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REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

REPORT OF THE BOARD OF DIRECTORS AND FINANCIAL STATEMENTS

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Content

Board of Directors’ report

Financial statements

Year 2021 in brief �� 3

Report of the Board of Directors 2021 �� 4

Financial indicators of the group �� 26

Calculation of key figures �� 27

Shares and shareholders ��29

Consolidated financial statements, IFRS ��30

Consolidated income statement ��30

Statement of comprehensive income ��30

Consolidated balance sheet �� 31

Consolidated statement of changes in equity ��32

Consolidated cash flow statement ��34

Notes to the consolidated financial statements �� 35

Income statement oe the parent company ��71

Parent company's financial statements, FAS ��71

Balance sheet of the parent company �� 71

Cash flow statement of the parent company �� 72

Notes to parent company financial statements �� 73

Signatures to the financial statements and Report of the Board of Directors, auditor’s note �� 80

Auditor’s Report (Translation of the Finnish Original) �� 81

Group and Segment information by quarter�� 86

Information for shareholder �� 89

Cover image: Tuomas Uusheimo

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

GEARING TARGET

REACHED, STRONG

CASH FLOW AND

GOOD EARNINGS

TREND IN THE

PROJECTS WITH

THE EXCEPTION OF

TAMPERE ARENA

Year 2021 in brief

932.6

EUR million

Revenue

872.3

EUR million

Order backlog

76.2

EUR million

Cash ﬂow from operating and investment activities

5.3

EUR million

Operative operating profit

47.5%

Net gearing ratio (excl. IFRS 16)

400

800

1,200

2017

2018

2019

2020

2021

932.6

975.5

1,060.9

959.7

1,114.1

Data Table

Legend

Value

2017

1114.1

2018

959.7

2019

1,060.9

2020

975.5

2021

932.6

Change from 2020: -4.4%

Revenue (EUR million)

500

1,000

1,500

2,000

2017

2018

2019

2020

2021

872.3

1,153.4

1,344.2

1,816.0

1,547.9

Data Table

Legend

Value

2017

1,547.9

2018

1,816.0

2019

1,344.2

2020

1,153.4

2021

872.3

Change from 2020: -24.4%

Order backlog

(EUR million)

At the period-end.

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

Report of the Board of Directors 2021

FINANCIAL YEAR 1 JANUARY–

31 DECEMBER 2021 IN BRIEF:



Revenue declined by 4�4 percent to

EUR932.6million(975.51−12/2020).



Operative operating profit amounted to

EUR 5�3 (15�8) million�



Operating profit was EUR -1�7 (1�5) million�



The result before taxes was

EUR -20�3 (-28�0) million�



Cash flow from operating and investment

activities totalled EUR 76�2 (73�0) million�



The equity ratio was 27�4 (22�6) per cent and

gearing was 103�0 (159�7) per cent� Excluding the

impact of IFRS 16, the equity ratio was 32�8 (27�8)

per cent and gearing was 47�5 (82�1) per cent�

The equity ratio in accordance with the loan

covenant calculation was 34�3 per cent�



At period-end, the order backlog stood at

EUR 872�3 (1,153�4) million� New agreements

valued at EUR 588�6 (707�1) million were signed

in January–December� The sold share of the order

backlog was 91�5 (86�4) per cent�



Earnings per share were EUR -0�08 (-0�15)�

The comparison figure has been adjusted for

share issues�

OUTLOOK FOR 2022

During 2022, 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 projects, which are

recognised as income upon delivery; the margin of

the order backlog and its development; the start-up

of new contracts and development projects; and the

rouble exchange rate and the development of the

Russian economy� Revenue in 2022 will mainly be

generated by cooperative contracting and develop-

ment projects sold to investors� In 2022, the share

of revenue accounted for by developer-contracted

housing production will still remain relatively small�

The impacts of the coronavirus pandemic have

been moderate on the whole, but its effects on the

construction market remain unclear and cause uncer-

tainty regarding the outlook for the future� Material

costs and the availability of materials pose uncertainty

to the development of SRV’s revenue and earnings�

Geopolitical tensions impact the general develop-

ment of the Russian economy and the exchange rate

of the rouble, which might have a significant effect on

SRV’s earnings trend and asset valuation�

• Consolidated revenue for 2022 is expected to

amount to EUR 800–950 million (revenue in

2021: EUR 932�6 million)�

• Operative operating profit is expected to

improve compared with 2021 (operative oper-

ating profit in 2021: EUR 5�3 million)�

GROUP KEY FIGURES

(IFRS, EUR million)

1-12/

2021

1−12/

2020 Change

Change,

Revenue 932.6 975�5 -43�0 -4�4

Construction 930.1 970�0 -39�9 -4�1

Investments 6.8 4�8 2�0 42�0

Other operations and eliminations -4.4 0�7 -5�1

Operative operating profit

5.3 15�8 -10�5 -66�5

Construction 14.1 25�1 -10�9 -43�7

Investments -4.6 -5�7 1�2

Other operations and eliminations -4.3 -3�5 -0�7

Operative operating profit, % 0.6 1�6

Operating profit -1.7 1�5 -3�2

Construction 14.1 27�4 -13�3 -48�5

Investments -11.6 -22�4 10�8

Other operations and eliminations -4.3 -3�5 -0�7

Operating profit, % -0.2 0�2

Financial income and expenses, total -18.6 -29�4 10�8

Profit before taxes -20.3 -28�0 7�6

Net profit for the period -19.9 -25�1 5�2

Net profit for the period, % -2.1 -2�6

Order backlog (unrecognised)

872.3 1,153�4 -281�1 -24�4

New agreements 588.6 707�1 -118�4 -16�7

The reconciliation calculation for operative operating profit can be found underneath the “Key figures” table.

The Group’s order backlog consists of the Construction business.

GROUP KEY FIGURES

(IFRS, EUR million)

1−12/

2021

1−12/

2020 Change

Change,

Equity ratio, % 27.4 22�6

Equity ratio, %, excl� IFRS 16

32.8 27�8

Net interest-bearing debt 170.0 289�1 -119�1 -41�2

Net interest-bearing debt, excl� IFRS 16

81.0 152�9 -72�0 -47�1

Net gearing ratio, % 103.0 159�7

Net gearing ratio, %, excl� IFRS 16

47.5 82�1

Return on investment, % -0.6 -0�8

Capital employed 403.0 566�8 -163�7 -28�9

Construction 195.8 386�8 -191�0 -49�4

Investments 167.3 171�9 -4�6 -2�7

Other operations and eliminations 40.0 8�1 31�9

Capital employed, excl� IFRS 16

319.4 436�0 -116�5 -26�7

Return on equity, % -11.5 -14�1

Earnings per share, EUR -0.08 -0�15 0�07 -46�2

Share price at end of period 0.53 0�59 -0�06 -10�2

Weighted number of shares at end of

period, millions

262.2 173�9

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

The comparison figures have been adjusted to reflect share issues.

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

JANUARY–DECEMBER 2021



The Group’s revenue declined by 4�4 per cent to

EUR 932.6 million (975.0 1−12/2020). This fall in

revenue was due to the smaller volume of business

premises contracting� Revenue from housing con-

struction increased� The second residential tower in

Kalasatama, Loisto, was completed and recognised

as income, contributing substantially to growth in

revenue from housing construction�



The Group’s operative operating profit amounted

to EUR 5�3 (15�8) million� Operative operating profit

totalled EUR 14�1 (25�1) million for the Construction

segment and EUR -4�6 (-5�7) million for the Invest-

ments segment� A major factor behind the decrease

in operative operating profit was that the Tampere

Arena construction project completed in the fourth

quarter had an earnings impact of around EUR -20

million� Decreased volume in business premises

contracting also had a negative impact on operative

operating profit� The recognition of Loisto in Kala-

satama – a project with a low margin – as income

weakened the relative profitability trend of devel-

oper-contracted housing production� The earnings

trend was positive in housing contracting carried out

as development projects� Shopping centre opera-

tions in Russia have started to get back to normal,

which contributed to decreasing the operative oper-

ating loss in the Investments segment�



The Group’s operating profit was EUR -1�7 (1�5) mil-

lion� Operating profit was impacted by the recogni-

tion of EUR -2�9 million in non-controlling interest

and translation differences due to the sale of the

Russian plot-owning company Eurograd, EUR -5�1

million impairment of Russian plots and a EUR -0�5

million change in the value of the additional sales

price receivable of the REDI shopping centre� This

receivable has no balance sheet value after recog-

under the VAT payment arrangement made in 2020

and the fact that sold receivables had been reduced

to less than EUR 5 million due to the good liquidity

situation� At the end of 2020, sold receivables

amounted to about EUR 10 million� Loan receivables

repaid in the second quarter had a positive impact on

cash flow from investment activities� During the com-

parison period, cash flow from investment activities

was positively affected by the sale of holdings in REDI

and Tampere Central Deck and Arena�



The equity ratio was 27�4 (22�6) per cent and

gearing was 103�0 (159�7) per cent� Excluding the

impact of IFRS 16, the equity ratio was 32�8 (27�8)

per cent and gearing was 47�5 (82�1) per cent� The

equity ratio in accordance with the loan covenant

calculation was 34�3 per cent�



At period-end, the Group’s order backlog stood at

EUR 872�3 (1,153�4) million� New agreements valued

at EUR 588�6 (707�1) million were signed in January–

December� The most significant new housing devel-

opment projects were the construction of 257 apart-

ments for DWS; the construction of 388 apartments

for Kojamo in the Pasila area and on Lapinmäentie in

Helsinki as well as Louhela and Pyhtäänkorventie in

Vantaa; and the construction of 153 apartments for

trade unions in Tampere� Four developer-contracted

housing projects were started during the review year:

in Oulu, Vantaa, Tampere and Kaarina� Major new

business premises projects included the renovation

of the Culture Barracks in Helsinki and the construc-

tion of a multipurpose ship construction hall for RMC

at the Rauma shipyard area, a school building for

800 students in Kangasala, the Satama Areena event

centre in Kotka, the Woodspin fibre mill in Jyväskylä,

as well as a warehouse and logistics building with geo-

thermal heating in Lieto and the Pressi B Building; the

last two are development projects� The sold share of

the order backlog was 91�5 (86�4) per cent�

nition� Operating profit was positively influenced

by a change in the exchange rate of the rouble,

which had a net impact of EUR 1�5 (-4�4) million�

The exchange rate impact, which largely had no

effect on cash flow, was caused by the valuation

of the euro-denominated loans of associated com-

panies in roubles, currency hedging expenses and

changes in the market value of currency hedges�



Financial income and expenses amounted to EUR

-18�6 (-29�4) million� Net financial expenses included

EUR 3�0 (3�3) million in dividend and interest

income, exchange rate differences amounting to

EUR 1�6 (-9�9) million arising from the conversion of

the 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�3 (-1�7) million, and interest expenses of EUR

-11�0 (-13�9) million, of which EUR 0�5 (0�5) million

was capitalised as of the beginning of the year� In

addition, financial expenses included EUR -5�2 (-5�7)

million in interest on lease agreement debts under

IFRS 16, EUR -6�1 (-1�5) million in impairment of the

loan receivables of associated companies, and EUR

-3�0 (-2�2) million in other financial expenses�



The Group's profit before taxes totalled EUR -20�3

(-28�0) million� This largely consists of EUR 3�5

(-18�1) million in rouble exchange rate gains with no

cash flow impact and EUR -0�1 (5�5) million in cur-

rency hedging gains and losses�



Cash flow from operating activities was EUR 68�9

(46�3) million and cash flow from investment activ-

ities was EUR 7�2 (26�6) million� The completion and

handover of Loisto in Kalasatama had a substantial

impact on cash flow from operating activities� Sales

of plots and completed apartments also had a pos-

itive effect on cash flow from operating activities�

Cash flow was negatively impacted by repayments



In April, the company was chosen to build Laakso

Joint Hospital in Helsinki using an alliance model�

The clients are the City of Helsinki and the Hospital

District of Helsinki and Uusimaa� About EUR 14

million of the work carried out in the project devel-

opment phase has been recognised in the order

backlog� Most of the project will be entered into the

order backlog in stages during 2022–2028, as it will

be divided into several developments and imple-

mentation stages with a total value of about EUR

730 million� In addition, SRV Infra Oy and Destia Oy

were selected in December to implement the infra-

structure work for the Laakso Joint Hospital under

a subcontracting alliance� The subcontracting alli-

ance covers the development and implementation

phases and is valued at EUR 180 million� Its division

between the parties will be specified further during

the development phase� SRV Infra is responsible for

the underground infrastructure work and Destia will

primarily handle infrastructure work above ground�

Separate agreements will be signed for the different

stages of the infrastructure works and they will be

recognised in the order backlog in stages�



The Group's earnings per share were EUR -0�08

(-0�15)� The comparison figure has been adjusted

for share issues�



During the coronavirus pandemic, the company

has been able to keep its construction sites in oper-

ation and the sites have for the most part continued

to operate as planned� That said, precautionary

measures against the pandemic have caused addi-

tional costs� Housing sales have been good in spite

of the coronavirus pandemic� Sales at shopping cen-

tres have also developed favourably and exceeded

the 2019 level� However, visitor numbers have been

lower than before the pandemic�

47,5%

Gearing (Excluding the

impact of IFRS 16)

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

VALUE CREATION

For executive management, sustainable business

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�

In 2021, we began steering our customer experi-

ence in a more consistent direction� SRV defined a

customer promise based on its new strategy – “by

listening, we build wisely”� This promise is built from

two elements: what we offer our customers through

our lifecycle-wise construction concepts and how

we interact with them� We want to put a greater

focus on listening to our customers and other stake-

holders� And we do that by asking� We believe that

by listening and building sustainably, we can improve

both people’s lives and the environment� Stake-

holders’ and customers’ opinions on sustainable

construction had an almost immediate impact on

SRV’s operations, as in late 2021 we decided to con-

vert all of SRV’s construction sites into zero-emission

sites from the beginning of 2022�

Sustainability programme

SRV seeks to ensure that, in addition to considering

business sustainability and environmental perspec-

tives, we also operate in a socially and ethically sus-

tainable manner� Certified management systems

– ISO9001 (quality), ISO14001 (environmental) and

ISO45001 (occupational health and safety) – ensure

compliance and create a credible base for our sus-

tainability efforts� The sustainability programme is

part of these efforts�

The themes of SRV’s sustainability programme

have been built around value creation� This ensures

that the sustainability programme’s themes sup-

port business development and the attainment of

SRV’s strategic targets� SRV’s sustainability themes

are leadership and value creation for customers,

personnel, partners, society, the environment

and investors� During 2021, our sustainability pro-

gramme’s objectives were updated in line with our

new strategy�

Good progress was made in sustainability work�

The decision on zero-emission construction sites

that was made in late 2021 is just one example of

our ambitious and goal-oriented efforts� The Com-

pliance working group established in 2020 has been

very active, and SDG targets were integrated into

our operations in a concrete manner� We continued

to enhance and monitor on-site safety, quality and

environmental activities� We also set a new develop-

ment target: to learn from best practices and share

them within the organisation� Taxonomy criteria will

be introduced into project planning and steering

during 2022� The EU’s taxonomy criteria will also be

integrated into HSEQ kick-off meetings�

Occupational safety continued in the same good

vein as last year, and resources were strengthened in

early 2022� The coronavirus pandemic has increased

the workload of those responsible for occupational

safety, and has led to practices that may change at

very short notice�

Environmental perspectives and responsibility

have been even more tightly integrated into the

supplier chain, and this work will continue over

the coming years� We have decided to use the RTS

Environmental Classification system in all of our

developer-contracted housing projects� We will cal-

culate the carbon footprint of all our lifecycle-wise

projects, and are preparing to introduce our carbon

handprint as well� Lifecycle wisdom is being further

developed, and its characteristics are being inte-

grated into SRV’s design guidelines and solutions�

The number of energy and lifecycle services we

provide continues to rise� You can read more about

projects that use environmental classification in the

section “Value for the environment”�

Climate risks were assessed in accordance with the

TCFD for the first time in 2021� At the same time, we

also analysed the new opportunities associated with

climate change� Our TCFD-compliant analysis is pre-

sented in the section “Risks”� Work on climate risks

and opportunities will be continued and deepened as

part of regular risk analysis over the coming years�

MARKETS

The Finnish economy has rebounded rapidly from the

recession caused by the coronavirus crisis� That said,

the spread of the omicron variant is a cause for con-

cern� It is estimated that the Finnish economy grew

by 3�5 per cent in 2021� Growth of 2�6 per cent is fore-

cast for 2022� The economy has recovered especially

thanks to private consumption� The resurgence of

demand and bottlenecks in global supply chains have

led to higher prices, and inflation will gain momentum

in 2022� After the end of this year, GDP growth is

expected to slacken due to the structural challenges

faced by the economy� The most significant risks of

weaker development are posed by the lengthening of

global supply disruptions and the unpredictability of

the pandemic� (Source: Bank of Finland)

Urbanisation is continuing in Finland and the pop-

ulation shift is maintaining demand for both housing

and business construction, especially in growth cen-

tres� Construction has swung to growth, driven by

the Finnish economy� It is estimated that construc-

tion volume rose by one per cent in 2021 and its

growth is forecast to accelerate to two per cent this

year� Construction will continue to face challenges in

2022 due to tough cost development and problems

with the availability of materials� (Source: Confeder-

ation of Finnish Construction Industries RT)

Housing production swung to brisk growth in 2021

and the construction of an estimated 44,000 residen-

tial units began during the year� Housing production

start-ups are expected to remain at a high level in

2022 as well� The reasons behind brisk housing con-

struction are scant housing supply relative to demand,

consumers’ high intentions to buy housing and low

interest rates� Business construction also returned to

a growth track in 2021, driven by the construction of

warehouses and industrial facilities� It is forecast that

business construction will continue to see growth this

year when – in addition to the construction of indus-

trial facilities and warehouses – public construction

swings back to growth after a muted period and office

starts pick up� (Source: Confederation of Finnish Con-

struction Industries RT)

The volume of real estate transactions remained

high in 2021� Investors have been primarily interested

in targets with strong cash flows, such as housing and

logistics properties� Furthermore, interest in office

properties has grown, while the appeal of commer-

cial properties remains low� Foreign investors, as well

as both Finnish and international funds, are contin-

ually increasing their market share alongside Finnish

institutionalinvestors.(Source:KTI/Newsec)

Last year, the Russian economy recovered quickly

from the recession caused by the coronavirus pan-

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

demic� However, economic growth will slow down in

the years ahead; Russia’s GDP is anticipated to grow

by 2–3 per cent in 2022 and by only 1–2 per cent

in 2023� Rapid recovery of domestic demand has

accelerated the rise in prices� The state of the pan-

demic, accelerating inflation and the intensification

of geopolitical tensions increase uncertainty and

may affect economic development� (Source: Bank of

Finland/Bofit)

SEGMENT REPORTING

The Construction segment covers all of SRV’s construc-

tion activities, including the capital and plots required

for developer-contracted housing production� SRV

intends to develop, build and sell these plots to a faster

schedule than those we report on in the Investments

segment� Construction encompasses housing con-

struction, 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 Met-

ropolitan 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 management and realisa-

tion of the Group’s real estate investments; the cre-

ation and ownership of new joint investment struc-

tures; and the operation of properties�

Other operations and eliminations include the

parent 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�

CONSTRUCTION

SRV provides efficient, top quality and end-to-end

project management contracting and construc-

tion services for both its own and its customers’

development projects� This segment focuses on

housing, business and infrastructure construction in

selected urban growth centres, as per the compa-

ny’s strategy� It is also responsible 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 pro-

fessional in project management and production

implementation� It takes the SRV Approach, which

is based on understanding customer needs and the

effective implementation of projects in collaboration

with our extensive network of professional partners�

January–December 2021

Revenue from Construction decreased to EUR 930�1

million (970�0 1–12 2020) in the January–December

period� This fall in revenue was due to the smaller

volume of business premises contracting� Revenue

from housing construction increased� The second

residential tower in Kalasatama, Loisto, was recog-

nised as income and contributed substantially to

growth in revenue from housing construction�

Construction’s operating profit declined to EUR

14�1 (27�4) million� The decrease in operating profit

was significantly affected by the negative earnings

impact of about EUR 20 million caused by the Tam-

pere Arena construction project� Decreased volume

in business premises contracting also had a nega-

tive impact on operating profit� The recognition of

Loisto in Kalasatama – a project with a low margin

– as income weakened the relative profitability

trend of developer-contracted housing production�

On the other hand, the earnings trend was posi-

tive in housing contracting carried out as develop-

ment projects�

Construction’s order backlog stood at EUR

872�3 (1,153�4) million and 91�5 (86�4) per cent of

the order backlog has been sold� New agreements

valued at EUR 588�6 (707�1) million were recognised

in the order backlog in January–December�

Construction’s capital employed totalled EUR

195�8 (368�8) million� Capital employed decreased

mainly due to the recognition of Loisto as income�

HOUSING CONSTRUCTION

In accordance with SRV’s strategy, the company’s

housing construction mainly consists of residential

development projects and developer-contracted

housing projects in Finland’s strongest growth cen-

tres, and particularly in the Helsinki Metropolitan

Area� In addition, SRV selectively carries out housing

construction projects for external clients� Thereare

no housing units currently under construction in

CONSTRUCTION

(EUR million)

1−12/

2021

1−12/

2020 Change Change, %

Revenue 930.1 970�0 -39�9 -4�1

business construction 581.4 680�7 -99�3 -14�6

housing construction 348.8 289�3 59�5 20�5

Operating profit 14.1 27�4 -13�3 -48�5

Operating profit, % 1.5 2�8

Capital employed 195.8 386�8 -191�0 -49�4

Return on investment, % 5.1 7�6 -2�5 -33�0

Order backlog

872.3 1,153�4 -281�1 -24�4

business construction 508.3 718�2 -209�9 -29�2

housing construction 364.0 435�2 -71�2 -16�4

Group, total

872.3 1,153�4 -281�1 -24�4

sold order backlog 798.2 996�6 -198�4 -19�9

unsold order backlog 74.0 156�7 -82�7 -52�8

sold order backlog, % 91.5 86�4

unsold order backlog, % 8.5 13�6

The Group’s order backlog consists of the Construction business.

REVENUE

FROM

HOUSING

CONSTRUC-

TION

INCREASED

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

Russia and all of the units in previous Russian pro-

jects have been sold�

A developer-contracted residential project is a

project that is developed by SRV and which has not

been sold when construction 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 residential development project is a project

that is developed by SRV, but which is sold to an

investor before construction begins� SRV bears the

construction risks in such projects, which are rec-

ognised as income according to the percentage of

completion� Construction contracts are construc-

tion projects that are launched by other parties but

implemented by SRV� They are recognised as income

based on of the percentage of completion or as set

out in the agreement�

January–December 2021

Revenue from housing construction in January–

December rose to EUR 348�8 (289�3) million thanks

to the higher volume of development and develop-

er-contracted projects� Fewer developer-contracted

housing units were recognised as income than in the

comparison period, a total of 453 (515)� Loisto in Kal-

asatama was completed and recognised as income

during the review period, largely in the fourth quarter�

The order backlog for housing construction stood at

EUR 364�0 (435�2) million� The construction of four

new developer-contracted housing construction pro-

jects was launched during the review period�

Housing under construction

At the end of December, SRV had a total of 2,085

(2,127) housing units under construction in Fin-

land, mostly in growth centres� There were 210

(383) developer-contracted housing units under

construction� SRV began the construction of 195

(68) developer-contracted housing units during the

review period� Developer-contracted housing units

are only recognised as income on completion, and

only to the extent that they have been sold, after an

average construction period of about 18 months� At

the end of December, a total of 1,648 (1,375) units

were under construction for investors, mainly in Hel-

sinki, Espoo, Vantaa and Tampere�

The Kalasatama towers being built in Kalasatama,

Helsinki comprise the largest construction project in

SRV’s history� The second residential tower, Loisto,

was completed on schedule at the end of September�

Residents started moving in that month� The con-

struction of the third residential tower (Lumo One,

previously called Kompassi, for Kojamo) began in

April 2020 and the tower reached its rooftop height

in March 2021� In December, SRV signed a EUR 101

million agreement with PATRIZIA to build Vision, the

fourth tower building in Kalasatama� Construction

will begin and the project will be entered in the

order backlog in the first quarter of 2022�

Housing construction projects

under development

SRV focuses on residential project development in

urban growth centres� SRV is currently developing

housing construction projects in areas such as

Kivenlahti, Espoonlahti, Kaitaa, Vermonniitty, Säter-

inkallio and Keilaniemi in Espoo and Lapinmäentie

and Bunkkeri in the Jätkäsaari district of Helsinki�

HOUSING CONSTRUCTION, GROUP

Units

1–12/

2021

1–12/

2020

Change,

units

Housing sales 1,313 1,266 47

developer contracting 409 354 55

sold to investors 904 912 -8

Developer contracting

start-ups 195 68 127

completed 368 520 -152

recognised as income 453 515 -62

completed and unsold 9 92 -83

Under construction 2,085 2,127 -42

contracts 0 0 0

negotiated contracts 227 369 -142

sold to investors 1,648 1,375 273

developer contracting 210 383 -173

sold 166 210 -44

unsold 44 173 -129

sold, % 79.0 55

unsold, % 21.0 45

ORDER BACKLOG, HOUSING CONSTRUCTION

(EUR million) 12/2021 12/2020

Change,

EUR million

Change,

Contracts and negotiated contracts 251.1 201�5 49�6 24�6%

Under construction, sold 38.8 77�0 -38�2 -49�6%

Under construction, unsold 71.2 128�4 -57�2 -44�6%

Completed and unsold developer

contracting 2.8 28�3 -25�4 -90�0%

Housing construction, total 364.0 435�2 -71�2 -16�4%

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

THE GROUP’S LARGEST DEVELOPER-CONTRACTED

HOUSING PROJECTS UNDER CONSTRUCTION IN FINLAND

Project name Location

SRV,

contract

value,

EUR million

Comple-

tion (esti-

mate) Units Sold* For sale*

Ilmarisenpuisto Helsinki 20 Q2/2022 68 59 9

Kalevan Divaani Tampere 14 Q3/2022 71 71 0

Aarni Vantaa 9 Q3/2022 42 18 24

Kartanonrinne Kaarina 6 Q2/2022 29 18 11

Total value of projects approx. EUR 49 million

* Situation at 31 December 2021

THE LARGEST ONGOING HOUSING PROJECTS IN FINLAND,

INVESTOR PROJECTS AND HOUSING CONTRACTING

Project name Location Developer

Completion

level, %*

Completion date

(estimate)

Tammelan Engel Tampere Taaleri 68 Q2/2022

Piispanristi Espoo Kojamo 76 Q3/2022

Lumo One Helsinki Kojamo 79 Q3/2022

Haltiantie 12 Vantaa Kojamo 33 Q3/2022

Kannen Opaali Tampere Tampereen Tornit 66 Q4/2022

Kalevan Klaffi Tampere Pro ry, PAM ry, JHL ry 26 Q4/2022

Pyhtäänkorpi 15F (H-I) Vantaa Kojamo 20 Q4/2022

Saunakukka Espoo DWS 10 Q4/2022

Haltiantie 14 Vantaa Kojamo 11 Q1/2023

Kalevan Vitriini Tampere Pro ry, PAM ry, JHL ry 24 Q1/2023

Helsingin Höyrypilli &

Vihellys

Helsinki Kojamo 13

Q3/2023

Pohjantytär Helsinki DWS 17 Q3/2023

Haltiantien Pekko Vantaa Suomen Asuntoneuvoja 5 Q4/2023

Ainonkannel Helsinki Kojamo 9 Q4/2023

Total value of projects approx. EUR 330 million

* Situation at 31 December 2021

Completed housing units

Atotalof368(5201–12/2020)housingunitswere

completed in January–December� At the end of

December, 9 (92) completed apartments remained

unsold� Housing sales went well despite the corona-

virus pandemic� A total of 409 (354) developer-con-

tracted housing units were sold during January–

December�

Housing units recognised as income

In January-December, 453 (515) developer-con-

tracted housing units were recognised as income,

generating total revenue of EUR 161�3 million�

BUSINESS AND INFRASTRUCTURE

CONSTRUCTION

In accordance with SRV’s strategy, the company’s

business construction mainly consists of project

management contracts and alliance projects for

external clients, lifecycle projects, and SRV’s own

development projects� In addition to the basic profit

margin, alliance projects offer the potential for

extra earnings if the targets set for the project are

achieved� Project management contracts are based

either on a target price and guaranteed maximum

price or a target budget� Like alliance projects, they

offer the potential for extra earnings� In lifecycle pro-

jects, SRV is responsible for both the construction of

the building and, for a separate service charge, also

the property’s maintenance for an agreed service

period� A business development project is a project

that is developed by SRV, but which is sold to an

investor before construction begins� SRV bears the

risks involved in both the construction and leasing

of such projects�

January–December 2021

Revenue from business construction fell to EUR

581.4 million (680.7 1–12/2020) and the order

backlog contracted to EUR 508�3 (718�2) million�

Business and infrastructure projects

under construction

The most significant business and infrastructure

projects currently under construction include the

HUS Bridge Hospital in Helsinki and the Espoonlahti

metro station� These will be implemented as project

management contracts� The Terminal 2 expansion

and alteration project at Helsinki Airport, which

is implemented under an alliance model, has pro-

gressed to its final phase�

In addition, SRV is currently carrying out the reno-

vation of the Culture Barracks in Helsinki, and building

the Satama Arena event centre in Kotka, the Wood-

spin fibre mill in Jyväskylä, a multipurpose hall for

Rauma Marine Constructions, the Pressi B building

for the Julius Tallberg Real Estate Corporation in the

Vantaankoski district of Vantaa, the Lamminrahka

school centre in Kangasala, the Matinkylä upper sec-

ondary school in Espoo, the Helsinki School of Nat-

ural Sciences, the Helsinki Upper Secondary School

of Languages, the Jousenkaari School in Espoo, the

Hovirinta School in Kaarina, business premises for

Sponda and Senate Properties, the Siuntio education

and wellness campus (as a lifecycle project), and the

basic renovations of the National Theatre and the

operating theatres at HUS Jorvi hospital�

Business and infrastructure projects

under development

SRV’s project development is developing a diverse

range of business premises, such as offices, hotels,

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

logistics centres and retail premises in Finland’s

strongest urban centres� Examples of major pro-

jects currently under development in the Greater

Helsinki area include the Horisontti office tower in

Kalasatama, Tower A (aka Pohjola Building) on Lap-

inmäentie, the Wood City quarter, the Pressi office

and logistics area in Vantaankoski, the metro centre

in Kivenlahti, and Bunkkeri in Jätkäsaari� Bunkkeri

is being turned into a 13-storey landmark with ver-

and refurbishment of Siltasaari 10, the extension of

Terminal 2 of Helsinki Airport, the Finnish-Russian

School in Helsinki, the Monikko Learning Centre in

Espoo, the Lumijälki logistics centre in Vantaa, the

basic renovation of the Metropolia campus in Hel-

sinki, and Hämeentie 135 in Helsinki�

INVESTMENTS

SRV’s investments focus on the management and

realisation of the Group’s real estate investments,

the creation and ownership of new joint investment

satile sports facilities, a swimming pool, and about

300 apartments�

Completed business and

infrastructure projects

The following projects were completed in the Jan-

uary–December period: Tampere Arena, Arena

Hotel, the Tampere Central Deck towers Topaasi

and Kruunu next to the Arena, the basic renovation

structures, and the operation of selected properties�

Investments’ key objectives are to increase SRV’s

financing capacity with the aid of joint financing

structures; harness the value chains created by pro-

jects more extensively through longer-term own-

ership, diversify capital risk, and generate positive

cash flow over the longer term�

January–December 2021

Investments’ revenue totalled EUR 6�8 (4�8) million in

the January–December period� Revenue was primarily

generated by shopping centre management and the

THE LARGEST ONGOING BUSINESS CONSTRUCTION PROJECTS

Project Location

SRV total

contract

value, EUR

million

Project

type

Completion

level, %

Completion

date (esti-

mated)

DEVELOPMENT PROJECTS

Warasto Finland Lieto Lieto * Retail 5 Q1/2023

Vantaan Pressi, B-vaihe Vantaa * Retail 18 Q1/2023

BUSINESS PREMISES

Espoonlahti Metro Station Espoo 52 Public 98 Q1/2022

STUK commercial premises Vantaa 47 Public 83 Q1/2022

Kirkkonummi Wellbeing Centre Kirkko nummi 32 Public 66 Q2/2022

Siuntio education and

wellness campus Siuntio 37 Public 54 Q2/2022

Open Innovation House Espoo 25 Public 55 Q2/2022

HUS Bridge Hospital Helsinki 254 Public 93 Q2/2022

HUS Jorvi, basic renovation of

operating theatres Espoo 39 Public 47 Q1/2023

Basic renovation of the Finnish

National Theatre Helsinki 40 Public 35 Q2/2023

Lamminrahka school centre Kangasala 27 Public 1 Q2/2023

Helsinki Upper Secondary

School of Languages and Upper

Secondary School for Adults Helsinki 38 Public 22 Q3/2023

Kotka Event Centre Kotka 28 Public 14 Q3/2023

Matinkylä upper secondary

school Espoo 38

Public

sector 1 Q4/2023

* Individual contracts has not been made public.

INVESTMENTS

(EUR million)

1–12/

2021

1–12/

2020 Change

Change,

Revenue 6.8 4�8 2�0 42�0

Percentage of associated

companies' profits 0.5 -13�4 13�9

Hedging expenses -0.1 5�5 -5�6 -102�2

Operative operating profit -4.6 -5�7 1�2

Operating profit -11.6 -22�4 10�8

Capital employed 167.3 171�9 -4�6 -2�7

Return on investment, % -8.1 -14�3 6�3

CAPITAL EMPLOYED

(EUR million) 31 Dec. 2021 31 Dec� 2020

Okhta Mall, shopping centre 69.3 67.1

Pearl Plaza, shopping centre 20.0 17.3

Tampere Central Deck and Arena 10.1 9.0

4Daily, shopping centre 0.0 5.6

Plots and other holdings 67.8 72.9

Total 167.3 171.9

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. Fluctuations in

the rouble exchange rate also affect the amount of capital employed.

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

recognition of sales income from the Decathlon pro-

ject� In accordance with SRV’s operating model, rev-

enue from associated companies’ projects and joint

ventures is reported under the Construction segment�

The operative operating profit totalled EUR -4�6

(-5�7) million� In addition to SRV’s Group compa-

nies, 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 depreciation, financial

expenses and taxes�

Investments’ operating profit was EUR -11�6

(-22�4) million� Operating profit was negatively

impacted by the recognition of EUR -2�9 million

in non-controlling interest and translation differ-

ences due to the sale of the Russian plot-owning

company Eurograd, EUR -5�1 million impairment of

Russian plots and a EUR -0�5 million change in the

value of the additional sales price receivable of the

REDI shopping centre� This receivable has no bal-

ance sheet value after recognition� On the other

hand, operating profit was positively influenced by

a change in the exchange rate of the rouble, which

had a net impact of EUR 1�5 (-4�4) million� The

exchange rate impact, which largely had no effect

on cash flow, was caused by the valuation of the

euro-denominated loans of associated companies in

roubles, currency hedging expenses and changes in

the market value of currency hedges�

Capital employed totalled EUR 167�3 million

(171.912/2020).Capitalemployedwasreducedby

the EUR 6�2 million write-down of the 4Daily shop-

ping centre in the fourth quarter, the sale of the

Russian plot-owning company Eurograd for EUR 1�7

million and EUR 5�1 million impairments of Russian

plot-owning companies� During the review period,

capital employed was increased by a EUR 2�6 million

investment in Voimaosakeyhtiö SF, a EUR 1�1 million

investment in the Arena hotel in Tampere, and the

strengthening rouble exchange rate�

The return on investment was -8�1 (-14�3) per

cent� When calculating the return on investment, the

income from interest on loans granted to associated

companies and changes in the value of loans are

also taken into consideration�

Despite the coronavirus pandemic, shopping

centre operations recovered during the first quarter�

Shopping centres remained open in January–March,

but the coronavirus restrictions continued to have

an impact on the business of some of the tenants�

However, restrictions had to be tightened again

towards the end of the second quarter as a con-

sequence of the worsening coronavirus situation�

Restrictions were still in place during the third and

fourth quarters� In spite of the restrictions, the

shopping centres increased their sales�

Shopping centres

SRV is a co-investor in three shopping centre pro-

jects 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�

The market situation and the development of the

area have a significant impact on when a shopping

centre reaches a stable level of rental income� Due

to the coronavirus pandemic and economic uncer-

tainty in Russia, it is possible that the sale of Russian

shopping centres may be postponed�

2019 figures have been used as the comparison

period, as all Russian shopping centres were almost

completely closed for many weeks in January–

December 2020 due to the coronavirus pandemic�

PEARL PLAZA, ST PETERSBURG

SRV has a 50 per cent holding in Pearl Plaza� This shop-

ping and entertainment centre in St Petersburg is fully

leased� Visitor figures in January-December were down

by 12 per cent on the corresponding period of 2019,

that is, before the coronavirus pandemic� Sales in rou-

bles saw growth of about 9 per cent compared with

the corresponding period of 2019�

In the third quarter, the joint venture owned by SRV

MOST SIGNIFICANT COMPLETED INVESTMENT PROJECTS, 31 DECEMBER 2021

Project Holding, % Opened Floor area (m

)

Occupancy rate

12/2021, %

Pearl Plaza,

shopping centre,

St Petersburg

SRV 50

Shanghai

Industrial

Investment

Company 50

August 2013

Gross floor area

96,000

Leasable area

48,000

Binding lease

agreements 100

Okhta Mall,

shopping centre,

St Petersburg

SRV 45

Russia Invest 55*

August 2016 Gross floor area

144,000

Leasable area

78,000

Binding lease

agreements 95�5

4Daily, shopping

centre,

Moscow

Vicus 26

SRV 19

Blagosostoyanie

April 2017 Gross floor area

52,000

Leasable area

25,500

Binding lease

agreements 92�6

* Russia Invest’s shareholders are Finnish institutional investors. Ilmarinen owns a 40 per cent stake in Russia Invest,

Sponda and SRV have 27 per cent holdings, and Conficap owns six per cent.

PANDEMIC

HAD AN

EFFECT ON

SHOPPING

CENTRE

OPERATIONS

LAND RESERVES

31 December 2021

Business

construction

Housing

construction Investments Total

Unbuilt land areas,

land acquisition commitments

and rented plots

Building rights

, 1,000 m² 106 215 183 504

Land development agreements

Building rights

, 1,000 m² 61 193 0 255

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.

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

and the Chinese company Shanghai Industrial Invest-

ment (Holdings) Co�, Ltd� signed a letter of intent on

the sale of the Pearl Plaza shopping centre� Sales

negotiations continued during the fourth quarter�

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 investment com-

pany Russia Invest� The shopping centre’s occu-

pancy rate stood at about 95�5 per cent at the end

of December� About 92 per cent of its stores were

open in December� In January–December, sales rose

by 9 per cent and visitor figures fell by 23 per cent

compared to the corresponding period of 2019�

The construction of the Okhta Mall’s parking

facility was completed during the first quarter� The

facility was opened in October 2021�

4DAILY, MOSCOW

The 4Daily shopping centre in the Moscow region

opened its doors in April 2017� SRV owns 19 per cent

of the shopping centre� By the end of December,

about 92�6 per cent of the centre’s premises were

leased� In December, 88 per cent of its stores were

open� In January–December, visitor numbers rose

by 27 per cent and sales by 106 per cent on the

corresponding period of 2019�

The shopping centre’s occupancy rate, and there-

fore its profitability, have been at an insufficient level

for a long time� The shopping centre has developed

in a positive direction, but has required additional

capital from its owners in order to operate� Its rate

of improvement has been inadequate and its largest

shareholder has expressed its unwillingness to commit

further capital� The future of the shopping centre is

uncertain� For this reason, SRV has decided to write

down the entire value of its holding and receivables,

a total of EUR 6�6 million� EUR 0�5 million of the write-

down is allocated to operative operating profit for

2021 and EUR 6�1 million to financial expenses�

Other projects

SRV owns 5 per cent of Tampere Arena and has an

8�33 per cent holding in other Tampere Central Deck

and Arena projects�

Plots held for future development in Russia include

the Okhta City plot next to the Okhta Mall in St Peters-

burg and the Mira-II plot next to 4Daily in Mytishchi�

SRV constructed a store building for the international

sports store giant Decathlon and sold part of the

Mira-II plot� The Decathlon store building was com-

pleted in the third quarter and it was inaugurated

in September�

SRV owns 50 per cent of the Etmia II office pro-

ject in downtown Moscow� Bankruptcy proceedings

have been started for the company that owns the

office complex� The financing bank will realise the

property held as collateral for its loan receivables�

In December, SRV sold its 51 per cent holding

in the Russian plot-owning company Eurograd in

its entirety�

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

At the end of the review period, the company’s

equity ratio (excluding the impact of IFRS 16) was

IFRS,

(EUR million) 1–12/2021 1–12/2020 Change, %

Equity ratio, % 27.4 22�6 21�1

Equity ratio, %, excl� IFRS 16

32.8 27�8 18�0

Net gearing ratio, % 103.0 159�7 -35�5

Net gearing ratio, %, excl� IFRS 16

47.5 82�1 -42�1

Shareholders’ equity 165.1 181�0 -8�8

Capital employed 403.0 566�8 -28�9

Net interest-bearing debt 170.0 289�1 -41�2

Net interest-bearing debt, excl� IFRS 16

81.0 152�9 - 47�1

Interest-bearing debt 238.0 385�8 -38�3

of which short-term

22.5 17�4 29�4

of which long-term 215.5 368�4 -41�5

Interest-bearing debt, excl� IFRS 16

149.0 249�7 -40�3

Cash and cash equivalents 68.0 96�7 -29�7

Unused committed revolving credit facilities

and≈overdraftfacilities 30.0 0�0

Unused project loans that can be drawn immediately 2.1 20�0 -89�6

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

Current liabilities include a EUR 10.0 million revolving credit facility loan, which can be rolled to April 2023 when

the covenants are met.

32.8percent(27.812/2020)andgearing(excluding

the impact of IFRS 16) was 47�5 per cent (82�1

12/2020).Theequityratiocalculatedasperthecov-

enants of financing agreements was 34�3 per cent,

as the covenant calculation took into account the

recognition of income from developer-contracted

projects on the basis of percentage of completion�

Equity ratio was improved by bond and revolving

credit facility repayments�

Net interest-bearing debt totalled EUR 170�0

million (289.1 12/2020) at the end of the review

period� Net interest-bearing debt saw a year-on-year

decrease of EUR 119�1 million� Excluding the impact

of IFRS 16, net interest-bearing debt totalled EUR

81�0 (152�9) million, representing a fall of EUR 72�0

million on the comparison period� Housing corpora-

tion loans account for EUR 18�1 (40�7) million of the

interest-bearing debt�

In April 2021, the company agreed on the replace-

ment of its previous EUR 51 million revolving credit

facility and EUR 40 million project financing facility

with the syndicate banks; the facilities were replaced

with a new EUR 40 million committed revolving

credit facility, a EUR 40 million committed project

financing facility and a EUR 63 million non-com-

mitted project financing facility� EUR 10 million of

the new EUR 40 million revolving credit facility will

mature in March 2022 and EUR 30 million in April

EUR

72.0

Million less net interest-

bearing debt

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

2023� The new project financing facilities of EUR 40

and 63 million will be used to finance future con-

struction projects� They fall due in April 2023 or

within another repayment period agreed for sepa-

rate construction projects�

During the review period, the company repaid a

total of EUR 30 million of its current revolving credit

facility� At the end of the review period, EUR 10

million of the company’s EUR 40 million revolving

credit facility was withdrawn and EUR 30 million

was unused� EUR 30�5 million of the company’s EUR

40 million committed project financing facility was

unused at the end of the review period� In addition,

the company’s EUR 63 million non-committed pro-

ject financing facility was entirely unused at the end

of the review period�

At the end of April 2021, SRV carried out written

procedures to extend the tenor of its EUR 100 mil-

lion (of which EUR 37�4 million is outstanding) senior

unsecured callable fixed-rate notes due 23 March

2022 by three years and the tenor of its EUR 75

million senior unsecured callable fixed-rate notes

due 27 September 2023 (of which EUR 67�4 million

is outstanding) by one and a half years, as well as

to amend certain terms and conditions of these

notes� The new due dates are 23 March 2025 for

the EUR 100 million senior unsecured callable fixed-

rate notes (with an outstanding principal of EUR

37�4 million at the end of the review period) and 27

March 2025 for the EUR 75 million senior unsecured

callable fixed-rate notes (with an outstanding prin-

cipal of EUR 67�4 million)�

SRV made partial early repayments on the afore-

mentioned notes of a total nominal amount of EUR

27�1 million in May 2021 and a total nominal amount

of EUR 5�1 million in September 2021�

At the end of the period, the Group’s financing

reservestotalledEUR100.1million(116.812/2020),

consisting of unused project loans (EUR 2�1 million),

an undrawn revolving credit facility (EUR 30 mil-

lion) and cash and cash equivalents (EUR 68�0 mil-

lion)� Financing reserves were affected by EUR 76�2

(731-12/2020)millionincashflowfromoperating

activities and investments, EUR -105�4 (-2�2) million

in cash flow from financing activities, and a decrease

in undrawn project loans�

The financial covenants of SRV’s financing agree-

ments are equity ratio, gearing, minimum operating

margin, minimum cash, the interest coverage ratio

and certain other restrictions� 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 pre-

vent the refinancing of existing sources of financing�

The interest cover ratio covenant of the bonds limits

the company from taking on additional debt if the

covenant is not met and the amount of SRV’s drawn

down loans, such as the commercial paper pro-

gramme, revolving credit facility, overdraft facilities,

pension insurance (TyEl) re-lending, and hybrid loans

or some other loans would exceed EUR 100 million

after taking new debt� At the end of December, the

drawn amounts for the items referred to above

amounted to EUR 25�4 million in total� The main cov-

enants of the financing agreements are presented in

note 11 to the interim report�

The covenant levels of these financing agree-

ments are determined on the basis of the accounting

principles in force when the loan agreements were

signed� Recognition of income on the basis of per-

centage of completion in developer contracting pro-

jects 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 deviations from traditional cov-

enant calculation methods�

At the beginning of December, the company

agreed on a temporary change to the calculation

of the minimum EBITDA covenant of the revolving

credit facility with the syndicate banks that granted

the facility, effective until 30 June 2022� This change

eliminates the impact of losses from the sale of the

Tampere Arena project and foreign assets in the cov-

enant calculation� As a result of the agreed change

in calculation methods, the minimum EBITDA cov-

enant was met on 31 December 2021� All other

covenants for loan agreements were also met on

31 December 2021�

SRV's investment commitments totalled EUR 21�1

(26.4 12/2020) million at the end of December,

and consisted of investments in Fennovoima’s Han-

hikivi-1 nuclear power plant project and the Tam-

pere Central Deck and Arena project�

SRV is exposed to changes in the exchange rate of

the rouble through its Russian subsidiaries, associ-

ated companies and joint ventures� The strengthening

rouble led to translation differences of EUR 1�8 mil-

lion (-18.3 1–12/2020), which impacted both share-

holders' equity and the comprehensive result for the

period� In addition to currency exchange rate gains

with no cash flow impact amounting to EUR 1�9 (-8�2)

million in financial income and expenses, the Group

also entered similarly derived currency exchange

rate gains of EUR 1�6 (-9�9) million with no cash flow

impact under the profit accounted for by associated

companies, which are due primarily to the conversion

of currency-denominated loans to roubles and the

stronger rouble exchange rate� Currency exchange

rate gains were reduced by EUR -0�1 (5�5) million in net

hedging returns� The total impact on shareholders’

equity was EUR 5�4 million� The currency risk position

is presented in note 12 to the interim report�

HR ISSUES, SOCIAL RESPONSIBILITY

AND HUMAN RIGHTS

SRVemployedanaverageof958(991 1–12/2020)

people in January–December 2021� On average,

803 (810) people worked in Construction and 100

(124) people worked in Investments� 55 (56) people

worked in Group operations� 20�6 per cent of SRV’s

personnel were women and 79�4 per cent men�

The company continued recruiting during the first

half of the year, particularly for construction site man-

agement positions� During the third quarter, 50 new

PERSONNEL BY SEGMENT AT END OF PERIOD

1–12/2021 1–12/2020

Percentage of

Group personnel

Construction 801 768 84�8

Investments 83 114 8�8

Other operations and eliminations 60 50 6�4

Group, total 944 932 100�0

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

employees joined the company to work in managerial,

expert and site positions� Active recruitment continued

in the fourth quarter and 49 new employees joined the

company in managerial, expert and site positions�

Training and internal communication

Personnel’s wellbeing consists of both physical and

psychosocial wellbeing� Every two years, we conduct

an extensive personnel survey covering workload,

employee satisfaction and wellbeing at work� This is

supplemented by lighter pulse surveys on a quarterly

basis� These pulse surveys were piloted in autumn

2021 and have shown that SRV has managed to retain

an excellent fitness for work in spite of the exceptional

circumstances� In addition to employee wellbeing, the

surveys also study things such as feedback, progress

with our strategy, and the meaningfulness of work�

At SRV, the impacts of the coronavirus pandemic

were reflected as a decrease in training and events

for personnel in 2021� The number of training days

per person in Finland was 1�0 (0�6)� Face-to-face

training was possible for some internal training ses-

sions with a low number of participants, but other-

wise 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 environ-

mental activities� Online study has not been included

in the calculation of the number of training days�

A two-part online coaching course was arranged

for all supervisors on team development and sup-

port for wellbeing and coping at work� This training

began in December and continued into 2022� The

SRV Trainee programme continued, and it provided

work for a total of about 80 construction students

during summer 2021�

standard of operations from our subcontractors and

other partners� In occupational safety, SRV’s opera-

tions are steered by the Group’s health and safety

policy and our certified occupational health and

safety management system (ISO 45001)�

In 2021, SRV issued a total of 37,572 (40,348)

access permits to its construction sites in Finland

to 25,301 (27,697) individuals� More than 23,500

(more than 20,000) remote inductions were com-

pleted using the remote induction system� The

qualitative content of site-specific remote induction

courses was revised during 2021�

Our occupational safety themes for 2021 were

improving safety reporting and our situational pic-

ture, and developing our occupational health and

safety work as part of SRV’s ISO 45001 management

system and our HSEQ activities� Safety audits (TTT

reviews) focused on verifying foreign employees’

right to work in Finland and confirming that our var-

ious safety plans were in order�

SRV’s long-term target is to reach a level of zero

accidents� The short-term target is to reduce the

accident frequency every year� In our own opera-

tions, we have committed to practices that are in

line with these targets�

Level of occupational safety

The accident frequency rate at SRV sites was sig-

nificantly better in 2021 than in the previous year:

12�2 vs� 17�9� A total of 89 (123) accidents leading

to absence occurred on SRV construction sites

during 2021, 9 (10) of which were serious (+30 days’

absence)� In terms of severity, the majority of acci-

dents were in the category 4–29 days of absence�

Most injuries were to the fingers or lower limbs�

There were no fatal accidents�

In late 2020, we launched an extensive campaign to

support wellbeing in collaboration with Firstbeat Tech-

nologies Oy� This collaboration includes wellness webi-

nars and a Firstbeat Life three-month measurement

for all personnel� As part of SRV’s three-year collabo-

ration with the Finnish Olympic Committee, personnel

were offered exercise-related content and informa-

tion on how they can increase their physical activity�

One example of this was a lecture given to all SRV

employees in November, which provided tips on how

to maintain an active lifestyle even on busy weekdays�

In 2021, the cornerstones of SRV’s internal com-

munications were the revised strategy for 2021–

2024, transformation projects, and presenting our

customer promise and a lifecycle-wise reality in a

diverse and comprehensive manner� The coronavirus

pandemic was reflected in our internal communica-

tions throughout the year� In particular, enhanced

communications about vaccinations and practices to

maintain a good level of health security were sent to

ensure operational continuity on construction sites�

Introducing and welcoming new employees to SRV,

along with sharing our joint successes, also formed

an important part of our internal communications�

Our goal for 2021 was to further enhance the

accessibility and coverage of personnel training,

build an equal workplace community, and increase

the attractiveness of the industry in cooperation with

other organisations such as the Confederation of

Finnish Construction Industries RT� The training has

been designed as a multiyear learning programme�

Occupational health and safety

SRV’s safety activities are always based on exceeding

legal requirements and being a safety pioneer in the

construction industry� We also require the same

96 per cent was SRV’s 2021 goal for the TR meas-

urements taken during the statutory weekly safety

inspection required on building construction sites�

2,273 TR and MVR measurements were taken on

construction sites� Our target was achieved, as

the results of these measurements averaged 96�3

per cent� SRV’s ambitious and goal-oriented safety

efforts will continue in line with our updated 2022

guidelines towards our goal of zero accidents� The

number of safety observations levelled off� The key

objective for 2022 will be to make higher-quality

observations� SRV has firmly established a culture

of making safety observations, which have stabilised

at a good level� A total of 14,471 (17,272) obser-

vations were made in 2021� SRV’s observation rate

was 1,984 (2,445) safety observations per million

hours worked�

Equality and human rights

SRV has been assessing human rights impacts since

2018� In conjunction with this assessment, we are

going through human rights norms, partially linking

them together and also adding examples of the

human rights impacts of SRV’s operations� Creating

a fair and equal working environment is important

to us at SRV� One of the sections in SRV’s general

induction covers compliance with the Non-discrim-

ination Act� SRV also promotes diversity within the

organisation by highlighting examples of equality

in communications and internal training� 21% of

SRV’s personnel are women, and women account

for 25% of the Corporate Executive Team� In 2022,

SRV will start cooperating with networks that pro-

mote diversity in the construction sector, such as

the women’s network of the Finnish Association of

Civil Engineers (RIL)�

FITNESS

FOR WORK

EXCELLENT

IN SPITE OF

PANDEMIC

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

In 2021, SRV responded to Finnwatch’s compre-

hensive survey on the use of foreign labour in the

construction sector�

In cooperation with the procurement team, ques-

tions pertaining to human rights were added to the

digital form that must be completed by new suppliers�

New questions asking partners to provide more infor-

mation about themselves and their responsibility

were also added at this time� This work will continue

in 2022 with the goal of making these themes (that

is, human rights issues and labour exploitation) an

integral part of our supplier path all from initial regis-

trationtopost-work/contractassessments.Thisgoal

also applies to our other sustainability themes�

All matters involving discrimination and har-

assment on SRV’s construction sites can easily be

reported via SRV’s ethics channel https://www.srv.

fi/en/sustainability/ethics-channel� This whistle-

blowing channel is available not only to people on

construction sites but throughout SRV� SRV received

12 reports in 2021� Eight reports concerning dis-

crimination and harassment were made through

the ethics channel and four through the safety

observation system� One of our key goals for 2022

is to increase the reachability of companies and

employees working on construction sites�

Supervision of the supply chain

SRV has to ensure that its subcontractors and sup-

pliers meet these requirements and do not cause

an increased risk to projects� We use contractual

means, such as the Construction Contract Pro-

gramme, to ensure the commitment of our sup-

pliers and subcontractors�

SRV’s Supplier Code of Conduct supplements the

requirements of the Construction Contract Pro-

gramme� When it comes to the role that procure-

ment plays as an enabler of sustainable operation,

closer cooperation with suppliers, competence

development and increased understanding are

important targets�

SRV’s supplier register contains a total of more

than 17,000 suppliers, of which about 3,500 were

active in 2021� SRV began to conduct supplier audits

in 2019� A total of 111 audits were carried out in

2019, but only 22 in 2020 due to the coronavirus

pandemic� Audits resumed remotely in the second

half of 2021� Supplier audits covered areas such as

the environment (ISO 14001), occupational health

and safety (ISO 45001) and quality management (ISO

9001), which includes project-specific plans, pro-

duction planning and documentation management�

Audits covered environmental issues such as

waste monitoring, environmental reporting and

waste reduction measures� They also included ques-

tions about occupational safety, such as the use of

personal protective equipment, work-related risk

assessment, and anti-substance abuse policies�

In October 2021, procurement introduced

a revised set of questions for those registering as

suppliers� Since then, 66 suppliers have been given

a sustainability score�

In 2022, all suppliers in SRV’s register will be

requested to provide additional details and given

a score based on an assessment of their sustaina-

bility� Enhancing the management of our supplier

and contractor network is a key goal for procure-

ment in 2022� Summaries of key performance indi-

cators will be used to develop procurement pro-

cesses in, for example, the selection of contractors�

As part of our sustainability management, we

have long been developing operating methods to

combat the grey economy and ensure the manage-

ability, transparency and legality of our operating

chain� Preventing labour exploitation has been iden-

tified as an important theme� From now on, SRV will

require all third-country nationals working on the

company’s construction sites to have a Finnish-is-

sued residence permit that entitles them to work�

CODE OF CONDUCT

Ethical operations based on transparency

SRV’s values – sustainability, enthusiasm, profitability,

bold in development and open in cooperation – will

continue to create a firm foundation for further devel-

opment� Our Code of Conduct creates a sustainable

foundation for everything we do� All of SRV’s compa-

nies, 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 coopera-

tion partners, to commit to the Code of Conduct�

SRV has an Ethics Channel through which anyone

can anonymously report observed or suspected

behaviour that contravenes the Code of Conduct�

SRV received 12 Ethics Channel reports in 2021�

Eight reports concerning discrimination and harass-

ment were made through the ethics channel and

four through the safety observation system� One

of our key goals for 2022 is to increase the reach-

ability of companies and employees working on

construction sites�

The SRV Compliance Team enhances awareness

of compliance issues and their importance in the

Group as well as improves the flow of information

and coordination on the issues between units� The

Team also improves knowledge of existing compli-

ance guidelines and compliance with them, and

assesses the need for new instructions and training�

The Team can also review reported cases of miscon-

duct and internal audit findings, and use these to

develop compliance functions�

Prevention of bribery and corruption

SRV complies with legislation and official regulations

in all of its operations and requires the same of its

employees, subcontractors and other partners�

The company only works with reliable and repu-

table partners� We check the backgrounds of sub-

contractors 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 on busi-

ness-related decision-making� Business-related hos-

pitality should be moderate and of minimal value�

Anti-corruption practices are an unconditional

requirement of SRV’s operations, and subcontrac-

tors and other partners are also required to have

zero tolerance for corruption�

Combatting the grey economy

SRV is committed to the prevention of economic

crime, and is continually developing its operating

methods and new tools to improve the transpar-

ency, legality and controllability of the entire oper-

ating 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 construction quality and

project management�

Construction site orientation and advance checks

of partners’ social obligations are important tools in

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

the fight against the grey economy� In addition to the

above, the company also has the SRV Network Reg-

ister (which SRV developed for official reporting) and

an electronically managed process for compliance

with the Act on the Contractor’s Obligations and Lia-

bility� On Anti-Grey Economy Days, we highlight prob-

lematic areas and provide guidance for personnel�

Four Anti-Grey Economy Days were held in 2021�

We only sign agreements with partners who

commit to following SRV’s Code of Conduct� This

Code of Conduct requires SRV’s partners to treat

their employees equally, prohibit discrimination and

harassment, respect human rights, and ensure a safe

working environment� Our partners must make sure

thattheirownpartners/subcontractorsalsoadhere

to the Code� Violations of the Code in the contract

chain may lead to the termination of the agreement�

SRV adheres to official procurement procedures

in the management of all new suppliers and existing

supplier relationships, and the SRV Network Register

is an element of this� The Network Register is an IT

system that helps SRV to combat the grey economy,

promote cooperation with the authorities, increase

construction site safety, and ensure a continuous

overall picture of large projects� The Network Reg-

ister is continually updated� In October 2021, pro-

curement introduced a revised set of questions for

those registering as suppliers� Since then, 66 sup-

pliers have been given a sustainability score�

SRV’s contract chains have been limited to two

tiers(SRV/main contractor – contractualpartner –

subcontractor)� All operators in the contract chain

must comply with the Contractor’s Liability Act, and

this is checked when the agreement is signed and

at three-month intervals thereafter� SRV uses the

Vastuu Group’s Reliable Partner and Valvoja ser-

vices to ensure compliance with the Contractor’s

Liability Act�

As part of our sustainability management, we

have long been developing operating methods to

combat the grey economy and ensure the manage-

ability, transparency and legality of our operating

chain� Preventing labour exploitation has been iden-

tified as an important theme� From now on, SRV will

require all third-country nationals working on the

company’s construction sites to have a Finnish-is-

sued residence permit that entitles them to work�

ENVIRONMENT

The concrete consequences of climate change on

both individuals and companies can be seen in

stakeholders’ growing interest in environmental

issues� SRV’s responds to these requirements with

legislative compliance, environmental protection,

operational development, and continuous improve-

ment with the aid of the ISO 14001 environmental

system� We also require our subcontractors and

partners to follow the same principles�

In accordance with our environmental policy, the

goals of SRV’s environmental activities are devel-

oping material efficiency and waste management

on sites, reducing the energy consumption of sites,

implementing projects and buildings that place a

smaller burden on the environment, and encour-

aging partners to develop more sustainable oper-

ating methods�

Environmental impacts

The environmental impacts of construction sites

are mainly caused by construction waste, noise and

dust, vibration, the consumption of energy, water

and materials, and transportation� The management

of storm water, trench water and chemicals is of key

importance in preventing environmental contamina-

tion� At SRV’s sites in Finland, environmental action

is based on the environmental plan, waste manage-

ment plan, and other management plans that are

created to address the special characteristics of the

site� The environmental risks of subcontractors and

means of preventing them are reviewed during con-

tract negotiations, weekly site meetings and the risk

assessments of each work phase�

We seek to minimise impacts on the surrounding

environment when planning construction sites�

Impacts arise from factors such as dust, noise, vibra-

tion, traffic arrangements, and changes in the eco-

system� Both the authorities and those in the sur-

rounding area are kept informed about the impacts

and timetables of construction sites� Special natural

features, such as protected habitats and species,

and biodiversity are taken into consideration when

planning construction�

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 construction

projects, we define project-specific environmental

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 decision-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 consumption is entered� Statistics on

the previous year are compiled and analysed at the

beginning of the year for annual reporting and man-

agement reviews� Management reviews specify the

objectives 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 envi-

ronmental activities� By steering both projects and

design, we are able to influence material choices and

technical solutions� Good design in particular can

enable successful procurement� A waste manage-

ment 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 tar-

gets for the specific waste volume and sorting-at-

source rate, which are set by the type of building�

SRV’s most significant waste streams are concrete

and wood� Crushed concrete can be used almost

entirely as a substitute for natural aggregate� Some

wood is burned for energy, while other wood is

used as a fibrous raw material in the manufacture

of products such as boards� Metals, gypsum and

cardboard are also completely recyclable materials�

The majority of the energy consumed by SRV’s

own operations is used for heating� Our chosen

heating method often depends on the characteris-

tics of the site� We use electricity, district heating

and fuels� When it comes to fuels for machinery,

SRV Infra already switched to biodiesel in 2021 and

our target for next year is to run our equipment on

nothing but biofuels� SRV also decided that, from

the beginning of 2022, its construction sites will be

zero-emission with regard to the company’s own

energy procurement� This means that our elec-

tricity will come partially from renewable sources

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

and partially from zero-emission nuclear power, and

we will use other lower-emission forms of energy

whenever possible� Any remaining emissions will be

compensated for�

One of the most significant impacts of construc-

tion is the formation of waste� For many years now,

we have invested in reducing waste volumes and

sorting waste on construction sites� Our target recy-

cling rate for construction waste – 92% – was clearly

achieved on all construction sites, even though

there are regional differences in waste manage-

ment services and project conditions vary widely�

The recycling rate covers both material recycling

and waste-to-energy�

There was no major environmental damage in

2021, and all reported deviations were low-risk in

nature� The most common deviations related to oil

and fuel leaks, which were most often caused by

subcontractors’ machinery� Absorbent agents were

used to soak up the spills, which the waste manage-

ment contractor then sent to a licensed operator for

treatment� As a consequence of these leaks, we have

further emphasised the importance of proper main-

tenance and inspection for machinery, and have also

urged our subcontractors to keep absorption agents

near machinery to aid in the speedy clean-up of any

damage� A total of 26 environmental deviations were

reported during the year, 15 of which were oil leaks�

An analysis of climate risks was carried out in

2021� This analysis will be expanded in 2022�

Information to be disclosed under

the EU Taxonomy for sustainable finance

The European Union (EU) has created the European

Green Deal to promote the aim of carbon neutrality�

As part of this programme, the EU has published a

classification system – a taxonomy – for sustainable

finance that enables the identification of sustainable

economic activities� The EU Taxonomy is a classifi-

cation system for sustainable finance that defines

which activities are deemed to be environmentally

sustainable� According to the EU’s Non-Financial

Reporting Directive (NFRD), taxonomy reporting

concerns 13 sectors� As a listed company in the

construction sector that employs more than 500

people, SRV is in the scope of taxonomy reporting�

SRV’s business mainly comprises construction,

which is covered by the classification system of the

taxonomy (7 Construction and Real Estate)� In 2021,

37% of SRV’s construction revenue was generated

by the building of new residential units, 56% by the

construction of new business premises and 7% by

the renovation of business premises�

SRV identified its taxonomy-eligible economic

activities in cooperation with sustainability experts

and business finance experts� This work assessed

economic activities in accordance with the Taxonomy

Regulation and compared them with economic activ-

ities in SRV’s different business areas� The outcome

of the work was the specification of SRV’s relevant

taxonomy-eligible economic activities in five groups:

Construction of new buildings (economic activity 7�1

in the Taxonomy), renovation of existing buildings

(7�2), infrastructure (6�13-6�17), lifecycle and energy

services (7�3-7�6) and management and lease of

both own and leasing properties (7�7)� Most these

functions concern the mitigation of climate change�

In accordance with the requirements of the

Taxonomy Regulation, we report revenue, capital

expenditure (capex) and operating expenses (opex)

as defined in the taxonomy for the 2021 reporting

period� For 2021, we report on the taxonomy-eligible

proportions of these indicators, but not the taxono-

my-aligned proportions� Taxonomy-aligned revenue,

capital expenditure and operating expenses will be

reported for 2022�

REVENUE

SRV’s taxonomy-eligible revenue is compared to

total consolidated revenue, with both calculated in

accordance with the Group’s accounting principles�

For more detailed information on income recognition

practices, see the notes to SRV’s consolidated finan-

cial statements� In assessing the taxonomy-eligibility

of revenue, SRV has divided its revenue at project

level and classified the projects in line with the taxon-

omy-eligible economic activities specified above such

that one project can belong only to one group of eco-

nomic activities� The taxonomy-eligible proportion is

determined by adding up the revenues of the taxono-

my-eligible economic activities� The double counting

of components of revenue has been prevented by not

taking intra-Group revenue into account�

CAPITAL EXPENDITURE (CAPEX)

The proportion of taxonomy-eligible capital expend-

iture has been compared with the Group’s total

capital expenditure� Both amounts have been cal-

culated in accordance with the Group’s accounting

principles� Capital expenditure consists of increases

in property, plant and equipment, intangible assets

and right-of-use assets during the past financial

year� When assessing eligibility, capital expenditure

items have been divided in accordance with the

separate company and the capital item in question�

In 2021, the Group’s capital expenditure consisted

of investments in machinery, energy systems, and

capitalised costs of systems in IT projects; the first

two of these were deemed to be taxonomy-eli-

gible� The capitalised costs of IT systems do not

serve any individual business function in particular,

but are mainly used for general administrative pur-

poses� For more information on capital expendi-

ture (Increases) during the financial year, see notes

13 and 14 to the consolidated financial statements�

OPERATING EXPENSES (OPEX)

The proportion of taxonomy-eligible operating

expenses has been compared with the Group’s

total operating expenses� Both amounts have been

calculated as defined in the Taxonomy Regulation�

Operating expenses under taxonomy reporting are

determined by identifying expenses allocated to

the Group’s property, plant and equipment, intan-

SUMMARY OF THE INDICATORS TO BE REPORTED AND THEIR TAXONOMY ELIGIBILITY

31 Dec� 2021

EUR million Total Taxonomy-eligible, % Non-taxonomy-eligible, %

Revenue* 932�6 99�2% 0�8%

Capital expenditure** 2�6 57�2% 42�8%

Operating expenses 0�7 100�0% 0�0%

* Revenue is based on consolidated revenue.

** Capital expenditure is based on increases of the Group’s tangible and intangible assets. (Notes 13 and 14)

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

gible assets and right-of-use assets as well as R&D

costs that have not been capitalised� In practice,

these costs consist of the maintenance and repair

costs of earthwork machinery� Those costs which

serve taxonomy-eligible business have been desig-

nated as taxonomy-eligible� The definition of oper-

ating expenses in the Taxonomy Regulation differs

substantially from the generally used definition of

operating expenses, and only a very small share of

SRV’s operating expenses are operating expenses as

defined in the Taxonomy Regulation�

SUMMARY OF THE INDICATORS TO BE

REPORTED AND THEIR TAXONOMY ELIGIBILITY

The majority of SRV’s revenue for 2021 is taxono-

my-eligible� The proportion of taxonomy-eligible cap-

ital expenditure of all capital expenditure was over

50%� Operating expenses calculated in accordance

with the definition used in the taxonomy are rather

small� All of these operating expenses in line with this

definition are taxonomy-eligible�

CHANGES IN THE CORPORATE

EXECUTIVE TEAM

Antti Nummi, SVP, Commerce, left SRV Group Plc's

employ and stepped down from the Corporate Exec-

utive Team by 31 January 2022�

On 18 August 2021, Miimu Airaksinen, D�Sc� (Tech�)

joined SRV Group Plc and was appointed to the Cor-

porate Executive Team� Miimu Airaksinen assumed

her position as SVP, Development and a member of

the Corporate Executive Team on 2 September 2021�

Antti Nummi, a member of SRV Group Plc’s Corporate

Executive Team, was appointed as Senior Vice Presi-

dent, Commerce (CCO) as of 2 September 2021�

The following joined SRV Group Plc as members

of the Corporate Executive Team: Anu Tuomola,

Senior Vice President, General Counsel, on 2 August

2021; Jorma Seppä, Senior Vice President, Housing,

Helsinki Metropolitan Area, on 2 August 2021; Jouni

Forsman, Senior Vice President, Business Premises,

Helsinki Metropolitan Area, on 16 February 2021;

Miia Eloranta, Senior Vice President, Communica-

tions and Marketing, on 4 January 2021; and Kris-

tiina Sotka, Senior Vice President, Human Resources,

on 1 February 2021�

The following left their positions at the company

and on the Corporate Executive Team: Johanna

Metsä-Tokila, Senior Vice President, General

Counsel, on 31 July 2021; Kim Jolkkonen, Senior Vice

President, Housing, Helsinki Metropolitan Area, on 8

June 2021; Maija Karhusaari, Senior Vice President,

Communications and Marketing, on 4 January 2021;

Ilkka Pitkänen, CFO, on 31 January 2021; and Juha

Toimela, Deputy CEO and Senior Vice President,

Business Premises, Helsinki Metropolitan Area, on 1

March 2021�

RISKS, RISK MANAGEMENT

AND CORPORATE GOVERNANCE

SRV has published a separate Corporate Governance

Statement, which includes a general description

of the company's risk management, in its Annual

Review and on the company's website�

The key objective of risk management is to identify

the main risk factors to which the company’s opera-

tions are exposed and to safeguard the achievement

of the company’s strategy and objectives� The most

significant risks concern negative changes in SRV’s

and its customers’ operating environment, currently

particularly the capital employed in major projects,

SRV’s earnings trend, availability of financing for SRV

and its projects, the development of the situation in

Russia, the rouble exchange rate, the development

of the coronavirus pandemic and key project imple-

mentation risks�

Strategic risks

MARKET RISKS

Demand for SRV’s products and services might be

weakened by negative changes in, for instance, gen-

eral economic development, the business environ-

ment of SRV and its customers, the functionality of

financial markets and the political operating envi-

ronment� SRV’s business opportunities would be

weakened by the deterioration of the operating con-

ditions of business premises customers, the weak-

ening of corporate and consumer confidence and

purchasing power, a slowdown in population growth

and migration, an increase in interest rates, more

difficult availability of financing or financial prob-

lems in public administration� In particular, a decline

in the need for business premises, increase in the

yield requirements of investors, tighter investment

criteria, a decrease in the demand for and prices

of apartments, and the weakening of investment

opportunities in public administration may pose a

substantial risk to the company’s financial position

and profitability�

The company continuously monitors the needs of

customers and the market situation, and seeks to both

anticipate changes and react to them rapidly� In order

to reduce market-related risks, the company has bol-

stered its activities to continuously identify commercial

opportunities, customer needs and customers as well

as to manage customer relationships and sales� In pro-

jects, the aim is to make outlays on public integrated

project deliveries� In the business premises sector, SRV

seeks to shift the focus more to private development

projects, while in the housing business area, projects

will be spread out more evenly among different sec-

tors of housing construction� With respect to business

operations, a key ongoing measure is the development

of lifecycle-wise construction�

RESOURCE RISKS

A significant risk that affects the operations of the

entire company is the identified potential shortage

of good professional resources and the loss of key

employees and expertise to competitors� The con-

struction sector is currently hindered by a labour

shortage and competition for professionally skilled

people is constant� The scarcity of resources may

make it more difficult to carry out projects according

to plan and could increase their costs�

In order to manage the resource situation, SRV

ensures that its personnel have competitive con-

ditions and remuneration� Good management and

corporate culture are considered to be key draws for

the company� The definition of the SRV Approach,

managerial coaching, mentoring and 360-degree

assessments are examples of the development of

culture at SRV� SRV maintains the health of personnel

with the systematic monitoring of health and effec-

tive healthcare services� Safety and security issues

are always on the agenda at key meetings of the

company� Employees are provided with systematic

training and opportunities for development and com-

munal activities� SRV overhauled its recruitment pro-

cess and system in 2021� A new induction process will

be launched in 2022 to ensure smooth onboarding�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

Further outlays will be made on managerial work and

performance management in 2022 by renewing both

the performance review process and the short-term

remuneration system for all employees� In addition to

these measures, the development of SRV’s employer

image and close cooperation with educational insti-

tutions are tools to ensure future resources� SRV will

work systematically on these in 2022 as well�

REPUTATION RISKS

Public discussion of negative matters affecting the

entire industry or certain companies – whether war-

ranted or not – can weaken the reputation of the

company or the trust of stakeholders� Such nega-

tive incidents may include serious accidents, the

grey economy, unethical operations or substantial

quality problems�

SRV seeks to prevent negative incidents with guide-

lines for different subareas of the company, operating

systems, monitoring of operations and other risk man-

agement measures� The company responds to any

problems rapidly in both its operations and commu-

nications� SRV proactively and openly communicates

about its own operations to different stakeholders� In

addition, SRV continuously develops the functionality

of both internal and external communications as well

as maintains the communications capabilities of the

key persons responsible�

Financial risks

FINANCING AND CREDIT RISKS

SRV’s ongoing major projects and completed shop-

ping centre projects are tying up a great deal of cap-

ital, as does developer-contracted construction� The

availability and price of financing are critical to the

company's business� The availability of the compa-

ny’s financing and certain guarantees has improved

thanks to the recovery measures taken in 2020

and 2021, but the availability of financing and cer-

tain guarantees for developer contracting projects

remains somewhat limited�

In addition to cash assets and undrawn housing

corporation loans, the company’s financing reserves

consist of an undrawn credit facility� Negative

changes in the company’s earnings trend may impact

on the fulfilment of the covenants of the revolving

credit facility and thereby on the usability of the

facility and the company’s financing reserves� The

company actively monitors the development of the

covenant situation and, if necessary, seeks to nego-

tiate on financing terms with the creditor banks�

In order to manage financial risks, financing for

developer contracting projects is ensured through

sales of projects, project-specific credit facilities and

the use of the company’s general financing reserves�

The financing situation of projects is assessed at dif-

ferent decision points and the company only starts

up projects for which financing has been secured�

The implementation of new orders recognised in the

order backlog in 2021 will not require any financing

from SRV, with the exception of developer-con-

tracted 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 company’s general

financing reserves and the sale of project-specific

receivables to financial institutions and project-spe-

cific loans negotiated separately before the start-up

of the project in question� Receivables can be sold

for the purpose of liquidity management only within

the limits allowed�

Due to the nature of the company's operations,

the unit sizes of projects and sales invoices are rel-

atively large� For this reason, the company’s receiv-

ables from individual customers may be subject to

credit risks� The company seeks to manage credit risks

by means of assessing the solvency of customers,

security arrangements, prudently drafting payment

installment tables and proactively keeping track of

receivables� The Group's commercial counterparties

are mainly listed companies or major real estate com-

panies or institutional investment companies� Histor-

ically, the amount of credit losses has been very low�

However, one business premises project under

construction in Finland involves higher credit loss

risks related to trade receivables� Due to the pay-

ment difficulties of the client, the payment of about

EUR 14�8 million in trade receivables to SRV was

overdue at the end of December� These receivables

are secured by a mortgage on the property under

construction and pledges on certain other asset

items� SRV is currently negotiating on the handling

of payment transactions with the client�

REPORTING RISKS

The company’s financial reporting is based on pro-

ject forecasts, which are estimates of the final

results of projects� Accurate forecasts are essential

for reliable reporting and planning for the future�

To manage reporting risks, SRV’s projects comply

with the company’s accounting and forecasting prin-

ciples as well as monitoring and reporting practices�

Particular attention is paid to schedule and cost

management as well as the drafting and analysis of

forecasts� Identifying and valuing risks and oppor-

tunities, and the necessary related measures, have

comprised a special priority area�

Operational risks

PROJECT MANAGEMENT RISKS

Competitive project operations with products and

services comprise a critical success factor for the

company’s business and may be subject to significant

risks� SRV seeks to implement profitable contracting

projects for developer customers and to develop

profitable developer contracting projects and prop-

erty projects together with its partners� In addition to

resource risks, the most significant project manage-

ment risks concern the operations of customers and

the authorities, contract management, site planning,

the implementation of procurement, the manage-

ment of schedules, quality, costs, safety and environ-

mental issues, and the marketing and sale of sites�

SRV seeks to manage project management risks by

retaining its position as one of the top companies in

its field by investing in the development of manage-

ment-enhancing systems and its own customer-fo-

cused, flexible and networked operating model (SRV

Approach)� As part of its operating system that steers

its functions, the company has ISO-certified quality,

environmental, occupational health and safety sys-

tems� SRV develops project management proactively�

In addition to risk management, costs, quality, safety

and customer service, the main starting points are

responsibility and the utilisation of digitalisation� SRV

currently has several ongoing projects to develop its

operations, such as expanding the utilisation of the

features of the CRM system in marketing and sales,

standardising assessment criteria, decision-making

points and risk management reviews in the project

development phase, introducing a new foreman’s

handbook, and improving the housing production

warranty work process and its feedback systems�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

SUBCONTRACTING RISKS

The management of the partner network in project

implementation involves risks related to matters

such as quality, costs, schedule, safety, the grey

economy and environmental issues� In addition to

potential failure to perform its obligations, a key

contractor or material supplier might go bankrupt

or otherwise out of operation during the project� In

addition, problems with the availability of resources

and products may cause additional costs and

delay projects�

To manage subcontractor risks, the backgrounds,

technical competencies and financial capacities of

key companies working in projects are assessed,

and phase-by-phase working plans are drawn up

before work begins� In addition to the implementa-

tion of the working plans, SRV constantly monitors

the development of procurement costs and reacts

rapidly to deviations� Procurement management

and documentation are handled with SRV’s procure-

ment system and in-house network register�

CONTRACTUAL RISKS

Incomplete or unclear contract terms and deficient

contract management may give rise to ambiguities

concerning the responsibilities and obligations of

the parties and disputes that weaken project prof-

itability� In particular, additional and modification

work implemented during projects in target-price

and guaranteed maximum price contracts are sub-

ject to the risk of divergent interpretations�

In order to avoid contractual risks, SRV’s key agree-

ments are drafted on the basis of legal expertise and

contract models adapted to the company’s opera-

tions� In addition, the company constantly maintains

the knowledge of responsible persons on different

contract terms and the content of contracts with

guidance and the necessary training� Contract prac-

tices are developed constantly�

RISKS OF LARGE AND DEMANDING PROJECTS

Construction projects involve a variety of risks in the

project development, construction and in-service

phases, and their circumstances develop and change

constantly� Large-scale development projects that tie

up a great deal of capital over a long period of time

are particularly exposed to changes and thereby to

risks� These projects at SRV include the Tampere Cen-

tral Deck, Kalasatama and Keilaniemi tower projects�

The company seeks to prepare for the risks of

large and demanding projects in each phase by car-

rying out thorough risk analyses and adhering to

the project processes and operating system defined

by the company� Major risky projects are under the

special supervision of the company’s management�

In order to develop risk management, SRV is cur-

rently specifying both the criteria for critical projects

and the special measures necessary for enhanced

steering of projects�

Other risks

PANDEMIC RISKS

If the coronavirus pandemic worsens, it can still not

only have an impact on the operating conditions and

business of SRV, its customers and other partners,

but also have broader effects on general economic

development� Many countries lifted restrictions in

early autumn 2021, but the pandemic took a serious

turn for the worse in late autumn� Restrictions to

prevent the spread of new waves and variants of

the virus as well as both vaccination coverage and

effectiveness play a key role in the development of

the situation�

In spite of the pandemic, only minor problems

were encountered in construction operations in Fin-

land in 2021 and the level of activity remained high�

SRV is closely assessing the developing impacts of

the pandemic and is proactively taking the neces-

sary measures to maintain health and wellbeing,

prevent the spread of the pandemic and ensure

business continuity�

RUSSIAN COUNTRY-SPECIFIC RISKS

Net rental income from SRV’s shopping centre invest-

ments typically reaches its target level about 3–5 years

after opening� Once this occurs, it is SRV’s strategy to

sell the investment� Developments in business oper-

ations and rental income in Russia are impacted by

factors such as geopolitical and economic trends,

consumer behaviour, successful shopping centre

management, the shopping centre’s reputation and

also the rouble exchange rate� Weaker-than-planned

developments in different factors and the assump-

tions made, both when starting up shopping centres

and on the scheduled sale date, may result in a need

to lower the shopping centre’s value in the balance

sheet� Uncertainty regarding the Russian situation

and the prolongation of the coronavirus pandemic

also pose uncertainty to the development and sales

dates of the Russian shopping centres� SRV’s invest-

ments in shopping centres are non-controlling inter-

ests 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 the shareholder agreement

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�

In addition to its shopping centre investments, SRV

also owns plots for development in Russia� Risks and

uncertainties in the Russian economy may, like in the

case of shopping centre investments, impact on the

value of plot holdings, the schedules of the projects

developed on them and the financial end results�

In its Russian business, fluctuations in the rouble

exchange rate expose SRV to translation and trans-

action risks� A ten per cent weakening of the rouble

against the euro on the reporting date would have

had an impact of about EUR -7�0 million on the Group’s

equity translation differences� A ten per cent weak-

ening in the exchange rate would correspondingly

have an impact of about EUR -3�1 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 associated com-

panies 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�

After period end, Russia began military operations

in Ukraine� As the event is still very recent, it is difficult

to assess its impact on SRV's business�

CYBER AND INFORMATION SECURITY RISKS

The functionality and security of information sys-

tems play a key role in the company’s business oper-

ations� The growing threat posed by cybercrime,

personnel misconduct, and system replacements

and modernisation are risk factors that can result in

the interruption of operations, reputational damage

and significant financial losses�

With respect to cyber and information security

risks, SRV enhances its information security culture by

maintaining and communicating its information secu-

rity policy and guidelines as well as information secu-

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

rity-related practices� SRV monitors external threats

and constantly keeps track of how the situation

develops� Other means of risk management include

automatic virus scans of systems and issuing separate

warnings about major information security threats�

In 2021, SRV decided to participate in TIETO22,

a cybersecurity exercise that will be held by the

National Emergency Supply Organisation's Digipooli

Network in 2022�

RISKS RELATED TO THE HANHIKIVI 1

NUCLEAR POWER PLANT PROJECT

SRV has made a financing commitment equating to a

1�8 per cent holding in the Hanhikivi-1 nuclear power

plant project to Fennovoima’s main owner, Voimao-

sakeyhtiö SF� SRV has the same rights and obligations

as other Voimaosakeyhtiö SF shareholders� No deci-

sion to start up the construction of the power plant

has been made yet� The balance sheet value of the

investment is EUR 13�3 million, which corresponds to

the amount that SRV has invested in the project� The

current and future value of the investment involves

risks related to the realisation of the project and par-

ticularly to the longer-term price of electricity� On 4

February 2022, SRV signed a set of agreements with

RAOS Voima Oy, which will lead to SRV’s exit from its

ownership in Fennovoima and from the agreements

regarding project management in the Hanhikivi 1

project� The completion of the contractual arrange-

ment is subject to approval by the Ministry of Eco-

nomic Affairs and Employment�

SUSTAINABILITY RISKS

Identified risks relate to issues such as serious

accidents, the grey economy, labour exploitation,

working conditions in the supply chain, adapting

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

responsibility and

human rights

• Accidents

• Coping at work

• Failure to comply with terms of employment and rights under

the employment relationship

• Labour exploitation in the supply chain

• Neglect of social responsibilities

• Safety and health of local residents

• Product responsibility for our customers

• ISO 45001 occupational safety management system

• ISO9001 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

• 15-minute safety information sessions

• Safety observations

• TR measurements

• Personnel survey

• SRV Network Register

• Operating process and guidelines for harassment or discrimination

incidents

• Responsible Procurement Steering Group

• Supplier cooperation

• Collecting and processing customer feedback

Environmental issues

• Environmental damage and accidents

• Physical climate risks

• ISO14001 environmental management system

• External audits

• Project risk management process

• Process risk identification and management

• Environmental plan

• HSEQ kick-off meetings at sites

• Site guidance

• Internal audits

Adaptation to

climate change

• Statutory requirements and increased regulation

• Business requirements set by customers, investors and

financiers

• Energy and lifecycle services

• Carbon footprint, Carbon handprint, 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

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

to climate change, climate risks, meeting investors’

requirements, and our reputation through stake-

holders’ 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�

Particular attention has been paid to occupational

safety management� Management commitment has

been increased and the quality of incident investi-

gations improved� In addition, the management and

monitoring of overall safety has been developed to

obtain an even more accurate and better picture

of the situation� At the same time, on-site training

and own observations of occupational safety have

been developed�

The physical effects of climate change, such as

extreme weather phenomena, may hinder construc-

tion and property maintenance� Climate impacts are

increasingly being considered 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 action

plan, and it provides the financial sector with tools for

assessing the sustainability of potential investments�

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 management organi-

sation are responsible for identifying and reporting

sustainability risks, and for implementing risk man-

agement measures� We are continually working to

Idened risk Descripon Risk management Signicance Probability Time span

Reputation

An offering that is considered poor

by customers or stakeholders,

or action that is considered poor

from a climate perspective�

Listening to customers and

stakeholders, developing our

offering, and the continual

monitoring and development of our

own operations

Critical Possible

Medium

term

Market changes

Sustainable solutions that meet

investors’ and customers’ wishes

and requirements cannot be

reconciled with liquidity from new

solutions�

Listening to customers and

stakeholders, developing our

offering and market analyses, and

the continual development of our

lifecycle wisdom concept

Critical Possible

Medium

term

Technological

changes

The overall impact of integrating

new low-carbon technologies

is not taken into account in the

entire construction lifecycle�

Analysing and simulating the

short- and long-term risks of new

technologies, materials and systems

– and combinations thereof – using a

variety of scenarios�

Possible

Medium

term

Legislation

Stricter legislation affects the

price and availability of low-

carbon materials, systems and

solutions�

Active market forecasting and

monitoring�

Moderate Possible

Short-to-

medium

term

Weather changes

Extreme weather phenomena lead

to changes in construction site

schedules and costs�

Monitoring changes in the weather

on construction sites, and making

preemptive provisions for potential

changes�

Moderate Possible

Medium-

to-long

term

Whenitcomestoopportuniescausedbyclimatechange,newlifecycleproductsandservicesinparcularwereseenassignicantandeven

crical,especiallyinthecaseofinformaon-basedopportunies.Theopportunieswereconsideredtobeverysignicant,evencrical,

andtheirlikelihoodwasthoughttobepossible.Similarly,alotofopportunieswereidenedinthefurtherdevelopmentofourcurrent

lifecycle-wiseoering,andwereconsideredtobeprobableevenintheshortterm.

The most significant identified climate change impacts for SRV’s business

Identified

opportunity

Description Significance Probability Time span

The further

processing and

development

of our current

offering

Construction and buildings generate about 32 per cent of Finland’s

emissions� With the aid of SRV’s lifecycle-wise concept, emissions can

already be reduced by 60 per cent without having to compromise on

users’ requirements�

Developing our offering will support lifecycle wisdom, particularly from

the perspective of energy and material efficiency, and will also help to

strengthen the SRV brand�

Significant Probable

Short-to-

medium

term

The development

of new products

and services

In the future, predictability with regard to facilities, conditions, energy,

materials and the use of equipment will be important for both resource

efficiency and user comfort� Correctly timed information creates

opportunities for the development of new services� Opportunities that

are relevant to SRV include services based on real-time information that

are either energy-related or targeted at property owners and residents�

Critical Possible

Medium-

to-long

term

control and reduce risks in both our own operations

and our subcontractor network�

SRV’s Code of Conduct for its own personnel and

suppliers creates a foundation for compliance� The

SRV Construction Contract Programme defines the

basic sustainability requirements for our partners

and subcontractors� For example, subcontractor

chaining is limited to two tiers� Certified manage-

ment systems create a strict framework for opera-

tion and require continual improvement and devel-

opment, including in risk management�

SRV’s Lifecycle Wisdom strategy programme takes

a firm stand on the role that business plays in com-

bating climate change and adapting to a changing

business environment� The physical threats and busi-

ness opportunities and risks associated with climate

change were analysed for the first time in 2021 and

this work will be honed in 2022� We will continue to

assess human rights impacts 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�

Climate risks, TCFD

In 2021, SRV for the first time assessed climate risks

and opportunities in accordance with TCFD (Task

Force on Climate-Related Financial Disclosures)�

Both business unit heads and Corporate Executive

Team members participated in the assessment� The

surveyed participants assessed previously identi-

fied climate change transition risks relating to, for

example, markets and legislation, as well as physical

risks relating to both acute extreme weather phe-

nomena and more permanent chronic changes�

The participants also assessed the possibilities

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

associated with climate action� SRV’s sustainability

working group then drafted the risk analysis� Climate

risk reporting will be further developed in 2022�

Management: The sustainability working group

develops and monitors SRV’s climate action together

with operative functions� Climate risks are discussed

alongside corporate risks at meetings of both the

Corporate Executive Team and the Board of Directors�

Strategy: In 2021, the focus was on identifying

climate risks and their opportunities, and assessing

their significance and time span� During 2022, our

focus will be on further deepening our assessments

and scenario analyses�

Risk management: In 2021, we focused on man-

aging identified risks and mobilising relevant pro-

cesses that will help us to manage all environmental

risks� We are currently integrating these processes

into the management of all of the company’s risks�

Indicators and targets: SRV has been measuring its

environmental objectives since the turn of the millen-

nium� These objectives have been gradually refined

and increased, and are constantly being developed�

In the 2021 Annual Report, we have reported on

emissions from our own operations and emissions

from purchased energy (EU NFR Scope 1 and Scope

2)� From now on, we will also be enhancing our meas-

urement of indirect emissions (Scope 3)�

CLIMATE RISK ASSESSMENT

The significance and probability of climate risks

were assessed using a three-point scale� In addition,

the time span of risks was assessed in three tiers�

The most significant climate risks were those asso-

ciated with the company’s reputation and changes

in the market� However, they were considered to

be possible rather than probable, and to be only

medium-term risks� SRV already has tools and estab-

lished processes for managing all identified risks in

its operational activities�

CORPORATE GOVERNANCE AND

THE DECISIONS OF THE ANNUAL

GENERAL MEETING

SRV Group Plc’s Annual General Meeting (AGM) was

held on Monday 29 March 2021 at the company’s

head office in Espoo�

The AGM was held remotely on the basis of tem-

porary legislation� Company shareholders could

attend the meeting and exercise their shareholders’

rights only by voting in advance and submitting

any counterproposals and questions in advance� To

ensure the health and safety of shareholders, per-

sonnel and other stakeholders, in-person attend-

ance was not possible�

The AGM adopted SRV Group Plc’s Financial

Statements, including the consolidated financial

statements, for the period 1 January–31 December

2020 and released the members of the Board of

Directors and the President & CEO from liability�

The minutes of the Annual General Meeting are

available on the company's website at www.srv.fi/agm�

Dividend payment

In accordance with the proposal of the Board of

Directors, the AGM decided that no dividend would

be paid for the financial year 2020�

Approval of the Remuneration Report

for governing bodies

In accordance with the proposal of the Board of Direc-

tors, the AGM approved the company’s Remuneration

Report for governing bodies for 2020� The decision

was advisory� The Remuneration Report is available

on SRV Group Plc's website at https://www.srv.fi/en/

investors/cg/remuneration/�

The Members and Chair of the Board

of Directors and remuneration

The number of members of the Board of Direc-

tors was confirmed as five (5)� Timo Kokkila, M�Sc�

(Tech�), Tomi Yli-Kyyny, M�Sc� (Tech�), Hannu Lei-

nonen, M�Sc� (Tech�), and Heikki Leppänen, Lic�Sc�

(Tech�), were re-elected to the Board of Directors

and Heli Iisakka, MSc� (Econ�), was elected as a new

member� Tomi Yli-Kyyny was elected as the Chair of

the Board of Directors� The term of office of mem-

bers of the Board of Directors will end at the close of

the 2022 Annual General Meeting�

The Annual General Meeting resolved that the

remuneration for the members of the Board of

Directors shall be EUR 6,000 per month for the

Chair, EUR 4,000 per month for the Vice Chair and

EUR 3,000 per month per member� The Chair of

the Audit Committee will receive EUR 4,000 per

month on condition that the Chair of the Audit

Committee is not also the Chair or Vice Chair

of the Board� In addition, a EUR 700 fee will be

paid to each member per Board and committee

meeting� Travel expenses arising from performing

the duties of a member of the Board of Directors

will also be reimbursed according to company’s

travel policy�

Auditor and remuneration

PricewaterhouseCoopers Oy, a firm of authorised

public accountants, was elected as auditor of the

company for a term until the close of the Annual

General Meeting of 2022� PricewaterhouseCoopers

Oy has announced that Enel Sintonen, Authorised

Public Accountant, will serve as the responsible

auditor� The auditors’ remuneration was confirmed

as payable on the basis of an approved invoice�

Amendment of the Articles of Association

The Annual General Meeting resolved that Article 6

of the Articles of Association is amended as follows:

Article 6� The Company shall be represented:

1) by a member of the Board of Directors together

with the President & CEO, the deputy to the CEO,

another member of the Board of Directors or

with a person authorized to represent the com-

pany, two together or

2) by persons authorized to represent the company

by the resolution of the Board of Directors, two

together or each separately with a member of the

Board of Directors or with the President & CEO�

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 company’s unre-

stricted equity as follows:

The Board of Directors was authorised to acquire

a maximum of 26,000,000 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�

The company’s own shares may be acquired at

the price in public trading on the day of acquisition

or otherwise at the market price� Own shares may

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

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 pay-

ment in corporate acquisitions, when the company

acquires assets relating to its business, as part of the

company's incentive programmes, or to be other-

wise conveyed, held or cancelled�

The Board of Directors is authorised to resolve on

all other terms and conditions of the acquisition of

the shares�

The authorisation is valid until 30 June 2022 and

it revokes the authorisation granted to the Board

of Directors at the Annual General Meeting on 26

March 2020 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 issu-

ance 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 consideration 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

26,000,000 shares� Any shares issued on the basis of

special rights entitling to shares are included 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 pursuant to Chapter

10, Section 1 of the Finnish Companies Act may be

granted in deviation from the pre-emption rights

of shareholders only if there exists a weighty finan-

cial reason for the company� A directed share issue

may be free of consideration only if there exists,

for the company and taking into account the inter-

ests of all its shareholders, a particularly weighty

financial reason�

The authorisation may be used, for example,

when issuing new shares or conveying shares as

consideration in corporate acquisitions, when the

company acquires assets relating to its business, in

order to strengthen the company's capital structure

and for implementing incentive schemes�

The Board of Directors is authorised to resolve on

all other terms and conditions of the share issue�

The authorisation is valid until 30 June 2022� The

authorisation cancels the authorisation to decide

on a share issue and on the issue of special rights

granted by the Annual General Meeting to the Board

of Directors on 26 March 2020�

THE ORGANISATION OF SRV GROUP

PLC’S BOARD OF DIRECTORS AND THE

COMPOSITION OF ITS COMMITTEES

At its organisational meeting on 29 March 2021,

SRV Group Plc’s 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 2022�

Timo Kokkila was selected as Vice Chair of the

Board of Directors�

Heli Iisakka was elected as Chair of the Audit

Committee, and Hannu Leinonen and Timo Kokkila

as members�

Tomi Yli-Kyyny was elected as Chair of the HR and

Nomination Committee, and Hannu Leinonen and

Heikki Leppänen as members�

SHARE-BASED INCENTIVE SCHEME

On 29 March 2021, SRV Group Plc’s Board of Direc-

tors decided to establish a new long-term share-

based incentive scheme for 2021–2025 and a

one-off long-term share-based incentive scheme

for 2021–2022 for the Group’s key personnel� The

purpose of these schemes is to align the objec-

tives of shareholders and key personnel in order

to increase the company's value over the long

term, and to enhance key personnel's commitment

to the company�

Long-term incentive scheme 2021–2025

The long-term incentive scheme has three three-

year earning periods starting in 2021–2023, the

calendar years 2021–2023, 2022–2024 and 2023–

2025� The Board of Directors decides on the key

persons to be included in each earning period and

the earning criteria for the scheme at the begin-

ning of the earning periods� The target group of

the first earning period of the scheme, 2021–

2023, consists of around 30 people, including

President & CEO Saku Sipola and executives of the

company�

Any incentives paid as part of the earning period

2021–2023 would be based on SRV Group Plc’s

total shareholder return (TSR) in relation to a sep-

arately selected reference group, the company’s

indebtedness and the increase in share price� The

total value of the incentives paid on the basis of the

2021–2023 earning period will be equivalent to a

maximum of about 4,400,000 SRV Group Plc shares

(gross amount, from which withholding taxes will

be deducted)� The incentives, if any, will be paid in

the form of shares in the company (net amount) in

2024 and the company will remit withholding taxes

to the tax authority on behalf of the key employees�

The potential share rewards of the President & CEO

are subject to a transfer restriction whereby he must

hold these shares for a period of two years after

being awarded�

One-off long-term incentive

scheme 2021–2022

At the same time, SRV’s Board of Directors decided

on a two-year one-off scheme to make it possible

to extend the earning period of the long-term

incentive scheme to three years� The one-off long-

term incentive scheme has one two-year earning

period, the calendar years 2021-2022� The target

group of the scheme consists of around 30 people,

including President & CEO Saku Sipola and execu-

tives of the company�

Any incentives paid for the earning period

2021–2022 would be based on the Group’s oper-

ative cash flow and total shareholder return (TSR)

on the SRV Group Plc share over a period of two

years� The total value of the incentives paid on

the basis of the 2021–2022 earning period will

be equivalent to a maximum of about 4,400,000

SRV Group Plc shares (gross amount, from which

the monetary component will be deducted)�

The incentives, if any, will be paid in the form of

shares in the company (net amount) in 2023 and

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of report of the the Board of Directors

the company will remit withholding taxes to the

tax authority on behalf of the key employees� The

potential share rewards of the President & CEO are

subject to a transfer restriction whereby he must

hold these shares for a period of two years after

being awarded�

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 company has one

class of shares�

During the financial year, 11,662 company shares

were returned to SRV Group Plc without compen-

sation in accordance with the terms of SRV's share-

based incentive scheme (earning period 2017-

2019)� These shares had originally been handed

over to persons covered by the share-based incen-

tive scheme� After these shares were returned, SRV

Group Plc owned 862,561 of its own shares�

The closing price at Nasdaq Helsinki on 31

December 2021 was EUR 0�53 (EUR 0�59 on 31

December 2020, change -10�2%)� The highest share

price during the reporting period was EUR 0�81 and

the lowest EUR 0�45� At the end of the period, SRV's

equity per share excluding the hybrid bond was

EUR 0�57� On 31 December 2021, SRV had a market

capitalisation of EUR 138�9 million, excluding the

Group’s treasury shares� 45�7 million shares were

traded during the review period with a trade volume

of EUR 27�9 million�

At the end of December, SRV Group Plc held 862,561

treasury shares (0�3 per cent of the total number of

shares and combined number of votes)�

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 earlier

than for the 1 January–31 December 2023

financial year� The longer-term objective is to

distribute a dividend of 30-50 per cent of the

annual result, taking into account the capital

needs of business operations�

PROPOSAL FOR THE

DISTRIBUTION OF PROFITS

The parent company’s distributable funds on

31 December 2021 are EUR 253,424,080�53,

of which net profit for the financial year is EUR

-8,741,753�60� The Board of Directors proposes to

the General Meeting that no dividend be paid for

the 2021 financial year�

EVENTS AFTER THE PERIOD

On 4 February 2022, SRV signed a set of agree-

ments with RAOS Voima Oy, which will lead to

SRV’s exit from its ownership in Fennovoima and

from the agreements regarding project man-

agement in the Hanhikivi 1 project� The comple-

tion of the contractual arrangement is subject to

approval by the Ministry of Economic Affairs and

Employment�

On 4 February 2022, SRV Group Plc’s Board of

Directors decided to use the buyback authorisation of

SRV’s shares granted by the Annual General Meeting

on 29 March 2021� The buyback programme will be

initiated at the earliest on 4 February 2022 and ter-

minated once all the necessary shares have been

purchased� The number of shares to be acquired is

a maximum of 3,900,000 shares, which represents

approximately 1�5 per cent of all SRV shares� The

acquired shares will be used to implement the com-

pany’s share-based incentive schemes�

On 4 February 2022, SRV and Senate Properties

signed an agreement on an additional building pro-

ject for the National Museum of Finland� The new

building will be implemented under a spearhead

alliance project model and the total cost estimate

is around EUR 55 million, of which SRV’s contract

account s for around EUR 45�6 million� The project

will be started immediately with a development

phase� It is expected that a separate decision on the

transition to the implementation phase will be made

in the autumn of 2022, when the project will be rec-

ognised in SRV’s order backlog�

On 24 January 2022, SRV and the City of

Uusikaupunki signed an agreement to start up the

implementation phase of the new Wintteri educa-

tion and well-being centre under a lifecycle model�

The value of the contractor agreement is EUR 59�7

million and that of the lifecycle service period EUR

28�2 million�

In December, SRV announced that it had made an

agreement to build a residential tower in Kalasatama,

Helsinki with rental housing and daycare facilities for

PATRIZIA� The agreement is valued at around EUR 101

million� The deal was completed in January 2022� This

project will be entered in the order backlog in the first

quarter of 2022�

After the period end, Russia began military opera-

tions in Ukraine� As the event is still very recent, it is

difficult to assess its impact on SRV's business�

GENERAL MEETING

The Annual General Meeting of SRV Group Plc is

scheduled for Monday 28 March 2022, starting at 4

pm� The Board of Directors will convene the Annual

General Meeting separately at a later date�

Espoo 28 February 2022

Board of Directors

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

FINANCIAL INDICATORS OF THE GROUP

2021 2020 2019 2018 2017

Revenue EUR million 932.6 975�5 1,060�9 959�7 1,114�4

Operative operating profit

EUR million 5.3 15�8 1�6 -20 28

Operative operating profit, % revenue % 0.6 1�6 0�2 -2�1 2�5

Operation profit EUR million -1.7 1�5 -93 -19�8 15�3

Operation profit, % revenue % -0.2 0�2 -8�8 -2�1 1�4

Operation profit, excl� IFRS16

EUR million -6.9 -2�7 -94�3 -19�8 15�3

Operation profit, % revenue excl� IFRS16

% -0.7 0�2 -8�8 -2�1 1�4

Profit before taxes EUR million -20.3 -28�0 -122�4 -37�3 4�6

Profit before taxes, % of revenue % -2.2 -2�9 -11�5 -3�9 0�4

Net profit attributable to equity holders of

the parent company EUR million -19.9 -22�8 0 -22�8 0

Return on equity, % % -11.5 -14�1 -50�6 -12�1 2

Return on investment, %

% -0.6 -0�8 -15�2 -2�9 3�1

Return on investment % excl� IFRS16

1, 4

% -2.1 -2�0 -17�5 -2�9 3�1

Capital employed EUR million 403.0 566�8 625�3 609�5 604�5

Capital employed excl� IFRS16

1, 4

EUR million 319.4 436�0 479�4 609�5 604�5

Equity ratio % % 27.4 22�6 21�2 28�5 35�5

Equity ratio excl� IFRS16, %

% 32.8 27�8 26�4 28�5 35�5

Net interest-bearing debt EUR million 170.0 289�1 422 282�8 297�6

Net interest-bearing debt excl� IFRS16

EUR million 81.0 152�9 271�9 282�8 297�6

Net gearing ratio, % % 103.0 159�7 240�3 121�1 105

Net gearing ratio excl� IFRS16, %

% 47.5 82�1 151�2 121�1 105

Order backlog

2, 3

EUR million 872.3 1,153�4 1,344�2 1,816 1,547�9

New agreements EUR million 588.6 707�1 487�6 1,133 771�4

Personnel on average 959 991 1,080 1,129 1,134

2021 2020 2019 2018 2017

Earnings per share

EUR -0.08 -0�15 -1�52 -0�46 0�04

Earnings per share (diluted)

EUR -0.08 -0�15 -1�52 -0�46 0�04

Equity per share

EUR 0.63 0�71 2�46 3�28 3�95

Equity per share (excluding hybrid bond)

EUR 0.57 0�65 1�31 2�65 3�33

Dividend per share

EUR 0.00 0�00 0�00 0�06 0�10

Dividend payout ratio, %

% neg. neg� neg� neg� neg�

Dividend yield, %

% 0.0 0�0 0�0 3�5 2�8

Priceperearningsratio(P/E-ratio) neg. neg� neg� neg� neg�

Share price development

Share price at the end of the period EUR 0.53 0�59 1�36 1�70 3�60

Average share price EUR 0.61 0�60 1�36 2�63 4�60

Lowest share price EUR 0.45 0�45 1�25 1�66 3�52

Highest share price EUR 0.81 1�10 2�19 4�12 5�74

Market capitalisation at the end of the period

EUR million 138.9 154�7 98�1 122�7 259�7

Trading volume

EUR 1,000 45,701 45,524 14,412 6,580 6,362

Trading volume, %

% 17.4 26�2 20�0 9�1 8�8

Weighted average number of shares

outstanding 1,000 262,158 173,891 72,149 72,149 72,099

Weighted average number of shares

outstanding (diluted)

1,000 262,158 173,925 72,149 72,149 72,099

Number of shares outstanding at the end of

the period

EUR 1,000 262,155 262,167 72,149 72,149 72,149

Effect of currency exchange fluctuations EUR million 1.5 -4�4 3�8 -9�8 -11�7

Alternative performance measures used in interim reporting

The company discloses certain other widely used performance 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 statement 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 comparing 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 and items affecting

comparability 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 currency

hedging are included above operating profit on the line “other operating expenses”.

SRV presents key figures excluding effect of IFRS 16 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

result. SRV is applying a simplified approach to adopting this standard, which is why the

figures for the comparison period have not been adjusted to comply with the standard.

The figures are considered to provide a bet ter comparabilit y to previous year figures.

At the end of the period

The Group's order backlog consists of the Construction business. The income

statement, which corresponds to the holding, is no longer included in the comparative

figures for the order backlog.

The company changed how it allocates deferred tax assets and liabilities; they are now

fully allocated to the Other operations and eliminations unit. Comparative data has

also been adjusted. The key figure also includes assets designated as held for sale in

the balance sheet.

The comparison figures have been adjusted to reflect share issue.

Financial indicators of the group

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

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 recoqnised in income statement - IFRS16 Retained earnings

Total assets – advances received – IFRS16 depreciations, leases and interest and financial expenses recoqnised 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 recoqnized 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 (diluted)

Equity per share =

Shareholders' equity attributable to equity holders of the parent company

Average number of shares at end of period

Calculation of key figures

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

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 +/- items aﬀecting comparability

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

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 2021 the highest price

was EUR 0�81 and the lowest price EUR 0�45� The

average share price for 2021 was EUR 0�61 and

The authorisations of the Board of Directors

The Annual General Meeting of SRV Group Plc resolved

on March 29, 2021, to authorise the Board of Directors

to decide on the repurchase of company shares as pro-

posed by the Board of Directors� The authorisation of

repurchase of company shares is valid 18 months from

the decision of the Annual General Meeting (note 25)�

the closing price EUR 0�53, giving the company a

market capitalisation of EUR 138�9 million as of 31

December 2021� 45�7 million shares were traded in

OMX which corresponds to 17�4 % of the weighted

average number of SRV shares outstanding� The

trading value of the shares was EUR 27�9 million�

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 16,587 708 shares on 31 December

2021 which corresponds to 6,31% of SRV shares and

voting rights� Timo Kokkila owns SRV shares through

Havu Capital Oy�

SHARES AND SHAREHOLDERS

SHAREHOLDERS ON 31 DECEMBER 2021

Shareholders

Number of

Holding and

voting rights, %

PONTOS CAPITAL AS 47,306,787 18

KESKINÄINEN ELÄKEVAKUUTUSYHTIÖ ILMARINEN 33,295,636 12�7

KOLPI INVESTMENTS OY 23,776,663 9

OP-HENKIVAKUUTUS OY 17,129,254 6�5

POHJOLA VAKUUTUS OY 15,785,996 6

HAVU CAPITAL OY 15,741,398 6

ETOLA GROUP OY 13,373,642 5�1

LAREALE INVESTMENTS OY 6,926,660 2�6

TUNGELIN INVESTMENTS OY 6,926,660 2�6

KOKKILA LAURI TAPANI 6,494,422 2�5

KOKKILA TUOMAS TAPANI 6,494,422 2�5

VALTION ELÄKERAHASTO 2,340,000 0�9

NORDEA HENKIVAKUUTUS SUOMI OY 1,730,342 0�7

KESKINÄINEN TYÖELÄKEVAKUUTUSYHTIÖ VARMA 1,433,332 0�5

OLKKONEN MIKKO JUHANI 1,150,100 0�4

ARKKITEHTITOIMISTO AJAK OY 1,080,000 0�4

TELIAN ELÄKESÄÄTIÖ 1,059,796 0�4

SUOMEN MERIMIES-UNIONI SMU RY 1,051,118 0�4

SEFLO AB 1,015,628 0�4

DREAM BROKER OY 877,777 0�3

20 largest shareholders 204,989,633 77.9

Nominee registration 3,096,164 1�2

Other 54,931,544 20�9

Total number of shares 263,017,341 100

BREAKDOWN OF SHARE OWNERSHIP ON 31 DECEMBER 2021 BY NUMBER OF SHARES OWNED

Number of shares

Number of

shareholders

% of share-

holders

Number of

shares % of shares

1–100 1,420 12�9 75,139 0�0

101–500 2,912 26�5 839,891 0�3

501–1,000 1,800 16�4 1,465,229 0�6

1,001–5,000 3,180 28�9 7,979,385 3�0

5,001–10,000 839 7�6 6,408,466 2�4

10,001–50,000 683 6�2 14,698,735 5�6

50,001–100,000 81 0�7 5,696,678 2�2

100,001–500,000 63 0�6 12,403,507 4�7

500,001– 30 0�3 213,450,311 81�2

Total 11,008 100 263,017,341 100

of which nominee registrations 8 3,096,164 1�2

BY SHAREHOLDER CATEGORY

% of shares

Corporations 31�7

Financial and insurance institutions 14�1

Public institutions 14�5

Households 20�4

Non-profit organisations 0�8

Non-Finnish shareholders 18�5

Total 100.0

Shares and shareholders

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Consolidated financial statements, IFRS

CONSOLIDATED INCOME STATEMENT

EUR 1,000 Note 2021 2020

Revenue 3 932,554 975,534

Other operating income 4 3,517 2,166

Change in inventories of finished goods and work in

progress -116,909 -828

Use of materials and services -733,357 -868,172

Employee benefit expenses 7 -71,567 -69,427

Share of profits of associated and joint venture companies 16 1,227 -13,562

Depreciations 6 -5,818 -7,387

Impairments 6 -500 -11,487

Other operating expenses 5 -10,721 -10,874

Income and expenses on currency derivatives 5 -124 5,506

Operating profit -1,697 1,468

Financial income 9 5,013 3,710

Financial expenses 9 -23,662 -33,136

Financial income and expenses, total -18,649 -29,426

Profit before taxes -20,346 -27,958

Income taxes 10 467 2,851

Net profit for the financial year -19,879 -25,107

Attributable to

Equity holders of the parent company -19,879 -22,807

Non-Controlling interests 0 -2,301

Earnings per share attributable to equity holders of the

parent company 11 -0.08 -0.15

Earnings per share attributable to equity holders of the

parent company (diluted) 11 -0.08 -0.15

STATEMENT OF COMPREHENSIVE INCOME

EUR 1,000 Note 2021 2020

Net profit for the financial year -19,879 -25,107

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 -1,115 -3,260

Share of other comprehensive income of associated

companies and joint ventures 2,912 -15,060

Other comprehensive income for the year, net of tax 1,797 -18,320

The share of comprehensive income attributable to equity

holders of the parent company 1,797 -18,569

Non-controlling interests in comprehensive income 0 249

Total comprehensive income for the year -18,082 -43,427

Total comprehensive income attributable to:

Equity holders of the parent company -18,082 -41,375

Non-Controlling interests 0 -2,052

Consolidated income statement

Statement of comprehensive income

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

CONSOLIDATED BALANCE SHEET

EUR 1,000 Note 2021 2020

ASSETS

Non-current assets

Property, plant and equipment 13 3,590 3,755

Property, plant and equipment, Right-of-use asset

13 9,538 10,699

Goodwill 14 1,734 1,734

Other intangible assets 14 867 1,210

Shares in associated and joint venture companies 16 51,919 48,144

Other financial assets 15, 17 24,728 22,220

Receivables 15, 18 9,664 9,389

Loan receivables from associated companies and joint

ventures 15, 21 40,490 44,281

Deferred tax assets 19 42,248 41,585

Non-current assets, total 184,779 183,017

Current assets

Inventories 20 227,350 355,262

Inventories, Right-of-use asset

72,723 118,752

Account and other receivables 15, 22 133,428 143,534

Loan receivables from associated companies and joint

ventures 15, 21 0 1,601

Current tax receivables 35 5

Cash and cash equivalents 23 68,009 96,748

Current assets, total 501,545 715,901

ASSETS TOTAL 686,324 898,918

EUR 1,000 Note 2021 2020

EQUITY AND LIABILITIES

Equity attributable to equity holders of the parent

company

Share capital 25 3,063 3,063

Invested free equity fund 25 264,680 264,680

Translation differences 25 -18,157 -19,953

Hybrid Bond 25 15,360 15,360

Retained earnings -99,890 -78,183

Equity attributable to equity holders of the parent

company, total 165,057 184,967

Non-controlling interests 0 -4,016

Equity, total 165,057 180,951

Non-current liabilities

Deferred tax liabilities 19 1,005 2,352

Provisions 26 13,048 12,384

Interest-bearing liabilities excluding lease liabilities 15, 27 128,771 234,857

Interest-bearing lease liabilities

27 86,743 133,588

Other liabilities 15, 28 14,762 20,817

Non-current liabilities, total 244,329 403,998

Current liabilities

Account and other payables 15, 28 243,205 284,463

Current tax payable 10 713

Provisions 26 11,259 11,430

Interest-bearing liabilities excluding lease liabilities 15, 27 20,192 14,796

Interest-bearing lease liabilities

27 2,272 2,566

Current liabilities, total 276,938 313,968

Liabilities, total 521,267 717,966

EQUITY AND LIABILITIES, TOTAL 686,324 898,918

Items related to IFRS 16 standard

Consolidated balance sheet

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Equity attributable to equity holders of the parent company

EUR 1,000 Share capital

Invested free

equity fund

Translation

differences Hybrid Bond

Retained

earnings Total

Non-

controlling

interests Equity Total

Equity, total, 1 Jan 2021 3,063 264,680 -19,953 15,360 -78,183 184,967 -4,016 180,951

Net profit for the financial year 0 0 0 0 -19,879 -19,879 0 -19,879

Other comprehensive income items (with the tax effect)

Foreign currency translation differences for foreign operations 0 0 -1,115 0 0 -1,115 0 -1,115

Share of other comprehensive income of associated companies

and joint ventures 0 0 2,912 0 0 2,912 0 2,912

Other financial assets 0 0 0 0 0 0 0 0

Other comprehensive income total 0 0 1,797 0 0 1,797 0 1,797

Comprehensive income for the review period 0 0 1,797 0 -19,879 -18,082 0 -18,082

Transactions with the owners

Dividends paid 0 0 0 0 0 0 0 0

Share based incentive plan 0 0 0 0 732 732 0 732

Hybrid bond interests 0 0 0 0 -2,561 -2,561 0 -2,561

Dissolution of non-controlling interest 0 0 0 0 0 0 4,016 4,016

Transactions with the owners, total 0 0 0 0 -1,829 -1,829 4,016 2,188

Equity, total, 31 Dec. 2021 3,063 264,680 -18,157 15,360 -99,890 165,057 0 165,057

Consolidated statement of changes in equity

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Equity attributable to equity holders of the parent company

EUR 1,000 Share capital

Invested free

equity fund

Translation

differences Hybrid Bond

Retained

earnings Total

Non-

controlling

interests Equity Total

Equity, total, 1 Jan 2020 3,063 142,543 -1,385 82,900 -49,522 177,598 -2,009 175,589

Net profit for the financial year 0 0 0 0 -22,807 -22,807 -2,301 -25,107

Other comprehensive income items (with the tax effect)

Foreign currency translation differences for foreign operations 0 0 -3,508 0 0 -3,508 249 -3,260

Share of other comprehensive income of associated companies

and joint ventures 0 0 -15,060 0 0 -15,060 0 -15,060

Other financial assets 0 0 0 0 0 0 0 0

Other comprehensive income total 0 0 -18,569 0 0 -18,569 249 -18,320

Comprehensive income for the review period 0 0 -18,569 0 -22,807 -41,375 -2,051 -43,427

Transactions with the owners

Dividends paid 0 0 0 0 0 0 -70 -70

Share based incentive plan 0 0 0 0 489 489 0 489

Right issue 0 49,799 0 0 0 49,799 0 49,799

Hybrid bond conversion, 2016 0 14,017 0 -12,700 -1,053 264 0 264

Hybrid bond conversion, 2019 0 61,025 0 -54,840 -4,948 1,237 0 1,237

Cost related to share issues excl� taxes 0 -2,703 0 0 0 -2,703 0 -2,703

Hybrid bond interests 0 0 0 0 -342 -342 0 -342

Other changes 0 0 0 0 0 0 114 114

Transactions with the owners, total 0 122,138 0 -67,540 -5,854 48,744 44 48,788

Equity, total, 31 Dec. 2020 3,063 264,680 -19,953 15,360 -78,183 184,967 -4,016 180,951

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

CONSOLIDATED CASH FLOW STATEMENT

EUR 1,000 2021 2020

Cash flows from operating activities

Cash receipts from customers 927,246 953,556

Cash receipts from other operating income 3,086 3,331

Cash paid to suppliers and employees -842,638 -888,665

Net cash before interests and taxes 87,694 68,222

Interests received and other financial income 1,825 7,637

Interests paid and other expenses from financial costs -20,479 -29,560

Income taxes paid and received -114 38

Cash flow from operating activities 68,926 46,337

Cash flows from investing activities

Purchase of tangible and intangible assets -1,336 -819

Sale of tangible and intangible assets 765 834

Purchase of investments -3,034 -4,586

Proceeds from sale of investments 0 11,030

Subsidiary shares bought -375 0

Investments in associated companies and joint ventures -26 -7,396

Associated companies and joint ventures sold 0 28,004

Increase in loan receivable from associated companies and

joint ventures 0 -2,742

Decrease in loan receivable from associated companies and

joint ventures 0 2,500

Loans granted -767 -177

Proceeds from repayments of loans 12,001 0

Net cash used in investing activities 7,229 26,648

Cash flows from operating and investing activities in

total 76,156 72,985

EUR 1,000 2021 2020

Cash flow from financing activities

Net cash from share issue 0 40,798

Share issue costs 0 -3,378

Proceeds from loans 0 9,000

Repayment of loans -76,992 -17,352

Hybrid bond interests -3,206 -427

Change in housing corporation loans -22,575 -9,705

Net change in short-term loans 0 -18,500

Dividends paid 0 -70

Repayment of lease liabilities -2,669 -2,609

Net cash flow from financing activities -105,442 -2,243

Net change in cash and cash equivalents -29,286 70,742

Cash and cash equivalents at the beginning of period 96,748 27,728

Effect of exchange rate changes in cash and cash

equivalents 549 -1,724

Cash and cash equivalents at the end of period 68,009 96,748

Consolidated cash flow statement

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Description of operations

SRV Group Plc and its subsidiaries (SRV Group) com-

prise one of Finland’s leading project management

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 opera-

tions are organised into two segments: Construction

and Investments� The main companies are SRV Con-

struction Ltd and SRV Russia Oy�

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 construction, business con-

struction, 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 Investments�

The Investments segment focuses on the man-

agement and realisation of the Group’s real estate

investments; the creation and ownership of new

joint investment structures; and the operation of

selected properties�

Other operations and eliminations include the

well as share-based payments which are measured

at fair value�

Following standards, interpretations and amend-

ments have been applied beginning from 1�1�2021:

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 deter-

mining contractual cash flows as a result of

IBOR reform

• Additional temporary exceptions from applying

specific hedge accounting requirements to

avoid failure of hedge relationships solely due

to IBOR reform

• Additional IFRS 7 disclosures related to IBOR

reform

The following standards, amendments and inter-

pretations shall be applied as from the financial

period beginning on 1 January 2022� The Group’s

management is reviewing the impact of future

standards, amendments and interpretations on the

consolidated financial statements:

group functions of the parent company, SRV Group

Plc, and the Project Development Unit’s property

and project development activities� Group elimi-

nations are also included in this unit� Deferred tax

assets and liabilities have been allocated in full to

Other operations and eliminations�

The Group’s parent company, SRV Group Plc (the

Company), is a Finnish public limited company that

is domiciled in Espoo, Finland� The Company’s regis-

tered address is Tarvonsalmenkatu 15, 02601 Espoo�

The Company’s Board of Directors approved

these consolidated financial statements on 28 Feb-

ruary 2022�

Accounting policies Basis of presentation

The consolidated financial statements have been

prepared on 31 December 2021 in accordance with

IFRS (International Financial Reporting Standards)�

International Financial Reporting Standards refer to

the standards and their interpretations issued and

approved for application within the EU in accord-

ance with the procedure prescribed in EU regula-

tion (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 income statement

and derivative contracts measured at fair value as

Property, Plant and Equipment: Proceeds

before intended use – Amendments to

IAS 16

The amendment to IAS 16 Property, Plant and Equip-

ment (PP&E) prohibits an entity from deducting

from the cost of an item of PP&E any proceeds

received from selling items produced while the

entity is preparing the asset for its intended use� It

also clarifies that an entity is ‘testing whether the

asset is functioning properly’ when it assesses the

technical and physical performance of the asset�

The financial performance of the asset is not rele-

vant to this assessment�

Entities must disclose separately the amounts of

proceeds and costs relating to items produced that

are not an output of the entity’s ordinary activities�

Reference to the Conceptual Framework

– Amendments to IFRS 3

Minor amendments were made to IFRS 3 Business

Combinations to update the references to the Con-

ceptual Framework for Financial Reporting and add

an exception for the recognition of liabilities and

contingent liabilities within the scope of IAS 37 Pro-

visions, Contingent Liabilities and Contingent Assets

and IFRIC 21 Levies� The amendments also confirm

that contingent assets should not be recognised at

the acquisition date� These updates do not change

the accounting requirements for business combina-

tions�

Notes to the consolidated financial statements

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Onerous Contracts – Cost of Fulfilling

a Contract Amendments to IAS 37

The amendment to IAS 37 clarifies that the direct

costs of fulfilling a contract include both the incre-

mental costs of fulfilling the contract and an allo-

cation of other costs directly related to fulfilling

contracts� Before recognising a separate provision

for an onerous contract, the entity recognises any

impairment loss that has occurred on assets used in

fulfilling the contract�

Annual Improvements to IFRS Standards

2018–2020

The following improvements were finalised in May

2020:

• IFRS 9 Financial Instruments – clarifies which

fees should be included in the 10% test for

derecognition of financial liabilities�

• IFRS 16 Leases – amendment of illustrative

example 13 to remove the illustration of pay-

ments from the lessor relating to leasehold

improvements, to remove any confusion about

the treatment of lease incentives�

• IAS 41 Agriculture – removal of the requirement

for entities to exclude cash flows for taxation

when measuring fair value under IAS 41� This

amendment is intended to align with the

requirement in the standard to discount cash

flows on a post-tax basis�

Impacts of the coronavirus on SRV’s

financial reporting

SRV continuously assesses how the coronavirus epi-

demic is developing and its potential impacts on

financial reporting�

the movement of SRV personnel, they could lead

to delays or the suspension of work on construc-

tion 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 project profit margins and the profitability

of SRV’s business�

An epidemic or pandemic may significantly

impact the financial position and financing of SRV’s

customers, which can in turn lead to development

projects being delayed, temporary shutdowns of

construction sites, cancellations 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 tenants,

including any potential rent reductions for tenants

have led and may lead in lower income from the

shopping centres operated by SRV in Russia� They

may have an impact on the value of loan receiva-

bles, either those from the associated companies

that own the Russian shopping centres or those of

SRV’s holdings in associated companies�

The pandemic could also affect demand for SRV’s

projects and services, such as commercial premises

and housing� Reduced demand could have a neg-

ative impact on SRV’s future revenue, cash flow,

liquidity and, for example, whether SRV will be able

to meet the covenants for its financing agreements�

The pandemic may also affect the availability of

project and working capital financing� A protracted

pandemic could also lead to a reduction in the

value of SRV’s financial assets, deferred tax assets,

unbuilt plots, and any development projects classi-

SRV uses certain stimulus measures introduced

in 2020 in response to the coronavirus pandemic�

The company still uses payment arrangements for

VAT liabilities� At the end of the review period, other

liabilities included EUR 15�6 million in tax liabilities

for which the tax authorities had granted payment

arrangements by the end of the period� In accord-

ance with these payment arrangements, the com-

pany must repay the tax liabilities in even install-

ments such that they have been repaid 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 coronavirus

pandemic that, if realised, could impact the com-

pany’s result, balance sheet and cash flows are

described below� Other potential coronavirus-re-

lated risks to SRV’s business have been described in

the section of the Financial Statement release titled

‘Risks, risk management and corporate governance’�

Potential financial risks associated with

the coronavirus pandemic

It is difficult to forecast the impacts of the corona-

virus pandemic (including the timing, duration 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 subcontractors and

employees� Impacts on subcontractors may lead

to a rise in material prices and increased problems

and disruptions in material delivery logistics� Com-

bined with sickness absences and restrictions on

fied 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 located 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 assets

and liabilities as well as on revenues, expenses and

contingent liabilities for the reporting period� Esti-

mates and assumptions have been used for example

in the impairment testing of goodwill, property, plant

and equipment and intangible assets, in the revenue

recognition of construction contracts, in the meas-

urement of current assets, in the measurement of

warranty and other provisions, in the valuation of

investments in associates and joint ventures, in the

recognition of current income tax assets and liabil-

ities, and the measurement of assets held for sale�

This Financial statement has been prepared on

a going concern basis, as SRV’s management con-

siders that there are no material uncertainties con-

cerning the ability to continue as a going concern�

In addition to the coronavirus-related risks detailed

above, the future development of the Group’s oper-

ations will be affected by factors such as its earnings

trend, availability of financing for projects that tie up

capital, sufficiency of liquidity, and the development

of the situation in Russia and the rouble exchange

rate� The Group’s management has made estimates

of the future revenues, operating margins, invest-

ments, financial position, the expected cash flows

from investments and loan receivables of associated

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

and joint ventures and working capital requirements

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� Percentage of completion is

determined by calculating for each project the share

of expenses accrued by the balance sheet date rel-

ative 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 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 recognised as an advance

received� Rental security deposits reduce pro-

ject-related advances received� Uncertainties asso-

ciated with signed lease agreements are taken into

account in recognition 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 provi-

sions are recorded when the amount of the provi-

sion can be estimated reliably� The recorded amount

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�

The Group regularly reviews its long-term assets

and their intended usage in the future and might

negotiate selling these assets� If the future cash flow

from the asset is expected to come mainly from the

sale of the asset, the management assesses reclassi-

fication of the asset as required by IFRS 5�

SRV has estimated the impacts of the risks caused

by the coronavirus epidemic on the Financial State-

ment income statement and balance sheet� In par-

ticular, the company has assessed whether there are

indications of the impairment of assets or the need

to update provisions or other accounting estimates�

Consolidated Financial Statements

SUBSIDIARIES

The consolidated financial statements comprise all

such companies that belong to parent company

SRV Yhtiöt Oy where the Group has authority� 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 transferred to the Group, and the

combination will end on the day when this authority

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 expe-

rience and it requires judgement from the Group

management�

When preparing the financial statements the

Group estimates the net realisable value of current

assets and the possible consequent need for write

down� Estimates of net realisable value are based

on the most reliable evidence available at the time

the estimates are made as to the amount the inven-

tories are expected to realise� Assessing the need

for impairment of inventory items may require man-

agement to make estimates of matters such as the

future costs of development and construction, the

future income and expenses accruing from the item,

the market return requirement at the time of reali-

sation and the sale value of the item�

The Group’s relevant holdings in associated com-

panies and joint ventures are investments in con-

struction projects, particularly shopping centres,

together with other investors� The Group assesses

the value of these investments in connection with

financial statements and when there are indications

of impairment� Based on an assessment of the value

of the associated companies and joint ventures that

own completed properties, a valuation calculation is

prepared for properties� For significant investments,

the Group obtains external property assessments, if

necessary� The determination of the present value of

investments is subject to assessment because present

value calculations include, for example, future rental

income, rental discounts given, turn-over based

rental income, occupancy rate, the running costs of

the property, the required return (yield) and, with

ceases� The balance sheet items of self-sufficient

construction projects are comprised within the con-

solidated financial statements�

The financial statements of the SRV Group have

been consolidated using the purchase method�

Acquisition cost is determined by taking into account

funds given as consideration and measured at fair

value, and liabilities assumed, as well as the direct

costs of an acquisition� Acquired and identifiable

assets and liabilities are measured at fair value at

the acquisition date, irrespective of the size of any

non-controlling interests� The amount by which the

cost exceeds the fair value of Group’s share of the

net identifiable assets acquired is recorded as good-

will� If the acquisition cost is less than the fair value

of the acquired subsidiary’s net assets, this differ-

ence 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 transactions, receiv-

ables and liabilities as well as unrealised gains on

intra-group transactions are eliminated in the con-

solidated financial statements� Unrealised losses are

eliminated if the loss is not caused by impairment�

The group recognizes non-controlling interests

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 presented

separately after Net profit for the period and in Total

equity� Losses applicable to non-controlling interests

in a subsidiary are allocated to non-controlling inter-

ests, even if doing so causes the non-controlling

interests to have a negative balance�

Changes in the ownership share of the parent com-

pany in the subsidiary that do not lead to the loss of

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

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 effect on income� This fair

value functions as an original book value when the

remaining share is later treated as an associated com-

pany, joint venture or as financial assets� In addition,

amounts entered previously into other comprehen-

sive 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 previ-

ously into other 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 gen-

erates 20–50% of the voting rights�

A joint arrangement is an arrangement of which

two or more parties have joint control� Joint control

is the jointly agreed sharing of control of an arrange-

ment, which exists only when decisions about the rel-

evant 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 con-

trol 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 lia-

bilities, relating to arrangement�

The Group has applied the IFRS 11 standard

to all joint arrangements from the outset of 2014

In accordance with the Group’s accounting prin-

ciples, Group management judges the deprecia-

tion 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 consol-

idated financial statements are measured using the

currency that best reflects the economic substance

of the underlying events and circumstances relevant

to Group Company (the functional currency)� The

functional currency of a group company may there-

fore differ from the currency used in its country of

location� The consolidated financial statements are

presented 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 translated 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 recorded in Translation differences under

equity� In so far as the loans between the group com-

panies are considered part of net investment in for-

eign subsidiaries, the currency exchange differences

are recorded in Translation differences� When a for-

eign subsidiary is sold, the cumulative translation dif-

onwards� According to IFRS 11, the joint arrange-

ments are classified as joint operations or joint ven-

tures in compliance with the investors' contractual

rights and obligations� The Group has assessed the

character of its joint arrangements and has deter-

mined that they are joint ventures�

The associated companies and joint ventures are

combined in the consolidated financial statements by

using the capital share method� If the Group's share of

associated company and joint venture losses exceeds

the book value of the investment, 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 ful-

filling the obligations of the associated company and

joint venture� Associated company and joint venture

investment contains the goodwill that has been gen-

erated from its acquisition� Non-realized profits and

losses 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 suggests a reduction

in value of the transferred asset� The Group’s own-

ership share from the share of financial year results

from an associated company 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

differences of associated companies and joint ven-

tures operating in foreign currency�

The financial statement formulation principles

observed by an associated company and joint venture

have been amended as required to comply with the

principles the Group observes�

ferences 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 currency 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 the date of the trans-

action� Exchange rate gains and losses on business

operations are included in corresponding 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 ben-

efit from them�

The Group’s sales revenues consist of various

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 elim-

inated from the margin of construction carried out

for associated companies and joint ventures� This

elimination is recognised as a reduction in rev-

enue and is entered into the balance sheet under

Advances received� The margin is realised when the

holding is sold to an external party�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Order backlog

A construction project is included in the order

backlog when the construction contract of the pro-

ject has been signed or the decision to start con-

struction has been made, and the contract agree-

ment has been signed in developer contracting

projects� In developer-contracted projects, the

order backlog includes the plot in addition to con-

struction� Moreover, in own-development projects,

the order backlog may include the plot, and in rev-

enue 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 backlog 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 devel-

oper contracted housing projects, part of interest

on borrowing costs is activated during the construc-

tion period (this is described in the section of the

accounting policies covering inventories) and is rec-

ognised as an expense when the project is sold� These

interest expenses are entered as project expenses

above operating 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 business-re-

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 spe-

cific notice of termination� Equipment is typically

leased for 1 month to 12 months� Leases for vehi-

cles are made for fixed terms and their duration is

generally 24 months�

In its reporting, the company applies two exemp-

tions 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 indefinite leases whose

notice of termination is less than 12 months are

considered to be short-term leases� The most sig-

nificant short-term leases are mainly for site equip-

ment� Low-value assets mainly include IT equipment

and small items of office furniture� In addition, some

minor leases, for example for vehicles and IT equip-

ment are treated as a group according to the bun-

dling 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 deter-

mining the present value of lease payments, an

estimate of the lease term is required in some cir-

cumstances� Such situations, for example, relate to

leases that have options to extend or terminate the

lease� Such an option is taken into account in deter-

mining the lease term if it is reasonably 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 payments for terminating the lease� Such

penalties are included in the amount of the lease

lated project development costs, and the treatment

of these is described in the section of the accounting

policies covering inventories�

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 representing the obligation to

make lease payments is recognised in liabilities� In

the income statement lease expenses are presented

in depreciation 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 balance

sheet� Land leases are usually long-term and are

typically made on behalf of a real estate company

being established� When the real estate company is

sold and its management is transferred to the buyer,

the lease and its obligations transfer to the buyer of

the property� In addition to land leases, other sig-

nificant 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

liability if it is considered during the lease term that

the Group will exercise this option�

Lease payments are discounted at the interest

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 lessee 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

economic environment� 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, alter-

natively, the incremental borrowing rate� The incre-

mental borrowing rate is an estimate of what the

company would have to pay to borrow, over a sim-

ilar 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 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 commencement

date of the lease, any initial direct costs incurred by

the lessee and the costs of restoration to the orig-

inal condition� Any incentives received are deducted

from the acquisition 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 recog-

nised on a straight-line basis over the lease term� If

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

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 underlying 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 finan-

cial expenses� Financial expenses are recognised

through profit and loss over the lease term, such

that the interest rate of the outstanding liability 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 applied in the pres-

entation of right-of-use assets� From the beginning

of construction, the depreciations 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-current assets and

in financial liabilities in respect of the obligation to

make lease payments in liabilities� The most signifi-

ACCOUNTING PRINCIPLE FOR LEASED

VEHICLES

Leases of leased vehicles are subject to the same

accounting principle as described above for prem-

ises 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 con-

solidated balance sheet at acquisition cost less accu-

mulated depreciation and any accumulated impair-

ment losses� Acquisition cost includes the expenses

directly related to acquiring the asset� Assets are sub-

ject 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 asset 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 estimates

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 car-

rying amount is lowered to correspond the recov-

erable amount� When controlling interest is lost in

cant 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 excep-

tion typically leases with an indefinite lease term�

Such leases generally entitle the company 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 termina-

tion 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 office IT

equipment such as printers, multifunction 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 example, IT server leases�

The same accounting principle 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�

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 operating

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� Goodwill is subject to an

annual impairment test� For this purpose, goodwill

has been allocated to cash-generating units� Good-

will is measured at historical cost less impairment�

Impairment is expensed directly to the income

statement�

Assets which are depreciated or amortised are

always tested for impairment when events or

changes in circumstances indicate the carrying

amount may not be recovered� Impairment is

recorded through profit and loss to the extent that

the carrying amount of the asset item exceeds the

recoverable amount� The recoverable 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 liabilities

in the following groups:

Financial assets: Financial assets at amortised

cost or at fair value through profit or loss�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Financial liabilities: Financial liabilities recognised

at fair value through profit or loss, or at amortised

cost using the effective interest rate method�

The Group measures financial assets at amortised

cost when the objective of the business model is to

hold the assets and collect all the contractual cash

flows, and when the contractual 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 lia-

bilities in its balance sheet when – and only when

– it becomes a party to the contractual terms and

conditions of the instrument� When an entity rec-

ognises a financial asset for the first time, it must

classify financial assets and financial liabilities into

the categories specified above�

A Group entity derecognises a financial asset item

from the balance sheet when the contractual rights

to the cash flows from the financial asset cease

to exist or when it transfers the financial 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 bal-

ance sheet when the obligation specified in the con-

tract has been discharged, cancelled or expired�

Financial assets are long-term when their maturity

is over 12 months and short-term when the remaining

maturity is less than 12 months� Other financial assets

are included in long-term financial assets unless there

is an intention to relinquish 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

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 balance sheet under financial

assets or liabilities� Foreign exchange option pre-

miums are considered 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 quoted

and non-quoted shares and they are measured 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 apply various valuation methods

to their valuation� These are, for example, recent

transactions 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 receiv-

ables from associated companies�

Financial assets measured at amortised cost

are initially measured at fair value less transaction

costs� After initial recognition, they are recognised

at amortised cost� Interest is recognised in the

income statement over the maturity of the loan

using the effective interest method�

does not have the absolute right to repay them

at least 12 months after the end of the reporting

period� Otherwise they are classified as long-term�

DERIVATIVE INSTRUMENTS

The Group designates derivative instruments at the

time of entering into the contract as either cash

flow hedges of business or financing cash flows or

as hedges of investments in foreign entities� Deriv-

atives are entered into for hedging purposes and

on their basis the receivables 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 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�

Group’s Treasury unit is responsible for the hedge

transactions according to the policy approved by

the Board of Directors� During the fiscal year 2021

and 2020 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� Deriv-

atives 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

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 rec-

ognised 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 infor-

mation is checked from public trade and credit infor-

mation registers, with a security deposit required

if necessary� For international commercial prem-

ises 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 losses 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 using 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 investments and

regularly assesses whether the credit risk related

to the receivables has increased significantly after

they were initially recorded� If the credit risk asso-

ciated 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 manage-

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

ment has estimated that the loan receivables in the

balance sheet at closing date are mainly included

in Stage 1, with no material credit losses expected

for them� However, the Group's management con-

tinuously 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

receivable and calculated by comparing future

estimated cash flows for the entire lifetime with

contractual cash flows� At closing date, the bal-

ance 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�

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of cash, current

bank deposits as well as other current liquid invest-

ments 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 con-

tinuing use and a sale is considered highly probable�

They are measured at the lower of their carrying

amount and fair value less costs to sell�

An impairment loss is recognised for any initial or

subsequent write-down of the asset to fair value less

The 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 interest for

the share of liabilities 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” com-

prises 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, the direct cost of labour, other

direct costs, indirect costs of purchase and construc-

tion as well as borrowing costs in certain cases�

In SRV’s developer-contracted housing projects,

part of interest expenses on borrowing is capital-

ized during the construction period in current assets

in accordance with the Group’s capitalization rate�

During the reporting period, SRV changed its capi-

talization practice such that, with respect to devel-

oper-contracted housing projects, interest expenses

on borrowing are capitalized primarily using the pro-

ject-specific financing cost� If the proportion of pro-

ject-specific financing is not significant, the Group’s

capitalization 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 addition, the

cost of borrowing is currently significantly lower

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 cumulative impairment loss

previously recognised� A gain or loss not previously

recognised by the date of the sale of the noncurrent

asset is recognised at the date of derecognition�

Non-current assets are not depreciated or amor-

tised while they are classified as held for sale�

Interest and other expenses attributable to the lia-

bilities related to non-current assets classified as

held for sale continue to be recognised�

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 sepa-

rately from other liabilities in the balance sheet�

HYBRID BONDS

The hybrid bonds (equity loans) do not have matu-

rity 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 hybrid 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 carrying amount of

financial liabilities� Interest is recognised in the income

statement over the maturity of the loan using the

effective interest method� Financial liabilities are rec-

ognised under non-current and current liabilities and

they can be interest-bearing or non-interest-bearing�

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-contracted

housing projects, and as a result the revision of the

capitalization practice would not, in the company’s

view, have a substantial impact on the comparative

periods presented in the financial statements�

The balance sheet item “Land areas and plot-

owning companies” comprises costs of develop-

ment stage projects� The costs that are considered

to increase the value of land areas and plot-owning

companies are capitalised�

The balance sheet item “Shares in completed

housing corporations and real-estate companies”

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 real-

isable 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 expected use�

The net realisable value of land areas 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 compa-

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

nies are impaired 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 realised

by sale, the net realisable value is based on the esti-

mated market price� The net realisable 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 assigned to

rent; such as the rental agency's fees� Sales and mar-

keting costs are not activated costs� In preparing the

asset, the activated rental costs should be entered

as expenditure along with the average duration of

the rental agreements� The margin generated from

rental services 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 cur-

rent assets are deemed eligible for activation when

they can be reliably to have a positive impact 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 cur-

rent taxes and deferred taxes� Current tax is calcu-

lated 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 related to items of

other comprehensive income or items directly rec-

ognised as equity�

SHARE-BASED PAYMENT

The Group applies IFRS 2 Share-based Payment

standard on its share-based incentive schemes�

Share-based incentive scheme share settled trans-

actions 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 period� 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 probable and the

amount of obligation can be reliably estimated� If

compensation can be received from a third party for

a part of the obligation, the compensation is recog-

nised 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 received from the contract�

SRV and its subsidiaries are reengaged in several

legal proceedings which relate to ordinary business

or to other processes� The result of these legal pro-

ceedings and processes is difficult to predict� In case

of litigation, a provision is recognised in the financial

statements according to the mentioned accounting

policies when there is a legal or constructive obliga-

tion against third-party, payment obligation is prob-

able and the amount of an obligation can be reliably

estimated�

Warranty provisions comprise the costs resulting

from the repair of completed projects if the war-

Taxes are adjusted for any taxes for previous

periods�

Deferred tax assets or liabilities are recognised 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 tem-

porary 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 reversed 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 immediate past

then, of the taxable loss, an imputed tax asset is

recognised only up to the amount where the com-

pany has sufficient taxable temporary differences

or other convincing evidence of the ability to uti-

lise the taxable loss�

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 insurance

companies based on paid salaries and wages� The

Group has only defined contribution plans� The pay-

ments in connection with Group’s defined contribu-

tion plans are recognised in the income statement in

the period which they relate to�

ranty period is still in effect at the balance sheet

date� A warranty provision is recognised at the time

of the project hand-over, and the amount of provi-

sion is based on prior experience of the materialisa-

tion of warranty expenses� It is expected that war-

ranty provisions are used during the two years from

the completion of the project�

The level of the construction industry’s 10-year

warranty provision is based on index-adjusted his-

torical 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�

Dividends

The dividend pay-out proposed by the Board of

Directors to the Annual General Meeting is recog-

nised in the financial statements when the compa-

ny’s shareholders have approved the relevant reso-

lution at the Annual General Meeting�

Events after the period

On 4 February 2022, SRV signed a set of agree-

ments with RAOS Voima Oy, which will lead to

SRV’s exit from its ownership in Fennovoima and

from the agreements regarding project manage-

ment in the Hanhikivi 1 project� The completion

of the contractual arrangement is subject to

approval by the Ministry of Economic Affairs and

Employment�

After the period end, Russia began military opera-

tions in Ukraine� As the event is still very recent, it is

difficult to assess its impact on SRV's business�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

SEGMENT INFORMATION

Segment information has been presented in accordance with IFRS 8 and following the accounting principles

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 liabilities of

segments are business items that the segments use in their operations or which on a reasonable 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 covers all of SRV’s construction activities, including the capital and plots required for devel-

oper-contracted housing 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 segment� Construction encompasses housing con-

struction, business construction, 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 focuses 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 selected prop-

erties� 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 develop-

ment and longer-term ownership, are also reported on under Investments�

Other operations and eliminations

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� development activities� Group eliminations are also included in this unit� Deferred tax

assets and liabilities are allocated in full to Other operations and eliminations�

Operating segment information

Segment information is reported in a manner consistent with internal reporting to the Chief Operating Deci-

sion Maker (CODM, as per IFRS 8)� The CODM is the Group President & CEO, who is assisted decision-making

by the Corporate Executive Team� Internal management reporting is consistent with segment reporting�

In the financial year 2021, the Group had one significant customer under the IFRS 8 definition in the Con-

struction operating segment as in the previous year� The largest customer accounted for approximately 11%

of the Group’s revenue�

2021

Construction Investments

Other

operations

and

eliminations TotalEUR 1,000

Revenue

Revenue recognition at a point in time 161,846 3,152 0 164,998

Revenue recognition over time 752,149 2,581 0 754,730

Other revenue 16,155 1,063 -4,392 12,826

Total 930,150 6,797 -4,392 932,554

Revenue, external 926,195 6,707 -347 932,554

Revenue, internal 3,955 90 -4,044 0

Total 930,150 6,797 -4,392 932,554

Included in operating profit:

Depriciations and write-downs, excluding

Right-of-use asset -1,546 -29 -444 -2,019

Depriciations and write-downs, Right-of-

use asset -3,106 -71 -1,123 -4,300

Operating profit 14,112 -11,551 -4,258 -1,697

Segment's assets

Shares in associated and join venture

companies 3,099 48,820 0 51,919

Inventories total, excluding Right-of-use

asset 178,084 50,596 -1,329 227,351

Land areas and plot-owning companies 65,559 48,174 0 113,733

Work in progres 105,432 0 -1,332 104,100

Shares in completed housing

corporations and real estate companies 2,642 2,416 0 5,058

Other inventories 4,451 6 3 4,460

Loan receivables from accociated

companies and joint ventures 0 40,490 0 40,490

Right-of-use asset 72,600 1,507 8,152 82,259

Other assets 200,540 29,787 53,979 284,306

Total 454,324 171,199 60,802 686,325

Segment's liabilities, excluding Lease

Liabilities 314,246 148,424 -30,417 432,253

Segment's liabilities, Lease Liabilities 78,623 1,652 8,739 89,014

Total 392,870 150,076 -21,679 521,267

Invested capital

At the end of period 195,792 167,261 39,982 403,035

Return on investment, % 5�1 -8�1 -0.6

Order backlog

872,277 - - 872,277

Business construction 508,292

Housing construction 363,985

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

2020

Construction Investments

Other

operations

and

eliminations TotalEUR 1,000

Revenue

Revenue recognition at a point in time 107,23 8 0 0 107,238

Revenue recognition over time 851,456 3,149 0 854,606

Other revenue 11,329 1,637 724 13,690

Total 970,024 4,787 724 975,534

Revenue, external 969,317 4,722 1,495 975,534

Revenue, internal 706 65 -771 0

Total 970,024 4,787 724 975,534

Included in operating profit:

Depriciations and write-downs, excluding

Right-of-use asset -1,405 -11,896 -477 -13,778

Depriciations and write-downs, Right-of-

use asset -3,859 -92 -1,146 -5,097

Operating profit 27,395 -22,382 -3,545 1,468

Segment's assets

Shares in associated and join venture

companies 2,360 45,784 0 48,144

Inventories total, excluding Right-of-use

asset 299,848 56,347 -933 355,262

Land areas and plot-owning companies 92,185 53,669 0 145,854

Work in progres 181,502 0 -886 180,616

Shares in completed housing

corporations and real estate companies 22,085 2,672 0 24,757

Other inventories 4,076 5 -48 4,034

Loan receivables from accociated

companies and joint ventures 1,601 44,281 0 45,882

Right-of-use asset 119,236 1,057 9,157 129,450

Other assets 264,904 31,121 24,157 320,181

Total 687,949 178,589 32,381 898,919

Segment's liabilities, excluding Lease

Liabilities 393,158 160,232 28,422 581,812

Segment's liabilities, Lease Liabilities 125,462 1,104 9,588 136,154

Total 518,621 161,336 38,010 717,966

Invested capital

At the end of period 386,796 171,875 8,088 566,759

Return on investment, % 7�6 -14�3 -0.8

Order backlog

1,153,364 - - 1,153,364

Business construction 718,165 0 0 0

Housing construction 435,198 0 0 0

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 did not sell or acquired any operations during financial year� In the previous year the company

sold business operations of SRV REAM Oy, which was responsible for operating the REDI shopping centre�

SALES REVENUE FROM CUSTOMER CONTRACTS

EUR 1,000 2021 2020

Revenue

932,554 975,534

Attributable to

Revenue recognition at a point in time 164,998 107,238

Revenue recognition over time 755,281 854,606

Other revenue 12,275 13,690

Total 932,554 975,534

A breakdown of revenue by segment is reported in Note 1 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 construc-

tion), alliance contract, residential development project, commercial development project and shopping

centre management�

EUR 1,000 2021 2020

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 8,090 13,011

Advance payments related to customer contracts 73,606 86,014

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

EUR 1,000 2021 2020

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 86,014 74,116

Sales revenue recognised for performance obligations fulfilled in

earlier periods 13,011 12,545

Customer contract performance obligations and significant judgment-based solutions

The Group’s most common project types are: project management contract, turnkey contract (overall respon-

sibility for the construction), alliance contract, fixed-price contract, lifecycle project, residential 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 engi-

neering 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 removal

service� In that case, the parking space and removal service are considered to be separate performance

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 penalties or

from undershooting or overshooting the target price� Group management monitors and assesses 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 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 recognised as an advance received� Rental secu-

rity deposits reduce project-related advances received� Uncertainties associated with signed lease agree-

ments are taken into account in recognition of revenue�

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� 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 immediately as an expense� If the expenses and recorded profits arising from a cus-

tomer project exceed the amount of progress billings, the difference is disclosed in the balance sheet item “trade

and other receivables”� 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 revenue at a point in time are recognised after control of the asset 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 revenue for the projects�

Development and developer-contracted projects may include a separate financing component� A signifi-

cant 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 projects 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 substan-

tial 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 recognised at the

time of the project handover, and the amount of provision is based on prior experience of the materialisa-

tion 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 following the completion of the project�

The plots of development projects are recognised as revenue over time� The timing of the revenue recog-

nition of plots is always assessed on a case-by-case basis, however�

EUR 1,000

Transaction price allocated to

the remaining performance

obligations of customer contracts

Within 1

year

Within 2

years

Within 3

years

Within 4

years

71�4% 23�7% 4�9% 0�0%

The aggregate amount of the

transaction price allocated to long-

term customer project contracts

that are partly or completely

unfulfilled 786,476 561,614 186,259 38,603 0

In practice, table reflects the amount of order backlog sold and its recognition as revenue in future years.

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Assets from obtaining or fulfilling customer contracts

Sales commissions may be associated with projects recognised as revenue over time� Expenses arising 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�

OTHER OPERATING INCOME

EUR 1,000 2021 2020

Equipment and intangible assets 1,120 612

Rental income 904 932

Other income 1,493 622

Total 3,517 2,166

OTHER OPERATING EXPENSES

EUR 1,000 2021 2020

Equipment and intangible assets 0 53

Rental expenses -68 665

Voluntary indirect personnel expenses 1,602 1,382

Car and travel expenses 534 660

Entertainment and marketing 905 432

Communications and IT 3,321 2,864

Other external services 1,241 2,632

Other fixed expenses 3,186 2,186

Total operating expenses 10,721 10,874

Income and expenses on currency derivatives 124 -5,506

Total 10,845 5,368

Auditing fees

EUR 1,000 2021 2020

Audit 357 434

Auditors' statements 2 2

Tax services 0 0

Other services 64 269

Total 423 705

PricewaterhouseCoopers Oy has provided non-audit services to the entities of SRV Group in total of 66

thousand euros during financial year 2021 (271 thousand)�

DEPRECIATION AND IMPAIRMENTS

EUR 1,000 2021 2020

Depreciation, excluding Right-of-use asset

Intangible assets

Other intangible assets 394 421

Property, plant and equipment

Buildings and structures 3 428

Machinery and equipment 1,021 1,329

Other tangible assets 101 113

1,519 2,291

Depreciation, Right-of-use asset

Land areas 2,268 2,899

Buildings and structures 1,393 1,438

Machinery and equipment 639 760

Other tangible assets 0 0

4,300 5,097

Depreciations 5,818 7,387

Impairments

500, 11,487

Impairments in 2021 include EUR 0.5 million impairment loss of REDI shopping center related earn out. Impaiments

in 2020 included EUR 6,9 million reversal of the 2019 impairment loss on the joint venture investments Pearl Plaza

shopping center, and a EUR 5.4 million impairment loss on the Okhta Mall associated investment, a write-down of EUR

0.8 million on the investment in the Ratsumestarinkatu 6 commercial property in Porvoo and a write-down of EUR

13.0 million on REDI's additional purchase price receivable on long-term receivables.

EMPLOYEE-BENEFIT EXPENSES

EUR 1,000 2021 2020

Wages and salaries

57,787 57,956

Pension expenses - defined contribution plans

9,957 8,613

Share-based incentive scheme 1,210 489

Other indirect personnel expenses 2,613 2,369

Total 71,567 69,427

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.

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Average number of personnel 2021 2020

Construction 803 810

Investments 100 124

Other operations and eliminations 55 56

Total 959 991

Share-based incentive schemes

Grant year

2017

2019

2021

2021 Total

Reward principle

Set

targets Employment Set targets Set targets

Original exercise price - 1�62 - -

Dividend and right issue adjusted exercise price 31�12�20 - 0�55 - -

Subscrition period

2017–

2019 2021–2026 2021–2023 2021–2022

Total amount 1,000,000 1,000,000 4,400,000 4,400,000

Share incentives 1.1.2020 112,650 600,000 0 0 712,650

Additions 0 400,000 0 0 400,000

Share incentives used* 33,975 0 0 0 33,975

Share incentives returned or expired 44,700 0 0 0 44,700

Share incentives 31.12.2020* 33,975 1,000,000 0 0 1,033,975

Share incentives 1.1.2021 33,975 1,000,000 0 0 1,033,975

Additions 0 4,400,000 4,400,000 8,800,000

Share incentives used 22,063 0 0 0 22,063

Share incentives returned or expired 11,912 0 0 0 11,912

Share incentives 31.12.2021 0 1,000,000 4,400,000 4,400,000 9,800,000

Expenses recognised in group 2020, EUR 1,000 -332 -157 0 0 -489

Expenses recognised in group 2021, EUR 1,000 -213 -103 -235 -658 -1,210

Shares granted based on incentives, 2020 33,975 0 0 0 33,975

Shares granted based on incentives, 2021 22,063 0 0 0 22,063

* Corrected comparison period information.

In February 2017, the Board of Directors decided on a new share-based incenve scheme for the Group's key personnel. The scheme covers 40 key

SRV personnel. The scheme will be in eect from 2017 to 2019 and rewards are ed to Group's result and specic business indicators. The potenal

reward will be paid partly as shares in the company and partly in cash. The proporon to be paid in cash will cover taxes and tax-related costs arising

from the reward. A maximum of 1,000,000 SRV Group shares will be granted to key employees. The original cost of the share-based incenve scheme

is calculated by using the share price EUR 5.20, which makes the IFRS-cost for the scheme EUR 5.5 million with the addion of the cash payments.

Actual cost is based how the company will achieve the nancial targets and the market value of the share. If a key person’s employment or service

ends during said restricon period, he/she must return the shares rewarded under the scheme to the company. 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ve plan

The Board of Directors of SRV Group Plc has made the decision for a share-based incentive scheme for the President & CEO for

2019–2026. Under the scheme, Saku Sipola has been given 600,000 acquisition rights, entitling him to acquire the number of

SRV Group Plc’s shares corresponding to the acquisition rights EUR 1.62 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 restric-

tion, 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 1 March 2021 and ends on 28 February 2023, the second begins on 1 Sep-

tember 2022 and ends on 31 August 2024, and the third begins on 1 September 2024 and ends on 31 August 2026. During each

exercise period, the acquisition rights holder is entitled to exercise 200,000 acquisition rights. The total recognised IFRS cost of

the incentive scheme 2019–2026 is approximately EUR 0.3 million. 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 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 ef-

fect 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 Septem-

ber 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

In 29 of March 2021 the Board of Directors resolved to establish a new share based Long-Term incentive plan. The Long-Term In-

centive Plan arrangement has three three-year performance periods, which begin yearly during 2021-2023. The calendar years

are 2021–2023, 2022–2024 and 2023–2025. The Board of Directors of the Company will resolve on the plan’s key persons and

performance criteria at the beginning of each performance period. Approximately 30 key persons belong to the first perfor-

mance period 2021-2023, including President and CEO Saku Sipola and members of Company’s management. The potential re-

ward from the performance period 2021–2023 will be based on the Group’s Total Shareholder Return (TSR) in relation to a sep-

arately selected reference group, level of the company’s indebtedness and share price increase. The rewards to be paid on the

basis of the performance period 2021-2023 correspond to the value of an approximate maximum total of 4,400,000 SRV Group

Plc’s shares (gross amount, of which the proportion to be paid as withholding tax will be deducted). The potential reward will

be paid in 2024 in SRV Group Plc’s shares (net amount) and the company will account for the withholding tax to tax authorities

on behalf of the key persons. The potential share reward to the President and CEO is subject to transfer restriction, which re-

quires the shares to be held for two years from their reward.

In 29 of March 2021 the Board of Directors of SRV Group Plc resolved on a two-year One-off Long-Term Incentive Plan to

enable the prolonging of the Long-Term Incentive Plan performance period to three years. The One-off Long-Term Incentive

Plan arrangement has one two-year performance period, calendar years 2021–2022. Approximately 30 key persons belong to

the target group of the plan, including President and CEO Saku Sipola and members of Company’s management. The poten-

tial reward from the performance period 2021-2022 will be based on the Group’s operative cash flow and the Group’s Total

Shareholder Return (TSR) during the two-year period. The rewards to be paid on the basis of the performance period 2021-

2022 correspond to the value of an approximate maximum total of 4,400,000 SRV Group Plc’s shares (gross amount, of which

the proportion to be paid as withholding tax will be deducted). The potential reward will be paid in 2023 in SRV Group Plc’s

shares (net amount) and the company will account for the withholding tax to tax authorities on behalf of the key persons.

The potential share reward to the President and CEO is subject to transfer restriction, which requires the shares to be held

for two years from their reward.

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

RESEARCH AND DEVELOPMENT EXPENSES

SRV Group does not have any actual research and development expenses� The Group has business-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 1,000 2021 2020

Financial income

Interest income from associated and joint venture companies 1,830 1,863

Interest income from the other receivables 1,219 1,572

Foreign exchange gains 1,939 0

Other financial income 25 275

Total 5,013 3,710

Financial expenses, excluding Lease Liabilities

Expenses for financial liabilities at amortised cost -10,499 -13,383

Financial assets and liabilities at fair value 3,074 -178

Foreign exchange losses 0 -8,159

Other financial expenses

-11,020 -5,728

Financial expenses, Lease Liabilities

Interests expences -5,218 -5,688

Total -23,662 -33,136

Financial income and expenses, total -18,649 -29,426

Other financial expenses include impairment losses of EUR 6.1 million (EUR 1.5 million) on financial assets of

associated companies and joint ventures.

INCOME TAXES

Income taxes in the income statement

EUR 1,000 2021 2020

Current taxes 754 668

Taxes for previous financial years 0 -1

Deferred taxes, Right-of-use asset -8 -298

Deferred taxes -1,212 -3,220

Total -467 -2,851

Effective income tax rate 2�3% 10�2%

The income taxes in the consolidated income statement differ from the statutory income tax rate in

Finland (20 percent in 2021 and in 2020) as follows:

Income tax reconciliation

EUR 1,000 2021 2020

Profit before taxes -20,346 -27, 958

Income taxes at statutory tax rate in Finland -4,069 -5,592

Differing tax rates of foreign subsidiaries -25 -9

Tax exempt income -23 -93

Non-deductible expenses 2,940 -282

Unrecognized and reversed tax losses 865 444

Taxes for previous financial years 0 -1

Share of profits of associated and joint venture companies -103 2,682

Adjustments -52 0

Income taxes -467 -2,851

Income taxes recognized in other items in comprehensive income were not material

The income tax credited directly to equity

EUR 1,000 2021 2020

Hybrid Bond interests tax 640 405

Share issue tax 0 676

Total 640 1,080

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

EARNINGS PER SHARE

EUR 1,000 2021 2020

Profit/lossfortheyearattributabletoequityholdersoftheparent -19,879 -22,807

Profit/lossfortheyearattributabletoHybridBondinvestors,tax

adjusted -1,648 -3,732

Profit/lossforthecalculatetheearningspershare -21,527 -26,539

Number of shares 2021 2020

Weighted average number of shares outstanding, (1,000 ) 262,158 173,891

Weighted average number of shares outstanding (diluted), (1,000) 262,158 173,925

Earnings per share attributable to equity holders of the parent

company, eur per share -0.08 -0.15

Earnings per share attributable to equity holders of the parent

company (diluted), eur per share -0.08 -0.15

DIVIDEND PER SHARE

Dividends were not paid in 2021 and 2020� A proposal for the Annual General Meeting on 28 March 2022

is that dividend from the year 2021 will not be paid�

PROPERTY, PLANT AND EQUIPMENT

Tangible assets, excluding Right-of-use asset

2021

EUR 1,000

Land and

water areas

Buildings

and

structures

Machinery

and

equipment

Other

tangible

assets Total

Historical cost, 1 Jan. 41 10,274 18,838 893 30,046

Increases 0 4 1,586 12 1,602

Decreases 0 -4 -592 -53 -650

Transfer 0 0 0 0 0

Foreign exchange differences 0 0 28 8 36

Historical cost, 31 Dec. 41 10,273 19,860 859 31,034

Accumulated depreciation and

impairments, 1 Jan. 0 -10,109 -15,600 -578 -26,289

Depreciation 0 -3 -1,021 -101 -1,125

EUR 1,000

Land and

water areas

Buildings

and

structures

Machinery

and

equipment

Other

tangible

assets Total

Accumulated depreciations of

decreases 0 0 0 0 0

Writedowns 0 0 0 0 0

Foreign exchange differences 0 0 -24 -4 -29

Transfer 0 0 0 0 0

Accumulated depreciation and

impairments, 31 Dec. 0 -10,112 -16,647 -684 -27,443

Carrying amount, 31 Dec. 41 161 3,213 175 3,590

Tangible assets, Right-of-use asset

2021

EUR 1,000

Land and

water areas

Buildings

and

structures

Machinery

and

equipment

Other

tangible

assets Total

Historical cost, 1 Jan. 0 11,890 3,197 0 15,087

Increases 0 358 576 0 934

Decreases 0 -154 -45 0 -199

Transfer 0 0 0 0 0

Foreign exchange differences 0 6 6 0 12

Historical cost, 31 Dec. 0 12,100 3,733 0 15,834

Accumulated depreciation and

impairments, 1 Jan. 0 -2,786 -1,603 0 -4,388

Depreciation 0 -1,393 -639 0 -2,031

Accumulated depreciations of

decreases 0 134 0 0 134

Writedowns 0 0 0 0 0

Foreign exchange differences 0 0 0 0 0

Transfer 0 -6 -3 0 -9

Accumulated depreciation and

impairments, 31 Dec. 0 -4,051 -2,244 0 -6,295

Carrying amount, 31 Dec. 0 8,049 1,489 0 9,538

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Tangible assets, excluding Right-of-use asset

2020

EUR 1,000

Land and

water areas

Buildings

and

structures

Machinery

and

equipment

Other

tangible

assets Total

Historical cost, 1 Jan. 41 10,321 18,811 999 30,172

Increases 0 0 720 29 749

Decreases 0 -313 -575 -77 -965

Transfer 0 277 16 0 293

Foreign exchange differences 0 -11 -134 -58 -203

Historical cost, 31 Dec. 41 10,274 18,838 893 30,046

Accumulated depreciation and

impairments, 1 Jan. 0 -9,729 -14,487 -497 -24,714

Depreciation 0 -428 -1,329 -113 -1,870

Accumulated depreciations of

decreases 0 0 0 0 0

Foreign exchange differences 0 47 231 33 311

Transfer 0 0 -15 0 -15

Accumulated depreciation and

impairments, 31 Dec. 0 -10,109 -15,600 -578 -26,289

Carrying amount, 31 Dec. 41 164 3,237 313 3,755

Tangible assets, Right-of-use asset

2020

EUR 1,000

Land and

water areas

Buildings

and

structures

Machinery

and

equipment

Other

tangible

assets Total

Historical cost, 1 Jan. 0 11,502 2,782 0 14,283

Increases 0 493 558 0 1,051

Decreases 0 -81 -131 0 -212

Transfer 0 0 0 0 0

Foreign exchange differences 0 -24 -12 0 -36

Historical cost, 31 Dec. 0 11,890 3,197 0 15,087

Accumulated depreciation and

impairments, 1 Jan. 0 -1,429 -849 0 -2,278

EUR 1,000

Land and

water areas

Buildings

and

structures

Machinery

and

equipment

Other

tangible

assets Total

Depreciation 0 -1,438 -760 0 -2,198

Accumulated depreciations of

decreases 0 65 0 0 65

Writedowns 0 0 0 0 0

Foreign exchange differences 0 0 0 0 0

Transfer 0 16 7 0 23

Accumulated depreciation and

impairments, 31 Dec. 0 -2,786 -1,603 0 -4,388

Carrying amount, 31 Dec. 0 9,105 1,594 0 10,699

GOODWILL AND OTHER INTANGIBLE ASSETS

2021

EUR 1,000

Intangible

rights

Intangible

rights

Other

capitalised

expenditure Total

Historical cost, 1 Jan. 907 1,734 4,094 6,735

Foreign exchange differences 0 0 0 0

Increases 0 0 56 56

Decreases 0 0 -4 -4

Transfers 0 0 0 0

Historical cost, 31 Dec. 907 1,734 4,147 6,788

Accumulated amortisation, 1 Jan. -615 0 -3,176 -3,791

Amortisation 0 0 -394 -394

Accumulated depreciations of decreases -34 0 33 -1

Write downs 0 0 0 0

Foreign exchange differences 0 0 0 0

Accumulated amortisation, 31 Dec. -650 0 -3,536 -4,,186

Carrying amount, 31 Dec. 257 1,734 610 2,601

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

2020

EUR 1,000

Intangible

rights Goodwill

Other

capitalised

expenditure Total

Historical cost, 1 Jan. 911 1,734 3,904 6,549

Foreign exchange differences 0 0 -3 -3

Increases 13 0 293 306

Decreases -17 0 -9 -26

Transfers 0 0 -91 -91

Historical cost, 31 Dec. 907 1,734 4,094 6,735

Accumulated amortisation, 1 Jan. -581 0 -2,724 -3,304

Amortisation -1 0 -420 -421

Accumulated depreciations of decreases -34 0 0 -34

Write downs 0 0 0 0

Foreign exchange differences 0 0 -32 -32

Accumulated amortisation, 31 Dec. -615 0 -3,176 -3,791

Carrying amount, 31 Dec. 292 1,734 918 2,944

SRV Group’s goodwill is allocated to operating segments:

Goodwill

EUR 1,000 2021 2020

Construction 1,734 1,734

Total 1,734 1,734

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 2021, 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�5 per cent was used� The calcu-

lation parameters of WACC are risk-free interest rate, market 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 mod-

erate changes in default factors�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

FINANCIAL ASSETS AND LIABILITIES BY MEASUREMENT CATEGORIES

2021

EUR 1,000

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 0 9,664 9,664 9,664 18

Long-term receivables 0 0 0 0 17,18

Loan receivables from associated companies and

joint ventures 0 40,490 40,490 40,490 21

Other financial assets 24,728 0 24,728 24,728 17

Current financial assets

Accounts receivables 0 57,946 57,946 57,946 22,29

Other interest bearing receivables 0 124 124 124 22

Derivative instruments 0 0 0 0 31

Loan receivables from associated companies and

joint ventures 0 0 0 0 21

Cash and cash equivalents 0 68,009 68,009 68,009 23

Total 24,728 176,233 200,961 200,961

Non-current financial liabilities

Interest bearing liabilities 0 128,771 128,771 111,054 27

Derivative instruments 5,903 0 5,903 5,903 28,31

Other non-current liabilities 0 8,860 8,860 8,860 28

Current financial liabilities

Interest bearing liabilities 0 20,192 20,192 20,192 27

Accounts payables 0 59,698 59,698 59,698 28

Total 5,903 217,521 223,424 205,707

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

2020

EUR 1,000

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 0 8,889 8,889 8,889 18

Long-term receivables 500 0 500 500 17,18

Loan receivables from associated companies and

joint ventures 0 44,281 44,281 44,281 21

Other financial assets 22,220 0 22,220 22,220 17

Current financial assets

Accounts receivables 0 56,199 56,199 56,199 22,29

Other interest bearing receivables 0 15,824 15,824 15,824 22

Derivative instruments 0 0 0 0 31

Loan receivables from associated companies and

joint ventures 0 1,601 1,601 1,601 21

Cash and cash equivalents 0 96,748 96,748 96,748 23

Total 22,720 223,542 246,262 246,262

Non-current financial liabilities

Interest bearing liabilities 0 234,857 234,857 207,438 27

Derivative instruments 8,977 0 8,977 8,977 28,31

Other non-current liabilities 0 11,840 11,840 11,840 28

Current financial liabilities

Interest bearing liabilities 0 14,796 14,796 14,796 27

Accounts payables 0 59,640 59,640 59,640 28

Total 8,977 321,134 330,111 302,692

Carrying amounts do not differ substantially from Fair value, excluding bonds� The fair values of the bonds are based on 31�12�2021 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�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

SHARES IN ASSOCIATED AND JOINT VENTURE COMPANIES

Shares in associated and joint venture companies

EUR 1,000 2021 2020

Shares in associated companies 30,551 30,154

Shares in joint venture companies 21,368 17,9 9 0

Total 51,919 48,144

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 2021 2020

Jupiter Realty 1 B�V Netherlands 45 45

The associated company is investing into Okhta Mall project in St Petersburg� SRV is investing into 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 2021 2020

Netherland Pearl Plaza B�V Netherlands 50 50

Netherland Pearl Plaza B�V the joint venture company is investing into Pearl Plaza project in St Petersburg�

Financial information about the substantial associated companies

Jupiter Realty 1 B�V Netherland Pearl Plaza B�V

EUR 1,000 2021 2020 2021 2020

Cash and cash equivalents - - 1 443 3 252

Other short term assets 16,373 18,145 674 1,028

Short term assest 16,373 18,145 2,116 4,281

Long term assets 147,411 137,401 116,115 110,777

Long term liabilities 29,326 23,729 8,620 25,334

Long term financial liabilities - - 69,596 55,036

Long term liabilities 110,681 108,603 - -

Other long term liabilities 110,681 108,603 69,596 55,036

Net sales - - 18,681 13,735

Depreciation - - -2,626 -2,797

Interest income - - 275 1,831

Interest expenses - - -6,684 -8,245

Income taxes - - -1,032 1,351

Profit for the financial period -1,481 -18,942 2,736 -4,138

Other comprehensive income 2,693 -15,193 2,592 -11,888

The reconciliation of the associated companies financial information

to Group's unbooked book value:

Group's ownership, % 45 45 50 50

Group's share of net assets 10,700 10,446 20,008 17,344

Adjustment to purchase price of associated companies 15,381 15,381 - -

Write downs -5,380 -5,380

The combined share of cumulative indirect profit -8,622 -8,706 0 0

The balance sheet value of the associated companies in Group balance sheet 12,079 11,741 20,008 17,34 4

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Summary of financial information

Other associated

companies

Other joint venture

companies

2021 2020 2021 2020

The Group's share of the profit -188 -2,815 714 -154

The total book value in Group's balance sheet 18,472 18,413 1,360 646

Share of profits of associated and joint venture companies

2021 2020

The substantial associated company Jupiter Realty 1 B�V -667 -8,524

The substantial joint venture company Netherland Pearl Plaza B�V 1,368 -2,069

Other associated companies -188 -2,815

Other joint venture companies 714 -154

Total 1,227 -13,562

Other comprehensive income

2021 2020

The substantial associated company Jupiter Realty 1 B�V 1,212 -6,837

The substantial joint venture company Netherland Pearl Plaza B�V

1,296 -5,944

Other associated companies 404 -2,279

Other joint venture companies 0 0

Total 2,912 -15,060

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

OTHER FINANCIAL ASSETS AND LONG-TERM RECEIVABLES

Other financial assets may include quoted or unquoted shares� The valuation methods and the fair value

hierarchy of the available-for-sale financial assests are presented in note 29�

EUR 1,000 2021 2020

Opening balance at 1 Jan. 22,720 11,858

Increases 3,093 24,113

Changes in fair value -500 -13,000

Decreases -585 -250

Closing balance, 31 Dec. 24,728 22,720

Non-current 24,728 22,720

Current 0 0

Unquoted shares 24,728 22,220

Long-term receivables 0 500

RECEIVABLES

EUR 1,000

Carrying

amount

2021

Carrying

amount

2020

Non-current receivables

Long-term receivables 0 500

Long-term interest bearing receivables 9,664 8,889

Total 9,664 9,389

DEFERRED TAX ASSETS AND LIABILITIES

2021

EUR 1,000 1 Jan�

Recognised

in the

income

statement

Recognised

in compre-

hensive

income

Recognised

in equity

Acquisitions

and

disposals

of business

Exchange

rate

difference 31 Dec�

Deferred tax assets

Tax losses 35,915 1,324 37,238

Financial assets at fair value through

profit and loss 151 0 151

Accrual differences in developer

contracting 1,060 -1,023 37

Undeductible depreciations in taxation 1,049 -48 1,001

Other temporary differences 2,069 -342 640 104 2,472

Right-of-use assets deferred tax

receivables 1,341 8 1,349

Total 41,585 -81 0 640 0 104 42,248

Deferred tax liabilities

Borrowing costs 997 -118 879

Cumulative depreciation differences 94 -127 -33

Other temporary differences 1,261 -1,057 -45 160

Total 2,352 -1,302 0 0 0 -45 1,005

Net deferred taxes 39,233 1,221 0 640 0 149 41,243

2020

EUR 1,000 1 Jan�

Recognised

in the

income

statement

Recognised

in compre-

hensive

income

Recognised

in equity

Acquisitions

and

disposals

of business

Exchange

rate

difference 31 Dec�

Deferred tax assets

Tax losses 33,891 2,024 0 0 0 0 35,915

Financial assets at fair value through

profit and loss 202 -51 0 0 0 0 151

Accrual differences in developer

contracting 363 697 0 0 0 0 1,060

Undeductible depreciations in taxation 1,133 -83 0 0 0 0 1,049

Other temporary differences -241 455 0 2,261 0 -407 2,069

Right-of-use assets deferred tax

receivables 1,043 298 0 0 0 0 1,341

Total 36,391 3,340 0 2,261 0 -407 41,585

Deferred tax liabilities

Borrowing costs 1,018 -21 0 0 0 0 997

Cumulative depreciation differences 111 -17 0 0 0 0 94

Other temporary differences 1,310 -141 0 0 0 92 1,261

Total 2,439 -179 0 0 0 92 2,352

Net deferred taxes 33,952 3,519 0 2,261 0 -498 39,233

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

On 31 December 2021, The Group's accumulated losses for which no deferred tax assets have been

recognised were EUR 12,581 thousand (EUR 20,608 thousand) because realisation of the tax benefit is not

considered probable�

Deferred tax assets have been recognized for right-of-use EUR 1,349 thousand (EUR 1,341 thousand)�

The deferred tax liability has been recognised in the consolidated financial statements in connection with

for the undistributed profits of subsidiaries whose income tax is determined on the basis of profit distribu-

tion� 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 1,000 2021 2020

Inventories excluding Right-of-use assets 227,350 355,262

Raw materials and consumables 0 104

Work in progress 104,100 180,616

Land areas and plot-owning companies 113,733 145,854

Shares in completed housing corporations and real estate

companies 5,058 24,757

Advance payments 465 985

Other inventories 3,994 2,944

Inventories, Right-of-use asset 72,723 118,752

Inventories, total 300,074 474,013

With respect to developer-contracted housing projects, interest expenses on borrowing are capitalised pri-

marily 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 930 thousand (2020:

EUR 1,465 thousand) was included in the value of work in progress� The carrying amount of completed

inventories used as security for loans in 2021 amounted to EUR 2,603 thousand (EUR 21,145 thousand), the

carrying amount of inventories under construction in 2021 was EUR 108,248 thousand (EUR 94,252 thou-

sand)� The carrying amount of land area used as a security for loans was EUR 44,073 thousand (EUR 21,263

thousand)� During the financial year 2021 there was no impairment losses in shares in completed housing

companies (EUR 808 thousand)� Impairments to plot assets totalled EUR 5 586 thousand (EUR 0 thousand)�

LOAN RECEIVABLES FROM ASSOCIATED COMPANIES AND JOINT VENTURES

EUR 1,000 2021 2020

Long term loan receivables from associated companies 44,281 43,835

Increases 2,206 3,949

Decreases 0 -348

Writedown, level 3 -6,512 -1,500

Foreign exchange difference 515 -1,655

Total 40,490 44,281

Long term loan receivables from joint ventures 0 160

Increases 0 0

Decreases 0 -160

Total 0 0

Short term loan receivables from joint ventures 1,601 62

Increases 0 1,601

Decreases -1,601 -62

Total 0 1,601

ACCOUNTS RECEIVABLES AND OTHER RECEIVABLES

EUR 1,000

Carrying

amount

2021

Carrying

amount

2020

Accounts receivables 57,946 56,199

Loan receivables 124 11,824

Gross amount due from customers related to construction

contracts 8,090 13,011

Accrued income and prepaid expenses 65,779 56,831

Other receivables 1,490 5,670

Total 133,428 143,534

Interest bearing receivables 124 11,824

Non-interest bearing receivables 133,304 131,710

Total 133,428 143,534

Carrying amount does not substantially differ from fair value� In 2021 the Group’s accounts receivables

were on average EUR 57 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�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

CASH AND CASH EQUIVALENTS

EUR 1,000 2021 2020

Cash and cash equivalents 68,009 96,748

Total 68,009 96,748

ASSETS HELD FOR SALE

SRV Group had no assets held for sale at year end 2021 or 2020�

EQUITY

Share capital and Invested free equity fund

Number of shares

1 Jan. 2019 59,580,976

Return of treasury shares 0

Transfer of treasury shares 67,950

The directed share issue 71,468,395

Share issue 131,049,371

31 Dec. 2019 262,166,692

1 Jan. 2020 262,166,692

Return of treasury shares -11,912

Transfer of treasury shares 0

The directed share issue 0

Share issue 0

31 Dec. 2020 262,154,780

Shares and share capital

On 31 December 2021, the total number of SRV Group Plc's shares outstanding was 262,154,780 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 862,561 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�

Translation difference

Translation difference comprises the differences of the translation of financial statetements of the foreign

subsidiaries to the functional currency of the parent company�

Hybrid bond

Equity includes an equity bond of EUR 11�8 million issued in 2016 (EUR 11�8 million)� Hybrid bond has an

annual coupon rate of 13�572 per cent� Also, equity includes an equity bond of EUR 3�6 milloin issued in

2019 (EUR 3�6 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 unse-

cured and subordinated to other debt instruments� The hybrid bonds do not confer shareholders’ rights to

bondholders�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

PROVISIONS

2021

EUR 1,000

Warranty

provisions

10-year

warranty

Other

provisions

for

construction

contracts

Other

provisions Total

1 Jan. 14,617 9,186 11 0 23,814

Currency exchange

differences 0 0 0 0 0

Increase in provisions 5,587 824 33 0 6,444

Provisions used -5,233 -699 -19 0 -5,951

Reversals of unused

provisions 0 0 0 0 0

31 Dec. 14,971 9,311 25 0 24,307

Non-current 6,505 6,518 25 0 13,048

Current 8,466 2,793 0 0 11,259

Total 14,971 9,311 25 0 24,307

2020

EUR 1,000

Warranty

provisions

10-year

warranty

Other

provisions

for

construction

contracts

Other

provisions Total

1 Jan. 11,538 7,664 533 0 19,735

Currency exchange

differences 0 -53 0 -53

Increase in provisions 7, 577 1,770 349 0 9,696

Provisions used -4,499 -248 -518 0 -5,265

Reversals of unused

provisions 0 0 -300 0 -300

31 Dec. 14,617 9,186 11 0 23,814

Non-current 5,943 6,430 11 0 12,384

Current 8,674 2,756 0 0 11,430

Total 14,617 9,186 11 0 23,814

Other provisions for construction contracts include warranty for potential disputes and other provisions

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�

INTEREST-BEARING LIABILITIES

Interest-bearing liabilities, excluding lease liabilities

Carrying

amount Fair value

Carrying

amount Fair value

EUR 1,000 2021 2021 2020 2020

Non-current

Loans from financial institutions 1,896 1,896 41,896 41,896

Bonds 94,156 78,169 135,625 108,206

Housing corporation loans 18,137 18,137 40,681 40,681

Other debt 14,583 14,583 16,655 16,655

Total 128,771 112,785 234,857 207,438

Current

Loans from financial institutions 10,000 10,000 14,765 14,765

Commercial papers 0 0 0 0

Bonds 10,192 8,461 0 0

Housing corporation loans 0 0 31 31

Total 20,192 18,461 14,796 14,796

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� More details to changes in interest-bearing liabilities

during 2021 can be found in Note 29 Financial Risk Management�

Interest-bearing lease liabilities

Machinery

and

equipment

2021

EUR 1,000 Land-Areas

Buildings

and

structures Others Total

Non-current 78,355 7,462 925 0 86,743

Current 466 1,158 649 0 2,272

Total 78,821 8,620 1,574 0 89,014

Interest-bearing lease liabilities

Machinery

and

equipment

2020

EUR 1,000 Land-Areas

Buildings

and

structures Others Total

Non-current 124,258 8,373 957 0 133,588

Current 719 1,156 691 0 2,566

Total 124,977 9,529 1,648 0 136,154

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

In addition to the above-mentioned lease liabilities, the Group has committed to enter into a lease agreement

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�6 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

2021

Carrying

amount

2020

EUR 1,000

Non-current

Derivative liabilities 5,903 8,977

Other liabilities 8,860 11,840

Total 14,762 20,817

Current

Accounts payables 59,698 59,640

Advance payments related to

construction contracts 73,606 86,014

Other advance payments 9,230 11,525

Other current liabilities 44,102 79,221

Accrued expenses and prepaid income 56,568 48,063

Total 243,205 284,463

Accrued expenses and prepaid income

Wages and salaries and related

expenses 11,085 12,278

Interest and other financial liabilities 1,777 3,198

Periodisations of project expenses 43,044 31,147

Other 663 1,439

Total 56,568 48,063

FINANCIAL RISK MANAGEMENT

SRV Group is exposed to a number of financial risks in its business operations� The most significant finan-

cial risks are related to interest rate, currency, liquidity and credit� The management of the Group’s finan-

cial risks is centralised in the Group’s finance department� The management of financial risks is imple-

mented in accordance with the financial policies approved by the Board of Directors� The financial policy

is updated as required to reflect changes in the marketplace� The objective of the Group’s financial risk

management is to reduce the uncertainty that changes in the financial markets cause for the Group’s

result and financial position�

Interest-rate risks

The cash flows and current values of the Group’s interest-bearing liabilities and receivables are affected 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 project-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 6�0 per cent (2020: 5�3 per cent)� 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 income

statement� Interest rate risks are managed by adjusting the ratio of the floating rate and fixed-rate liabili-

ties in the loan portfolio� At the balance sheet date, fixed-rate loans accounted for 78 per cent of the total

loan portfolio (2020: 59 per cent)� Interest rate risks are also managed through derivatives 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 contracts 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 expenses 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 ter-

minated the derivative contract� The fair value of interest rate derivatives has been defined based on price

quotations from counterparties� These quotations 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 derivative valuations would have been EUR 3�5 million (2020: EUR 4�5

million) if interest rates had increased by one percentage point� If interest rates had decreased by one per-

centage point, the profit impact would have been EUR -3�6 million (2020: EUR -4�7 million)� General changes

in interest rates also have direct impacts on the investment decisions of the Group’s customers and, there-

fore, on the Group's operating cash flows� The company does not consider it likely that interest rates will

decrease in the prevailing market situation�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Currency risks

The Group is exposed to currency risks related to the international business operations’ commercial cash

flows, financing of projects during construction, currency-denominated equity, and investments in foreign

project companies and associated companies� The most significant currency to pose currency risk in 2021

was the Russian ruble� The foreign subsidiaries are, in accordance with the Group’s financial policies, respon-

sible for identifying and reporting currency exchange risks connected with currency-denominated cash flows

to the finance department� The objective of currency risk management is to protect the Group against

currency fluctuations whose impact on indebtedness indicators could endanger the Group’s loan cove-

nants� Derivatives or currency loans can be used as hedging instruments in accordance with Group policy to

manage currency risk� At the balance sheet date, the Group did not have any derivative contracts to hedge

against exchange rate risks (2020: EUR 10 million)�

Currency risks are divided into transaction risk and translation risk� Transaction risk relates to foreign cur-

rency-denominated business (sales and purchases) and financing (loans) cash flows� Translation risk relates

to investments in foreign subsidiaries, associated companies and project companies in which the functional

currency is not the euro, and whose imputed effects are reflected in translation differences in the Group’s

consolidated equity� Currency risk is also present in project financing in Russia, as the value of project collat-

eral can be affected by changes in the value of the ruble� Declining project collateral value can lead to a need

for additional collateral or re-negotiation of loan terms and amounts�

Sensitivity to currency fluctuation

The rouble-denominated currency position that poses a translation risk was EUR 73�2 million (2020: EUR

68�4 million)� The rouble-denominated currency position that poses transaction risks was EUR 38�2 million

(2020: EUR 58�9 million)� At the balance sheet date, there were no currency hedging positions to hedge

against transaction risks (2020: EUR 10 million)� The currency hedging position consisted of a short-term

currency option� The positions are presented in the table below� The total increase in the value of the net

investments in the Group’s equity resulting from changes in exchange rates was EUR 5�1 million (2020: EUR

-32�2 million) compared to the end of the previous year, consisting of EUR 1�8 million (2020: EUR -18�6 mil-

lion) for changes due to translation risks, EUR 3�6 million (2020: EUR -18 million) for changes in transaction

risks, EUR -0�1 million (2020: EUR 5�5 million) for the currency hedging effect and EUR -0�1 million (2020: EUR

-1�1 million) for the tax effect of currency hedging�

2021 2020

Interest risk

position

Average

interest

rate

Average

maturity,

months

Interest rate

sensitivity EUR

Financial expenses

and income

Interest risk

position

Interest rate

Sensitivity, EUR

EUR 1,000 -1% +1% -1% +1%

Debt, floating rate -30,033 2�91% 4�2 0

-81 -95,260 0

-364

Derivatives 100,000 -0,41%

3�4 -729 729 100,000 -729 729

Fair value change of derivatives 100,000 -3,616 3,448 100,000 -4,707 4,481

Total -4,345 4,096 -5,436 4,846

Effect of one percentage point in market interest rates on the Group's interest expenses and income during the next 12 months. All other variables assumed unchanged.

² Three and twelve month Euribor forward rates have been used to predict fixing date interest rates in order estimate sensitivity to interest rate changes.

³ If floating market rates are negative, decrease in market rate does not have effect on interest amount, as under the contracts the reference rate is at least 0%.

The accompanying sensitivity analysis under IFRS 7 contains variable interest rate financial liabilities and receivables in which there is an interest rate fixing during the next 12 months, in accordance with the closing

balance sheet� Variable interest rate financial liabilities include project-specific company loans and variable interest rate loans related to the Group’s general financing� The sensitivity analysis also includes interest rate

swap contracts�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Ruble exchange risk position

EUR million 31.12.2021 31�12�2020

Translation risk position

Group companies' equity 13�8 13�5

Joint ventures and associated companies' equity 59�4 54�8

Yhteensä 73.2 68.4

Transaction risk position

Group Companies' euro loan receivable or debt 8�1 19�5

Joint ventures and associated companies euro loan receivables or

debt 30�1 39�4

Total 38.2 58.9

Ruble exchange risk position total 111.4 127. 2

Short-term foreign exchange option- and forward contracts capital 0�0 10�0

For translation risks, a 10 per cent weakening or strengthening of the rouble against the euro would have had a

negative or positive impact on the Group's equity translation differences of approximately EUR 7�0 million at the

balance sheet date (2020: EUR 6�3 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 per cent weakening

at the balance sheet date would have had a negative impact on SRV's result amounting to approximately EUR 3�1

million (2020: EUR 4�6 million), with the positive effect of a 10 per cent strengthening being EUR 3�1 million (2020:

EUR 4�9 million)� The transaction risk sensitivity takes into account the impact of hedges at the balance sheet date�

Liquidity and Refinancing risks

Liquidity and refinancing risks may have an effect on the Group's financial results, cash flow and the implementa-

tion of the Group’s developer contracting projects if the Group is unable to ensure sufficient financing for its oper-

ations� 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, a committed revolving credit facility and

bonds� Financing for developer contracting projects is ensured through sales of projects, project-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 balance 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�

In April 2021, the company agreed on the replacement of its previous EUR 51 million revolving credit

facility and EUR 40 million project financing facility with the syndicate banks; the facilities were replaced

with a new EUR 40 million committed revolving credit facility, a EUR 40 million committed project financing

facility and a EUR 63 million non-committed project financing facility� EUR 10 million of the new EUR 40

million revolving credit facility will mature in March 2022 and EUR 30 million in April 2023� The new project

financing facilities of EUR 40 and 63 million will be used to finance future construction projects� They fall due

in April 2023 or within another repayment period agreed for separate construction projects�

During the review period, the company repaid a total of EUR 30 million of its current revolving credit facility�

At the end of the review period, EUR 10 million of the company’s EUR 40 million revolving credit facility was

withdrawn and EUR 30 million was unused� EUR 30�5 million of the company’s EUR 40 million committed pro-

ject financing facility was unused at the end of the review period� In addition, the company’s EUR 63 million

non-committed project financing facility was entirely unused at the end of the review period� The company

has a EUR 100 million commercial paper programme� The company issued no new commercial papers in 2021�

At the end of April 2021, the company carried out written procedures to extend the tenor of its EUR 100

million (of which EUR 37�4 million is outstanding) senior unsecured callable fixed-rate notes due 23 March

2022 by three years and the tenor of its EUR 75 million senior unsecured callable fixed-rate notes due 27

September 2023 (of which EUR 67�4 million is outstanding) by one and a half years, as well as to amend

certain terms and conditions of these notes� The new due dates are 23 March 2025 for the EUR 100 million

senior unsecured callable fixed-rate notes (with an outstanding principal of EUR 37�4 million at the end of

the review period) and 27 March 2025 for the EUR 75 million senior unsecured callable fixed-rate notes

(with an outstanding principal of EUR 67�4 million)�

SRV made partial early repayments on the aforementioned notes of a total nominal amount of EUR 27�1

million in May 2021 and a total nominal amount of EUR 5�1 million in September 2021�

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, liquidity facility, overdraft facilities, pension insurance (TyEl)

re-lending, new bonds and hybrid loans and some other loans, may amount to EUR 100 million if the interest

cover ratio test is failed� At the balance sheet date, the drawn amounts for the items referred to above

amounted to EUR 25�4 million in total� The interest cover ratio covenant is described in more detail below�

The financial covenants of SRV’s financing agreements are equity ratio, gearing, minimum operating margin,

minimum cash, the interest coverage ratio and certain other restrictions� 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 covenant levels of these financing agreements are determined on the basis of the accounting prin-

ciples in force when the loan agreements 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

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

deviations from traditional covenant calculation methods� Minimum cash consists of the Group’s cash and

deposits in syndicate banks, with trade payables overdue for more than 10 days deducted� 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 accounting principles specified in each

loan agreement� The agreements include cross-default conditions�

At the beginning of December, the company agreed on a temporary change to the calculation of the

minimum EBITDA covenant of the revolving credit facility with the syndicate banks that granted the facility,

effective until 30 June 2022� This change eliminates the impact of items from the sale of the Tampere Arena

project and certain foreign assets in the covenant calculation� As a result of the agreed change in calcula-

tion method, the minimum EBITDA covenant was met on 31 December 2021� All other covenants for loan

agreements were also met on 31 December 2021� The company actively monitors the development of the

covenant situation and, if necessary, seeks to negotiate on financing terms with the creditor banks�

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 basis 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 creditor 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� These payments include interest payments, capital repayments, and

other contractual payments� 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 100�1 million (2020: EUR

116�7 million) and consisted of EUR 2�1 million (2020: EUR 20�0 million) in unwithdrawn project loans and

EUR 68�0 million (2020: EUR 96�7 million) in cash and cash equivalents� At the balance sheet date, SRV's

remaining purchase price receivables for developer-contracted housing and commercial premises under

construction in Finland amounted to EUR 7�4 million (2020: EUR 24 million), with the amount of financing for

developer-contracted projects not withdrawn amounting to EUR 9�5 million (2020: EUR 38�6 million)� SRV

estimates that EUR 13�6 million (2020: EUR 29�1 million) will be used for the completion of developer-con-

tracted projects� The sources of financing are described in table format under the maturity table�

Liquidity reserves

EUR 1,000 31.12.2021 31�12�2020

Committed credit facility 30,000 0

Committed current account overdraft limits 0 0

Undrawn housing loans and loans from financial institutions 2,074 20,031

Cash and cash equivalents 68,009 96,748

Total 100,083 116,778

Financial liabilities, excluding lease liabilities

2021 Maturity

EUR 1,000 Carrying amount

Contractual

liability

2022 2023 2024 2025 later

Bonds 104,348 124,099 16,078 15,480 14,903 7 7,638 0

Loans from financial institutions 11,896 13,481 11,103 2,378 0 0 0

Housing loans

18,137 23,023 309 300 508 964 20,942

Other liabilities 14,583 14,583 0 0 0 0 14,583

Other non-interest bearing liabilities 11,529 11,529 2,561 5,381 0 2,775 813

Derivative liabilities 5,903 7,398 1,907 1,907 1,907 1,677 0

Accounts payables 59,698 59,698 59,698 0 0 0 0

Total 226,093 253,811 91,656 25,446 17,318 83,054 36,338

Financial liabilities, excluding lease liabilities

2021 Maturity

EUR 1,000 Book Value Carrying amount 2022 2023 2024 2025 later

Lease liabilities 89,014 215,926 6,793 6,594 6,018 5,927 190,593

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Credit risk

The Group is exposed to credit risk related to accounts receivable, amounts due from long-term project cus-

tomers, associated company and joint venture loan receivables, cash investments, and receivables based on

derivative transactions� Credit risk is managed in accordance with credit policy principles� Project customers

are mainly large, well-known and financially sound companies� If no information is available on the customer’s

solvency, a check is made of general trade and credit information records, and collateral requested, if neces-

sary� With regard to international business projects, more detailed customer background checks are made if

the customer is not already known� The creditworthiness of home buyers is not checked, but the ownership of

an apartment is not transferred to the customer until the purchase price has been paid in full� In transactions

made for unfinished apartments, the buyer has the option under the Housing Transactions Act to cancel the

transaction prior to the handover of the apartment, but damages are payable for the cancellation� Similarly, a

construction company may cancel a transaction if the buyer fails to make the agreed payments�

Deposits and derivatives

The Group does not have any significant investment activities, other than investments on properties in the

investment business segment� Investments relate to daily cash management and are mainly short-term bank

deposits with the Group’s main banks� The Group Treasury unit is responsible for managing investment and

derivative instrument counterparty risks in accordance with the Group financing policy approved by the

Board of Directors� Derivatives are made for hedging purposes and the balance sheet receivables based on

them are small� Agreements made with counterparties to derivative contracts are based on the ISDA Con-

vention� Under the terms and conditions of arrangements, the net asset or liability position of an individual

counterparty in the same currency is considered should certain events (such as payment default) occur to

be a liability and all arrangements related to it are terminated� As SRV does not, at the closing date, have

a legally enforceable right of set-off, these amounts have not been deducted from the balance sheet� The

credit risk associated with both deposits and derivatives is considered to be low�

Accounts receivable and amounts due based on customer projects

Business units are responsible for the credit risk related to amounts due and accounts receivable based on

customer projects, in accordance with the Group credit policy� Group credit policy defines the requirements

for the credit decision process, terms of sale, and debt collection� The Group’s commercial counterparties

are mainly listed companies or major real estate or institutional investment companies� In the housing busi-

ness, the counterparties are mainly private individuals� In apartment sales, the customer gains control of the

apartment when all of the purchase price items have been paid� The same Group credit policy principles are

applied to tenant selection as in 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 recognised over the

Financial liabilities, excluding lease liabilities

2020 Maturity

EUR 1,000

Carrying amount

Contractual

liability

2020 2021 2022 2023 later

Bonds

135,625 156,823 7,915 68,960 79,949 0 0

Loans from financial institutions

56,661 60,134 17,270 42,864 0 0 0

Housing loans

40,712 48,527 628 614 1,104 2,155 44,027

Other liabilities

16,655 16,655 0 0 0 0 16,655

Derivative liabilities

11,840 11,840 0 2,553 5,363 0 3,924

Accounts payables

8,977 8,618 1,768 1,768 1,768 1,768 1,544

Investment commitment

59,640 59,640 59,640 0 0 0 0

Total

330,111 362,238 87,221 116,760 88,184 3,923 66,150

Financial liabilities, excluding lease liabilities

2020 Maturity

EUR 1,000

Book Value Carrying amount

2020 2021 2022 2023 later

Lease liabilities

136,154 341,110 9,388 9,094 8,534 8,469 305,625

Includes all contractual payments, e.g. interest and commitment fees.

² The liability for payment of principal and interest of housing corporation loans is transferred to the buyer at the time of sale. Loan and interest payment liability is noted for the full contractual amount until the completion of the property

and thereafter in proportion of the sales rate.

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

entire applicable duration� Due to the business model and customer profile described in the previous para-

graph, 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 closing date� However, one business

premises project under construction in Finland involves higher credit loss risks related to trade receivables�

Due to the payment difficulties of the client, the payment of about EUR 14�8 million in trade receivables to

SRV was overdue at the end of December� These receivables are secured by a mortgage on the property

under construction and pledges on certain other asset items� SRV is currently negotiating on the handling

of payment transactions with the client� Of the EUR 9�1 million due at the end of the comparison period, no

material credit losses were realised in 2021�

Competition for new orders in the construction industry is intense, which may affect the volume and profita-

bility of SRV’s new order backlog� Contracts concerning construction have a significant value� Terms and condi-

tions of agreement require the parties to achieve agreed targets on a specified timetable and to adhere to agreed

operating practices� In particular, execution of additional and alteration work may involve financial risks� Contract

receivables may involve additional and alteration work involving customer complaints or disputes concerning

the payment obligations of the customer� If agreement cannot be reached on payment obligations during the

final financial review, the company may have to enter into legal proceedings against the customer� The outcomes

of legal proceedings involve uncertainties� It is also impossible to assess precisely the time required by court

procedures in dispute cases� For additional and alteration work in contracts recognised as revenue over time,

only the portion likely to be invoiced is recognised, in accordance with IFRS 15 Revenue from Contracts with

Customers� Items subject to a significant risk of impairment and which the company does not expect to receive

are not taken into account in the contract invoicing forecast�

Due to the business model and client profile, the Group has not made any credit loss bookings during

recent years� All trade receivables and contractual assets are reviewed separately and if material expected

credit losses are not identified, no credit loss provision is booked�

Overdue accounts receivables

EUR 1,000 2021 2020

Undue accounts receivables 38,986 47,114

1–30 days past due 7,393 5,173

31–60 days past due 517 394

61–90 days past due 1,418 411

91–180 days past due 3,792 724

181–360 day past due 5,572 2,288

Over 361 days past due 267 94

Total 57,9 46 56,199

There were no past due receivables in other group financial assets�

Credit loss provisions are not included in accounts receivables, because SRV Group does not have any

substantial credit losses�

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 regularly

assesses whether the credit risk related to the receivables has increased significantly after they were ini-

tially 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 impair-

ment 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 expected 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 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 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.

At the beginning of 2021, the total amount of loans included in Stage 3 was EUR 5.6 million, with a EUR

6.1 million impairment loss recorded for the loans, and at the end of 2021, the loans included in Stage 3

totalled EUR 0.0 million.

Long-term and short-term loan receivables from associated companies and joint ventures

EUR 1,000 Level 1 Level 2 Level 3 Total

31.12.2021

Long-term loan receivables 40,490 0 0 40,490

Short-term loan receivables 0 0 0 0

31.12.2020

Long-term loan receivables 38,661 0 5,620 44,281

Short-term loan receivables 1,601 0 0 1,601

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Fair value hierarchy of financial assets and liabilities

Financial assets at fair value through profit or loss

On 31 December 2021, the Group had interest rate swaps recognised at fair value through profit or loss� During

comparative period, the Group had currency options and interest rate swaps recognised at fair value through

profit or loss�

Derivative financial instruments at fair value through profit or loss

EUR 1,000 Level 1 Level 2 Level 3 Total

31.12.2021

Derivative financial assets 0 0 0 0

Derivative financial liabilities 0 5,903 0 5,903

31.12.2020

Derivative financial assets 0 1 0 1

Derivative financial liabilities 0 8,977 0 8,977

Other financial assets at fair value through profit or loss

EUR 1,000 Level 1 Level 2 Level 3 Total

31.12.2021

Unquoted shares and holdings 0 628 24,100 24,728

Non-current receivables 0 0 0 0

31.12.2020

Unquoted shares and holdings 0 606 21 614 22 219

Non-current receivables 0 0 500 500

Level 1 instruments are traded in active markets and their fair values are directly based on the market price�

The fair values of level 2 instruments are derived from market data�

The fair values of level 3 instruments are not based on observable market data but on amortised cost, quo-

tations provided by brokers and market valuation reports�

Unlisted shares and investments consist mainly of shares purchased for leisure facilities used by SRV’s

employees (level 2) as well as shares in Voimaosakeyhtiö SF and investments in and related to real estate

funds and projects (level 3)�

Assets recognised in level 3 consist mainly of SRV Voima’s investment in Voimaosakeyhtiö SF (12 2021 EUR

13�3 million) and Tampere Deck and Arena (12 2021 EUR 9�2 million), in addition to which they include

investments in and related to real estate funds and projects�

The table below presents movements in level 3 instruments for 2021

EUR 1,000

Unquoted shares

and holdings

Opening balance at 1�1�2021 22,114

Increases 3,071

Decreases -585

Gains and losses recognised in profit or loss -500

Closing balance, 31.12.2021 24,100

The table below presents movements in level 3 instruments for 2020

EUR 1,000

Unquoted shares

and holdings

Opening balance at 1�1�2020 11,275

Increases 24,089

Decreases -250

Gains and losses recognised in profit or loss -13,000

Closing balance, 31.12.2020 22,114

Capital risk 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 operations and use of capital to maintain its

capital structure� The Group monitors its 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 company’s capital

structure is controlled through net gearing, and the Group's financial target is to reduce the net gearing

ratio (excluding IFRS 16) 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-controlling minority shareholders

and an equity loan�

The Group’s loans are subject to covenants that are described in the section “Management of liquidity and

refinancing risks” (see above)� These covenants are calculated in accordance with the terms and conditions

of each loan agreement, and are based on either FAS or IFRS figures� The table below describes the key

covenants that must be reported for the bonds and liquidity facility that was in use by the Group at the end

of the financial period 2021, and their levels on 31 December 2021 and 31 December 2020� The covenant

levels for all loan agreements were met on 31 December 2021�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Loan agreement covenants Covenant value 31.12.2021 31.12.2020

Percentage of completion equity

ratio, RCF %

> 28% 34�3% 28�7%

Percentage of completion equity

ratio, Bonds % > 26% 34�3% 28�7%

Minimum liquidity ≥15Meuratperiodend 58�7 71�3

Gearing %

≤140% 151,2%

151,2%

EBIDTA

2,3

EUR 16–25 million depending

on the testing date 32 34

In accordance with terms of loan agreements, excluding impact of IFRS 16

² At the beginning of December, the company agreed on a temporary change to the calculation of the minimum

EBITDA covenant of the revolving credit facility with the syndicate banks that granted the facility, effective until 30

June 2022.

³ Minimum EBITDA excluding the share of associated company results and before transaction costs and impairments

OPERATING LEASES, COMMITMENTS AND CONTINGENT LIABILITIES

EUR 1,000 2021 2020

Collateral given for own liabilities

Real-estate mortgages given 20,033 44,260

Other commitments

Investment commitments given 19,666 26,412

Landarea commitments 28,947 33,365

The Group has guaranteed obligations of its subsidiaries� The total amount of these guarantees was EUR

262�7 million (EUR 284�4 million)�

The cost of rental agreements not included in lease liabilities

EUR 1,000 2021 2020

Cost related to short-term leases -25,482 -29,808

The cost of low-value assets -51 -43

Cost related to variable leases that are not includes in lease

liabilities -740 -962

Total -26,272 -30,814

The cost of rental agreements not included in lease liabilities contains mainly costs related to site equip-

ments (short-term lease)

Cash flow of lease liabilities

EUR 1,000 2021 2020

Total -8,749 -11,037

Cash flow of lease liabilities are presented under the item ‘Interest paid and other expenses from financial

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 1,000 2021 2020

Fair values of derivative instruments Positive Negative Positive Negative

Foreign exchange forward contracts

and options 0 0 1 0

Interest rate swap 0 5,903 0 8,977

Total 0 5,903 1 8,977

EUR 1,000 2021 2020

Nominal values of derivative instruments

Foreign exchange forward contracts and options 0 10,000

Interest rate swap 100,000 100,000

Total 100,000 110,000

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

RECONCILIATION OF DEBTS REPORTED IN FINANCING ACTIVITIES

Long term Short term

EUR 1,000

Interest-

bearing

debt Hybrid bond

Interest-

bearing

debt Total

Debt 31.12.19 424,124 82,900 25,614 532,638

Proceeds from loans 9,000 0 0 9,000

Repayment of loans -17,352 0 0 -17,352

Transferlongterm/shorttermdebts -10,143 0 10,143 0

Change in Lease Liabilities -14,083 0 112 -13,971

Proceeds from Hybrid bond 0 0 0 0

Repayment of hybrid bond 0 0 0 0

Change in housing corporation loans -9,698 0 -7 -9,705

Net change in short-term loans 0 0 -18,500 -18,500

Other interest bearing debts -3,502 0 0 -3,502

0 0 0 0

Change in debt, non cash:

Efective interest 0 0 0 0

Other non-cash changes -9,901 - 67,54 0 0 -77,441

Debt 31.12.20 368,445 15,360 17,362 401,167

Proceeds from loans 0 0 0 0

Repayment of loans -76,992 0 0 -76,992

Transferlongterm/shorttermdebts -5,427 0 5,427 0

Change in Lease Liabilities -46,846 0 -294 - 47,14 0

Proceeds from Hybrid bond 0 0 0 0

Repayment of hybrid bond 0 0 0 0

Change in housing corporation loans -22,544 0 -31 -22,575

Net change in short-term loans 0 0 0 0

Other interest bearing debts -2,072 0 0 -2,072

Change in debt, non cash:

Efective interest 0 0 0 0

Other non-cash changes 950 0 0 950

Debt 31.12.21 215,514 15,360 22,464 253,338

SUBSIDIARIES

Name Domicile

Group's

holding, %

Group's

voting right, %

Shares in subsidiaries

SRV Rakennus Oy Espoo 100�00 100�00

SRV Ream Oy Helsinki 100�00 100�00

SRV Asumisen Palvelut Oy Espoo 100�00 100�00

SRV Joensuu Oy Joensuu 100�00 100�00

SRV Infra Oy Kerava 100�00 100�00

SRV Voima Oy Espoo 100�00 100�00

SRV Russia Oy Espoo 100�00 100�00

OOO SRV Development Pietari 100�00 100�00

OOO SRV 360 Pietari 100�00 100�00

SRV Ehituse AS Tallinna 100�00 100�00

SRV Realty B�V Amsterdam 100�00 100�00

The list does not include project companies�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

RELATED PARTY TRANSACTIONS

2021

EUR 1,000

Selling of

goods and

services

Purchase of

goods and

services

Interest

income Receivables Liabilities

Management and Board of Directors 0 0 0 0 0

Joint ventures 1,032 0 0 223 7

Associate company 4,160 1 2,286 56,318 0

Other related parties 127 0 0 0 0

Total 5,319 1 2,286 56,541 7

2020

EUR 1,000

Selling of

goods and

services

Purchase of

goods and

services

Interest

income Receivables Liabilities

Financial

transacons

Management and

Board of Directors 0 0 0 0 0 3,188

Joint ventures 6,994 23 0 2,544 7 0

Associate

company 14,811 3 2,529 54,561 1 0

Other related

parties 0 0 0 0 0 42,097

Total 21,805 25 2,529 57,105 7 45,285

These financial transactions concern share issues involving the participation of related parties with their converted

hybrid bonds and subscription rights.

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 included

in the consolidated financial statements and therefore the transactions between Group companies are not

included in note 34 Related party transactions�

Itemisation of management salaries and employment-based benefits

EUR 1,000 2021 2020

Management salaries and other short-term employment-based

benefits 2,879 2,783

Share-based payments 0 25

Post-employment benefits, statutory pensions 896 631

Post-employment benefits, voluntary additional pensions 7 41

Benefits paid upn termination 410 0

Total 4,192 3,479

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, 24�2 (22�7%)�

Salaries and compensations of CEO & Board of Directors

EUR 1,000 2021 2020

Saku Sipola, President and CEO from 1 Sep 2019 605 645

Nieminen Timo, Deputy CEO 231 200

Members of the Board

Yli-Kyyny Tomi, Chairman 84 86

Kokkila Ilpo, Chairman until 26 Mar 2020 - 31

Kallasvuo Olli-Pekka, Vice Chairman until 29 Mar 2021 18 77

Alitalo Minna, until 29 Mar 2021 14 68

Hannu Leinonen 54 38

Kokkila Timo, Vice Chairman from 29 Mar 2021 59 68

Leppänen Heikki 51 40

Hintikka Juhani, until 26 Mar 2020 0 24

Iisakka Heli, from 29 Mar 2021 46 -

Members of the Board, total 324 432

The CEO's period of notice is 6 months� If SRV Group Plc terminates the contract, the period of notice is

twelve months�

The 2021 paid statutory occupational pension insurance of the president and CEO and deputy CEO were

203 thousand euros (191 thousand euros in 2020)�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Parent company's financial statements, FAS

BALANCE SHEET OF THE PARENT COMPANY

EUR 1,000 Note 31.12.2021 31�12�2020

ASSETS

NON-CURRENT ASSETS

Intangible assets 9 816 1,134

Property, plant and equipment 9 434 525

Investments

Shares in group companies 10 316,301 299,279

Other financial assets 10 1,944 2,453

NON-CURRENT ASSETS, TOTAL 319,494 303,391

CURRENT ASSETS

Inventories 4 4

Long-term receivables 12 22,095 15,813

Short-term receivables 12 160,359 181,329

Cash and cash equivalents 58,141 63,630

Current assets, total 240,599 260,777

ASSETS, TOTAL 560,092 564,168

EQUITY AND LIABILITIES

EQUITY

Share capital 14 3,063 3,063

Invested free equity fund 14 268,592 268,592

Retained earnings 14 -6,426 5,499

Profit/lossforthefinancialyear 14 -8,742 -11,925

EQUIT Y, TOTAL 256,487 265,228

LIABILITIES

Non-current liabilities 17 110,948 193,892

Current liabilities 18 192,657 105,047

LIABILITIES, TOTAL 303,606 298,939

EQUITY AND LIABILITIES, TOTAL 560,092 567,351

INCOME STATEMENT OE THE PARENT COMPANY

EUR 1,000 Note 2021 2020

Revenue 1 9,630 9,562

Other operating income 2 3 479

Personnel expenses 3 -5,436 -6,418

Indirect personnel costs

Pension costs -869 -815

Other indirect personnel costs -219 -173

Depreciation and impairments 4 -452 -485

Other operating expenses 5 -6,449 -7,481

Operating profit -3,792 -5,330

Financial income and expenses 6 -7,129 -9,734

Profit berofe appropriations and taxes -10,921 -15,064

Appropriations 7

Income taxes 8 2,179 3,139

Net profit for the financial year -8,742 -11,925

Income statement oe the parent company

Balance sheet of the parent company

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

CASH FLOW STATEMENT OF THE PARENT COMPANY

EUR 1,000 2021 2020

Cash flows from operating activities

Cash receipts from customers 8,728 8,816

Cash receipts from other operating income 912 831

Cash paid to suppliers and employees -19,516 -17,563

Net cash before interests and taxes -9,876 -7,916

Interests received and other financial income 6,868 13,737

Interests paid and other expenses from financial costs -12,874 -21,487

Cash flow from operating activities -15,882 -15,665

Cash flow from investing activities

Purchase of tangible and intangible assets -42 -234

Purchase of investments -662 -422

Proceeds from sale of investments 0 474

Subsidiary shares bought -375 0

Loans granted for subsidiarys -2,604 -1,892

Loans granted for others 0 -4,000

Proceeds from repayments of subsidiary loans 356 537

Dividends received 0 130

Net cash used in investing activities -3,327 -5,407

EUR 1,000 2021 2020

Cash flow from financing activities

Net cash from share issue 0 40,799

Repayment of loans -73,227 -9,000

Proceeds from Hybrid bond 0 9,000

Hybrid bond intrests 0 -225

Net change in short-term loans 0 -18,500

Change in group accounts 86,946 44,567

Net cash from financing activities 13,719 66,641

Net change in cash and cash equivalents -5,489 45,569

Cash and cash equivalents at the beginning of financial year 63,630 18,061

Cash and cash equivalents at the end of financial year 58,141 63,630

Cash flow statement of the parent company

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

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

January 1- December 31, 2021�

ACCOUNTING PRINCIPLES

Non-Current assets

Tangible and intangible assets 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 depreciation

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

Foreign 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�

Taxes

The taxes in the income statement include the taxes for the financial year and adjustments for previous

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 present 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 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 the 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

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

INCOME SATEMENT

REVENUE

EUR 1,000 2021 2020

Group services 8,696 8,368

Rent income 909 827

Other revenues 25 367

Total 9,630 9,562

OTHER INCOME

2021 2020

Other income 3 479

INFORMATION CONCERNING PERSONNEL

2021 2020

Number of personnel on average

Office employees 60 63

DEPRECIATION AND IMPAIRMENTS

EUR 1,000 2021 2020

Depreciation on Intangible assets 360 382

Depreciation on Buildings and Structures 10 10

Depreciation on Machinery and Equipment 81 93

Total 452 485

OTHER OPERATING EXPENSES

EUR 1,000 2021 2020

Rents 1,188 1,247

Voluntary indirect personnel expenses 392 366

Car and travel expenses 185 246

Entertainment and marketing expenses 761 307

Communication and IT expenses 1,805 1,433

Other external services 647 1,844

Operating and maintenance costs 453 143

Other fixed expenses 1,017 1,895

Total 6,449 7,481

Auditing fees included in other operating expenses

EUR 1,000 2021 2020

Auditing 202 302

Statements 0 0

Tax advisory services 0 0

Other services 57 227

Total 259 529

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

FINANCIAL INCOME AND EXPENSES

EUR 1,000 2021 2020

Dividend income

From group companies 0 130

Total 0 130

Interest and other financial income

From group companies 5,989 6,346

From other companies 73 76

Fair value impact of currency forward contracts 0 403

Income from currency forward contracts 0 6,758

Fair value impact of interest rate swap contracts 3074 0

Total 9,136 13,583

Interest expenses

Interest expenses to group companies 0 -138

Interest expenses to others -12,238 -16,907

Total -12,238 -17,045

Other financial expenses

To others

Fair value impact of interest rate swap contracts 0 -178

Fair value impact of currency forward contracts -813 0

Structuring costs from currency forward contracts -123 -1,655

Other financial expenses -3,090 -4,568

Total -4,026 -6,401

Financial income and expenses total -7,129 -9,734

APPROPRIATIONS

The company did not have transactions to be recorded in appropriations during the financial year or the

comparison period�

INCOME TAXES

EUR 1,000 2021 2020

Change in deferred taxes 2,179 3,139

Total 2,179 3,139

NOTES TO BALANCE SHEET

CHANGES IN NON-CURRENT ASSETS

Intangible assets

2021

EUR 1,000

Intangible

assets

Other

intangible

expenditures Total

Historical cost 1� Jan 715 2,379 3,095

Increase 0 42 42

Historical cost 31. Dec 715 2,421 3,137

Accumulated depreciation and impairments, 1 Jan� -465 -1,495 -1,960

Depreciation 0 -360 -360

Accumulated depreciation and impairments, 31 Dec. -465 -1,855 -2,321

Carrying amount, 31 Dec. 250 566 816

2020

EUR 1,000

Intangible

assets

Other

intangible

expenditures Total

Historical cost 1� Jan 715 2,261 2,976

Increase 0 209 209

Transfer 0 -91 -91

Historical cost 31. Dec 715 2,379 3,095

Accumulated depreciation and impairments, 1 Jan� -465 -1,113 -1,579

Depreciation 0 -382 -382

Accumulated depreciation and impairments, 31 Dec. -465 -1,495 -1,960

Carrying amount, 31 Dec. 250 884 1,134

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Tangible assets

2021

EUR 1,000

Land and

water

areas

Buildings

and

Machinery

and

equipment Total

Historical cost 1� Jan 41 437 2,029 2,507

Increase 0 0 0 0

Decrease 0 0 0 0

Historical cost 31. Dec 41 437 2,029 2,507

Accumulated depreciation and

impairments, 1 Jan� 0 -115 -1,867 -1,982

Depreciation 0 -10 -81 -91

Accumulated depreciation and

impairments, 31 Dec. 0 -125 -1,948 -2,074

Carrying amount, 31 Dec. 41 312 81 434

2020

EUR 1,000

Land and

water

areas

Buildings

and

Machinery

and

equipment Total

Historical cost 1� Jan 41 437 1,914 2,392

Increase 0 0 115 115

Historical cost 31. Dec 41 437 2,029 2,507

Accumulated depreciation and

impairments, 1 Jan� 0 -105 -1,774 -1,879

Depreciation 0 -10 -93 -103

Accumulated depreciation and

impairments, 31 Dec. 0 -115 -1,867 -1,982

Carrying amount, 31 Dec. 41 322 162 525

INVESTMENTS

EUR 1,000 2021 2020

Shares in subsidiaries

Historical cost, 1 Jan� 299,279 295,857

Increases 17,022 3,423

Historical cost, 31 Dec. 316,301 299,279

Other shares and holdings

Historical cost, 1 Jan� 2,453 2,660

Increases 15 15

Decreases -525 -222

Historical cost, 31 Dec. 1,944 2,453

SUBSIDIARY COMPANIES

Domicile 2021 2020

SRV Rakennus Oy Espoo 100�0 100�0

SRV Infra Oy Kerava 100�0 100�0

SRV Voima Oy Espoo 100�0 100�0

SRV Russia Oy Espoo 100�0 100�0

SRV Ehituse AS Tallinna 100�0 100�0

SRV Joensuu Oy Joensuu 100�0 65�0

SRV Ream Oy Helsinki 100�0 100�0

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

LONG-TERM AND SHORT-TERM RECEIVABLES

EUR 1,000 2021 2020

Long-term receivables

From Group companies

Loan receivables 1,640 1,640

Interest receivables 268 159

From others

Loan receivables 0 0

Other receivbales 5,746 1,751

Deferred tax receivable 14,442 12,263

Total 20,188 14,014

Long-term recaivables Total 22,095 15,813

Short-term receivables

From Group companies

Accounts receivable 4 3

Loan receivables 14,513 12,265

Other receivables 145,369 163,779

Total 159,886 176,047

From others

Accounts receivable 6 69

Other receivables 403 5,198

Accrued receivables 64 15

Total 473 5,282

Short-term receivables, total 160,358 181,328

ACCRUED RECEIVABLES

EUR 1,000 2021 2020

Fair value of currency forward 0 1

Other 64 14

Total 64 15

CHANGES IN EQUITY

EUR 1,000 2021 2020

Share capital 1�1� 3,063 3,063

Share capital 31.12. 3,063 3,063

Share premium reserve 1�1� 268,592 143,751

Share Issue 0 124,841

Share premium reserve 31.12. 268,592 268,592

Retained earnings 1�1� -6,426 5,499

Transfer between items 0 289

Purchase/sellofownshares 0 -289

Retained earnings 31.12. -6,426 5,499

Net profit for the financial year -8,742 -11,925

Unrestricted shareholders' equity total 253,424 262,166

Equity 31.12. 256,487 265,228

CALCULATION ON THE DISTRIBUTABLE EQUITY

EUR 1,000 2021 2020

Share premium reserve 268,592 268,592

Retained earnings -6,426 5,499

Purchase/sellofownshares 0 -289

Net profit for the financial year -8,742 -11,925

Total 253,424 262,166

PROVISIONS

The company did not have transactions to be recorded in provisions during the financial year or the com-

parison period�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

LONG-TERM LIABILITIES

EUR 1,000 2021 2020

To other companies

Hybrid Bond 15,360 15,360

Loans from financial institutions 0 40,000

Bonds 94,677 137,0 9 6

Other loans 731 1,256

Total 110,768 193,712

To Group Companies

Other loans 180 180

Long-term liabilities total 110,948 193,892

SHORT-TERM LIABILITIES

EUR 1,000 2021 2020

To Group Companies

Other liabilities 161,197 76,661

Total 161,197 76,661

To other companies

Loans from financial institutions 10,000 11,000

Bonds 10,192 0

Accounts payable 604 326

Accrued expenses 10,261 16,544

Other loans 403 517

Total 31,460 28,387

Short term liabilities total 192,657 105,047

ACCRUED LIABILITIES

EUR 1,000 2021 2020

Salaries including social costs 1,234 1,952

Accrued liability related to interest rate swap 5,903 8,977

Interest and other financial expenses 3,124 5,603

Other 0 11

Total 10,261 16,544

DERIVATIVE FINANCIAL INSTRUMENTS

On the closing date, the parent company did not have any short-term foreign exchange derivative contracts, hedging

against currency risk� In the comparison period the hedging instruments totaled EUR 10 million� By means of interest

rate swap contracts, protection is sought from market interest rate changes during the financial year� Interst rate swap

contracts mature during the financial year 2025�

Derivative financial instruments

EUR 1,000 2021 2020

Interest rate swaps

- Fair value negative 5,903 8,977

- Nominal value of underlying instruments 100,000 100,000

Hedging instruments

- Fair value positive 0 1

Nominal value of underlying instruments 0 10,000

Fair value hierarcy of financial instruments:

Fair value hierarcy 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 the Consolidated Financial Statement�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

LEASING AND OTHER RENT AGREEMENTS

EUR 1,000 2021 2020

Payable in less than a year 74 120

Payable later 57 72

Total 131 192

Rental lease liabilities

Payable in less than a year 1,337 1,348

Payable later 8,432 9,671

Total 9,768 11,019

OTHER LIABILITIES

EUR 1,000 2021 2020

Guarantee obligations given on behalf of Group companies 262,699 284,432

Investment commitments 18,681 24,294

The group has committed to invest 18 681 thousand euros in Voimaosakeyhtiö SF in order fo finance

Hanhikivi 1 project� At the end of 2021 the investments made were 13 319 thousand euros in total�

RELATED PARTY TRANSACTIONS

There were no related party tansactions 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 1,000 2021 2020

Salaries and other benefits 2,453 1,170

Total 2,453 1,170

Salaries and other benefits of CEO

CEO, Saku Sipola 605 645

Deputy Vice President, Timo Nieminen 231 200

Rewards and benefits of the members of the board:

Yli-Kyyny Tomi, Chairman from 26�3�2020 84 86

Kokkila Ilpo, Chairman until 26�3�2020 0 31

Kokkila Timo, Vice Chairman from 29�3�2021 59 68

Kallasvuo Olli-Pekka, Vice Chairman until 29�3�2021 18 77

Alitalo Minna, until 29�3�2021 14 68

Leinonen Hannu 54 38

Leppänen Heikki 51 40

Hintikka Juhani, until 26�3�2020 0 24

Iisakka Heli, from 29�3�2021 46 0

Total 324 432

The 2021 paid statutory occupational pension insurance of the president and CEO and deputy CEO were 203

thousand euros (191 thousand euros in 2020)�

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�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Part of Financial Statements

Espoo, 28 February 2022

Tomi Yli-Kyyny Timo Kokkila

Chairman Vice Chairman

Heli Iisakka Hannu Leinonen

Heikki Leppänen Saku Sipola

President and CEO

Our auditor’s report has been issued today�

Helsinki, 28 February 2022

PricewaterhouseCoopers Oy

Authorized Public Accounting Firm

Enel Sintonen

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

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

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 Finan-

cial Reporting Standards (IFRS) as adopted by

the EU

• the financial statements give a true and fair

view of the parent company’s financial perfor-

mance and financial position in accordance with

the laws and regulations governing the prepa-

ration 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 2021� The financial

statements comprise:

• the consolidated income statement and statement

of comprehensive income, consolidated balance

sheet, statement of changes in equity, consoli-

As part of designing our audit, we determined

materiality and assessed the risks of material mis-

statement in the financial statements� In particular,

we considered where management made subjec-

tive judgements; for example, in respect of signif-

icant accounting estimates that involved making

assumptions and considering future events that are

inherently uncertain�

MATERIALITY

The scope of our audit was influenced by our appli-

cation of materiality� An audit is designed to obtain

Our Audit Approach

OVERVIEW

• Overall group materiality: 4,500,000 euros

• We performed an audit of SRV Group’s parent company and its sub-

sidiaries that are most significant based on the financial position and

result�

• Revenue recognised from construction contracts over time

• Valuation of investments in associated companies and joint ventures

• Valuation of slow moving land plots in inventory

• Renewal of financing

dated 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

under 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

basis for our opinion�

INDEPENDENCE

We are independent of the parent company and of

the group companies in accordance with the ethical

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 parent 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Regulation(EU)No537/2014.The

non-audit services that we have provided are disclosed

in note 5 to the Financial Statements�

reasonable assurance whether the financial state-

ments are free from material misstatement� Mis-

statements may arise due to fraud or error� They are

considered material if individually or in aggregate,

they could reasonably be expected to influence the

economic decisions of users taken on the basis of

the financial statements�

Based on our professional judgement, we deter-

mined certain quantitative thresholds for mate-

riality, including the overall group materiality for

the consolidated financial statements as set out in

the table below� These, together with qualitative

Auditor’s Report (Translation of the Finnish Original)

Materiality

Key audit

matters

Group

scoping

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

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 con-

solidated financial statements based on net sales,

profit before taxes and total assets�

Rationale for the materiality

benchmark applied

We chose the combination described above as it

reflects the size of the business, financial perfor-

mance and the capital invested in the business� In

our view, those are the benchmarks against which

the performance of the Group is most commonly

measured by users�

HOW WE TAILORED OUR GROUP AUDIT SCOPE

We tailored the scope of our audit, taking into

account the structure of the SRV Group, the

accounting processes and controls, and the industry

in which the group operates�

SRV Group consists of two business areas; con-

struction and investments� In addition, Group

services are reported as 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 that are most significant

based on the financial position and result�

HOW OUR AUDIT ADDRESSED

THE KEY AUDIT MATTER

Our procedures included the following procedures,

among others:

– We updated our understanding of processes

of revenue recognition and total cost estima-

tion of contracts� Also, we tested the effective-

ness of selected key controls�

– On selected construction contracts we per-

formed substantive audit procedures, of which

the main ones are described below�

– We read construction contracts and assessed

the appropriateness of applied revenue recog-

nition accounting principles�

– We compared the estimated revenue with the

terms of construction contracts�

– We monitored the progress of the projects

and changes in the total cost estimates by

reading the minutes of project meetings and

discussing with the management and respon-

sible personnel�

– We assessed the accuracy of management

estimates by comparing the total cost esti-

mates of uncompleted projects included in

the previous financial year financial state-

ments to their actual outcome in the current

financial year�

– We tested the mathematical accuracy of the

spreadsheets used to determine the per-

centage of completion as well as the rev-

enue and cost that was recognised based on

that�

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 cur-

rent 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, including

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 recognised from construction contracts

over time

Refer to Accounting policies for consolidated finan-

cial statements and Note 3

Revenue and costs of construction contracts are

recorded over time as revenue and costs on the

basis of the percentage of completion where the

outcome of the construction contract can be esti-

mated reliably� The percentage of completion is cal-

culated on the basis of the estimated total cost of

a contract and the cumulative costs at the balance

sheet date�

Management judgment has a significant impact on

the estimate of total cost of construction contracts

and on revenue and result of those contracts� There-

fore revenue recognised from construction contracts

over time is considered as a key audit matter in the

audit of the Group financial statements�

KEY AUDIT MATTER IN THE AUDIT

OF THE GROUP

Valuation of investments in associated companies

and joint ventures

Refer to Accounting policies for consolidated finan-

cial statements and Note 16

The group’s investments in associated companies

and joint ventures are investments in construction

projects together with other investors� After com-

pletion of the construction, the Group can own and

operate these investments�

The associated companies and joint ventures are

accounted for by using the equity method in the

consolidated financial statements� The Group com-

pares the balance sheet value of the investments to

the estimated future cash flows of those to identify

indications of the impairment�

Valuation of investments in associated compa-

nies and joint ventures involve significant manage-

ment judgements and is therefore considered as a

key audit matter in the audit of the Group financial

statements�

HOW OUR AUDIT ADDRESSED

THE KEY AUDIT MATTER

Our procedures included the following procedures,

among others:

– We read the valuation reports, acquired by the

management, and assessed the appropriate-

ness of the valuation model used� We tested the

mathematical accuracy of valuation calculations�

– We discussed with the management about the

most significant assumptions used in the valua-

tion models and compared, for example, yields

used in the valuation calculations to observable

market data�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

– We ensured that the management has used

results from valuation reports when assessing

the balance sheet value of the investments

KEY AUDIT MATTER IN THE AUDIT

OF THE GROUP

Valuation of slow moving land plots

Refer to Accounting policies for consolidated finan-

cial statements and Note 20

Land plots in inventories are valued at the lower of

cost and net realisable value�

The net realisable value of land plots depends

on the intended use of it, which most commonly is

a use in a construction project� The net realisable

value of a land plot intended to be used in a con-

struction project is estimated as a part of the net

realisable value of the construction project� Impair-

ment of land plot is recognised only if the construc-

tion project is estimated to generate losses�

Valuation of slow moving land plots in inventories

involve significant management judgement and is

therefore considered as a key audit matter in the

audit of the Group financial statements

HOW OUR AUDIT ADDRESSED

THE KEY AUDIT MATTER

Our procedures included the following procedures,

among others:

– We assessed and assessed the appropriate-

ness of the valuation model used� We tested

the mathematical accuracy of valuation calcu-

lations�

– We investigated the construction plans and

timetables of selected land plots as well as

changes in the intended use of those during

the financial year�

– We discussed with the management about

financing arrangements

– We examined new financing agreements and

evaluated the accounting treatment of those�

– We evaluated the covenant calculations pre-

pared by the management�

– We evaluated the disclosures containing

information of new financing agreements

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 mis-

statement 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 Statements

The Board of Directors and the Managing Director

are responsible for the preparation of consolidated

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 gov-

erning the preparation of financial statements 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 mis-

statement, whether due to fraud or error�

In preparing the financial statements, the Board of

Directors and the Managing Director are responsible

for assessing the parent company’s and the group’s

– We discussed with the management about the

most significant assumptions used in the valua-

tion models and compared those to observable

market data�

– We prepared sensitivity analysis of most sig-

nificant assumptions� Those assumptions were

among others rental income, construction

costs and yield

KEY AUDIT MATTER IN THE AUDIT

OF THE GROUP

Renewal of financing

Refer to Accounting policies for consolidated finan-

cial statements and Note 29

Refer to Accounting policies for consolidated finan-

cial statements and Note 29

The Group’s main sources of financing are

revolving credit facility, project financing facilities

and notes� Financing agreements contain cove-

nants, which are common in nature�

The parent company agreed on changes in the

terms of unsecured callable fixed-rate notes and

signed a new committed revolving credit facility,

committed and uncommitted project financing

facility during the financial year� This resulted in

extension of financing and decrease in interest

bearing liabilities�

Renewal of financing has had a significant impact

to the Group’s financing position and is therefore

considered as a key audit matter in the audit of the

Group financial statements

HOW OUR AUDIT ADDRESSED

THE KEY AUDIT MATTER

Our procedures included the following procedures,

among others:

ability to continue as a going concern, disclosing, as

applicable, matters relating to going concern and

using the going concern basis of accounting� The

financial statements are prepared using the going

concern basis of accounting unless there is an inten-

tion to liquidate the parent company or the group or

to cease operations, or there is no realistic alterna-

tive 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 mis-

statement when it exists� Misstatements can arise

from fraud or error and are considered material if,

individually or in the aggregate, they could reason-

ably be expected to influence the economic deci-

sions 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 skepticism throughout

the audit� We also:

• Identify and assess the risks of material mis-

statement 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

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

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 rele-

vant to the audit in order to design audit proce-

dures 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 pol-

icies used and the reasonableness of accounting

estimates and related disclosures made by man-

agement�

• 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 com-

pany’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 conclu-

sions 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�

matters in our auditor’s report unless law or regu-

lation precludes public disclosure about the matter

or when, in extremely rare circumstances, we deter-

mine that a matter should not be communicated in

our report because the adverse consequences of

doing 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 and our appoint-

ment represents a total period of uninterrupted

engagement of 8 years�

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 and the information included in the Annual

Report, but does not include the financial statements

and our auditor’s report thereon�

Our opinion on the financial statements does not

cover the other information�

In connection with our audit of the financial state-

ments, our responsibility is to read the other infor-

mation identified above and, in doing so, consider

whether the other information is materially incon-

sistent with the financial statements or our knowl-

edge obtained in the audit, or otherwise appears

• 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 enti-

ties or business activities within the group to

express an opinion on the consolidated financial

statements� We are responsible for the direc-

tion, supervision and performance of the group

audit� We remain solely responsible for our audit

opinion�

We communicate with those charged with govern-

ance regarding, among other matters, the planned

scope and timing of the audit and significant audit

findings, including any significant deficiencies in

internal control that we identify during our audit�

We also provide those charged with governance

with a statement that we have complied with rele-

vant 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 applicable,

related safeguards�

From the matters communicated with those

charged with governance, we determine those mat-

ters that were of most significance in the audit of the

financial statements of the current period and are

therefore the key audit matters� We describe these

to be materially misstated� With respect to the

report of the Board of Directors, 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 con-

clude that there is a material misstatement of the

other information, we are required to report that

fact� We have nothing to report in this regard�

Helsinki 28 February 2022

PricewaterhouseCoopers Oy

Authorised Public Accountants

Enel Sintonen

Authorised Public Accountant (KHT)

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Independent Auditor’s Reasonable Assurance

Report on SRV Group Plc ESEF Financial Statements

(Translation of the Finnish Original)

To the Management of SRV Group Plc

We have been engaged by the Management of

SRV Group Plc (business identity code 1707186-8)

(hereinafter also “the Company”) to perform a rea-

sonable assurance engagement on the Company’s

consolidated IFRS financial statements for the finan-

cial year 1�1�-31�12�2021 in European Single Elec-

tronic Format (“ESEF financial statements”) version

743700GB29FXC0VXF414-2021-12-31-en�zip�

MANAGEMENT’S RESPONSIBILITY FOR

THE ESEF FINANCIAL STATEMENTS

The Management of SRV Group Plc is responsible for

preparing the ESEF financial statements so that they

comply with the requirements as specified in the

Commission Delegated Regulation (EU) 2019/815

of 17 December 2018 (“ESEF requirements”)� This

responsibility includes the design, implementation

and maintenance of internal control relevant to the

preparation of ESEF financial statements that are

free from material noncompliance with the ESEF

requirements, whether due to fraud or error�

OUR INDEPENDENCE AND QUALITY

CONTROL

We have complied with the independence and other

ethical requirements of the International Code of

Ethics for Professional Accountants (including Inter-

national Independence Standards) issued by the

The procedures selected depend on the auditor’s

judgment, including the assessment of the risks of

material noncompliance of the ESEF financial state-

ments with the ESEF requirements, whether due to

fraud or error� In making those risk assessments, we

considered internal control relevant to the Compa-

ny’s preparation of the ESEF financial statements�

We believe that the evidence we have obtained

is sufficient and appropriate to provide a basis for

our opinion�

OPINION

In our opinion, SRV Group Plc ESEF financial state-

ments for the financial year ended 31�12�2021

comply, in all material respects, with the ESEF

requirements�

Our reasonable assurance report has been pre-

pared in accordance with the terms of our engage-

ment� We do not accept, or assume responsibility

to anyone else, except for SRV Group Plc for our

work, for this report, or for the opinion that we

have formed�

Helsinki 28 February 2022

PricewaterhouseCoopers Oy

Authorised Public Accountants

Enel Sintonen

Authorised Public Accountant (KHT)

International Ethics Standards Board for Account-

ants (IESBA Code), which is founded on fundamental

principles of integrity, objectivity, professional com-

petence and due care, confidentiality and profes-

sional behavior�

Our firm applies International Standard on Quality

Control 1 and accordingly maintains a comprehen-

sive system of quality control including documented

policies and procedures regarding compliance with

ethical requirements, professional standards and

applicable legal and regulatory requirements�

OUR RESPONSIBILITY

Our responsibility is to express an opinion on the

ESEF financial statements based on the procedures

we have performed and the evidence we have

obtained�

We conducted our reasonable assurance engage-

ment in accordance with the International Standard

on Assurance Engagements (ISAE) 3000 (Revised)

Assurance Engagements Other than Audits or

Reviews of Historical Financial Information� That

standard requires that we plan and perform this

engagement to obtain reasonable assurance about

whether the ESEF financial statements are free from

material noncompliance with the ESEF requirements�

A reasonable assurance engagement in accordance

with ISAE 3000 (Revised) involves performing proce-

dures to obtain evidence about the ESEF financial

statements compliance with the ESEF requirements�

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

GROUP AND SEGMENT INFORMATION BY QUARTER

SRV Group

EUR million 10–12/2021 7–9/2021 4–6/2021 1–3/2021 10–12/2020 7–9/2020 4–6/2020 1–3/2020

Revenue 336.3 191�1 218�0 187�1 292�5 209�9 265�0 208�1

Operative operating profit -4.6 -0�6 5�7 4�8 5�3 5�6 0�5 4�3

Operating profit -11.5 -1�6 6�3 5�2 -8�0 1�7 3�3 4�5

Financial income and expenses, total -8.1 -2�8 -3�7 -4�1 -6�5 -8�8 -3�1 -11�1

Profit before taxes -19.5 -4�4 2�6 1�1 -14�5 -7�0 0�2 -6�6

Order backlog

872.3 1,038�2 1,0 47�5 1,061�1 1,153�4 1,280�3 1,332�4 1,361�5

New agreements 160.7 166�6 176�0 85�4 140�7 154�4 213�7 198�2

Earnings per share, eur

-0.08 -0�02 0�01 0�00 -0�05 -0�01 0�02 -0�11

Equity per share, eur 0.57 0�65 0�66 0�65 0�65 0�69 0�75 1�03

Share closing price, eur 0.53 0�58 0�66 0�57 0�59 0�53 0�48 0�94

Equity ratio, % 27.4 27�0 26�1 23�8 22�6 23�8 25�3 20�4

Equity ratio, % excl� IFRS16

32.8 34�0 32�5 29�4 27�8 29�6 30�6 25�8

Net interest-bearing liabilities 170.0 269�0 279�8 309�5 289�1 341�7 307�4 400�4

Net interest-bearing liabilities excl� IFRS16

81.0 142�1 152�5 180�5 152�9 194�9 177�0 254�1

Net gearing, % 103.0 147�5 151�9 170�8 159�7 177�4 148�5 260�2

Net gearing, % excl� IFRS16

47.5 75�5 80�3 96�5 82�1 98�4 83�5 160�2

Revenue

EUR million 10–12/2021 7–9/2021 4–6/2021 1–3/2021 10–12/2020 7–9/2020 4–6/2020 1–3/2020

Construction 335.8 188�0 218�5 187�8 292�0 209�1 264�1 204�9

business construction 184.8 115�2 140�9 140�5 186�7 157�8 182�2 154�0

housing construction 151.1 72�8 77�6 47�3 105�3 51�3 81�9 50�8

Investments 0.6 4�2 1�0 1�0 0�9 1�1 1�2 1�6

Other operations and eliminations -0.2 -1�1 -1�5 -1�7 -0�3 -0�3 -0�2 1�6

Group, total 336.3 191.1 218.0 187.1 292.5 209.9 265.0 208.1

Operative operating profit

EUR million 10–12/2021 7–9/2021 4–6/2021 1–3/2021 10–12/2020 7–9/2020 4–6/2020 1–3/2020

Construction -1.3 1�6 7�0 6�9 8�5 3�7 7�4 5�5

Investments -1.7 -1�6 -0�5 -0�8 -1�9 1�6 -4�4 -1�0

Other operations and eliminations -1.5 -0�6 -0�8 -1�3 -1�3 0�3 -2�4 -0�2

Group, total -4.6 -0.6 5.7 4.8 5.3 5.6 0.5 4.3

Group and Segment information by quarter

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Operative operating profit

% 10–12/2021 7–9/2021 4–6/2021 1–3/2021 10–12/2020 7–9/2020 4–6/2020 1–3/2020

Construction -0.4 0�8 3�2 3�7 2�9 1�8 2�8 2�7

Investments - - - - - 141�5 - -

Group -1.4 -0.3 2.6 2.5 1.8 2.7 0.2 2.1

Operating profit

EUR million 10–12/2021 7–9/2021 4–6/2021 1–3/2021 10–12/2020 7–9/2020 4–6/2020 1–3/2020

Construction -1.3 1�6 7�0 6�9 8�7 5�2 7�4 6�2

Investments -8.6 -2�6 0�1 -0�4 -15�4 -3�8 -1�7 -1�4

Other operations and eliminations -1.5 -0.6 -0.8 -1.3 -1�3 0.3 -2.4 -0.2

Group, total -11.5 -1.6 6.3 5.2 -8.0 1.7 3.3 4.5

Operating profit

% 10–12/2021 7–9/2021 4–6/2021 1–3/2021 10–12/2020 7–9/2020 4–6/2020 1–3/2020

Construction -0.4 0�8 3�2 3�7 3�0 2�5 2�8 3�0

Investments - - - - - - - -

Group -3.4 -0.8 2.9 2.8 -2.8 0.8 1.2 2.2

The Group's order backlog consists of the Construction business.

The comparison figure have been adjusted for share issues.

The effects of IFRS16 have been adjusted from the figure.

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Order backlog

EUR million 31.12.2021 30.9.2021 30.6.2021 31.3.2021 31�12�2020 30�9�2020 30�6�2020 31�3�2020

- business construction 508.3 566�3 587�4 606�5 718�2 825�8 837�9 858�4

- housing construction 364.0 471�9 460�1 454�6 435�2 454�5 494�6 503�1

Group, total

872.3 1,038.2 1,047. 5 1,061.1 1,153�4 1,280�3 1,332.4 1,361.5

sold order backlog 798�2 956�3 942�3 930�6 996�6 1,112�6 1,141�7 1,153�2

unsold order backlog 74�0 81�9 105�2 130�5 156�7 167�7 190�7 208�3

Group's order backlog consists only of construction segment.

Order backlog, housing construction in Group

EUR million 31.12.2021 30.9.2021 30.6.2021 31.3.2021 31�12�2020 30�9�2020 30�6�2020 31�3�2020

Negotiation and construction contracts 251 259 231 207 202 187 210 191

Under construction, sold 39 131 124 117 77 100 94 104

Under construction, unsold 71 79 99 114 128 147 162 183

Completed and unsold 3 3 6 17 28 21 28 25

Housing construction, total 364 472 460 455 435 455 495 503

Housing production in Group

(units) 10–12/2021 7–9/2021 4–6/2021 1–3/2021 10–12/2020 7–v9/2020 4–6/2020 1–3/2020

Housing sales, total 190 328 447 348 327 130 445 364

sales, developer contracting 31 71 137 170 104 83 59 108

sales, negotiation contracts 159 257 310 178 223 47 386 256

Developer contracting

- start-ups 0 0 71 124 68 0 0 0

- completed 260 42 66 0 282 96 142 0

-recognized in revenue 259 48 102 44 235 127 128 25

- completed and unsold 9 8 14 46 92 45 76 60

Under construction, total 2,085 2,464 2,392 2,271 2,127 2,076 2,316 2,168

construction contracts 0 0 0 0 0 80 80 80

negotiation contracts 227 234 215 409 369 247 247 247

negotiated contracts 1,648 1,760 1,665 1,355 1,375 1,152 1,296 1,006

developer contracting 210 470 512 507 383 597 693 835

- of which sold 166 394 371 334 210 341 385 454

- of which unsold 44 76 141 173 173 256 308 381

REPORT OF THE BOARD OF DIRECTORS FINANCIAL STATEMENTS AUDITOR’S REPORT

Information for shareholder

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 2022

Financial Statements Release 2021 will be published on Thursday, 3 February 2022 at 8�30 am�

Annual Report 2021 (including the Financial Statements and the Report of the Board of Directors) will be

published on Wednesday, 2 March 2022�

Interim Report for January-March 2022 will be published on Thursday, 28 April 2022 at 8�30 am�

Half-year Report for January-June 2022 will be published on Thursday, 21 July 2022 at 8�30 am�

Interim Report for January-September 2022 will be published on Thursday, 27 October 2022 at 8�30 am�

The Annual General Meeting of SRV Group Plc is scheduled for Monday 28 March 2022, starting at 4 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 Finan-

cial 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

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�