and their duration is generally 24 months.
In its reporting, the company applies two ex-
emptions included in the standard that relate
to short-term leases and to leases where the
underlying asset is of low value. Leases whose
lease term is no more than 12 months and indef-
inite leases whose notice of termination is less
than 12 months are considered to be short-term
leases. The most significant short-term leases
are mainly for site equipment. Low-value assets
mainly include IT equipment and small items of
office furniture. In addition, some minor leases,
for example for vehicles and IT equipment are
treated as a group according to the bundling
principle.
At the commencement of the contract, the
lease liability is valued at the present value of the
lease payments payable over the lease term. In
determining the present value of lease payments,
an estimate of the lease term is required in some
circumstances. Such situations, for example,
relate to leases that have options to extend or
terminate the lease. Such an option is taken into
account in determining the lease term if it is rea-
sonably certain that the option will be exercised.
The lease liability also includes the amount to be
paid on the basis of any residual value guarantee
and the possible exercise price of a purchase
option, if it is reasonably certain that the option
will be exercised. There may also be penalty pay-
ments for terminating the lease. Such penalties
are included in the amount of the lease liability
if it is considered during the lease term that the
Group will exercise this option.
Lease payments are discounted at the inter-
est rate implicit in the lease if the interest rate
is readily determinable, otherwise the interest
rate on the lessee’s incremental borrowing rate
is used. Under IFRS 16, the lessee’s incremental
borrowing rate is the rate of interest that the les-
see would have to pay to borrow, over a similar
term and with similar security, the funds neces-
sary to obtain an asset of a similar value to the
right-of-use asset in a similar economic envi-
ronment. Land leases account for more than
90% of SRV Group’s right-of-use assets, and
the interest rate implicit in the leases is always
used as their discount rate. For other leases, the
rate implicit in the lease is primarily used and,
alternatively, the incremental borrowing rate.
The incremental borrowing rate is an estimate of
what the company would have to pay to borrow,
over a similar term and with similar security, the
funds necessary to obtain an asset of a similar
value to the right-of-use asset in a similar eco-
nomic environment. The incremental borrowing
rate used by the company in the last financial
period was 5%.
The acquisition cost of a right-of-use asset
consists of the liability initially measured under
the lease, any lease payments paid by the com-
mencement date of the lease, any initial direct
costs incurred by the lessee and the costs of
restoration to the original condition. Any incen-
tives received are deducted from the acquisi
-
tion cost of the underlying asset. Subsequent
measurement of the right-of-use asset is based
on the acquisition cost model, whereby the right-
of-use asset is measured at acquisition cost less
depreciation and impairment. Depreciation is
recognised on a straight-line basis over the lease
term. If the lease transfers the ownership of the
underlying asset to the lessee by the end of the
lease term or if the acquisition cost of the under-
lying item takes into account that the lessee will
exercise the option to purchase, the underlying
asset is amortised over its useful life.
The Group is exposed to possible increases
in variable rents based on an index or price that
are not taken into account in the lease liability
until they occur. When changes in rents based
on an index or price occur, the lease liability is
reassessed and adjusted against the right-of-
use asset.
The rents paid are allocated to capital and fi-
nancial expenses. Financial expenses are recog-
nised through profit and loss over the lease term,
SRV I FINANCIAL STATEMENTS 2020
such that the interest rate of the outstanding li-
ability is the same in each period.
Accounting principle for plot leases
The SRV Group presents right-of-use assets
related to leased plots as inventories, because
plots directly owned by the Group are presented
as inventories and the same principle is also ap-
plied in the presentation of right-of-use assets.
From the beginning of construction, the depre-
ciations of the leased plots are recognised as
part of the cost of the construction project. The
interest expense on the lease liability presented
in balance sheet liabilities is capitalised as part
of the cost of the construction project.
Accounting principle for premises leases
The SRV Group presents right-of-use assets
related to premises in balance sheet non-cur-
rent assets and in financial liabilities in respect
of the obligation to make lease payments in lia-
bilities. The most significant premises leases in
the SRV Group are the lease for the company’s
head office leases and leases for regional offices
in Finland and Russia.
Accounting principle for site equipment
leases
Leases for site equipment are almost without ex-
ception typically leases with an indefinite lease
term. Such leases generally entitle the compa-
ny to decide to terminate the contract for each
leased item at its chosen time. Site equipment
is generally leased to the site for a special work
stage, in which case the lease term is usually
for less than 12 months. Due to the short lease
terms and flexible termination conditions, the
exemption for short-term leases under IFRS 16
is generally applied to site equipment leases.
If, however, a site equipment lease is made for
a fixed term, and the lease is not low value, the
lease is subject to the same accounting principle
as described above for premises leases.
Accounting principle for office equipment
leases
Leases for IT equipment typically concern of-
fice IT equipment such as printers, multifunc-
tion devices and computers. The exemption for
low-value asset items is applied to these assets.
Leases for IT equipment also include contracts
that cannot be considered to be low value and
short term. Such agreements include, for exam-
ple, IT server leases. The same accounting prin-
ciple as described above for premises leases is
applied to such leases, but such that the asset
items are treated as a single entity in accordance
with the bundling principle. IT equipment lease
terms are typically 24 or 48 months long.
Accounting principle for leased vehicles
Leases of leased vehicles are subject to the
same accounting principle as described above
for premises leases, but such that the asset items
are treated as a single entity in accordance with
the bundling principle. Leases for leased vehicles
are typically 24 months long.
Property, plant and equipment
Property, plant and equipment is entered into
the consolidated balance sheet at acquisition
cost less accumulated depreciation and any ac-
cumulated impairment losses. Acquisition cost
includes the expenses directly related to acquir-
ing the asset. Assets are subject to straight-line
depreciation over the estimated useful financial
life of the asset. Land and water areas are not
depreciated because the useful financial life of
these assets cannot be determined.
Depreciation is recognised as an expense
over the estimated useful financial life of an as-
set as follows:
• Buildings: 40–60 years
• Production machinery and equipment:
3–10 years
• Office fittings: 3–10 years
• IT equipment: 3–5 years
• Vehicles and rolling stock: 5 years
• Other tangible assets: 5–10 years
The carrying amounts and economic lives of
property, plant and equipment are estimated
and values adjusted as needed. The Group es-
timates at every balance sheet date if there is a
need for impairment. If the carrying amount of an
asset item exceeds the estimated recoverable
amount, the carrying amount is lowered to corre-
spond the recoverable amount. When controlling
interest is lost in the current asset company in a
transaction carried out, its remaining holding is
measured at fair value.
Capital gains and losses on property, plant
and equipment are included in the income state-
ment, other operating income or other operat-
ing expenses.
Intangible assets
Intangible assets which have a limited useful
life are valued at historical cost and amortised
over their estimated economic life (3–5 years).
Intangible assets which have an unlimited useful
life are tested yearly for impairment.
Goodwill is the excess of the cost of the
business combination over the fair value of the
Group’s share of acquired net assets. Good-
will is subject to an annual impairment test. For
this purpose, goodwill has been allocated to
cash-generating units. Goodwill is measured
at historical cost less impairment. Impairment
is expensed directly to the income statement.
Assets that are depreciated or amortised are
always tested for impairment when events or
changes in circumstances indicate the carry-
ing amount may not be recovered. Impairment
is recorded through profit and loss to the ex-
tent that the carrying amount of the asset item
exceeds the recoverable amount. The recover-
able amount is the higher of the following: the
fair value of the asset item less selling costs or
its value in use.
Financial assets and liabilities
The Group classifies its financial assets and lia-
bilities in the following groups:
Financial assets: Financial assets at amor-
tised cost or at fair value through profit or loss
Financial liabilities: Financial liabilities rec-
ognised at fair value through profit or loss, or
at amortised cost using the effective interest
rate method.
The Group measures financial assets at am-
ortised cost when the objective of the business
model is to hold the assets and collect all the
contractual cash flows, and when the contrac-
tual cash flows of the instrument consist only
of payments of principal and interest. All other
financial assets are recognised and measured
in the Group at fair value through profit or loss.
A Group entity records financial assets and
liabilities in its balance sheet when – and only
when – it becomes a party to the contractual
terms and conditions of the instrument. When
an entity recognises a financial asset for the first
time, it must classify financial assets and finan-
cial liabilities into the categories specified above.
A Group entity derecognises a financial asset
item from the balance sheet when the contrac-
tual rights to the cash flows from the financial
asset cease to exist or when it transfers the fi-
nancial asset to another party and a significant
part of the risks and benefits of ownership have
been transferred to the other party.
A financial liability is derecognised from the
balance sheet when the obligation specified in
the contract has been discharged, cancelled
or expired.
Financial assets are long-term when their ma-
turity is over 12 months and short-term when the
remaining maturity is less than 12 months. Oth-
er financial assets are included in long-term fi-
SRV I FINANCIAL STATEMENTS 2020
nancial assets unless there is an intention to re-
linquish the investment within 12 months of the
balance sheet date.
Financial liabilities are classified as short-
term if their maturity is under 12 months or if the
Group does not have the absolute right to repay
them at least 12 months after the end of the re-
porting period. Otherwise, they are classified
as long-term.
Derivative instruments
The Group designates derivative instruments
at the time of entering into the contract as ei-
ther cash flow hedges of business or financing
cash flows or as hedges of investments in for-
eign entities. Derivatives are entered into for
hedging purposes and on their basis the receiva-
bles and liabilities in the balance sheet are small.
Contracts concluded with the counterparties of
derivative instruments are based on the ISDA
Master Agreement. According to the terms of
the arrangements, if certain events occur (such
as payment default), the net receivable or liabil-
ity position of an individual counterparty in the
same currency is designated as a liability and all
related arrangements are terminated. As SRV
does not have a legally enforceable offsetting
right at the closing date, said amounts have not
been deducted from each other in the balance
sheet.
Group’s Treasury unit is responsible for the
hedge transactions according to the policy ap-
proved by the Board of Directors. During the fis-
cal year 2020 and 2019 there were no hedges
qualifying for IFRS hedge accounting.
Items recognised at fair value through
profit or loss
The derivative instruments used by the Group
are classified at fair value through profit or loss.
Derivatives are initially recognised in the balance
sheet at fair value on the transaction day and
thereafter measured at fair value on each balance
sheet date. The fair value of interest rate swaps
is usually zero at the original time of recognition.
Changes in fair values of interest rate swaps are
recognised in the income statement under other
financial income and expenses and in the bal-
ance sheet under financial assets or liabilities.
Foreign exchange option premiums are consid-
ered to amount to the fair value at the time of
acquisition.
Changes in the fair values of foreign exchange
forward contracts and options are recognised
in the income statement under other financial
income and expenses, because they are used
primarily to hedge against currency rate gains
and losses included in the share of associated
companies’ income.
Other financial assets may include both quot-
ed and non-quoted shares and they are meas-
ured at fair value through profit or loss. The
fair value of the investment is determined on
the basis of the investment’s bid price. In the
event that there are no quoted bid prices for
the other financial assets, the Group will ap
-
ply various valuation methods to their valua-
tion. These are, for example, recent transac-
tions between independent interests, discounted
cash flows, or other similar types of instrument
valuations.
Measured at amortised cost
Financial assets measured at amortised cost are
trade receivables, other receivables and loan re-
ceivables from associated companies.
Financial assets measured at amortised cost
are initially measured at fair value less transac-
tion costs. After initial recognition, they are rec-
ognised at amortised cost. Interest is recognised
in the income statement over the maturity of the
loan using the effective interest method.
Impairment
In the recognition of expected credit losses, the
Group applies an approach according to which
all trade receivables and contractual assets are
reviewed separately and expected credit losses
recognised over the entire applicable duration.
The project customers are mainly large, well-
known companies with solid finances. If there
is no information on the customer's solvency,
the information is checked from public trade
and credit information registers, with a security
deposit required if necessary. For international
commercial premises projects, more detailed
customer background checks are carried out
for new customers.
Due to the business model and customer
profile described in the previous paragraph, the
Group has not incurred any material credit loss-
es over the last few years, and no material credit
losses are expected regarding the items included
in the balance sheet at closing date.
Loan receivables from associated companies
and joint ventures are tested for impairment us-
ing a three-stage model.
1. The Group’s management first reviews the
expected cash flows for the loan receivables
from associated companies and joint ventures
together with the associated company invest-
ments and regularly assesses whether the cred-
it risk related to the receivables has increased
significantly after they were initially recorded.
If the credit risk associated with a receivable
is deemed to be low or if the credit risk has not
significantly increased after it was initially re-
corded, the receivable is included in Stage 1 and
the impairment is measured based on an esti-
mate of the probability of credit losses occurring
within 12 months. The Group's management has
estimated that the loan receivables in the bal-
ance sheet at closing date are mainly included
in Stage 1, with no material credit losses expect-
ed for them. However, the Group's management
continuously assesses the likelihood of credit
loss risks and monitors any developments in
the situation.
2. If it is discovered that the credit risk concern-
ing a loan receivable has increased significantly,
the loan receivables are transferred to Stage 2,
in which case the associated likelihood of loss is
assessed over the entire lifetime. In this case, the
credit loss is recorded for the entire lifetime of
the loan receivable and calculated by comparing
future estimated cash flows for the entire lifetime
with contractual cash flows. At closing date, the
balance sheet included no loan receivables in-
cluded in Stage 2.
3. If loan receivables are found to be impaired
as a result of credit risk, they are transferred to
Stage 3
Cash and cash equivalents
Cash and cash equivalents consist of cash, cur-
rent bank deposits as well as other current liquid
investments with a maturity not exceeding three
months. Bank overdrafts are included in current
liabilities in the balance sheet.
Non-current assets held for sale
Non-current assets are classified as held for
sale if their carrying amount will be recovered
principally through a sale transaction rather than
through continuing use and a sale is considered
highly probable. They are measured at the low-
er of their carrying amount and fair value less
costs to sell.
An impairment loss is recognised for any ini-
tial or subsequent write-down of the asset to fair
value less costs to sell. A gain is recognised for
any subsequent increases in fair value less costs
to sell of an asset, but not in excess of any cu-
mulative impairment loss previously recognised.
A gain or loss not previously recognised by the
date of the sale of the noncurrent asset is rec-
ognised at the date of derecognition.
Non-current assets are not depreciated or
amortised while they are classified as held for
sale. Interest and other expenses attributa-
ble to the liabilities related to non-current as-
sets classified as held for sale continue to be
recognised.
SRV I FINANCIAL STATEMENTS 2020
Non-current assets classified as held for sale
are presented separately from the other assets
in the balance sheet. The liabilities related to
non-current assets classified as held for sale
are presented separately from other liabilities
in the balance sheet.
Hybrid bonds
The hybrid bonds (equity loans) do not have
maturity dates at which the holder of the loan
can demand repayment of the loan. The hybrid
bonds are unsecured and subordinated to the
Company’s other debt instruments but senior
to other equity instruments. However, the hy
-
brid bonds do not confer shareholders’ rights
to bondholders.
Financial liabilities measured at
amortised cost
Financial liabilities measured at amortised cost
are initially recognised at fair value. Transaction
costs have been included in the original car-
rying amount of financial liabilities. Interest is
recognised in the income statement over the
maturity of the loan using the effective inter-
est method. Financial liabilities are recognised
under non-current and current liabilities and
they can be interest-bearing or non-interest-
bearing.
The liability for repaying the principal and in-
terest on company loans is transferred to the
buyer of the apartment at apartment assign-
ment. Regardless of whether the project is com-
pleted or not, but not yet assigned to the buyer,
the principal and interest for the share of liabil-
ities is presented in full in SRV’s consolidated
balance sheet, calculated until the due date of
the loan. Interest and principal are removed from
the table only when control is assigned.
Inventories
The costing of raw materials and consumables is
measured using weighted average cost method.
The balance sheet item “Work in progress”
comprises the cost of construction work and
plot for uncompleted construction projects not
yet expensed. The acquisition costs included in
the Work in progress are raw materials, direct
cost of labour, other direct costs, indirect costs
of purchase and construction as well as borrow-
ing costs in certain cases.
In SRV’s developer-contracted housing pro-
jects, part of interest expenses on borrowing is
capitalized during the construction period in cur-
rent assets in accordance with the Group’s cap-
italization rate. During the reporting period, SRV
changed its capitalization practice such that,
with respect to developer-contracted housing
projects, interest expenses on borrowing are
capitalized primarily using the project-specific
financing cost. If the proportion of project-spe-
cific financing is not significant, the Group’s cap-
italization rate is used in capitalizing interest
expenses.
The significance of project financing obtained
for developer-contracted housing projects has
grown during the reporting period and, in addi-
tion, the cost of borrowing is currently signifi-
cantly lower than the Group’s average interest
rate, so the new practice will, in the company’s
view, result in a more correct capitalization of
interest expenses.
In the comparison year, the Group’s general
financing was mainly used for developer-con-
tracted housing projects, and as a result, the re-
vision of the capitalization practice would not, in
the company’s view, have a substantial impact
on the comparison periods presented in the fi-
nancial statements.
The balance sheet item “Land areas and
plot-owning companies” comprises costs of
development stage projects. The costs that are
considered to increase the value of land are-
as and plot-owning companies are capitalised.
The balance sheet item “Shares in complet-
ed housing corporations and real-estate com-
panies” comprises unsold completed projects.
The balance sheet item “Advance payments”
comprises advance payments in connection with
the inventories.
The balance sheet item “Other inventories”
comprises share capitals from projects of which
the decision to start construction has not yet
been made and the property bought for resale.
Inventories are valued at the lower of cost and
net realisable value. In ordinary business, net re-
alisable value is the estimated selling price which
is obtainable, less the estimated costs incurred
in bringing the product to its present condition
and selling expenses.
The net realisable value of land areas and
plot-owning companies is based on their ex
-
pected use. The net realisable value of land ar-
eas and plot-owning companies expected to be
used in project operations is evaluated as part
of the net realisable value of the entire project.
Land areas and plot-owning companies are im-
paired only if it is forecast that the project as a
whole will result in a loss. If it is expected that a
land area or plot-owning company will be real-
ised by sale, the net realisable value is based
on the estimated market price. The net realis-
able value of work in progress and completed
housing corporations and real-estate companies
is based on their selling price at the expected
time of sale.
Rental costs remitted to an external party
can be activated to book value for the asset as-
signed to rent; such as, e.g. the rental agency's
fees. Sales and marketing costs are not activated
costs. In preparing the asset, the activated rent-
al costs should be entered as expenditure along
with the average duration of the rental agree-
ments. The margin generated from rental ser-
vices sold by the associated company and joint
venture should be eliminated in relation to the
ownership share.
Expenses arising from construction plans for
plots managed mainly by SRV and classified as
current assets are deemed eligible for activation
when they can be reliably to have a positive im-
pact on the value of the plot or project.
These expenses can be capitalised before a
decision is made on the launch of construction.
Income taxes
Tax expense in the income statement comprises
current taxes and deferred taxes. Current tax is
calculated based on the taxable income for the
financial period using the statutory tax rate that
is force in each country at the balance sheet date
(and local tax legislation). Taxes are recognised
in the income statement, other than those relat-
ed to items of other comprehensive income or
items directly recognised as equity.
Taxes are adjusted for any taxes for previ-
ous periods.
Deferred tax assets or liabilities are recog-
nised on temporary differences arising between
the tax bases of assets and liabilities and their
carrying amounts in the consolidated financial
statements. The deferred tax asset is recognized
for unused losses and all temporary differences.
Deferred taxes are not recognised in connec-
tion with investments made in subsidiaries when
the Group can control the timing of the reversal
of the temporary difference, and the temporary
difference will probably not be reverse in the
foreseeable future. A tax asset is recognised
to the extent when it is probable that the asset
can be utilised against future taxable income. If
a Group company has made a loss in the imme-
diate past then, of the taxable loss, an imputed
tax asset is recognised only up to the amount
where the company has sufficient taxable tem-
porary differences or other convincing evidence
of the ability to utilise the taxable loss.
SRV I FINANCIAL STATEMENTS 2020
Employee benefits
Pension liabilities
Group companies have various pension plans in
accordance with the local regulations and prac-
tices of each country of operation. Pension plans
are funded through contributions paid to insur-
ance companies based on paid salaries and
wages. The Group has only defined contribution
plans. The payments in connection with Group’s
defined contribution plans are recognised in the
income statement in the period which they re-
late to.
Share-based payment
The Group applies IFRS 2 Share-based Payment
standard on its share-based incentive schemes.
Share-based incentive scheme share settled
transaction are valued at fair value by using the
share price at the time of granting and paid in
cash are valued at fair value in every interim and
annual closing. Changes in value are recognised
in the income statement over their effective peri-
od. The share-based payments of the Group are
cash or share settled transactions.
Provisions
A provision is recognised when the company
has a legal or constructive obligation as a result
of a past event, the payment obligation is prob-
able and the amount of obligation can be relia-
bly estimated. If compensation can be received
from a third party for a part of the obligation, the
compensation is recognised as a separate item
when it is virtually certain that the compensation
will be received. A provision is recognised for a
loss-making contract when the costs required
to meet the obligations exceed the benefits re-
ceived from the contract.
SRV and its subsidiaries are re-engaged in
several legal proceedings which relate to ordi-
nary business or to other processes. The re-
sult of these legal proceedings and processes
is difficult to predict. In case of litigation a pro-
vision is recognised in the financial statements
according to the mentioned accounting policies
when there is a legal or constructive obligation
against third-party, payment obligation is prob
-
able and the amount of an obligation can be re-
liably estimated.
Warranty provisions comprise the costs re-
sulting from the repair of completed projects
if the warranty period is still in effect at the bal-
ance sheet date. A warranty provision is recog-
nised at the time of the project hand-over, and
the amount of provision is based on prior ex-
perience of the materialisation of warranty ex-
penses. It is expected that warranty provisions
are used during the two years from the comple-
tion of the project.
The level of the construction industry’s 10-
year warranty provision is based on index-adjust-
ed historical information or the estimated total
costs of certain individual projects. It is expect-
ed that a 10-year provision will be used over the
ten years following the completion of the project.
Dividends
The dividend pay-out proposed by the Board
of Directors to the Annual General Meeting is
recognised in the financial statements when the
company’s shareholders have approved the rel-
evant resolution at the Annual General Meeting.
SRV I FINANCIAL STATEMENTS 2020
SEGMENT INFORMATION
Segment information has been presented in accordance with IFRS 8 and following the accounting princi-
ples of the consolidated financial statements and the Group’s management and organisational structure.
Pricing of transactions between segments takes place at current market prices. The assets and li-
abilities of segments are business items which the segments use in their operations or which on a rea-
sonable basis can be allocated to the segments. Unallocated items include income tax and financial
items as well as items common to the entire Group.
Operating segments
SRV Group has the following operating segments:
Construction
The Construction segment, which has operated since the beginning of 2019, covers all of SRV’s con-
struction activities, including the capital and plots required for developer-contracted housing produc-
tion. It is SRV’s intention to develop, build and sell these plots to a faster schedule than those we report
on in the Investments segment. Construction encompasses housing construction, business construc-
tion, technical units and procurement as well as internal services in Finland and Russia. Construction
employs approximately 800 people, i.e. the most of SRV’s personnel.
Investments
The Investments segment, which has operated since the beginning of 2019, focuses on the management
and realisation of the Group’s real estate investments, the creation and ownership of new joint invest-
ment structures, and the operation of selected properties. Investments en compasses both complete
and incomplete sites in which the company is a long-term investor. Plots that SRV will develop itself,
and whose expected profits will be generated through development and longer-term ownership, are
also reported on under Investments.
Other operations and elimination
Other operations and eliminations include the group functions of the parent company, SRV Group Plc,
and the Project Development Unit’s property and project development activities. Group eliminations
are also included in this unit. Deferred tax assets and liabilities are allocated in full to Other operations
and eliminations
2020
Con-
struction Investments
Other oper
-
ations and
eliminations TotalEUR
Revenue
Revenue recognition at a point in time
Revenue recognition over time
Other revenue
Total
Revenue, external
Revenue, internal -
Total
Included in operating profit:
Depreciations and write-downs, excluding Right-of-use asset - - - -
Depreciations and write-downs, Right-of-use asset - - - -
Operating profit - -
Segment's assets
Shares in associated and joint venture companies
Inventories total, excluding right-of-use asset -
Land areas and plot-owning companies
Work in progress -
Shares in completed housing corporations and
real estate companies
Other inventories -
Loan receivables from associated companies and joint ventures
Right-of-use asset
Other assets
Total
Segment's liabilities, excluding Lease Liabilities
Segment's liabilities, Lease Liabilities
Total
Invested capital
At the end of period
Return on investment, - -
Order backlog
- -
Business construction
Housing construction
Operating segment information
Segment information is reported in a manner consistent with internal reporting to the Chief Operating
Decision Maker (CODM, as per IFRS 8). The CODM is the Group President & CEO, who is assisted de-
cision-making by the Corporate Executive Team. Internal management reporting is consistent with
segment reporting.
In financial year 2020, the Group had one significant customers under the IFRS 8 definition in the
Construction operating segment. In 2019, there was two. The largest customer accounted for approx-
imately 11% of the Group’s revenue.
SRV I FINANCIAL STATEMENTS 2020
2019
Con-
struction Investments
Other oper
-
ations and
eliminations TotalEUR
Revenue
Revenue recognition at a point in time
Revenue recognition over time
Other revenue -
Total -
Revenue, external -
Revenue, internal -
Total -
Included in operating profit:
Depreciations and write-downs, excluding Right-of-use asset - - - -
Depreciations and write-downs, Right-of-use asset - - - -
Operating profit - - -
Segment's assets
Shares in associated and joint venture companies
Inventories total excluding right-of-use asset -
Land areas and plot-owning companies
Work in progress -
Shares in completed housing corporations and
real estate companies
Other inventories -
Loan receivables from assoociated companies and joint ven
-
tures
Right-of-use asset
Other asset
Total
Segment's liabilities, excluding Right-of-use asset
Segment's liabilities, Right-of-use asset
Total
Invested capital
At the end of period
Return on investment, - -
Order backlog
Business construction
Housing construction
The Group order backlog consists of the Construction business. The unrecognised margin corresponding to the holding is
no longer included in the order backlog comparison figures. Capital employed and order backlog are unaudited.
ACQUISITIONS AND DISPOSALS
The company has sold business operations of SRV REAM Oy, which was responsible for operating the
REDI shopping centre. The sale happened on 25 June 2020 to CBRE Finland. Its employees, a total of
eight persons, transferred to the employ of CBRE Finland on 1 September 2020 under their existing
terms of employment. The transaction had a very minor impact on the company’s income statement
and balance sheet. No business operations were acquired during the financial year. No new business
operations were acquired or sold during the comparison period.
SALES REVENUE FROM CUSTOMER CONTRACTS
EUR
Revenue
Attributable to
Revenue recognition at a point in time
Revenue recognition over time
Other revenue
Total
A breakdown of revenue by segment is reported in Note Segment information.
Sales revenue for the following SRV project types is recognised at a point in time:
Developer-contracted residential project and commercial project
Sales revenue for the following SRV project types is recognised over time:
Fixed-price contract, project management contract, turnkey contract (overall responsibility for the
construction), alliance contract, residential development project, commercial development project
and shopping centre management.
EUR
Assets and liabilities based on customer contracts:
The Group’s trade receivables and trade payables are mainly based on customer
contracts. The Group’s balance sheet includes the gross amount due related to customer
contracts and other short-term advance payments.
Gross amount due based on customer contracts
Advance payments related to customer contracts
SRV I FINANCIAL STATEMENTS 2020
EUR
Sales revenue recognised related to liabilities based on customer contracts
Sales revenue recognised that was included in contract-based liabilities at the beginning
of the period
Sales revenue recognised for performance obligations fulfilled in earlier periods
Customer contract performance obligations and significant judgment-based solutions
The Group’s most common project types are project management contract, turnkey contract (overall
responsibility for the construction), alliance contract, fixed-price contract, lifecycle project, residen-
tial development project, commercial development project, developer-contracted residential project
and commercial project.
In SRV’s contractor agreements and development projects, the management tasks and structural
engineering work of a construction or renovation project management contact concerning a property
owned by the customer have typically been agreed with the customer. Contract projects may include
a number of different work stages and tasks. These mainly, however, form a single integrated entity
that is handled as one performance obligation.
In developer-contracted projects, buyers of apartments may be offered a parking space or a re
-
moval service. In that case, the parking space and removal service are considered to be separate per-
formance obligations. Typically, these are handed over and recognised as revenue at the same time
as the apartment itself. Any possible consideration exemptions are equivalent to discounts and these
are taken into account as an adjustment to the selling price.
The Group’s contract projects include variable considerations resulting, for example, from penal-
ties or from undershooting or overshooting the target price. Group management monitors and assess-
es variable considerations at the end of each reporting period. The transaction price used in revenue
recognition is based on the most likely estimate. Of the estimated amount of variable consideration,
only that portion is included in the transaction price and revenue only recognised up to an amount
such that it is highly likely that no significant reversal will have to be made to the amount of accrued
recognised sales revenue.
Development and developer-contracted projects also include variable considerations that may re
-
sult, for example, from delay penalties and lease liabilities. Recognition of revenue is deferred for the
estimated rental liability and this estimated share of project revenue is recognised as an advance re-
ceived. Rental security deposits reduce project-related advances received. Uncertainties associated
with signed lease agreements are taken into account in recognition of revenue.
Assets recognised as revenue over time are controlled by the customer, and the revenue and ex
-
penses of these customer projects are recognised as revenue and expenses based on percentage of
completion, when the outcome of the project can be reliably estimated. Percentage of completion is
determined by calculating for each project the share of expenses accrued by the balance sheet date
relative to total expenses estimated for each project. The amount corresponding to the percentage
of completion is recognised as revenue. When it is probable that total costs necessary to complete a
project will exceed total revenue obtained from the project, the expected loss is recognised immedi-
ately as an expense. If the expenses and recorded profits arising from a customer project exceed the
amount of progress billings, the difference is disclosed in the balance sheet item “trade and other re-
ceivables”. If expenses and recorded profits arising from a customer project are less than the amount
of progress billings, the difference is disclosed in the balance sheet items “trade and other payables”.
Tables of payments are used in customer billing, and terms of payment for contracts typical for the
industry are agreed.
Customer projects recognised as revenueat a point in time are recognised after control of the as-
set has been transferred and at the earliest after the completion of the project. The share of revenue
and expenses corresponding to the percentage of sale at the time of completion is recognised as rev-
enue for the projects.
Development and developer-contracted projects may include a separate financing component. A
significant financing component may arise in factoring projects in which the factoring costs are charged
from the client. On average, the construction time in Group factoring and developer contracting pro-
jects is less than two years, in which case the average financing period is less than a year. In these, the
Group will apply the “practical expedient” for periods of less than a year as set out in IFRS 15.63. The
Group also has projects with an average financing period of more than one year. In such projects, the
treatment procedure for a substantial financing component is applied and the item recognised as a
reduction in revenue and an adjustment of interest income on financial items.
Customer project warranty provisions comprise the costs resulting from the repair of completed
projects if the warranty period is still in effect at the balance sheet date. A warranty provision is rec-
ognised at the time of the project handover, and the amount of provision is based on prior experience
of the materialisation of warranty expenses. It is expected that warranty provisions will be used during
the two years following the completion of the project. The level of the construction industry’s 10-year
warranty provision is based on index-adjusted historical information or the estimated total costs of
certain individual projects. It is expected that a 10-year provision will be used over the ten years fol-
lowing the completion of the project.
The plots of development projects are recognised as revenue over time. The timing of the revenue
recognition of plots is always assessed on a case-by-case basis, however.
EUR
Transaction price allocated to the remaining
performance obligations of customer con
-
tracts
Within
year
Within
years
Within
years
Within
years
The aggregate amount of the transaction price
allocated to long-term customer project con
-
tracts that are partly or completely unfulfilled
In practice, the table reflects the amount of order backlog sold and its recognition as revenue in future years.
Assets from obtaining or fulfilling customer contracts
Sales commissions may be associated with projects recognised as revenue over time. Expenses aris-
ing from obtaining these contracts are capitalised in project costs and recognised as an expense over
the term of the contract. During the reporting period and in the comparison period, the Group did not
have any related assets.
SRV I FINANCIAL STATEMENTS 2020
OTHER OPERATING INCOME
EUR
Equipment and intangible assets
Rental income
Other income
Total
OTHER OPERATING EXPENSES
EUR
Equipment and intangible assets
Rental expenses
Voluntary indirect personnel expenses
Car and travel expenses
Entertainment and marketing
Communications and IT
Other external services
Other fixed expenses
Total operating expenses
Income and expenses on currency derivatives -
Total
Auditing fees
EUR
Audit
Auditors' statements
Tax services
Other services
Total
PricewaterhouseCoopers Oy has provided non-audit services to the entities of SRV Group in total of
271 thousand euros during financial year 2020 (964 thousand).
DEPRECIATION AND IMPAIRMENTS
EUR
Depreciation, excluding Right-of-use asset
Intangible assets
Other intangible assets
Property, plant and equipment
Buildings and structures
Machinery and equipment
Other tangible assets
Depreciation, Right-of-use asset
Land areas
Buildings and structures
Machinery and equipment
Other tangible assets
Depreciations
Impairment in associated and joint ventures
Impaiments in includes EUR million reversal of the impairment loss on the joint venture investments
Pearl Plaza shopping center, and a EUR million impairment loss on the Okhta Mall associated investment, a write-
down of EUR million on the investment in the Ratsumestarinkatu commercial property in Porvoo and a write-down
of EUR million on REDI's additional purchase price receivable on long-term receivables. Impairments in in
-
cludes EUR million impairment recognized in assets classified as held for sale (Note )
EMPLOYEEBENEFIT EXPENSES
EUR
Wages and salaries
Pension expenses - defined contribution plans
Share-based incentive scheme -
Other indirect personnel expenses
Total
Information on management’s compensation as well as employee benefits is disclosed in Section Related party
transactions. SRV Group has only defined contribution plans in connection with the pensions.
Average number of personnel
Construction
Investments
Other operations and eliminations
Total
SRV I FINANCIAL STATEMENTS 2020
Share-based incentive schemes
Grant year
Total
Reward principle Employment Set targets Employment
Original exercise price -
Dividend and right issue adjusted exercise price
-
Subscriction period – – –
Total amount
Share incentives
Additions
Share incentives used
Share incentives returned or expired
Share incentives
Share incentives
Additions
Share incentives used
Share incentives returned or expired
Share incentives
IFRS-Costs , EUR * -
IFRS-Costs , EUR * - - -
Shares granted based on incentives,
Shares granted based on incentives,
In February , the Board of Directors decided on a new share-based incentive scheme for the Group's key person-
nel. The scheme covers key SRV personnel. The scheme will be in effect from to and rewards are tied to
Group's result and specific business indicators. The potential reward will be paid partly as shares in the company and part
-
ly in cash. The proportion to be paid in cash will cover taxes and tax-related costs arising from the reward. A maximum of
SRV Group shares will be granted to key employees. The original cost of the share-based incentive scheme is
calculated by using the share price EUR , which makes the IFRS-cost for the scheme EUR million with the addition
of the cash payments. Actual cost is based on how the company will achieve the financial targets and the market value of
the share. If a key person’s employment or service ends during said restriction period, he/she must return the shares re
-
warded under the scheme to the company. On July , SRV announced that it had assigned a total of treasury
shares to the members of the company’s share-based incentive plan
The Board of Directors of SRV Group Plc has made the decision for a share-based incentive scheme for the President &
CEO for –. Under the scheme, Saku Sipola has been given acquisition rights, entitling him to acquire
the number of SRV Group Plc’s shares corresponding to the acquisition rights EUR per share. Under the scheme, new
shares or treasury shares in the possession of the company can be issued. The company’s Board of Directors will make a
decision on the manner of implementation separately each time. Under the terms of the scheme, the acquired shares are
subject to a transfer restriction, which is valid for two years from the acquisition of the shares. The acquisition rights can
be exercised in three two-year long exercise periods, the first of which begins on March and ends on February
, the second begins on September and ends on August , and the third begins on September
and ends on August . During each exercise period, the acquisition rights holder is entitled to exercise
acquisition rights. The total recognised IFRS cost of the incentive scheme – is approximately EUR million.
On December , the Board of Directors of SRV Group Plc decided on changes to the share-based incentive scheme
of President and CEO Saku Sipola. The changes concern the number of acquisition rights, the subscription price of the
acquisition rights and the periods during which the acquisition rights can be exercised. The purpose of the changes is to
ensure that the incentive effect of the scheme remains at its previous level by taking into account the changes in the num
-
ber of the company’s shares caused by SRV’s rights issues. The incentive effect of the scheme is based on the val-
ue increase of SRV Group Plc’s shares. As a result of the changes, Sipola has the right to acquire shares at a
subscription price of EUR per share. The basis for determining the subscription price is the volume-weighted average
price of SRV’s share on Nasdaq Helsinki in continuous trading from August to November . After the changes,
the acquisition rights can be exercised in the following three periods: the first begins on March and ends on
February , the second begins on March and ends on August , and the third begins on September
and ends on August . During the first and second exercise periods, the acquisition rights holder is entitled
to exercise acquisition rights and during the third period acquisition rights.
* IFRS-Costs recognised in the income statement.
RESEARCH AND DEVELOPMENT EXPENSES
SRV Group does not have any actual research and development expenses. The Group has busi-
ness-related project development costs, and the treatment of these is described in the section of the
accounting policies covering inventories.
FINANCIAL INCOME AND EXPENSES
EUR
Financial income
Interest income from associated and joint venture companies
Interest income from the other receivables
Foreign exchange gains
Other financial income
Total
Financial expenses, excluding Lease Liabilities
Expenses for financial liabilities at amortised cost - -
Financial assets and liabilities at fair value - -
Foreign exchange losses -
Other financial expenses
- -
Financial expenses, Lease Liabilities
Interests expences - -
Total - -
Financial income and expenses, total - -
Other financial expenses include impairment losses of EUR million () on financial assets of associated companies
and joint ventures.
SRV I FINANCIAL STATEMENTS 2020
INCOME TAXES
Income taxes in the income statement
EUR
Current taxes
Taxes for previous financial years -
Other taxes
Deferred taxes, Right-of-use asset - -
Deferred taxes - -
Total - -
Effective income tax rate , ,
The income taxes in the consolidated income statement differ from the statutory income tax rate in
Finland (20 per cent in 2020 and in 2019) as follows:
Income tax reconciliation
EUR
Profit before taxes - -
Income taxes at statutory tax rate in Finland - -
Differing tax rates of foreign subsidiaries - -
Tax exempt income - -
Realization of previously unrecognized deferred tax receivables - -
Non-deductible expenses -
Unrecognized and reversed tax losses
Taxes for previous financial years -
Share of profits of associated and joint venture companies -
Adjustments
Income taxes - -
Income taxes recognized in other items in comprehensive income were not material.
The income tax credited directly to equity
EUR
Hybrid Bond interests tax
Share issue tax -
Total
EARNINGS PER SHARE
EUR
Profit/loss for the year attributable to equity holders of the parent - -
Profit/loss for the year attributable to Hybrid Bond investors, tax adjusted - -
Profit/loss for the calculate the earnings per share - -
Number of shares
Weighted average number of shares outstanding, ( )
Weighted average number of shares outstanding (diluted), ()
Earnings per share attributable to equity holders of the parent company,
eur per share - -
Earnings per share attributable to equity holders of the parent company (diluted),
eur per share - -
The comparison figure has been adjusted for share issues.
DIVIDEND PER SHARE
Dividends were not paid in 2020 and 2019. A proposal for the Annual General Meeting on 29 March
2021 is that dividend from the year 2020 will not be paid.
SRV I FINANCIAL STATEMENTS 2020
PROPERTY, PLANT AND EQUIPMENT
Tangible assets, excluding Right-of-use asset
2020
EUR
Land and
water
areas
Buildings and
structures
Machinery
and
equipment
Other
tangible
assets Total
Historical cost, Jan.
Increases
Decreases - - - -
Transfer
Foreign exchange differences - - - -
Historical cost, Dec.
Accumulated depreciation and impairments,
Jan. - - - -
Depreciation - - - -
Accumulated depreciations of decreases
Writedowns
Foreign exchange differences
Transfer - -
Accumulated depreciation and impairments,
Dec. - - - -
Carrying amount, Dec.
Tangible assets, Right-of-use asset
2020
EUR
Land
areas
Buildings and
structures
Machinery
and
equipment
Other
tangible
assets Total
Historical cost, Jan.
Increases
Decreases - - -
Transfer
Foreign exchange differences - - -
Historical cost, Dec.
Accumulated depreciation and impairments,
Jan. - - -
Depreciation - - -
Accumulated depreciations of decreases
Writedowns
Foreign exchange differences
Transfer
Accumulated depreciation and impairments,
Dec. - - -
Carrying amount, Dec.
Tangible assets, excluding Right-of-use asset
2019
EUR
Land and
water
areas
Buildings and
structures
Machinery
and
equipment
Other
tangible
assets Total
Historical cost, Jan.
Increases
Decreases - -
Transfer
Foreign exchange differences
Historical cost, Dec.
Accumulated depreciation and impairments,
Jan. - - - -
Depreciation - - - -
Accumulated depreciations of decreases
Foreign exchange differences - - - -
Transfer
Accumulated depreciation and impairments,
Dec. - - - -
Carrying amount, Dec.
Tangible assets, Right-of-use asset
2019
EUR
Land
areas
Buildings and
structures
Machinery
and
equipment
Other
tangible
assets Total
Historical cost, Jan.
Increases
Decreases - -
Transfer
Foreign exchange differences
Historical cost, Dec.
Accumulated depreciation and impairments,
Jan.
Depreciation - - -
Accumulated depreciations of decreases
Writedowns
Foreign exchange differences
Transfer - -
Accumulated depreciation and impairments,
Dec. - - -
Carrying amount, Dec.
SRV I FINANCIAL STATEMENTS 2020
GOODWILL AND OTHER INTANGIBLE ASSETS
2020
EUR
Intangible
rights Goodwill
Other
capitalised
expenditure Total
Historical cost, Jan.
Foreign exchange differences - -
Increases
Decreases - - -
Transfers - -
Historical cost, Dec
Accumulated amortisation, Jan. - - -
Amortisation - - -
Accumulated depreciations of decreases - -
Writedowns
Foreign exchange differences - -
Accumulated amortisation, Dec. - - -
Carrying amount, Dec.
2019
EUR
Intangible
rights Goodwill
Other
capitalised
expenditure Total
Historical cost, Jan.
Foreign exchange differences
Increases
Decreases - - -
Historical cost, Dec.
Accumulated amortisation, Jan. - - -
Amortisation - - -
Accumulated depreciations of decreases -
Writedowns
Foreign exchange differences - -
Accumulated amortisation, Dec. - - -
Carrying amount, Dec.
SRV Group’s goodwill is allocated to operating segments:
Goodwill
EUR
Construction
Total
Impairment test
The recoverable amount of cash-generating units is based on value in use calculation model in which
cash flows are based on base year figures and on business units growing cash flows for the next five
years strategy period. In the impairment test of goodwill performed in December 2020, a growth factor
of 2 per cent was used and it does not exceed the actual long-term growth of the business. The main
factors in impairment test are operating profit margin and discount factor. The discount factor used
is the latest weighted average cost of capital (WACC) before taxes. In the value in use calculation a
WACC of 10,0 per cent was used. The calculation parameters of WACC are risk-free interest rate, mar-
ket risk and company -specific premium, industry -specific beta, the cost of liabilities and equity ratio.
The recoverable amount exceeded the carrying amounts significantly in all cash-generating unit
with goodwill. According to the impairment tests there were no need for impairments.
Sensitivity analysis
The performed sensitivity analysis does not cause impairments for cash-generating units when using
moderate changes in default factors.
SRV I FINANCIAL STATEMENTS 2020
FINANCIAL ASSETS AND LIABILITIES BY MEASUREMENT CATEGORIES
2020
EUR
Financial assets and
liabilities at fair value
through profit and loss
Financial assets and
liabilities measured at
amortised cost
Carrying amounts by
balance sheet item Fair value Note
Non-current financial asset
Long-term interest bearing receivables
Long-term receivables
Loan receivables from associated companies and joint ventures
Other financial assets
Current financial assets
Accounts receivables
Other interest bearing receivables
Derivative instruments
Loan receivables from associated companies and joint ventures
Cash and cash equivalents
Total
Non-current financial liabilities
Interest bearing liabilities
Derivative instruments
Other non-current liabilities
Current financial liabilities
Interest bearing liabilities
Accounts payables
Total
SRV I FINANCIAL STATEMENTS 2020
2019
EUR
Financial assets and
liabilities at fair value
through profit and loss
Financial assets and
liabilities measured at
amortised cost
Carrying amounts by
balance sheet item Fair value Note
Non-current financial asset
Long-term interest bearing receivables
Loan receivables from associated companies and joint ventures
Other financial assets
Current financial assets
Accounts receivables ,
Other interest bearing receivables
Derivative instruments - - -
Loan receivables from associated companies and joint ventures
Cash and cash equivalents
Total
Non-current financial liabilities
Interest bearing liabilities
Derivative instruments
Other non-current liabilities
Current financial liabilities
Interest bearing liabilities
Accounts payables
Total
Carrying amounts do not differ substantially from Fair value, excluding bonds. The fair values of the
bonds are based on 31.12.2020 market prices. Counterparty price quotations are used to determine
the fair value of derivatives. These price quotations are based on predominant market circumstances
and generally accepted pricing models. Carrying amounts of financial assets represent the maximum
amount of credit risk at the balance sheet date.
SRV I FINANCIAL STATEMENTS 2020
SHARES IN ASSOCIATED AND JOINT VENTURE COMPANIES
Shares in associated and joint venture companies
EUR
Shares in associated companies
Shares in joint venture companies
Total
Shares in associated and joint venture companies are investments into construction projects together
with other investors.
Information about the substantial associated companies
Domicile Direct ownership ()
Name
Jupiter Realty B.V Netherlands
The associated company is investing in Okhta Mall project in St Petersburg. SRV is investing in the
project also through partnership in Russia Invest. SRV will receive a proportion of the project’s income
corresponding at least to its holding. The final distribution of the project’s income is subject to condi-
tions that entitle SRV to a higher proportion of the profits than its investment holding should income
exceed the pre-agreed level.
Information about the substantial joint venture companies
Domicile Direct ownership ()
Name
Netherland Pearl Plaza B.V Netherlands
KSK Redi Ky (REDI) Finland -
KSK Parking I Ky (REDI) Finland -
Netherland Pearl Plaza B.V the joint venture company is investing in Pearl Plaza project in St Petersburg.
REDI joint venture companies are investing in construction of Helsinki Kalasatama shopping center and
parking facility. The REDI holdings was sold at their balance sheet value during the 2020 financial year.
Financial information about the substantial associated companies
Jupiter Realty B.V Netherland Pearl Plaza B.V
EUR
Cash and cash equivalents - - , -
Other short term assets -
Short term assest -
Long term assets -
Long term liabilities -
Long term financial liabilities - - -
Long term liabilities - -
Other long term liabilities -
Net sales -
Depreciation - - - -
Interest income - - -
Interest expenses - - - -
Income taxes - - -
Profit for the financial period - - -
Other comprehensive income - - -
The reconciliation of the associated companies financial information to Group's unbooked book value:
Group's ownership, -
Group's share of net assets -
Adjustment to purchase price of associated companies - -
The combined share of cumulative indirect profit - - - -
The balance sheet value of the associated companies in Group balance sheet -
Netherland Pearl Plaza B.V and REDI as well as the KSK Parking I Ky joint venture investments was classified as assets held for sale in the financial statements of December .
SRV I FINANCIAL STATEMENTS 2020
Summary of financial information
Other associated com-
panies
Other joint venture
companies
The Group's share of the profit
- -
The total book value in Group's balance sheet
Share of profits of associated and joint venture companies
The substantial associated company Jupiter Realty B.V -
The substantial joint venture company Netherland Pearl Plaza B.V
-
REDI joint venture company classified as held for sale - -
Other associated companies -
Other joint venture companies -
Total -
Other comprehensive income
The substantial associated company Jupiter Realty B.V -
The substantial joint venture company Netherland Pearl Plaza B.V
-
Other associated companies -
Other joint venture companies - -
Total -
Comparison year figure Includes consolidation of the result of assets classified as held for sale.
SRV I FINANCIAL STATEMENTS 2020
OTHER FINANCIAL ASSETS AND LONGTERM RECEIVABLES
Other financial assets may include quoted or unquoted shares. The valuation methods and the fair
value hierarchy of the available-for-sale financial assets are presented in note 29.
EUR
Opening balance at Jan.
Increases
Changes in fair value - -
Decreases - -
Closing balance, Dec.
Non-current
Current
Unquoted shares
Long-term receivables
RECEIVABLES
EUR
Carrying
amount
Carrying
amount
Non-current receivables
Loan receivables related to a construction project
Long-term receivables -
Long-term interest bearing receivables
Total
DEFERRED TAX ASSETS AND LIABILITIES
EUR Jan.
Recog
-
nised
in the
income
statement
Recog
-
nised in
compre
-
hensive
income
Recog
-
nised in
equity
Acquisi
-
tions and
disposals
of
business
Exchange
rate
difference Dec.
Deferred tax assets
Tax losses
Financial assets at fair value through
profit and loss -
Accrual differences in developer contracting
Undeductible depreciations in taxation -
Other temporary differences - -
Right-of-use assets deferred tax receiv
-
ables
Total -
Deferred tax liabilities
Borrowing costs -
Cumulative depreciation differences -
Other temporary differences -
Total -
Net deferred taxes -
EUR Jan.
Recog
-
nised
in the
income
statement
Recog
-
nised in
compre
-
hensive
income
Recog
-
nised in
equity
Acquisi
-
tions and
disposals
of
business
Exchange
rate
difference Dec.
Deferred tax assets
Tax losses
Employee-benefits -
Financial assets at fair value through prof
-
it and loss
Accrual differences in developer contract
-
ing -
Undeductible depreciations in taxation -
Other temporary differences - -
Right-of-use assets deferred tax receiv
-
ables
Total
Deferred tax liabilities
Borrowing costs -
Cumulative depreciation differences
Other temporary differences -
Total -
Net deferred taxes
SRV I FINANCIAL STATEMENTS 2020
On 31 December 2020, The Group's accumulated losses for which no deferred tax assets have been
recognised were EUR 20,608 thousand (EUR 15,421 thousand) because realisation of the tax benefit
is not considered probable.
Deferred tax assets have been recognized for right-of-use assets EUR 1 ,341 thousand (EUR 1,043
thousand).
The deferred tax liability has been recognised in the consolidated financial statements in connec-
tion with the undistributed profits of subsidiaries whose income tax is determined on the basis of profit
distribution. The deferred tax liability has not been recognised when Group is able to control the timing
of profit distribution and the distribution is not probable at the balance sheet date.
INVENTORIES
EUR
Inventories excluding Right-of-use assets
Raw materials and consumables
Work in progress
Land areas and plot-owning companies
Shares in completed housing corporations and real estate companies
Advance payments
Other inventories
Inventories, Right-of-use asset
Inventories, total
With respect to developer-contracted housing projects, interest expenses on borrowing are capitalised
primarily using the project-specific financing cost. If the proportion of project-specific financing is not
significant, the Group’s capitalisation rate is used in capitalising interest expenses. Capitalisation rate
used was 5,0% on average. During the financial year capitalized interests the amount of which was EUR
1,465 thousand (2019: EUR 681 thousand) was included in the value of work in progress.
The carrying amount of completed inventories used as security for loans in 2020 amounted to EUR
21,145 thousand (EUR 15,772 thousand), the carrying amount of inventories under construction in 2020
was EUR 94,252 thousand (2019 EUR 93,151 thousand) and the carrying amount of land area was EUR
21,263 thousand (EUR 34,867 thousand).
During the financial year 2020 there was impairment losses in shares in completed housing com-
panies for EUR 808 thousand. During the financial year 2019 there was impairment losses in land area
for EUR 13,935 thousand and in completed housing companies for EUR 1,000 thousand. There was no
reversed impairment losses in financial year 2020 and 2019.
LOAN RECEIVABLES FROM ASSOCIATED COMPANIES AND JOINT
VENTURES
EUR
Long term loan receivables from associated companies
Increases
Decreases - -
Writedown, level -
Foreign exchange difference - -
Total
Long term loan receivables from joint ventures
Increases
Decreases - -
Total
Short term loan receivables from joint ventures
Increases
Decreases - -
Total
ACCOUNTS RECEIVABLES AND OTHER RECEIVABLES
EUR
Carrying
amount
Carrying
amount
Accounts receivables
Loan receivables
Gross amount due from customers related to construction contracts
Accrued income and prepaid expenses
Other receivables
Total
Interest bearing receivables
Non-interest bearing receivables
Total
Carrying amount does not substantially differ from fair value. In 2020 the Group’s accounts receiva-
bles were on average EUR 52 million. The accounts receivables are non-interest bearing and they are
normally about 21 days by age. More information about credit risks in note 29.
SRV I FINANCIAL STATEMENTS 2020
CASH AND CASH EQUIVALENTS
EUR
Cash and cash equivalents
Total
ASSETS HELD FOR SALE
EUR
Shares in associated and joint venture companies
REDI shopping centre and Parking -
Pearl Plaza shopping centre -
Tampereen Central Deck and Arena investments -
Loan and financial receivables, REDI Parking -
Total -
The holdings and loan receivables of the REDI and Tampereen Central Deck and Arena projects clas-
sified as held for sale in 2019 were sold at their balance sheet value during the reporting period. On 31
December 2019, SRV’s holding in the Pearl Plaza shopping centre was designated as an asset held for
sale and measured at its probable selling price less costs of sale, as its sale during the next 12 months
was considered likely. Negotiations on the sale of Pearl Plaza progressed well in early 2020, when it
was considered highly likely that a deal would be made. The coronavirus pandemic slowed down the
negotiations. The second wave of the pandemic was ultimately the major reason why the sales
negotiations ended without reaching an agreement. The property was reclassified as a holding in as-
sociated companies and joint ventures. Due to this reclassification, an impairment recognised in 2019
was reversed, with a positive impact of about EUR 6.9 million on operating profit for 2020 and com-
bined retrospectively its share of the joint venture result for the financial year 2020.
EQUITY
Share capital and Invested free equity fund
Number of shares
Jan.
Return of treasury shares
Transfer of treasury shares
Share issue
Dec.
Jan.
Return of treasury shares
Transfer of treasury shares
The directed share issue
Share issue
Dec.
Shares and share capital
On 31 December 2020, the total number of SRV Group Plc's shares outstanding was 262,166,692 and
the share capital amounted to EUR 3,062,520. The share has no nominal value and the total number
of shares is 263,017,341.
At the end of December there were 850,649 own shares in Group´s possession.
Invested free equity fund
Invested free equity fund consists of the net proceeds from the Offering of SRV Group Plc reduced by
the cost related to share issue as well as received and cancelled SRV shares.
In May, the company organised a directed share issue for the holders of the two outstanding hybrid
bonds. In the issue, about EUR 75 million of the EUR 92 million principal of the hybrid bonds and the
interest accrued on them were converted into shares. As a result of the implementation of the share
issue, the total outstanding principal of the 2016 hybrid bonds is approximately EUR 11.8 million and
the outstanding principal of the 2019 hybrid bonds is approximately EUR 3.6 million. The share issue
increased the total number of SRV shares by 71,468,395 to 131,967,970. The new shares were entered
in the Trade Register on 19 May 2020.
In June, the company organised a rights issue in which SRV received gross income of approximately
EUR 50 million. Due to the share issue, SRV’s number of shares rose by 131,049,371 from 131,967,970 to
a total of 263,017,341 shares. The new shares were entered in the Trade Register on 18 June 2020. The
capital loan of EUR 9 million drawn on 30 March was used for payment in accordance with its terms
and conditions, and was converted into equity. The company has recognised the EUR 124.8 million in
proceeds from the share issues in the invested unrestricted equity fund, less EUR 3.4 million in share
issue-related expenses and EUR 0.7 million in tax adjustments of expenses
SRV I FINANCIAL STATEMENTS 2020
Translation difference
Translation difference comprises the differences of the translation of financial statements of the for-
eign subsidiaries to the functional currency of the parent company.
Hybrid bond
After the conversion of the directed share issue hybrid bond, equity includes an equity bond of EUR
11.8 milloin issued in 2016 (EUR 24.5 million). Hybrid bond has an annual coupon rate of 13.572 per cent.
After the conversion of the directed share issue hybrid bond, equity includes an equity bond of EUR
3.6 milloin issued in 2019 (EUR 58.4 million). Hybrid bond has an annual coupon rate of 12.00 per cent.
The hybrid bond has no maturity dates at which the holder of the loan can demand repayment of
the loan. The hybrid bond is unsecured and subordinated to other debt instruments. The hybrid bonds
do not confer shareholders’ rights to bondholders.
Dividends
The Board of Directors will not propose a dividend to be paid from the year 2020.
PROVISIONS
2020
EUR
Warranty
provisions
-year
warranty
Other provi
-
sions for
construction
contracts
Other
provisions Total
Jan.
Currency exchange differences - -
Increase in provisions
Provisions used - - - -
Reversals of unused provisions - -
Dec.
Non-current
Current
Total
2019
EUR
Warranty
provisions
-year
warranty
Other provi
-
sions for
construction
contracts
Other
provisions Total
Jan.
Currency exchange differences
Increase in provisions
Provisions used - - - -
Reversals of unused provisions - -
Dec.
Non-current
Current
Total
Other provisions for construction contracts include warranty for potential disputes and other provi-
sions for construction contracts. The level of the construction industry’s 10-year warranty provision is
based on index-adjusted historical information or the estimated total costs of certain individual projects.
INTERESTBEARING LIABILITIES
Interest-bearing liabilities, excluding lease liabilities
Carrying
amount Fair value
Carrying
amount Fair value
EUR
Non-current
Loans from financial institutions
Bonds
Housing corporation loans
Other debt
Total
Current
Loans from financial institutions
Commercial papers
Bonds
Housing corporation loans
Total
Carrying amounts do not differ substantially from Fair value, excluding bonds. The fair values of the
bonds are based on 31.12.2020 market price indications.
SRV I FINANCIAL STATEMENTS 2020
Interest-bearing lease liabilities
Machinery and
equipment
EUR Land-Areas
Buildings and
structures Others Total
Pitkäaikainen
Lyhytaikainen
Yhteensä
Interest-bearing lease liabilities
Machinery and
equipment
EUR Land-Areas
Buildings and
structures Others Total
Non-current
Current
Total
In addition to the above-mentioned lease liabilities, the Group has committed to enter into a lease agree-
ment for the two Keilaniemi plots when the City of Espoo transfers the management of the plots to new
buyers. By agreement, the transfer of management will take place for the first plot in 2022 and for the
second plot in 2023. When management is transferred, the lease liability for the plots will be recognised
in the consolidated balance sheet in accordance with IFRS 16 Leases. Before the transfer of management,
the company will pay compensation to a plot fund for use of capital. Payment of the transaction price
of the plots will be phased so that the total expense of leasing the plots will be approximately EUR 0.4
million in 2021, approximately EUR 0.7 million in 2022–2023, approximately EUR 1.4 million in 2024–2025
and approximately EUR 1.9 million per year from 2026.
OTHER LIABILITIES
Carrying
amount
Carrying
amount
EUR
Non-current
Derivative liabilities
Other liabilities
Total
Current
Accounts payables
Advance payments related to construction contracts
Other advance payments
Other current liabilities
Accrued expenses and prepaid income
Total
Accrued expenses and prepaid income
Wages and salaries and related expenses
Interest and other financial liabilities
Periodisations of project expenses
Other
Total
SRV I FINANCIAL STATEMENTS 2020
MANAGEMENT OF FINANCIAL RISKS
The SRV Group is exposed to multiple financial risks in its business operations. The most significant
financial risks are interest rate, exchange rate, liquidity and credit risks. The Group's financial risk man-
agement is carried out centrally by the Group's finance department. Financial risk management is im-
plemented in accordance with the financing policy approved by the Board of Directors. The financing
policy is updated on an as-needed basis to reflect changes in the market situation. The objective of the
Group's financial risk management is to reduce the uncertainty that changes in the financial markets
cause to the Group's performance and financial position.
Interest rate risk
The cash flows and current values of the Group’s interest-bearing liabilities and receivables are af-
fected by changes in interest rates. The interest rate risk mainly consists of short-term and long-term
loans related to business financing. The Group's financing is divided into general financing and pro-
ject-specific financing. Project-specific financing is financing during construction, which is typically
either refinanced or paid off when a project is assigned. The Group may take out long-term loans at
both floating and fixed interest rates. At the balance sheet date, the weighted average interest rate for
the entire loan portfolio (including the effect of interest rate derivatives) was 5.3 per cent ( 2019: 4.6%).
As a rule, Euribor is used as the reference rate for floating-rate loans.
Gap analysis is used to monitor and measure the interest rate risk from the perspective of the in-
come statement. Interest rate risks are managed by adjusting the ratio of the floating rate and fixed-
rate liabilities in the loan portfolio. At the balance sheet date, fixed-rate loans accounted for 59 per
cent of the total loan portfolio (2019: 56 per cent). Interest rate risks are also managed through de-
rivatives and the choice of interest rate periods. In July 2015, SRV Group Plc signed two interest rate
swaps with a total capital of EUR 100 million. The interest rate swap started in July 2016, and the con-
tracts mature in 2025. Interest rate derivatives are used for hedging against changes in market rates,
and any changes in the fair value of interest rate derivatives are recognised in financial income or ex-
penses for the period in which they arise. The fair values of derivatives correspond to the prices that
the Group would receive or have to pay if it terminated the derivative contract. The fair value of inter-
est rate derivatives has been defined based on price quotations from counterparties. These quota
-
tions are based on market conditions and generally accepted pricing models. Hedge accounting has
not been applied to the interest rate derivatives that were used. The profit impact of interest rate de-
rivative valuations would have been EUR 4.5 million ( 2019: EUR 5.9 million) if interest rates increased
by one percentage point. If interest rates decreased by one percentage point, the profit impact would
have been EUR -4.7 million (2019: EUR -6.4 million). General changes in interest rates also have direct
impacts on the investment decisions of the Group’s customers and, therefore, on the Group's operat-
ing cash flows. The company does not consider it likely that interest rates would decrease in the pre-
vailing market situation.
The following IFRS 7-compliant sensitivity analysis covers the floating rate financial liabilities and
receivables in the financial statements for which interest rate adjustments will take place over the next
12 months. Floating rate financial liabilities consist of project-specific company loans and floating rate
loans included in the Group's general financing. Floating rate financial receivables consist of loans to
associated companies. The sensitivity analysis also includes interest rate swaps.
Exchange rate risk
The Group's cash flows from international business, project financing during construction, capital in
foreign currency and investments in foreign inventory companies and associated companies are sub-
ject to foreign exchange risks. In 2020, the most significant currency with exchange rate risk was the
Russian rouble. In accordance with the Group's financing policy, foreign subsidiaries are responsible for
identifying exchange rate risks related to their cash flows in foreign currency and for reporting such risks
to the finance department. The objective of exchange rate risk management is to minimise the impact
of currency fluctuations on the Group's operating result and equity. According to the Group’s policy,
derivatives and foreign currency loans may be used as hedging instruments to manage exchange rate
risks. At the balance sheet date, the Group had short-term currency options hedging against exchange
rate risks, with the total principal amounting to EUR 10 million (2019: EUR 50 million).
2020 2019
Interest rate position Average interest rate
Average maturity,
months
Interest rate
sensitivity EUR
Financial
expenses and income
Interest risk
position
Interest rate
Sensitivity, EUR
EUR - -
Floating rate liabilities - ,
- -
-
Derivatives -,
- -
Change in the fair value of derivatives - -
Receivables
Total - -
The impact that one percentage point in market rates has on the Group's interest expenses or income over the next months. Other variables are assumed to remain constant.
The market forecast available at the balance sheet date for three-month and twelve-month Euribor rates per interest determination date was used for the interest rate sensitivity.
If market interest rates for floating rate liabilities/receivables are negative, a decrease in interest rates has no impact on the amount of interest payable because the reference rate agreed in the contracts is at least .
SRV I FINANCIAL STATEMENTS 2020
10% appreciation being EUR 4.9 million (2019: EUR 5.2 million). The transaction risk sensitivity takes
into account the impact of hedges at the balance sheet date.
Management of liquidity and refinancing risks
Liquidity and refinancing risks may have an effect on the Group's financial results, cash flow and the
implementation of the Group’s developer contracting projects if the Group is unable to ensure sufficient
financing for its operations. The Group's management monitors the adequacy of financing through
regular short-term and long-term liquidity planning and monitoring. The Group maintains sufficient
liquidity through efficient cash management.
The Group's main sources of financing are project-specific loans, committed revolving credit facil-
ity and bonds. Financing for developer contracting projects is ensured through sales of projects, pro-
ject-specific credit facilities and the use of the company’s general financing reserves. The Group only
starts projects for which financing has been secured. Individual receivables may also be sold within
the limits allowed for the purpose of liquidity management, as necessary. Receivables are transferred
with risks and benefits with no repurchase obligations and are therefore fully excluded from the bal-
ance sheet. The arrangement involves a risk characteristic of factoring financing with the counterparty
in the arrangement having the option to terminate the receivables arrangement unilaterally, in which
case the receivables can no longer be sold.
The liquidity and refinancing risk indicated by the maturity distribution is managed by ensuring that
the maturity of the financial liabilities corresponds with the cash flow for liabilities. In February 2020,
the company agreed on the replacement of its EUR 100 million revolving credit facility with the syn-
dicate banks; the facility was replaced with two separate facilities, one of EUR 60 million and one of
EUR 40 million. At the end of June, the company concluded an agreement with the syndicate banks
whereby the undrawn portion of the facility, amounting to EUR 9 million, of the EUR 60 million facility
will be terminated. The remaining amount of the facility is EUR 51 million, which is fully drawn. Accord-
ing to the repayment plan updated in April, the amount remaining of the facility on 31 December 2020,
EUR 51 million, will be repaid in December 2021 by an amount of EUR 11 million and in January 2022
by an amount of EUR 40 million. The revolving credit facility of EUR 40 million will be used to finance
future construction projects. It falls due in January 2022 or within another repayment period agreed
for separate construction projects. At the end of December, EUR 30.5 million of the EUR 40 million li-
quidity facility remained unused. The company has a EUR 100 million commercial paper programme.
The company issued no new commercial papers in 2020.
At the end of May 2020, SRV carried out written procedures to extend the one-year tenor of its EUR
100 million (of which EUR 62.1 million is outstanding) senior unsecured callable fixed-rate notes due 23
March 2021 and the one-and-a-half-year tenor of its EUR 75 million senior unsecured callable fixed-
rate notes due 27 March 2022 as well as to amend certain terms and conditions of these notes. The
new due dates are 23 March 2022 for the EUR 100 million senior unsecured callable fixed-rate notes
(with an outstanding principal of EUR 62.1 million) and 27 September 2023 for the EUR 75 million sen-
ior unsecured callable fixed-rate notes.
Due to the interest cover ratio covenant related to these notes, the total amount of SRV’s drawn
down loans, such as the commercial paper programme, revolving credit facility, overdraft facilities,
pension insurance (TyEl) re-lending, new bonds and hybrid loans and some other loans, may amount
to EUR 137 million if the interest cover ratio test is failed. At the balance sheet date, the drawn amounts
Currency risks are divided into transaction risks and translation risks. Transaction risks are related
to currency-denominated cash flows for business (sales and purchases) and financing (loans). Trans-
lation risks encompass investments made in foreign subsidiaries, associated companies and inven-
tories companies operating in currencies other than the euro, the accounting effects of which are re-
corded in the translation differences for shareholders' equity in the consolidated figures. Changes in
the collateral value of the assets used as collateral for the financing of projects in Russia may also be
deemed to be an exchange rate risk due to changes in the value of the rouble. A decrease in the collat-
eral value of a project may result in the need for additional project collateral or, alternatively, the loan
terms and amount may need to be renegotiated.
Group's sensitivity to exchange rate changes
The rouble-denominated currency position that poses a translation risk was EUR 68.4 million (2019:
EUR 107.3 million). The rouble-denominated currency position that poses transaction risks was EUR
58.9 million (2019: EUR 80.2 million). At the balance sheet date, the currency hedging position hedg-
ing against transaction risks was EUR 10 million (2019: EUR 50 million). The currency hedging position
consisted of a short-term currency option. The positions are presented in the table below. The total
reduction in the value of the net investments in the Group’s equity resulting from changes in exchange
rates was EUR -32.2 million (2019: EUR 20 million) compared to the end of the previous year, consist-
ing of EUR -18.6 million (2019: EUR 11.5 million) for changes due to translation risks, -18 million (2019:
EUR 11.9 million) for changes in transaction risks, EUR 5.5 million (2019: EUR -3.8 million) for the cur-
rency hedging effect and EUR -1.1 million (2019: EUR 0.4 million) for the tax effect of currency hedging.
Currency position in roubles
(EUR million)
Translation risk position
Equity of Group companies
Equity of associated companies and joint ventures
Total
Transaction risk position
Receivables or liabilities for the euro-denominated loans of Group companies
Receivables or liabilities for the euro-denominated loans of associated companies and
joint ventures
Total
Currency position in roubles, total
Currency hedging position protecting against transaction risk
For translation risks, a 10% depreciation or appreciation of the rouble against the euro would have had
a negative or positive impact on the Group's equity translation differences of approximately EUR 6.3
million at the balance sheet date (2019: EUR 10 million). SRV’s transaction risk largely consists of the
euro-denominated loans of associated companies and subsidiaries in Russia that are partly owned
by SRV. For these, a 10% depreciation at the balance sheet date would have had a negative impact on
SRV's result amounting to approximately EUR 4.6 (2019: EUR 5.6 million), with the positive effect of a
SRV I FINANCIAL STATEMENTS 2020
Maturity breakdown of financial liabilities, excluding lease liabilities
2020
Maturity
EUR Carrying value Contractual liability
later
Bonds
Loans from financial institutions
Corporate loans
Commercial papers
Other liabilities
Other non-interest bearing liabilities
Derivative liabilities
Trade payables
Total
Maturity breakdown of financial liabilities, lease liabilities
2020
Maturity
EUR Carrying value Contractual liability later
Lease liabilities
for the items referred to above amounted to EUR 51 million in total. The interest cover ratio covenant
is described in more detail below.
SRV's financing agreements include standard covenants. The financial covenants for the financial
period included equity ratio (including revenue recognition over time), net gearing, minimum cash, min-
imum operating margin, interest cover ratio and some other restrictions. Minimum cash consists of the
Group’s cash and deposits in syndicate banks, with trade payables overdue for more than 10 days de-
ducted. The interest cover ratio is the ratio of the Group’s operating margin (EBITDA) to its net financial
expenses. The covenant levels of these financing agreements are determined on the basis of the ac-
counting principles specified in each loan agreement. The agreements include cross-default conditions.
In the financial period, covenant reporting covered the equity ratio, gearing and minimum EBITDA,
which were reported on a quarterly basis and every six months. Minimum cash is reported on the ba-
sis of the situation prevailing on the last day of each month. The interest cover ratio is tested only if
any new loan financing is withdrawn; the covenant does not prevent the refinancing of existing loans or
other sources of financing. In the case of breaches concerning regularly reported covenants, the cred-
itor has the right to demand immediate debt repayment. The covenants and their levels at the balance
sheet date are presented later in this document in the Capital management section.
The maturity breakdown below presents the contractual payments concerning the Group's financial
liabilities at the balance sheet date. The payments include interest payments and capital repayments.
The maturity table does not include the future estimated payments for hybrid equity loans presented
under equity. Further information on hybrid loans is provided in Note 25 Equity and accounting principles.
At the end of the reporting period, the Group’s financing reserves totalled EUR 116.7 million (2019:
EUR 40 million) and consisted of project loans not drawn down (EUR 20 million) and cash funds (EUR
96.7 million). At the balance sheet date, SRV's remaining purchase price receivables for developer
contracting housing and commercial premises under construction in Finland amounted to EUR 24
million (2019: EUR 35.8 million), with the amount of financing for developer contracting projects not
withdrawn amounting to EUR 38.6 million (2019: EUR 70.3 million). SRV estimates that EUR 29.1 million
(2019: EUR 96.8 million) will be used for the completion of developer contracting projects. The sourc-
es of financing are described in table format under the maturity table.
SRV I FINANCIAL STATEMENTS 2020
Financial reserves
EUR
Revolving credit facility
Project loans not drawn
Cash and cash equivalents
Total
The use of a revolving credit facility (EUR million) is subject to restrictions imposed due to the interest cover ratio
covenant.
Credit risk
Receivables, accrued income for long-term projects from customers and loan receivables from asso-
ciated companies and joint ventures, deposits and derivative transactions are subject to credit risk.
Credit risk is managed in accordance with the credit policy principles. The project customers are
mainly large, well-known companies with solid finances. If there is no information on the customer's
solvency, the information is checked from public trade and credit information registers, with a security
deposit required if necessary. For international commercial premises projects, more detailed customer
background checks are carried out for new customers. No solvency data is checked for homebuyers,
but ownership of the apartment is transferred to the customer only after the purchase price has been
paid in full. For transactions concerning unfinished apartments, buyers have the option, pursuant to the
Housing Transactions Act, to annul the transaction before the apartment is assigned, but cancellation
is subject to the obligation to pay damages. Similarly, the construction company may annul the sale if
the buyer fails to make the agreed payments.
Deposits and derivatives
The Group is not engaged in any significant investment activities. The investments made are related
to day-to-day cash management and are mainly short-term bank deposits at financially solid coop-
eration banks. The Group's finance unit is responsible for the credit risk associated with the invest-
ment counterparties in accordance with the Board's financing policy. Derivatives are entered into for
hedging purposes and thus the receivables in the balance sheet are minor. Contracts concluded with
the counterparties of derivative instruments are based on the ISDA Master Agreement. According to
the terms of the arrangements, if certain events occur (such as payment default), the net receivable
or liability position of an individual counterparty in the same currency is designated as a liability and
all related arrangements are terminated. As SRV does not have a legally enforceable offsetting right
at the closing date, said amounts have not been deducted from each other in the balance sheet. The
credit risk related to both deposits and derivatives is considered to be minor.
Trade receivables and accrued income from customer projects
Business units manage accrued income from customer projects and credit risks related to trade re-
ceivables in accordance with the Group's credit policy principles. The credit policy defines the re-
Maturity breakdown of financial liabilities, excluding lease liabilities
2019
Maturity
EUR Carrying value Contractual liability
later
Bonds
Loans from financial institutions
Corporate loans
Commercial papers
Other liabilities
Other non-interest bearing liabilities
Derivative liabilities
Trade payables
Total
Maturity breakdown of financial liabilities, lease liabilities
2019
Maturity
EUR Carrying value Contractual liability later
Lease liabilities
Contractual liability includes interest and other contractual payments
he liability for repaying the principal and interest on company loans is transferred to the buyer of the apartment at apartment assignment. Regardless of whether the project is completed or not, but not yet assigned to the buyer, the principal and inter-
est for the share of liabilities is presented in full, calculated until the due date of the loan. Interest and principal are removed from the table only when control is assigned.
SRV I FINANCIAL STATEMENTS 2020
quirements for the credit decision process, terms of sale and debt collection. The Group's commercial
counterparties are mainly listed companies or major real estate companies or institutional investment
companies. In the housing business, the counterparties are mainly private individuals. In a housing trans-
action, the customer is granted control of the apartment when all purchase price payments have been
made. Tenant procurement adheres to the same credit policies that are applied to commercial projects.
In the recognition of expected credit losses, the Group applies an approach according to which all
trade receivables and contractual assets are reviewed separately and expected credit losses recog-
nised over the entire applicable duration. Due to the business model and customer profile described in
the previous paragraph, the Group has not incurred any material credit losses over the last few years,
and no material credit losses are expected regarding the items included in the balance sheet at clos-
ing date. Of the EUR 18.2 million due at the end of the comparison period, no material credit losses
were realised in 2020.
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 with-
in a set timetable and to adhere to agreed working methods. In particular, additional work and altera-
tions may involve financial risks. Project receivables can involve additional work and alterations that
are subject to complaints or disputes over the payment obligations of the client. If no mutual agree-
ment on payment liability is reached during the final financial analysis of a project, the company may
have to instigate legal proceedings against the client. The outcomes of legal proceedings involve un-
certainties. Furthermore, it is not possible to accurately estimate the time required for court hearings
in disputes. For income from additional work and alterations that is recognised over time, only the por
-
tion that will likely be invoiced is recognised through IFRS 15-compliant entries. The total forecast for
project invoicing does not take into account items that involve a significant risk of impairment and that
the company does not expect to receive.
Aging itemisation of trade receivables
EUR
Trade receivables not yet due
– days overdue
– days overdue
– days overdue
– days overdue
– days overdue
Overdue by more than days
Total trade receivables
At the balance sheet date, there were no overdue items in other financial assets.
Due to the business model and customer profile, the Group has not incurred any material credit
losses over the past few years. Trade receivables and contractual assets have been examined sep-
arately and, as no material credit losses are expected, no reserve for bad debts has been recorded.
Loan receivables from associated companies and joint ventures
Loan receivables from associated companies and joint ventures are tested for impairment using a
three-stage model.
1.
The Group’s management first reviews the expected cash flows for the loan receivables from asso-
ciated companies and joint ventures together with the associated company investments and reg-
ularly assesses whether the credit risk related to the receivables has increased significantly after
they were initially recorded. If the credit risk associated with a receivable is deemed to be low or if
the credit risk has not significantly increased after it was initially recorded, the receivable is included
in Stage 1 and the impairment is measured based on an estimate of the probability of credit losses
occurring within 12 months. The Group's management has estimated that the loan receivables in
the balance sheet at closing date are mainly included in Stage 1, with no material credit losses ex-
pected for them. However, the Group's management continuously assesses the likelihood of credit
loss risks and monitors any developments in the situation.
2.
If it is discovered that the credit risk concerning a loan receivable has increased significantly, the loan
receivables are transferred to Stage 2, in which case the associated likelihood of loss is assessed over
the entire lifetime. In this case, the credit loss is recorded for the entire lifetime of the loan receiva-
ble and calculated by comparing future estimated cash flows for the entire lifetime with contractu-
al cash flows. At closing date, the balance sheet included no loan receivables included in Stage 2.
3.
If loan receivables are found to be impaired as a result of a credit risk, they are transferred to Stage
3. In the beginning of 2020, the total amount of loans included in Stage 3 was EUR 7.0 million, with
a EUR 1.5 million impairment loss recorded for the loans, and at the end of 2020, the loans included
in Stage 3 totalled EUR 5.6 million.
Long-term and short-term loan receivables from associated companies and joint ventures
EUR Level Level Level Total
Long-term loan receivables
Short-term loan receivables
Long-term loan receivables
Short-term loan receivables
Financial assets and liabilities valued at fair value categorised based on the
valuation hierarchy
Financial assets recognised at fair value through profit or loss
On 31 December 2020, the company had currency options and interest rate swaps recognised at fair
value through profit or loss.
Derivatives recognised at fair value through profit or loss
EUR Level Level Level Total
Derivative receivables
Derivative liabilities
Derivative receivables
Derivative liabilities
SRV I FINANCIAL STATEMENTS 2020
Other assets recognised at fair value through profit or loss
EUR Level Level Level Total
Unquoted shares and holdings
Non-current receivables
Unquoted shares and holdings
Level 1 instruments are actively traded on the market, with their current values based directly on the
market price.
The fair value of Level 2 instruments is based on market data.
Instead of actual market information, the fair value of Level 3 instruments is based, for example, on
quotations provided by agents, market valuation reports or cash flow-based forecasts. Valuations may
also be based on acquisition costs if this is the best estimate of fair value.
Unquoted shares and investments consist mainly of shares purchased for the leisure use of person-
nel (Level 2), Voimaosakeyhtiö SF shares and real estate investment funds and projects (Level 3). The
funds recorded for Level 3 consist mainly of SRV Voima's investment in Voimaosakeyhtiö SF (EUR 10.7
million 12/2020) and the Tampere Central Deck and Arena project (EUR 8.8 million 12/2020) and they
also include investments in real estate investment funds and projects. Level 3 also includes REDI's ad-
ditional purchase price receivable of EUR 0.5 million. The company sold its holding of approximately
40 per cent in shopping centre REDI in February 2020 and recorded an additional purchase price re-
ceivable of EUR 13.5 million for the additional potential future purchase price of EUR 50 million agreed
in connection with the transaction. Based on an updated cash flow-based forecast for shopping centre
REDI, SRV records a change in the value of the additional purchase price receivable, which will result
in a negative impact of approximately EUR 13 million on the operating profit for 2020.
The following table presents the changes in Level 3 instruments for 2020
EUR
Unquoted shares and holdings and long
term receivable
Opening balance January
Increase
Decrease -
Other net gains/losses recognised at fair value through profit or loss -
Final balance December
The following table presents the changes to Level 3 instruments for 2019
EUR Unquoted shares and holdings
Opening balance January
Increase
Decrease -
Other net gains/losses recognised at fair value through profit or loss
Final balance December
Capital management
Efficient management of the Group’s capital structure ensures that the Group is able to support its
business operations and increase the ownership value of investors. The Group has no public credit
rating issued by a credit institution. The Board of Directors of SRV Group Plc regularly assesses the
Group's capital structure. In order to maintain its capital structure, the Group may adjust its dividend
payment, issue new shares or float equity bonds. In addition, the Group may adjust its business op-
erations and use of capital to maintain its capital structure. The Group monitors the capital structure
through the Group's equity ratio and net gearing, which are also the financial covenants reported for
any major loans. In the long term, the capital structure is controlled through net gearing, and the Group's
financial target is to reduce the net gearing ratio to 40–60 per cent by the end of the strategy period.
Total shareholders’ equity includes the capital belonging to the parent company owners and non-con-
trolling minority shareholders and an equity loan.
In May, the company organised a directed share issue for the holders of the two outstanding hybrid
bonds. In the issue, about EUR 75 million of the EUR 92 million principal of the hybrid bonds was con-
verted into shares. As a result of the implementation of the share issue, the total outstanding principal
of the 2016 hybrid bonds is approximately EUR 11.8 million and the outstanding principal of the 2019
hybrid bonds is approximately EUR 3.6 million.
In June, the company organised a rights issue in which SRV received gross assets of approximately
EUR 50 million. Due to the share issue, SRV’s number of shares rose by 131,049,371 from 131,967,970 to
a total of 263,017,341 shares. The capital loan of EUR 9 million drawn on 30 March was used for pay-
ment in accordance with its terms and conditions, and was converted into equity.
The Group's loans include covenants that are described above under “Management of liquidity and
refinancing risks”. The covenants are calculated in accordance with the terms of each loan agreement
and they are based on either the FAS or IFRS figures. The table below describes the key covenants
reported for the Group’s bonds and liquidity facility in use at the end of the financial period 2020 and
their levels on 31 December 2020 and 31 December 2019. The covenant levels for all loan agreements
were met on 31 December 2020.
Covenants for credit agreements Covenant value
Equity ratio based on percentage of
completion, liquidity facility
Equity ratio based on percentage of
completion, bonds
Minimum cash
EUR million at the end of the period,
EUR million otherwise
-
Gearing ratio,
Minimum EBITDA
Varies between EUR – million
depending on the time of testing
-
In accordance with the terms of the loan agreements, excluding the effect of IFRS
At the end of December , the company made a standstill agreement with the syndicate banks that issued the credit
facility, that is, the loan covenants will not be tested during the period specified.
Minimum EBITDA before the impact of the financial results, transaction costs and impairments of associated companies.
The new covenant for the liquidity facility entered into force in , no reference data is available.
SRV I FINANCIAL STATEMENTS 2020
OPERATING LEASES, COMMITMENTS AND CONTINGENT LIABILITIES
EUR
Collateral given for own liabilities
Real-estate mortgages given
Other commitments
Investment commitments given
Land area commitments
The Group has guaranteed obligations of its subsidiaries. The total amount of these guarantees was
EUR 284,4 million (EUR 308,4 million).
The cost of rental agreements not included in lease liabilities
EUR
Cost related to short-term leases - -
The cost of low-value assets - -
Cost related to variable leases that are not includes in lease liabilities - -
Total - -
The cost of rental agreements not included in lease liabilities contains mainly costs related to site
equipment (short-term lease).
Cash flow of lease liabilities
EUR
Total - -
Cash flow of lease liabilities are presented under the item ‘Interest paid and other expenses from finan-
cial costs’, and the items ‘proceeds and repayment of lease liabilities' under cash flow from financing
activities, instead of the item ‘cash paid to suppliers and employees’ under cash flow from operating
activities.
FAIR AND NOMINAL VALUES OF DERIVATIVE INSTRUMENTS
EUR
Fair values of derivative instruments
Positive Negative Positive Negative
Foreign exchange forward contracts and options
Interest rate swap
Total
EUR
Nominal values of derivative instruments
Foreign exchange forward contracts and options
Interest rate swap
Total
The fair values of derivative instruments are based on the price quatations of the counterparties.
RECONCILIATION OF DEBTS REPORTED IN FINANCING ACTIVITIES
Long term Short term
EUR
Interest-bear
-
ing debts Hybrid bond
Interest-bearing
debts Total
Debt
Proceeds from loans
Repayment of loans - - -
Transfer long term/short term debts -
Change in Lease Liabilities
Proceeds from Hybrid bond
Repayment of hybrid bond - -
Change in housing corporation loans - -
Net change in short-term loans - -
Change in debt, non-cash:
Other non-cash changes
Debt
Proceeds from loans
Repayment of loans - -
Transfer long term/short term debts -
Change in Lease Liabilities - -
Proceeds from Hybrid bond
Repayment of hybrid bond
Change in housing corporation loans - - -
Net change in short-term loans - -
Other interest bearing debts - -
Change in debt, non-cash:
Efective interest
Other non-cash changes - - -
Debt
SRV I FINANCIAL STATEMENTS 2020
SUBSIDIARIES
Name Domicile
Group's
holding,
Group's voting
right,
Shares in subsidiries
SRV Rakennus Oy Espoo
SRV Ream Oy Helsinki
SRV Asumisen Palvelut Oy Espoo
Rakennusliike Purmonen Oy Joensuu
SRV Infra Oy Kerava
SRV Voima Oy Espoo
SRV Russia Oy Espoo
OOO SRV Development Pietari
SRV Stroi OOO Moskova
OOO SRV Pietari
SRV Ehituse AS Tallinna
SRV Realty B.V Amsterdam
The list does not include project companies.
RELATED PARTY TRANSACTIONS
2020
EUR
Selling of
goods and
services
Purchase of
goods and
services
Interest
income Receivables Liabilities
Financial
transactions
Management and Board
of Directors
Joint ventures
Associate company
Other related parties
Total
These financial transactions concern share issues involving the participation of related parties with their converted hy-
brid bonds and subscription rights.
2019
EUR
Selling of
goods and
services
Purchase of
goods and
services
Interest
income Receivables Liabilities
Management and Board
of Directors
Joint ventures
Associate company
Other related parties
Total
The related parties of Group include parent company, subsidiaries and associated companies as well
as joint ventures. The related parties also include Board of Directors and Corporate Executive Team.
Other related parties include transactions carried out with other companies under the control of
the Group's management or with companies under control of minority shareholders.
Goods and services are sold to related parties at market price.
Subsidiaries included in related parties are listed above in note 33 Subsidiaries. Subsidiaries are in-
cluded in the consolidated financial statements and therefore the transactions between Group com-
panies are not included in note 34 Related party transactions.
SRV I FINANCIAL STATEMENTS 2020
Itemisation of management salaries and employment-based benefits
EUR
Management salaries and other short-term employment-based benefits
Share-based payments
Post-employment benefits, statutory pensions
Post-employment benefits, voluntary additional pensions
Benefits paid upon termination
Total
The statutory occupational pension insurance of the company's employees is handled through Ilmarinen.
Pension payments are made on the basis of the statutory pension percentage, 22.7 (24.7%). In 2019,
severance pay remitted in connection with resignations was entered as expense in the 2019, but this
was not paid until 2020.
Salaries and compensations of CEO & Board of Directors
EUR
Sipola Saku, President and CEO from Sep
Ojala Juha Pekka, President and CEO until Aug
-
Nieminen Timo, Deputy CEO
Members of the Board
Yli-Kyyny Tomi, Chairman from Mar
Kokkila Ilpo, Chairman until Mar
Kallasvuo Olli-Pekka, Vice Chairman
Alitalo Minna
Leinonen Hannu -
Kokkila Timo
Leppänen Heikki -
Hintikka Juhani, until Mar
Elomaa Juhani, until Mar -
Members of the Board, total
The President and CEO's employment obligation ended on August and his employment ended on December
The CEO's period of notice is 6 months. If SRV Group Plc terminates the contract, the period of notice
is twelve months.
The 2020 paid statutory occupational pension insurance of the president and CEO and deputy
CEO were 191 thousand euros (165 thousand euros in 2019).
SRV I FINANCIAL STATEMENTS 2020
PARENT COMPANY'S FINANCIAL STATEMENTS, FAS
BALANCE SHEET OF THE PARENT COMPANY
EUR Note
ASSETS
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Shares in group companies
Other financial assets
Non-current assets, total
Current assets
Inventories
Long-term receivables
Short-term receivables
Cash and cash equivalents
Current assets, total
ASSETS, TOTAL
EQUITY AND LIABILITIES
Equity
Share capital
Invested free equity fund
Retained earnings
Profit/loss for the financial year - -
Equity, total
Provisions
Liabilities
Non-current liabilities
Current liabilities
Liabilities, total
EQUITY AND LIABILITIES, TOTAL
INCOME STATEMENT OF THE PARENT COMPANY
EUR Note
Revenue
Other operating income -
Purchase during the financial year -
Personnel expenses - -
Indirect personnel costs
Pension costs - -
Other indirect personnel costs - -
Depreciation and impairment - -
Other operating expenses - -
Operating profit - -
Financial income and expenses - -
Profit berofe appropriations and taxes - -
Appropriations
Income taxes
Net profit for the financial year - -
SRV I FINANCIAL STATEMENTS 2020
CASH FLOW STATEMENT OF THE PARENT COMPANY
EUR
Cash flows from operating activities
Cash receipts from customers
Cash receipts from other operating income
Cash paid to suppliers and employees - -
Net cash before interests and taxes - -
Interests received and other financial income
Interests paid and other expenses from financial costs - -
Cash flow from operating activities - -
Cash flow from investing activities
Purchase of tangible and intangible assets - -
Purchase of investments -
Proceeds from sale of investments
Loans granted for subsidiaries - -
Loans granted for others -
Proceeds from repayments of subsidiary loans
Dividends received
Net cash used in investing activities -
EUR
Cash flow from financing activities
Net cash from share issue
Proceeds from loans
Repayment of loans - -
Proceeds from capital loan
Capital loan interests -
Net change in short-term loans - -
Change in group accounts -
Net cash from financing activities -
Net change in cash and cash equivalents -
Cash and cash equivalents at the beginning of financial year
Cash and cash equivalents at the end of financial year
SRV I FINANCIAL STATEMENTS 2020
Basic data
SRV Group Plc (reg 1707186-8) is a Finnish company founded in accordance with the Finnish law and
based in Espoo, Tarvonsalmenkatu 15, 02600 Espoo, Finland
Parent company's financial statements and the comparable information
The parent company's financial statements are prepared in accordance with the principles of Finnish
accounting legislation. The financial statements are prepared for 12 months in the financial period 1
January - 31 December 2020.
ACCOUNTING PRINCIPLES
Non-Current assets
Tangible and intangible asset are recognized on the balance sheet at historical cost less depreciation
according to plan and impairment. Depreciation according to plan is calculated as straight-line de-
preciation on the basis of the estimated economic life of tangible and intangible assets. Depreciation
periods are as follow:
• Other intangible rights, 3–5 years
• Buildings and structures, 40–60 years
• Machinery and equipment, 3–10 years
• IT-programs, 3–5 years
Investments are stated at the original purchase cost less accumulated impairment if the future income
from the investment is probably going to be smaller compared to purchase price. No depreciation is
booked on land and water areas and intangible rights. Development costs are recognized as annual
costs during the year they arise.
Items denominated in foreign currency
Foregn currency business transactions are recognized at the exchange rate of transaction date.
Pensions
The statutory pension security in the parent company is provided by an external pension insurance
company.
Ta xe s
The taxes in the income statement include the taxes for the financial year and adjustments for previ-
ous periods. The deferred tax liability and receivable is calculated from the temporary difference in
bookkeeping versus taxation using the confirmed tax rate for the coming fiscal years.
The valuation of financial instruments
Financial instruments have been valued as of 1 January 2015 at fair value in accordance with the Chapter
5 Section 2(a) of Finnish Accounting Act. The fair value of derivatives is estimated based on the pres-
ent value of future cash flows using market prices on the closing date. The change in fair value of the
interest rate swaps are recognized in interest income and expenses in the income statement and the
the cumulative change in fair values is recognized in the accrued income and expenses at the balance
sheet. Hedging instruments are booked in the income statement in financial expenses and in balance
sheet in accrued expenses.
Currency forward deal premium cost are recongnized in financial expenses at transaction date.
Commitments
The parent company has given absolute guarantees on behalf of group companies. The guarantees
are related to construction projects.
Notes to parent company financial statements
SRV I FINANCIAL STATEMENTS 2020
NOTES TO INCOME STATEMENT
REVENUE
EUR
Group services
Rent income
Other revenues
Total
OTHER INCOME
Other income -
INFORMATION CONCERNING PERSONNEL
Number of personnel on average
Office employees
DEPRECIATION AND IMPAIRMENTS
EUR
Depreciation on Intangible assets
Depreciation on Buildings and Structures
Depreciation on Machinery and Equipment
Total
OTHER OPERATING EXPENSES
EUR
Rents
Voluntary indirect personnel expenses
Car and travel expenses
Entertainment and marketing expenses
Communication and IT expenses
Other external services
Operating and maintenance costs
Other fixed expenses
Total
Auditing fees included in other operating expenses
EUR
Auditing
Statements
Tax advisory services
Other services
Total
SRV I FINANCIAL STATEMENTS 2020
FINANCIAL INCOME AND EXPENSES
EUR
Dividend income
From group companies
Total
Interest and other financial income
From group companies
From other companies
Fair value impact of currency forward contracts
Income from currency forward contracts
Total
Interest expenses
Interest expenses to group companies - -
Interest expenses to others - -
Total - -
Other financial expenses
To others
Fair value impact of interest rate swap contracts - -
Fair value impact of currency forward contracts -
Costs from currency forward contracts -
Structuring costs from currency forward contracts - -
Impairment and reversing from non-current investments -
Other financial expenses - -
Total - -
Financial income and expenses total - -
APPROPRIATIONS
The company did not have transactions to be recorded in appropriations during the financial year or
the comparison period.
INCOME TAXES
EUR
Change in deferred taxes
Total
NOTES TO BALANCE SHEET
CHANGES IN NONCURRENT ASSETS
Intangible assets
EUR Intangible assets
Other intangible
expenditures Total
Historical cost . Jan
Increase
Decrease - -
Historical cost . Dec
Accumulated depreciation and impairments, Jan. - - -
Depreciation - -
Accumulated depreciation and impairments,
Dec. - - -
Carrying amount, Dec.
SRV I FINANCIAL STATEMENTS 2020
EUR Intangible assets
Other intangible
expenditures Total
Historical cost . Jan
Increase
Historical cost . Dec
Accumulated depreciation and impairments, Jan. - - -
Depreciation - -
Accumulated depreciation and impairments,
Dec. - - -
Carrying amount, Dec.
Tangible assets
EUR
Land and
water areas
Buildings and
structures
Machinery
and
equipment Total
Historical cost . Jan
Increase
Historical cost . Dec
Accumulated depreciation and impairments, Jan. - - -
Depreciation - - -
Accumulated depreciation and impairments,
Dec. - - -
Carrying amount, Dec.
EUR
Land,and
water,areas
Buildings,and
structures
Machin
-
ery,and
equipment Total
Historical cost . Jan
Increase
Historical cost . Dec
Accumulated depreciation and impairments, Jan. - - -
Depreciation - - -
Accumulated depreciation and impairments,
Dec. - - -
Carrying amount, Dec.
INVESTMENTS
EUR
Shares in subsidiaries
Historical cost, Jan.
Increases
Decreases -
Historical cost, Dec.
Other shares and holdings
Historical cost, Jan.
Increases
Decreases - -
Historical cost, Dec.
Investments total
SUBSIDIARY COMPANIES
Domicile
SRV Rakennus Oy Espoo
SRV Infra Oy Kerava
SRV Voima Oy Espoo
SRV Russia Oy Espoo
SRV Ehituse AS Tallinna
Rakennusliike Purmonen Oy Joensuu
SRV Ream Oy Helsinki
SRV I FINANCIAL STATEMENTS 2020
LONGTERM AND SHORTTERM RECEIVABLES
EUR
Long-term receivables
From Group companies
Loan receivables
Interest receivables
From others
Other receivables
Deferred tax receivable
Long-term receivables Total
Long-term receivables Total
Short-term receivables
From Group companies
Accounts receivable
Loan receivables
Other receivables
Accrued receivables
Total
From others
Accounts receivable
Other receivables
Loan receivables
Accrued receivables
Total
Short-term receivables, total
ACCRUED RECEIVABLES:
EUR
Fair value of currency forward
Interest
Other
Total
CHANGES IN EQUITY
EUR
Share capital .
Share capital .
Share premium reserve .
Share Issue
Share premium reserve .
Retained earnings .
Transfer between items
Purchase/sell of own shares -
Retained earnings .
Net profit for the financial year - -
Equity .
CALCULATION ON THE DISTRIBUTABLE EQUITY
EUR
Share premium reserve
Retained earnings
Net profit for the financial year - -
Total
PROVISIONS
EUR
Other provisions
Provision related to the selling of SRV Kalusto Oy
SRV I FINANCIAL STATEMENTS 2020
LONGTERM LIABILITIES
EUR
To other companies
Hybrid Bond
Loans from financial institutions
Bonds
Other loans
Total
To Group Companies
Other loans
Long-term liabilities total
SHORTTERM LIABILITIES
EUR
To Group Companies
Accounts payables
Other liabilities
Total
To other companies
Hybrid Bond
Loans from financial institutions
Commercial papers
Accounts payable
Accrued expenses
Other loans
Total
Short term liabilities total
ACCRUED LIABILITIES
EUR
Salaries including social costs
Accrued liability related to currency forward deal
Accrued liability related to interest rate swap
Interest and other financial expenses
Other
Total
DERIVATIVE FINANCIAL INSTRUMENTS
On the closing date, parent company had short-term foreign exchange derivative contracts, hedging
against currency risk, with capital totaling EUR 10 million. By means of interest rate swap contracts,
protection is sought from market interest rate changes during the financial year. Interest rate swap
contracts mature during the financial year 2025.
Derivative financial instruments:
EUR
Interest rate swaps
Fair value negative
Nominal value of underlying instruments
Hedging instruments
Fair value positive
Fair value negative
Nominal value of underlying instruments
Fair value hierarchy of financial instruments
Fair value hierarchy of financial instruments is described in the note 29 in SRV group notes.
RISK MANAGEMENT
The group has a systematic and structured approach to risk management across business operations
and processes. There are no separate or individual risk management policies or procedures for the
Parent company. Risk management is described in the Report of the Board of Directors and in note
29 in Consolidated Financial Statement.
LEASING AND OTHER RENT AGREEMENTS
EUR
Payable in less than a year
Payable later
Total
Rental lease liabilities
Payable in less than a year
Payable later
Total
SRV I FINANCIAL STATEMENTS 2020
OTHER LIABILITIES
EUR
Guarantee obligations given on behalf of Group companies
Investment commitments
The group has committed to invest 24 294 thousand euros in Voimaosakeyhtiö SF in order fo finance
Hanhikivi 1 project. At the end of 2020 the investments made were 10 714,6 thousand euros in total.
RELATED PARTY TRANSACTIONS
There were no related party transactions which would not been carried out under ordinary commercial
terms or which would be necessary to provide in order to give true and fair view of the transactions.
Itemisation of management salaries and employment-based benefits
EUR
Salaries and other benefits
Total
Salaries and other benefits of CEO
CEO, Saku Sipola, from
CEO, Juha-Pekka Ojala, until
Deputy Vice President, Timo Nieminen
Rewards and benefits of the members of the board:
Yli-Kyyny Tomi, puheenjohtaja from
Kokkila Ilpo, puheenjohtaja until
Kallasvuo Olli-Pekka, varapuheenjohtaja
Alitalo Minna
Hannu Leinonen
Kokkila Timo
Leppänen Heikki
Hintikka Juhani, until
Elomaa Juhani, until
Total
The former President and CEO's (Juha-Pekka Ojala) employment obligation ended on 31 August 2019
and his employment ended on 31 December 2019. The amount of the severance pay to Juha-Pekka
Ojala in 2019 was EUR 518,808.
The 2019 paid statutory occupational pension insurance of the president and CEO and deputy CEO
were 191 thousand euros (165 thousand euros in 2019).
On 17 December 2020, the Board of Directors of SRV Group Plc decided on changes to the share-
based incentive scheme of President and CEO Saku Sipola. The changes concern the number of
acquisition rights, the subscription price of the acquisition rights and the periods during which the
acquisition rights can be exercised. The purpose of the changes is to ensure that the incentive effect
of the scheme remains at its previous level by taking into account the changes in the number of the
company’s shares caused by SRV’s 2020 rights issues. The incentive effect of the scheme is based
on the value increase of SRV Group Plc’s shares.
As a result of the changes, Sipola has the right to acquire 1,000,000 shares at a subscription price of
EUR 0.55 per share. The basis for determining the subscription price is the volume-weighted average
price of SRV’s share on Nasdaq Helsinki in continuous trading from 1 August to 30 November 2020.
After the changes, the acquisition rights can be exercised in the following three periods: the first begins
on 1 March 2022 and ends on 28 February 2023, the second begins on 1 March 2023 and ends on 31
August 2024, and the third begins on 1 September 2024 and ends on 31 August 2026. During the first
and second exercise periods, the acquisition rights holder is entitled to exercise 300,000 acquisition
rights and during the third period 400,000 acquisition rights.
SRV I FINANCIAL STATEMENTS 2020
Espoo, 2 March 2021
Tomi Yli-Kyyny Olli-Pekka Kallasvuo
Chairman Vice Chairman
Minna Alitalo Timo Kokkila
Heikki Leppänen Hannu Leinonen
Saku Sipola
President and CEO
Our auditor’s report has been issued today.
Helsinki, 4 March 2021
PricewaterhouseCoopers Oy
Authorized Public Accounting Firm
Samuli Perälä
KHT
SIGNATURES TO THE FINANCIAL STATEMENTS AND REPORT OF THE
BOARD OF DIRECTORS
AUDITOR´S NOTE
Signatures to the financial statements and
Report of the Board of Directors, auditor´s note
SRV I FINANCIAL STATEMENTS 2020
Auditor’s Report (Translation of the Finnish Original)
To the Annual General Meeting of SRV Yhtiöt Oyj
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion
• the consolidated financial statements give a true and fair view of the group’s financial position and
financial performance and cash flows in accordance with International Financial Reporting Standards
(IFRS) as adopted by the EU
• the financial statements give a true and fair view of the parent company’s financial performance
and financial position in accordance with the laws and regulations governing the preparation of the
financial statements in Finland and comply with statutory requirements.
Our opinion is consistent with the additional report to the Audit Committee.
What we have audited
We have audited the financial statements of SRV Yhtiöt Oyj (business identity code 1707186-8) for the
year ended 31 December 2020. The financial statements comprise:
• the consolidated balance sheet, consolidated income statement, statement of comprehensive
income, statement of changes in equity, consolidated cash flow statement and notes, including a
summary of significant accounting policies
• the parent company’s balance sheet, income statement, statement of cash flows and notes.
Basis for Opinion
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities un-
der good auditing practice are further described in the Auditor’s Responsibilities for the Audit of the
Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a ba-
sis for our opinion.
Independence
We are independent of the parent company and of the group companies in accordance with the ethi-
cal requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, the non-audit services that we have provided to the par-
ent company and to the group companies are in accordance with the applicable law and regulations
in Finland and we have not provided non-audit services that are prohibited under Article 5(1) of Reg
-
ulation (EU) No 537/2014. The non-audit services that we have provided are disclosed in note 5 to the
Financial Statements.
Our Audit Approach
Overview
• Overall group materiality: 4,500,000 euros
• Audit scope: The group audit was focused on parent company and
its Finnish subsidiaries
• Revenue recognized from construction contracts over time, estimated
project margins and the related receivables and payables
• Valuation of investments in associated companies and joint ventures
• Valuation of slow moving land areas in inventory
• Financing of operations
As part of designing our audit, we determined materiality and assessed the risks of material misstate-
ment in the financial statements. In particular, we considered where management made subjective
judgements; for example, in respect of significant accounting estimates that involved making assump-
tions and considering future events that are inherently uncertain.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to ob-
tain reasonable assurance whether the financial statements are free from material misstatement.
Misstatements may arise due to fraud or error. They are considered material if individually or in ag-
gregate, they could reasonably be expected to influence the economic decisions of users taken on the
basis of the financial statements.
Materiality
Key audit
matters
Group
scoping
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall group materiality for the consolidated financial statements as set out in the table
below. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements
on the financial statements as a whole.
Overall group materiality
4,500,000 euros (previous year 4,500,000 euros)
How we determined it
We determined the overall materiality for the consolidated financial statements based on as a weight
-
ed average of net sales, profit before taxes and total assets.
Rationale for the materiality benchmark applied
We chose the combination described above as it, in our opinion, reflects the volume and result of the
operations and the capital invested in the business.
How we tailored our group audit scope
We tailored the scope of our audit, taking into account the structure of the SRV Yhtiöt Oyj group, the
accounting processes and controls, and the industry in which the group operates.
SRV Yhtiöt Oyj group consists of two business areas; construction and investments. In addition
Group services are reported as the other operations. As the majority of the operations are in Finland,
the focus of our audit has mainly been on the parent company and its Finnish subsidiaries.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial statements of the current period. These matters were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
As in all of our audits, we also addressed the risk of management override of internal controls, in-
cluding among other matters consideration of whether there was evidence of bias that represented a
risk of material misstatement due to fraud.
• Key audit matter in the audit of the group
Revenue recognized from construction contracts over time, estimated project margin and the related receivables
and payables
Refer to Accounting policies for consolidated financial statements and Notes 3, 15, 22 and 28
Income and costs of construction contracts are recorded over time as revenue and expenses
on the basis of the percentage of completion, when the outcome of the project can be estimated
reliably. The percentage of completion is calculated on the basis of the estimated total cost of a
contract and the cumulative costs at the balance sheet date.
Revenue recognized based on percentage of completion includes significant management
estimates affecting the recognised revenue and margin as well as the valuation of certain balance
sheet items. Particularly the estimated total margin and estimated total expenses of the projects
include management judgement. Estimates include also, for example, the margins of possible
additional work not yet approved by customers and the possible rental liabilities related to con-
tracts. An error in one or several of the estimates can lead to significant discrepancies in revenue
recognition.
Revenue recognized from construction contracts over time is considered a key audit matter,
because revenue is a significant item in the financial statements and because the percentage
of completion method includes significant management judgement, which affects the revenue
recognized as well as the margins of the projects.
• How our audit addressed the key audit matter
Our procedures included the following but was not limited to:
–
We have updated our understanding of processes in relation to revenue recognition and estimates
of projects as well as tested the operation of selected controls.
–
We have read contracts and assessed the appropriateness of accounting principles used to
recognize revenue for a sample of projects.
– We compared for a sample of projects the estimated net sales with the contracts.
–
We assessed the reliability and accuracy of management estimates by comparing the estimated
margins and total cost to complete for uncompleted projects in the previous year-end to their
actual outcome.
–
We had discussions with relevant personnel concerning the progress of the most significant
projects, focusing especially on estimation uncertainties related to cost estimates, and read
memos from selected project meetings.
– We tested the mathematic accuracy of the spreadsheets used to determine the percentage of
completion as well as the revenue and margin that was recognised based on that.
– We tested a sample of new projects to ensure that they have been approved and processed in
accordance with the group’s decision making policy.
• Valuation of investments in associated companies and joint ventures
Refer to Accounting policies for consolidated financial statements and Notes 16 and 24
The group’s investments in associated companies and joint ventures are investments in construction
projects together with other investors. After completion of the construction, the group can own and
operate these investments.
The group estimates the value of these investments, for example commercial centers, based
on their discounted future cash flows. The determination of discounted future cash flows includes
estimates of future rental income, vacancy rate, operating expenses, yield, and, as concerns the
commercial centers located in Russia, assumptions in relation to exchange rates.
Valuation of investments in associated companies and joint ventures is considered a key audit
matter because they form a significant balance sheet item and their valuation includes manage-
ment judgements.
• Valuation of investments in associated companies and joint ventures
Our procedures included the following but was not limited to:
–
Management has acquired external valuation reports concerning the most significant completed
real estate owned by the associated companies and joint ventures. We read the valuation reports
and discussed the most significant assumptions in the valuation models with management. Fur-
thermore, we ascertained that the information in the valuation reports was used by management
in their impairment calculations of the investments.
– We assessed the applicability of the valuation models used by management to test the impair-
ment of the investments in associated companies and joint ventures. Furthermore, we tested
by sampling the mathematical accuracy of the calculations.
–
We, for example evaluated the appropriateness of the yields used in the above-mentioned
valuation calculations by comparing to observable market data.
–
We prepared sensitivity analysis for the above-mentioned calculations prepared by management
for the key variables. These variables include, for example, rental income, vacancy rate and yield.
• Valuation of slow moving land areas
Refer to Accounting policies for consolidated financial statements and Note 20
Inventories consist primarily of the cost of construction work and land plot for construction projects in
progress, land areas and plot-owning companies related to projects under development or for which
the decision to start construction has not yet been made, as well as completed unsold apartments
and buildings.
Inventories in the balance sheet are valued at the lower of cost and net realizable value. Calculation
of the net realizable value includes management judgement.
The net realizable value of land areas depends on the intended use of the land area. The net
realizable value of a land area intended to be used in a construction project is estimated as a part
of the net realizable value for the whole construction project.
Valuation of land areas is considered a key audit matter because they form a significant balance
sheet item and their valuation includes management judgement.
• How our audit addressed the key audit matter
Our procedures included the following but was not limited to:
–
We assessed the applicability of the valuation models used by management. Furthermore, we
have tested the mathematic accuracy of the calculations on a sample basis.
–
We have discussed with management about their action plans in relation to slow moving land plots.
–
Specifically for the unconstructed land plots with the largest net realizable value, we investigated
the construction plans and timetables as well as plans to change the intended use during the
financial year.
• Financing of operations
Refer to Accounting policies for consolidated financial statements and Note 29
The group’s main sources of financing are project-specific loans, bonds and committed revolving
credit facility. Financing agreements contain standard covenants.
The group executed multiple financing arrangements during the financial year, including con-
version of the former revolving credit facility, extending the tenors of bonds and amending certain
other conditions in these instruments. In addition the group executed a share issue directed to the
holders of capital notes and a share issue with pre-emptive rights of shareholders.
Financing of operations is considered a key audit matter because of the significant impact of
the financing arrangements to the groups balance sheet and financial position.
• How our audit addressed the key audit matter
Our procedures included the following but was not limited to:
–
We discussed with the management about executed financing arrangements, read the financing
agreements and evaluated the accounting treatment of executed transactions
– We evaluated the covenant calculations prepared by the group
We have no key audit matters to report with respect to our audit of the parent company financial
statements.
There are no significant risks of material misstatement referred to in Article 10(2c) of Regulation
(EU) No 537/2014 with respect to the consolidated financial statements or the parent company finan-
cial statements.
Responsibilities of the Board of Directors and the Managing Director for the
Financial Statementst
The Board of Directors and the Managing Director are responsible for the preparation of consoli-
dated financial statements that give a true and fair view in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and
fair view in accordance with the laws and regulations governing the preparation of financial state-
ments in Finland and comply with statutory requirements. The Board of Directors and the Managing
Director are also responsible for such internal control as they determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the Board of Directors and the Managing Director are re-
sponsible for assessing the parent company’s and the group’s ability to continue as a going concern,
disclosing, as applicable, matters relating to going concern and using the going concern basis of ac-
counting. The financial statements are prepared using the going concern basis of accounting unless
there is an intention to liquidate the parent company or the group or to cease operations, or there is
no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with good auditing practice will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment
and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due
to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the parent company’s or the group’s internal control.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
•
Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the
going concern basis of accounting and based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on the parent
company’s or the group’s ability to continue as a going concern. If we conclude that a material uncer-
tainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events
or conditions may cause the parent company or the group to cease to continue as a going concern.
•
Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events
so that the financial statements give a true and fair view.
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the group to express an opinion on the consolidated financial statements.
We are responsible for the direction, supervision and performance of the group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in in-
ternal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with rel-
evant ethical requirements regarding independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on our independence, and where applica-
ble, related safeguards.
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the financial statements of the current period and are there-
fore the key audit matters. We describe these matters in our auditor’s report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse consequences of do-
ing so would reasonably be expected to outweigh the public interest benefits of such communication.
OTHER REPORTING REQUIREMENTS
Appointment
We were first appointed as auditors by the annual general meeting on 26 March 2014.
Other Information
The Board of Directors and the Managing Director are responsible for the other information. The other
information comprises the report of the Board of Directors
Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility is to read the other informa-
tion and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
Our responsibility also includes considering whether the report of the Board of Directors has been
prepared in accordance with the applicable laws and regulations.
In our opinion
• the information in the report of the Board of Directors is consistent with the information in the
financial statements
• the report of the Board of Directors has been prepared in accordance with the applicable laws and
regulations.
If, based on the work we have performed, we conclude that there is a material misstatement of the report
of the Board of Directors, we are required to report that fact. We have nothing to report in this regard.
Helsinki 4.3.2021
PricewaterhouseCoopers Oy
Authorised Public Accountants
Samuli Perälä
Authorised Public Accountant (KHT)
GROUP AND SEGMENT INFORMATION BY QUARTER UNAUDITED
SRV Group
EUR million -/ -/ –/ –/ –/ –/ –/ –/
Revenue
Operation profit - - - -
Financial income and expenses, total - - - - - - - -
Profit before taxes - - - - - - -
Order backlog
New agreements
Earnings per share, eur - - - - - - -
Equity per share, eur
Share closing price, eur
Equity ratio,
Equity ratio, excl. IFRS
Net interest-bearing liabilities
Net interest-bearing liabilities excl. IFRS
Net gearing,
Net gearing, excl. IFRS
Revenue
EUR million –/ –/ –/ –/ –/ –/ –/ –/
Construction
business construction
housing construction
Investments
Other operations and eliminations - - - - - - -
Group, total
Operating profit
EUR million –/ –/ –/ –/ –/ –/ –/ –/
Construction -
Investments - - - - - - -
Other operations and eliminations - - - - - -
Group, total - - - -
Operating profi
–/ –/ –/ –/ – / –/ –/ –/
Construction -
Investments - - - - - - - -
Group - - - -
The Group's order backlog consists of the Construction business.
The effects of IFRS have been adjusted from the figure.
Order backlog
EUR million
business construction
housing construction
Group, total
sold order backlog
unsold order backlog
Group's order backlog consists only of construction segment.
Order backlog, housing construction in Group
EUR million
Negotiation and construction contracts
Under construction, sold
Under construction, unsold
Completed and unsold
Housing construction, total
Capital employed
EUR million
Construction
Investments
Other operations and eliminations - -
Group, total
Housing production in Group
(units) –/ –/ –/ –/ –/ –/ –/ –/
Housing sales, total
sales, developer contracting
sales, negotiation contracts
Developer contracting
start-ups
completed
recognized in revenue
completed and unsold
Under construction, total
construction contracts
negotiation contracts
negotiated contracts
developer contracting
of which sold
of which unsold
Information for shareholders
BASIC INFORMATION ABOUT THE SHARE
SRV Group Plc's shares are quoted on Nasdaq Helsinki, under the sector heading Industrial products
and Services in the small-cap group. The share's trading code is SRV1V.
The ISIN code of the share is FI0009015309.
SRV'S FINANCIAL INFORMATION IN 2021
Financial Statement Release 2020: 4 February 2021 at 8.30 am.
Annual Review 2020 (including the Financial Statements and the Report of the Board of Directors) is
published on Friday 5 March 2021.
Interim Report for January–March 2021 is published on Thursday 29 April 2021 at 8.30 am.
Half-year Report for January–June 2021 is published on Wednesday 21 July 2021 at 8.30 am.
Interim Report for January–September 2021 is published on Thursday 28 October 2021 at 8.30 am.
SRV Group Plc’s Annual General Meeting is planned to be held on Monday 29 March 2021 at 4.00 pm.
The Board of Directors will convene the meeting separately in due course.
SILENT PERIOD
SRV’s silent period always starts 30 calendar days before the publication of an Interim Report or the
Financial Statement Release. The silent period ends on the publication of an Interim Report or the
Financial Statement Release.
INVESTOR RELATIONS CONTACTS
CFO
Jarkko Rantala
Telephone: +358 40 674 1949
Email: jarkko.rantala@srv.fi
SVP, Communications and Marketing
Miia Eloranta
Telephone: +358 50 441 4221
Email: miia.eloranta@srv.fi
Communications Manager
Johanna Ylitalo
Telephone: +358 40 510 8604
Email: johanna.ylitalo@srv.fi
ORDERING PUBLICATIONS
SRV's annual reviews and other financial bulletins can be ordered from SRV's website
www.srv.fi/en/investors or by email investor.relations@srv.fi.
SRV I FINANCIAL STATEMENTS 2020