Merko Ehitus : 2020 9 months and III quarter consolidated unaudited interim report
November 05, 2020 at 01:01 am EST
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COMMENTARY FROM MANAGEMENT
Merko Ehitus posted revenue of EUR 79.7 million and a net profit of EUR 4.9 million in the third quarter of 2020, the respective growth were 8.6% and 92%. The group’s 9-month revenue amounted to EUR 209 million and net profit to EUR 13.1 million. In 9 months of 2020, Merko sold 534 apartments.
The majority of group’s profit has come from the sale of apartments in previously launched projects. Merko sold the most apartments in Vilnius, where the good work done in the last couple of years has borne fruit. The share of apartment development in Merko’s business has grown – therefore, the quarterly results may vary considerably, depending on when the projects are finished.
In the first 9 months of 2020, Merko’s sales revenue in the area of real estate development grew more than three times compared to the same period in the preceding year, and the number of apartments sold increased more than 2.5 times. The largest apartment development projects include Uus-Veerenni, Lahekalda and Pikaliiva in Tallinn, Gaiļezers and Viesturdārzs in Riga, and Vilneles Slenis and Rinktinės Urban in Vilnius.
The majority of construction contracts concluded in 9 months are public procurements. According to the management, there will be no increase in the orders in the Baltic construction market in the coming 12 months. The group’s companies concluded new contracts for EUR 248 million in the first 9 months of 2020 and for EUR 72.9 million in the third quarter. The largest of those were the establishment of the third stage of the Mustamäe medical campus of the North Estonia Medical Centre, the renovation of Nordic Hotel Forum and Tallink City Hotel in Estonia and the construction of the Orkla waffle and biscuit factory in Ādaži as well as a kindergarten in Salaspils, both in Latvia. As at the end of September, the group’s secured order book balance was EUR 251.2 million.
In the third quarter, the largest projects in progress were the Tallinn School of Music and Ballet, the Arte Gymnasium, Terminal D parking house at the Tallinn passenger port, a data centre in Harju County, the reconstruction of Aaspere-Haljala road section, and the design and construction of the infrastructure of the Republic of Estonia’s southeast land border. In Latvia, work continued on the school building and dormitory in Pinki and Lidl logistics centre as well as the reconstruction of the Riga Technical University Civil Engineering Faculty building. In Lithuania, the major ongoing projects included Hotel Neringa in Vilnius, wind park infrastructure facilities in Telšiai district, and, in Kaunas, the district police headquarter building and NATO barracks.
OVERVIEW OF THE III QUARTER AND 9 MONTHS RESULTS
PROFITABILITY 2020 9 months’ profit before tax was EUR 13.9 million and Q3 2020 was EUR 5.1 million (9M 2019: EUR 10.3 million and Q3 2019 was EUR 2.8 million), which brought the profit before tax margin to 6.6% (9M 2019: 4.5%). Net profit attributable to equity holders of the parent in 9 months 2020 was EUR 13.1 million (9M 2019: EUR 7.0 million) and Q3 2020 net profit attributable to equity holders of the parent was EUR 4.9 million (Q3 2019: EUR 2.5 million). 9 months net profit margin was 6.2% (9M 2019: 3.1%). Compared to 9 months 2020, the net profitability of 2019 was influenced by, among other things, a significantly increased income tax expense: in Q2, the group’s income tax expense on paid dividends was EUR 2.7 million. In 2020, the group’s parent company has not paid dividends.
REVENUE Q3 2020 revenue was EUR 79.7 million (Q3 2019: EUR 73.4 million) and 9 months’ revenue was EUR 209.5 million (9M 2019: EUR 227.6 million). 9 months’ revenue decreased by 8.0% compared to same period last year. The share of revenue earned outside Estonia in 9 months 2020 was 47.6% (9M 2019: 53.2%).
SECURED ORDER BOOK As at 30 September 2020, the group’s secured order book was EUR 251.2 million (30 September 2019: EUR 152.2 million). In 9 months 2020, group companies signed new contracts in the amount of EUR 248.0 million (9M 2019: EUR 127.6 million). In Q3 2020, new contracts were signed in the amount of EUR 72.9 million (Q3 2019: EUR 41.6 million).
REAL ESTATE DEVELOPMENT In 9 months 2020, the group sold a total of 534 apartments (incl. 3 apartments in a joint venture); in 9 months 2019, the group sold 206 apartments (incl. 36 apartments in a joint venture). The group earned a revenue of EUR 67.0 million from sale of own developed apartments in 9 months 2020 and EUR 20.2 million in 9 months 2019. In Q3 of 2020 a total of 165 apartments (incl. 1 apartment in a joint venture) were sold, compared to 106 apartments (incl. 3 apartments in a joint venture) in Q3 2019, and earned a revenue of EUR 21.0 million from sale of own developed apartments (Q3 2019: EUR 10.9 million).
CASH POSITION At the end of the reporting period, the group had EUR 25.4 million in cash and cash equivalents, and equity of EUR 143.3 million (53.0% of total assets). Comparable figures as at 30 September 2019 were EUR 13.4 million and EUR 121.1 million (39.4% of total assets), respectively. As at 30 September 2020, the group’s net debt stood at EUR 25.2 million (30 September 2019: EUR 71.0 million).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME unaudited in thousand euros
2020 9months
2019 9months
2020 IIIquarter
2019 IIIquarter
2019 12months
Revenue
209,480
227,620
79,747
73,418
326,779
Cost of goods sold
(184,268)
(206,723)
(71,018)
(67,191)
(291,958)
Gross profit
25,212
20,897
8,729
6,227
34,821
Marketing expenses
(3,157)
(2,626)
(1,284)
(842)
(4,260)
General and administrative expenses
(8,148)
(8,841)
(2,755)
(2,600)
(12,988)
Other operating income
1,714
1,740
592
510
2,983
Other operating expenses
(1,316)
(1,222)
(64)
(969)
(1,318)
Operating profit
14,305
9,948
5,218
2,326
19,238
Finance income/costs
(432)
363
(122)
460
1,085
incl. finance income/costs from joint venture
204
845
112
642
1,766
interest expense
(530)
(471)
(200)
(185)
(656)
foreign exchange gain (loss)
(12)
-
(8)
4
-
other financial income (expenses)
(94)
(11)
(26)
(1)
(25)
Profit before tax
13,873
10,311
5,096
2,786
20,323
Corporate income tax expense
(1,227)
(2,983)
(441)
(95)
(3,833)
Net profit for financial year
12,646
7,328
4,655
2,691
16,490
incl. net profit attributable to equity holders of the parent
13,071
7,003
4,896
2,550
16,270
net profit attributable to non-controlling interest
(425)
325
(241)
141
220
Other comprehensive income, which can subsequently be classified in the income statement
Currency translation differences of foreign entities
(117)
(10)
11
(39)
13
Comprehensive income for the period
12,529
7,318
4,666
2,652
16,503
incl. net profit attributable to equity holders of the parent
12,939
7,002
4,895
2,522
16,281
net profit attributable to non-controlling interest
(410)
316
(229)
130
222
Earnings per share for profit attributable to equity holders of the parent (basic and diluted, in EUR)
0.74
0.40
0.28
0.14
0.92
CONSOLIDATED STATEMENT OF FINANCIAL POSITION unaudited in thousand euros
30.09.2020
30.09.2019
31.12.2019
ASSETS
Current assets
Cash and cash equivalents
25,353
13,355
24,749
Trade and other receivables
44,518
72,280
50,413
Prepaid corporate income tax
91
94
104
Inventories
153,433
183,056
166,226
223,395
268,785
241,492
Non-current assets
Investments in joint venture
2,702
1,577
2,498
Other long-term loans and receivables
16,238
10,590
11,094
Investment property
13,955
14,077
14,047
Property, plant and equipment
13,152
11,336
11,919
Intangible assets
664
777
777
46,711
38,357
40,335
TOTAL ASSETS
270,106
307,142
281,827
LIABILITIES
Current liabilities
Borrowings
24,221
41,750
20,725
Payables and prepayments
60,916
84,643
69,585
Income tax liability
1,325
309
812
Short-term provisions
5,775
7,675
7,976
92,237
134,377
99,098
Non-current liabilities
Long-term borrowings
26,365
42,571
43,001
Deferred income tax liability
1,635
1,589
1,682
Other long-term payables
2,785
2,653
3,491
30,785
46,813
48,174
TOTAL LIABILITIES
123,022
181,190
147,272
EQUITY
Non-controlling interests
3,807
4,893
4,217
Equity attributable to equity holders of the parent
Share capital
7,929
7,929
7,929
Statutory reserve capital
793
793
793
Currency translation differences
(842)
(722)
(710)
Retained earnings
135,397
113,059
122,326
143,277
121,059
130,338
TOTAL EQUITY
147,084
125,952
134,555
TOTAL LIABILITIES AND EQUITY
270,106
307,142
281,827
Interim report is attached to the announcement and are also published on NASDAQ Tallinn and Merko’s web page (group.merko.ee).
Priit Roosimägi Head of Group Finance Unit AS Merko Ehitus +372 650 1250 priit.roosimagi@merko.ee
AS Merko Ehitus (group.merko.ee) group consists of AS Merko Ehitus Eesti in Estonia, SIA Merks in Latvia, UAB Merko Statyba in Lithuania and Peritus Entreprenør AS in Norway. Besides providing construction service as a main contractor, the group’s other major area of activity is apartment development. As at the end of 2019, the group employed 694 people, and the group’s revenue for 2019 was EUR 327 million.
Merko Ehitus AS is an Estonia-based holding company engaged in the construction industry sector. Through its subisidaries the Company focuses on construction of buildings, facilities and roads. In addition, it is also engaged in the real estate sector, which is based on the Companyâs own real estate development, including construction and sale, as well as maintenance and leasing of real estate. Merko Ehitus AS is active domestically and abroad in Latvia and Lithuania. The Company operates through 35 subsidiaries, five associates and joint ventures, such as SIA Merks, UAB Merko Statyba, AS Merko Infra, Tallinna Teede As and AS Gustaf, among others.