SRV Group Plc launches a recovery programme

SRV GROUP PLC    INSIDE INFORMATION     31 OCTOBER 2019     8.20 EET

SRV Group Plc launches a recovery programme

SRV is launching a recovery programme with the short-term goal of ensuring its operative operating profit and cash flow for 2020 are positive and returning its operative operating profit for 2021 to the level of 2017.

In order to improve its profitability and strengthen its liquidity position, the company will begin a recovery programme focusing on organisation and organisational culture reformation, lightening its balance sheet, strengthening cash flow, and cost savings.

The company continues lightening its balance sheet by selling e.g. completed housing units, plots and investments at an accelerated rate. In addition, the company is exploring opportunities to reduce its ownership in various collaborative projects. The goal is to reduce the balance sheet by EUR 40 million during 2020.

The company’s construction, which has an impact on the balance sheet, will be reduced by shifting production focus from developer-contracted projects to development projects that SRV will sell to the investor before construction begins. The selection of developer-contracted and development projects will be tightened and investments will be focused on fewer potential projects, resulting in annual savings of at least one million euros in project development. In addition, project selection limits the share of high-risk projects in the project portfolio, thereby shifting the tendering activities to profitable projects and healthy volume.

Centralising housing production’s procurement further, strengthening the management of the procurement categories for business construction and increasing the share of international procurement in the total volume play a key role in improving profit. The goal is to achieve savings of several percentage points on the company's purchasing volume of several hundred million euros. In addition, the company seeks annual savings of at least one million euros through indirect purchases and business premise solutions by the end of 2020.

The company plans to renew its operational culture and organisation with the aim of improving the quality and efficiency of its operations.

Due to production and financial reasons as well as possible reorganisation of operations, the company will start co-operation negotiations. The negotiations concern personnel in Finland. The estimated need for personnel reductions is 90 person-years, which corresponds to an annual cost impact of approximately EUR 6 million.