SRV GROUP PLC STOCK EXCHANGE RELEASE 14 SEPTEMBER 2018 11.00 AM
Profit warning: SRV Group Plc lowers its guidance for 2018
SRV Group Plc specifies its outlook and changes its guidance for 2018. The company estimates that its operating profit for 2018 will be at loss, mainly due to the cost increase of the REDI project. REDI shopping centre will open in September, according to the schedule and quality targets.
In its 2018 second-quarter interim report, the company reported that its operative operating profit was weakened by increased material and labour costs and extended delivery times due to the market situation. The company also reported that higher-than-expected costs of the REDI shopping centre that is being implemented as a fixed price construction contract had negative effect on the financial performance. According to the latest cost estimate, the costs of the project will be higher than the previous forecast, and therefore the company's operative operating profit will be at loss for 2018. The total profit impact of the entire REDI project can be calculated once the shopping centre and all residential high-rise buildings are completed and sold.
The new guidance is:
- Fewer developer-contracted housing units will be completed in 2018 than in the comparison period. It is estimated that a total of 526 housing units will be completed in 2018 (782 in 2017). Although housing will be completed on a steadier schedule in 2018 than in the previous year, a significant part of operating profit will still be made in the second half of the year. In addition, earnings in 2018 will be impacted by the lower-than-expected margins of certain ongoing projects and particularly by the higher-than-expected costs of the REDI shopping centre.
- Full-year consolidated revenue for 2018 is expected to decline compared with 2017 (revenue EUR 1,114.4 million). Operative operating profit is expected to be at loss (operative operating profit EUR 27.0 million).
The earlier guidance, issued on 19 July 2018 was:
- Fewer developer-contracted housing units will be completed in 2018 than in the comparison period. It is estimated that a total of 526 housing units will be completed in 2018 (782 in 2017). Although housing will be completed on a steadier schedule in 2018 than in the previous year, a significant part of operating profit will still be made in the second half of the year. In addition, earnings in 2018 will be impacted by the lower-than-expected margins of certain ongoing projects and particularly by the higher-than-expected costs of the REDI shopping centre.
- Full-year consolidated revenue for 2018 is expected to decline compared with 2017 (revenue EUR 1,114.4 million). Operative operating profit is expected to be lower than in 2017 (operative operating profit EUR 27.0 million).
SRV Group Plc will publish its January – September interim report on Thursday 25 October 2018.
For further information, please contact:
Ilkka Pitkänen, CFO, +358 40 667 0906, ilkka.pitkanen@srv.fi
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