Skip to content

SRV - Project risks materialized

SRV issued a profit warning due to the materialization of cost risks in the Tampere Arena project and postponement of the expected Pearl Plaza divestment, creating a dent in the improved progress so far during 2021.

Profitability guidance lowered
SRV issued a profit warning on Monday, December 13th. The company now expects its operative operating profit to be positive (prev. EUR 16-21m). The revenue guidance of EUR 900-1,000 remains unchanged. The guidance revision is mainly due to cost risk materialization in the Tampere Arena project. The impact on 2021 figures has been approx. EUR -20m, of which EUR -13m was already included in Q3/2021 figures. Further affecting the guidance revision is the postponement of the sale of the Pearl Plaza shopping centre, which was earlier expected to be finalized during 2021.

Project risks continue to materialize
SRV has previously had challenges in managing certain projects of significant size, with these risks unfortunately materializing again. The project has been completed and further risks should be limited to certain final cost calculations. The P&L impact is unfortunate but shouldn’t cause financial risks, especially with the completion of the Loisto tower project and subsequent cash flows during Q4. The significant negative impact of the Tampere Arena project does continue to highlight that the underlying construction profitability is actually at rather good levels, but this is unfortunately of little consolation when risks in single major projects continue to materialize. We have lowered our 2021 operative operating profit estimate to EUR 4.4m (prev. EUR 17.2m) but apart from that our estimates remain largely unchanged.

BUY with a target price of EUR 0.6 (0.7)
With the risks to the company’s turnaround at elevated levels we lower our target price to EUR 0.6 (0.7). Upside potential is in our view still clearly in place but appears more remote with the postponement of expected Pearl Plaza divestment. Our rating remains BUY.

Open Report