COMMENTARY FROM MANAGEMENT
Second-quarter revenue for Merko Ehitus was EUR 86 million and net profit was
EUR 6.4 million. The revenue for first half increased by 12% to EUR 146 million
and net profit by 19% to EUR 9.8 million. This year, Merko has sold nearly 150
apartments this year and launched the construction of more than 800 apartments.
According to the management of Merko Ehitus, the construction sector is more and
more influenced by the rapid price rise of materials and problems related to
supply, as a result of which the risks related to on-time completion of
construction objects and staying within budget have soared. Considering the
current market situation, the management is satisfied with the results of the
first half of the year. The group's revenue and net profit grew in both Q2 and
in the first half of the year. The number of new construction contracts signed
this year decreased somewhat, while the launch of new apartment development
projects continued, which are not reflected in the portfolio of contracts.
The share of the apartment development sector segment in the group's revenue
decreased in the first half-year due to the time timing of completion of the
development projects. In the first half of the year, almost 150 apartments have
been handed over to buyers and launched the construction of more than 800 new
apartments, of which the majority will be completed in 2022. The number of
apartments under construction is up significantly and apartment sales are going
according to plan - most of the finished apartments have been sold and a large
part of the apartments under construction are reserved under preliminary
contracts of sale. As a whole, the apartment market in the Baltics has been
active this year. Merko's largest apartment development projects were
Noblessner, Uus-Veerenni, Odra, Metsatuka and Lahekalda, in Tallinn; Erminurme,
in Tartu; Viesturd?rzs and Mezhpils?ta, in Riga; and Vilneles Skverai, in
Vilnius.
In Q2, AS Merko Ehitus Eesti entered into a contract for acquiring a 35% holding
in the network construction and maintenance company Connecto Eesti AS, under
which Merko Ehitus Eesti's electrical engineering unit will merge with Connecto
Eesti AS. The management of Merko Ehitus considers that that investments into
energy and communication infrastructure are continuing and Connecto has good
prospects to be a part of these developments.
In Q2 of 2021, Merko entered into new contracts worth EUR 38 million of which
the largest were a contract for the design and construction of the
infrastructure of the Republic of Estonia's southeast land border sections 4-6
and a contract for the construction of St John's School in Tallinn. The Merko
group's secured order book balance grew to EUR 250 million as of the end of the
second quarter.
In the second quarter, the largest objects in Estonia were the third development
phase of the Mustamäe medical campus of the North-Estonia Medical Centre, the
Tallinn School of Music and Ballet, construction on the Liivalaia business and
residential complex and the construction of infrastructure segments of the
Republic of Estonia's southeast land border. In Latvia, the works in progress
were the Orkla wafer and biscuit production plant and NATO facilities in ?dazhi,
and the Kauguri city park and youth house. In Lithuania, infrastructure for a
number of wind farms and the Kaunas district police headquarters building, NATO
barracks and a production building for Continental Automotive.
OVERVIEW OF THE II QUARTER AND 6 MONTHS RESULTS
PROFITABILITY
2021 6 months' pre-tax profit was EUR 10.5 million and Q2 2021 was EUR 6.7
million (6M 2020: EUR 8.8 million and Q2 2020 was EUR 6.7 million), which
brought the pre-tax profit margin to 7.2% (6M 2020: 6.8%).
Net profit attributable to shareholders for 6 months 2021 was EUR 9.8 million
(6M 2020: EUR 8.2 million) and for Q2 2021 net profit attributable to
shareholders was EUR 6.4 million (Q2 2020: EUR 6.2 million). 6 months net profit
margin was 6.7% (6M 2020: 6.3%).
REVENUE
Q2 2021 revenue was EUR 85.8 million (Q2 2020: EUR 73.9 million) and 6 months'
revenue was EUR 145.9 million (6M 2020: EUR 129.7 million). 6 months' revenue
increased by 12.4% compared to same period last year. The share of revenue
earned outside Estonia in 6 months 2021 was 38.0% (6M 2020: 50.3%).
SECURED ORDER BOOK
As of 30 June 2021, the group's secured order book was EUR 249.8 million (30
June 2020: EUR 236.7 million). In 6 months 2021, group companies signed new
contracts in the amount of EUR 135.1 million (6M 2020: EUR 175.1 million). In Q2
2021, new contracts were signed in the amount of EUR 37.8 million (Q2 2020: EUR
87.8 million).
REAL ESTATE DEVELOPMENT
In 6 months 2021, the group sold a total of 145 apartments; in 6 months 2020,
the group sold 369 apartments. The group earned a revenue of EUR 25.8 million
from sale of own developed apartments in 6 months 2021 and EUR 46.0 million in
6 months 2020. In Q2 of 2021 a total of 55 apartments were sold, compared to
236 apartments in Q2 2020, and earned a revenue of EUR 11.0 million from sale of
own developed apartments (Q2 2020: EUR 27.4 million).
CASH POSITION
At the end of the reporting period, the group had EUR 21.7 million in cash and
cash equivalents, and equity of EUR 145.3 million (52.5% of total assets).
Comparable figures as of 30 June 2020 were EUR 23.7 million and EUR 138.4
million (50.3% of total assets), respectively. As of 30 June 2021, the group's
net debt was EUR 16.1 million (30 June 2020: EUR 34.2 million).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros
2021 2020 2021 2020 2020
6 months 6 months II quarter II quarter 12 months
Revenue 145,860 129,733 85,753 73,861 315,918
Cost of goods sold (128,622) (113,250) (75 489) (62,852) (272,169)
Gross profit 17,238 16,483 10 264 11,009 43,749
Marketing expenses (1,830) (1,873) (883) (925) (4,212)
General and
administrative expenses (5,706) (5,393) (2,991) (2,588) (13,412)
Other operating income 1,314 1,122 639 614 2,320
Other operating expenses (93) (1,252) (39) (1,189) (2,979)
Operating profit 10,923 9,087 6,990 6,921 25,466
Finance income/costs (441) (310) (257) (211) (1,009)
incl. finance
income/costs from joint
venture 3 92 (4) 2 (144)
interest expense (316) (330) (170) (158) (719)
foreign exchange gain
(loss) (39) (4) (39) (4) (7)
other financial income
(expenses) (89) (68) (44) (51) (139)
Profit before tax 10,482 8,777 6,733 6,710 24,457
Corporate income tax
expense (856) (786) (427) (648) (1,954)
Net profit for financial
year 9,626 7,991 6,306 6,062 22,503
incl. net profit
attributable to equity
holders of the parent 9,763 8,175 6,395 6,156 22,994
net profit attributable
to non-controlling
interest (137) (184) (89) (94) (491)
Other comprehensive
income, which can
subsequently be
classified in the income
statement
Currency translation
differences of foreign
entities 16 (128) (7) 60 (115)
Comprehensive income for
the period 9,642 7,863 6,299 6,122 22,388
incl. net profit
attributable to equity
holders of the parent 9,779 8,044 6,387 6,221 22,890
net profit attributable
to non-controlling
interest (137) (181) (88) (99) (502)
Earnings per share for
profit attributable to
equity holders of the
parent (basic and
diluted, in EUR) 0.55 0.46 0.36 0.35 1.30
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros
30.06.2021 30.06.2020 31.12.2020
ASSETS
Current assets
Cash and cash equivalents 21,713 23,728 47,480
Trade and other receivables 62,902 44,790 32,657
Prepaid corporate income tax 315 91 306
Inventories 136,605 161,534 126,332
221,535 230,143 206,775
Non-current assets
Investments in joint venture 2,357 2,590 2,354
Other long-term loans and receivables 22,797 14,504 17,979
Deferred income tax assets 842 - 653
Investment property 13,872 13,988 13,922
Property, plant and equipment 14,611 12,996 14,521
Intangible assets 733 686 711
55,212 44,764 50,140
TOTAL ASSETS 276,747 274,907 256,915
LIABILITIES
Current liabilities
Borrowings 9,279 28,011 13,649
Payables and prepayments 77,814 63,243 55,846
Income tax liability 731 912 1,202
Short-term provisions 5,720 5,915 6,347
93,544 98,081 77,044
Non-current liabilities
Long-term borrowings 28,493 29,900 15,409
Deferred income tax liability 1,739 1,650 3,001
Other long-term payables 3,586 2,858 4,026
33,818 34,408 22,436
TOTAL LIABILITIES 127,362 132,489 99,480
EQUITY
Non-controlling interests 4,078 4,036 4,207
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 (798) (841) (814)
Retained earnings 137,383 130,501 145,320
145,307 138,382 153,228
TOTAL EQUITY 149,385 142,418 157,435
TOTAL LIABILITIES AND EQUITY 276,747 274,907 256,915
Interim report is attached to the announcement and is also published on NASDAQ
Tallinn and Merko's web page (group.merko.ee (https://group.merko.ee/en/)).
Urmas Somelar
Head of Group Finance Unit
AS Merko Ehitus
+372 650 1250
urmas.somelar@merko.ee (mailto:urmas.somelar@merko.ee)
AS Merko Ehitus (group.merko.ee (https://group.merko.ee/en/)) 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 general contractor, the group's other major area of activity is
apartment development. As at the end of 2020, the group employed 666 people, and
the group's revenue for 2020 was EUR 316 million.
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