SRV Juha Pekka Ojala

Fantastic year of renewal and growth

CEO reviews usually end with words of gratitude to all stakeholders, but this year I want to start off by saying thanks. Thank you to our customers for your outstanding projects, open collaboration, and above all, valuable feedback. Genuine collaboration and an open dialogue are the only ways to improve and advance business in the right direction. Thank you to our investors and financers for your trust and constructive discussions as we work together to advance all our projects – from the small ones to those that by all measures, including our own, are mega-sized. Thank you to our personnel for the enthusiasm and professionalism you show in your work and for your ability to challenge and question the way we work – it further improves our operations. I am proud of the fact that you also consider SRV to be Finland's 11th most inspiring workplace.

We do this work together with our stakeholders, and we too, are occasionally astonished by the size of the group of people who are impacted by our work, both in the development and construction phases. Not to mention when buildings are finished and they become a vibrant part of the community. That is what this construction is all about – building tomorrow's society.

All in all, there were many things worthy of praise in 2015. The words renewal and growth could also be used to describe the year because SRV recorded many historically significant achievements. Finland's biggest ever city construction project – and also SRV’s biggest ever – construction project, REDI, finally reached full speed in April. Construction is progressing as planned, and the project has been very well received.

Another historically significant achievement is our order backlog, which nearly doubled. New records were set in every quarter, and the value of our order backlog at year-end was close to a staggering EUR 1.6 billion. An excellent performance from our entire team and, above all, an unprecedented indication of the broad recognition of our professionalism. Along with the REDI project, some of the other biggest construction projects I want to highlight include the expansion of Tampere University Hospital, the Niittykumpu Metro Centre, the Tapiola urban development project, the New Children's Hospital, and the renovation of Helsinki City Theatre. Projects in the development and negotiation pipeline and awaiting implementation include Kivenlahti Metro Centre in Espoo, Kerava city centre, Bunkkeri and Wood City in Helsinki Jätkäsaari district, Perkkaa in Espoo and Hanhikivi-1 nuclear power plant project, as well as Tampere Central deck and Arena project.

In addition to the order backlog, the development in revenue has been positive – although with respect to our strategic profitability objective we are in the halfway. In fact, 2016 will have numerous projects and actions aiming to improve profitability and the cost efficiency of projects. The result is unevenly distributed between quarters and mostly weighted to the latter part of the year; this is solely due to the fact that residential development and developer-contracted projects are recognised as revenue on a percentage of completion basis. The same trend will continue also this year because the numerous housing start-ups will be recognised in the result at the end of 2016 at the earliest.

Many significant projects were completed during the year and several of them, I am pleased to say, with excellent customer feedback. A couple of these include the ongoing Koivusaari metro station project in Helsinki, which, deservedly so, earned Site of the Year 2015 award, and Jorvi Hospital emergency care building in Espoo, which was given the HURRAA award by the Building Control Committee of the city of Espoo.

In 2015, SRV proved once and for all that it has established a permanent position at the forefront of housing construction. SRV is one of the Helsinki metropolitan area's largest housing constructors in the consumer markets. SRV currently has almost 1,900 housing units under construction, which is over 200 units more than a year ago. At the same time, the focus has shifted more strongly to developer-contracting projects i.e. apartments directly targeted at the consumer market, which will be seen as improved profitability. The same strong trend will continue. There will be up to 3,500 housing units in the development pipeline in the coming years, and our goal is to build 15,000-20,000 new homes in the next ten years.

While work continued at full throttle on our approximate 80 construction sites, numerous new projects were also under development. One of the projects under development at the end of the year was Bunkkeri, in which we are helping to give a brand-new lease of life to a warehouse building in the Jätkäsaari district of Helsinki. This new entity comprises a swimming hall and sports facilities, as well as apartments rising above them, offering amazing views. New projects also include the Kivenlahti Metro Centre in Espoo, which we are participating in as a developer, and the Keilaniemi Ring Road I project in Espoo, in which SRV Infra is responsible for moving the Ring Road I into a concrete tunnel and building a green deck over it. The launch of the construction will be a significant step for the entire Keilaniemi project.

It is likely that big projects will not be limited only to the Helsinki metropolitan area in the years to come. In Tampere, we will start advancing the unique Tampere Central Deck and Arena project worth 500 million euros. The Finnish biggest multi-purpose area will combine restaurants, a hotel and residential towers. The investor negotiations continue at full speed and the final decision for the implementation of the unique complex to be built over the existing railroad is likely to be made during summer. When we add to this the numerous other projects under development, e.g. along the Western Metro line, I must say that I am more than excited about the years ahead.

One of the year's important events is related to our strategy work which started in autumn 2015. The final result, which contains a new vision, three strategic objectives and six strategic development programmes, is an excellent mark of our current management's and the entire organisation's ability to cooperate and achieve renewal. The majority of our development programmes are already fully underway, and we will be closely monitoring their progress. Our main focal points during 2016 will be development of profitability and the customer experience, as well as our sustainability and our management principles.

The situation in Russia faces a lot of uncertainty, but we have a firm belief in our strategy for Russia. The Okhta Mall shopping centre under construction in St. Petersburg will open its doors in August this year and leasing is progressing according to schedule. Success is continuing for our other important project, the Pearl Plaza shopping centre, opened in August 2013. The shopping centre attracted over one million more visitors in 2015 than in the previous year and the sales in roubles increased by 25 per cent. Pearl Plaza was also showered with numerous awards in 2015, including the Best Medium-sized Shopping Centre 2015 and honourable mention in the 2015 Golden Brick Award, one of the most highly esteemed awards in the Russian real estate industry. It's obvious that we won't actively be seeking new projects in the current climate; but focus on the construction of existing projects and our strengths in shopping centre management.

Committed shareholders played a significant role last year and will do so again this year. Late summer's share issue was a resounding success. One way in which we thank our shareholders for their commitment is stable dividend policy during the past years. By applying a combination of committed shareholders, skilled and motivated personnel, and our updated vision and strategic objectives to our many challenging – yet therefore even more rewarding – construction projects, we can expect 2016 to be a busy, interesting, and despite the challenging market environment, above all, successful year.


Juha Pekka Ojala