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MerkoEhitu-10001770631-en.pdf
MerkoEhitu-10001770633-et.pdf
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Valuuta
Pealkiri Audited annual report 2018
Tekst
AS Merko Ehitus consolidated audited financial results for 2018 remain unchanged
compared to the preliminary disclosure on 14 February 2019.

STATEMENT OF THE CHAIRMAN OF THE MANAGEMENT BOARD

The  Baltic states' construction sector continued on the rising path in 2018 and
was  one  of  the  main  engines  driving  economic  growth.  We  were among the
beneficiaries  of the  growth in  the construction  market - the group's revenue
increased  over 30 per cent and  crossed the EUR 400 million  mark for the first
time. The foundation for the extraordinarily high construction volumes and rapid
growth  was laid  in the  form of  large-scale construction  contracts concluded
several  years ago. We have never had so many large projects - shopping centres,
offices,  hotels and public buildings  - under construction at  the same time in
all three Baltic states than we did last year.

We  are  glad  that  besides  the  rapid  growth  in  revenue, we also preserved
profitability  - the group's net profit also  grew more than 30 per cent and net
return  on equity was in excess of 15 per  cent, which is the best result in the
last  decade.  The  solid  results  can  be  attributed to the contributions and
professionalism of our employees. We are also grateful to customers and partners
who have put their trust in us.

Construction  is a project-based business where we depend directly on the volume
of  orders on the  market. Looking at  the future, we  must acknowledge that the
rapid  growth  period  is  over  on  the  construction  market  and  a period of
stabilization  and  maybe  even  decline  is  about  to  start. In recent years,
commercial buildings have been built in the Baltics in great numbers and it will
take  time for  the market  to absorb  the accrued  volumes of commercial space.
Construction  has also become much more expensive, among other things because of
rapidly  growing  wages  and  salaries.  This  has  made  real estate developers
cautious  when it comes to launching new  projects. We perceived a clear decline
in  the volume of construction orders already  in the first half of 2018 and the
group's  secured order book decreased by close  to one-third during the year. We
are  prepared to adapt  to the construction  market and our  primary focus is on
operating  profitably.  The  state  remains  an  important  player on the public
building  and infrastructure  field and  we shall  see what  will happen  on the
construction market in two or three years' time, if construction of Rail Baltica
should go ahead.

Alongside  general contracting of  construction, we have  shifted our focus even
more  to apartment  development. Merko's  brand as  a home developer and builder
continues  to be strong  in all of  the Baltic states.  Last year was noteworthy
also  in  the  sense  that  we  launched  construction  of  more  than 1,000 new
apartments  in the  Baltics combined.  That is  almost twice  as many as in past
years.

We  are  confident  in  our  capability  to  create  a  quality,  modern  living
environment  for smaller and larger families,  for younger people and those with
longer  life experience, for higher income segments and more economically minded
home buyers alike. Our apartment development business has a long perspective arc
-  we are ready  to invest and  offer the apartments  that buyers demand in both
market boom periods and more stable phases.

Merko  puts a premium on quality and  trustworthiness. We want to build a better
future  through our main activity and also by giving back to society in general.
We intend to continue working with partners who share our goals and values.

BRIEF OVERVIEW OF 2018

PROFITABILITY
Net  profit  in  2018 was  EUR  19.3 million  (2017:  EUR  14.7 million), having
increased  by 31.6% compared  to last  year. Net  profit margin  attributable to
equity holders of the parent remained at 4.6% (2017: 4.6%). Profit before tax in
2018 was  EUR 19.8 million  (2017: EUR  18.8 million), which  is equivalent to a
profit before tax margin of 4.7% (2017: 5.9%).

REVENUE
Revenue  in  2018 was  EUR  418.0 million  (2017:  EUR 317.6 million), which has
increased by 31.6% compared to last year. The share of revenue earned outside of
Estonia  was 51.5% (2017: 39.9%) and the share  of revenue earned in Estonia was
48.5% (2017: 60.1%).

REAL ESTATE DEVELOPMENT
The  number of apartments  sold in 2018 (482  units, incl. 131 in joint venture)
increased by 23.0% (2017: 392 units, incl. 17 in joint venture). This was due to
an  increase in the number of apartments sold  in the joint project. At the same
time,  the revenue of own developed  apartments has decreased (EUR 41.3 million)
compared  to last year (2017: EUR 47.1 million).  The decrease in revenue was in
addition caused by lower average apartment price compared to 2017.

SECURED ORDER BOOK
In 2018, group companies signed new contracts in the amount of EUR 246.4 million
(2017:  EUR 334.9 million).  As at  31 December 2018, the  group's secured order
book stood at EUR 229.0 million (31 December 2017: EUR 344.4 million).

CASH POSITION
At  the end of the reporting period, the  group had EUR 40.0 million in cash and
cash   equivalents  and  equity  EUR  131.8 million  (48.9%  of  total  assets).
Comparable  figures as at 31 December 2017 were  EUR 39.2 million and EUR 130.2
million  (47.0% of total assets) respectively. As at 31 December 2018, the group
had net debt of EUR 4.2 million (31 December 2017: EUR 20.1 million).

PROPOSAL FOR DISTRIBUTION OF PROFITS
The Management Board proposes to distribute to shareholders EUR 17.7 million
(EUR 1 per share) in dividends from retained earnings in 2019. This is
equivalent to a 92% dividend rate for 2018.

                                                   2018        2017      CHANGE
-------------------------------------------------------------------------------
 Revenue                            million EUR       418.0       317.6  +31.6%
-------------------------------------------------------------------------------
 Operating profit                   million EUR        19.9        19.5   +1.7%
-------------------------------------------------------------------------------
 Operating profit margin            %                   4.8         6.2
-------------------------------------------------------------------------------
 Net profit attributable to equity
 holders of the parent              million EUR        19.3        14.7  +31.6%
-------------------------------------------------------------------------------
 Net margin                         %                   4.6         4.6
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
                                                31.12.2018  31.12.2017  CHANGE
-------------------------------------------------------------------------------
 Equity ratio                       %                  48.9        47.0
-------------------------------------------------------------------------------
 Number of employees                people              764         757   +0.9%
-------------------------------------------------------------------------------

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
in thousand euros

                                                                 2018      2017
-------------------------------------------------------------------------------
 Revenue                                                      418,011   317,598
-------------------------------------------------------------------------------
 Cost of goods sold                                         (384,962) (286,747)
-------------------------------------------------------------------------------
 Gross profit                                                  33,049    30,851
-------------------------------------------------------------------------------
 Marketing expenses                                           (3,285)   (3,215)
-------------------------------------------------------------------------------
 General and administrative expenses                         (12,304)  (11,289)
-------------------------------------------------------------------------------
 Other operating income                                         3,527     3,793
-------------------------------------------------------------------------------
 Other operating expenses                                     (1,115)     (601)
-------------------------------------------------------------------------------
 Operating profit                                              19,872    19,539
-------------------------------------------------------------------------------
 Finance income                                                     8         4
-------------------------------------------------------------------------------
 Finance costs                                                  (696)     (849)
-------------------------------------------------------------------------------
 Profit (loss) from sale and  liquidation of subsidiary          (62)        14
-------------------------------------------------------------------------------
 Profit (loss) from joint ventures                                653        64
-------------------------------------------------------------------------------
 Profit before tax                                             19,775    18,772
-------------------------------------------------------------------------------
 Corporate income tax expense                                   (375)   (3,020)
-------------------------------------------------------------------------------
 Net profit for financial year                                 19,400    15,752
-------------------------------------------------------------------------------
 incl. net profit attributable to equity holders of the
 parent                                                        19,343    14,694
-------------------------------------------------------------------------------
   net profit attributable to non-controlling interest             57     1,058
-------------------------------------------------------------------------------
 Other comprehensive income (loss), which can subsequently
 be classified in the income statement
-------------------------------------------------------------------------------
 Currency translation differences of foreign entities             (6)      (74)
-------------------------------------------------------------------------------
 Comprehensive income for the period                           19,394    15,678
-------------------------------------------------------------------------------
 incl. attributable to equity holders of the parent            19,324    14,637
-------------------------------------------------------------------------------
   attributable to non-controlling interest                        70     1,041
-------------------------------------------------------------------------------
 Earnings per share for profit attributable to equity
 holders of the parent (basic and diluted, in EUR)               1.09      0.83
-------------------------------------------------------------------------------

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
in thousand euros

                                                     31.12.2018 31.12.2017
--------------------------------------------------------------------------
 ASSETS
--------------------------------------------------------------------------
 Current assets
--------------------------------------------------------------------------
 Cash and cash equivalents                               39,978     39,210
--------------------------------------------------------------------------
 Trade and other receivables                             76,183     75,844
--------------------------------------------------------------------------
 Prepaid corporate income tax                               224        492
--------------------------------------------------------------------------
 Inventories                                            117,992    118,421
--------------------------------------------------------------------------
                                                        234,377    233,967
--------------------------------------------------------------------------
 Non-current assets
--------------------------------------------------------------------------
 Investments in joint ventures                              732         79
--------------------------------------------------------------------------
 Other long-term loans and receivables                   10,391     17,163
--------------------------------------------------------------------------
 Deferred income tax assets                                   -          5
--------------------------------------------------------------------------
 Investment property                                     13,771     15,719
--------------------------------------------------------------------------
 Property, plant and equipment                            9,715      9,665
--------------------------------------------------------------------------
 Intangible assets                                          671        497
--------------------------------------------------------------------------
                                                         35,280     43,128
--------------------------------------------------------------------------

--------------------------------------------------------------------------
 TOTAL ASSETS                                           269,657    277,095
--------------------------------------------------------------------------

--------------------------------------------------------------------------
 LIABILITIES
--------------------------------------------------------------------------
 Current liabilities
--------------------------------------------------------------------------
 Borrowings                                              19,900     24,218
--------------------------------------------------------------------------
 Payables and prepayments                                77,016     74,972
--------------------------------------------------------------------------
 Income tax liability                                       381        413
--------------------------------------------------------------------------
 Short-term provisions                                    8,100      4,569
--------------------------------------------------------------------------
                                                        105,397    104,172
--------------------------------------------------------------------------
 Non-current liabilities
--------------------------------------------------------------------------
 Long-term borrowings                                    24,266     35,138
--------------------------------------------------------------------------
 Deferred income tax liability                            1,481      1,259
--------------------------------------------------------------------------
 Other long-term payables                                 2,179      1,789
--------------------------------------------------------------------------
                                                         27,926     38,186
--------------------------------------------------------------------------

--------------------------------------------------------------------------
 TOTAL LIABILITIES                                      133,323    142,358
--------------------------------------------------------------------------

--------------------------------------------------------------------------
 EQUITY
--------------------------------------------------------------------------
 Non-controlling interests                                4,577      4,567
--------------------------------------------------------------------------
 Equity attributable to equity holders of the parent
--------------------------------------------------------------------------
 Share capital                                            7,929      7,929
--------------------------------------------------------------------------
 Statutory reserve capital                                  793        793
--------------------------------------------------------------------------
 Currency translation differences                         (721)      (702)
--------------------------------------------------------------------------
 Retained earnings                                      123,756    122,150
--------------------------------------------------------------------------
                                                        131,757    130,170
--------------------------------------------------------------------------
 TOTAL EQUITY                                           136,334    134,737
--------------------------------------------------------------------------

--------------------------------------------------------------------------
 TOTAL LIABILITIES AND EQUITY                           269,657    277,095
--------------------------------------------------------------------------

AS  Merko Ehitus audited annual report  for 2018 is attached to the announcement
and  is also  published on  NASDAQ Tallinn  and Merko's web page (group.merko.ee
(http://group.merko.ee/en/)).

Andres Trink
Chairman of the Management Board
AS Merko Ehitus
+372 650 1250
andres.trink@merko.ee (mailto:andres.trink@merko.ee)

Priit Roosimägi
Head of Group Finance Unit
AS Merko Ehitus
+372 650 1250
priit.roosimagi@merko.ee (mailto:priit.roosimagi@merko.ee)

AS  Merko Ehitus (group.merko.ee  (http://group.merko.ee/en/)) group consists of
Estonia's  leading  construction  company  AS  Merko  Ehitus Eesti, the Latvian-
market-oriented SIA Merks, UAB Merko Statyba operating on the Lithuanian market,
and the Norwegian construction company Peritus Entreprenør AS. Besides provision
of  construction service as a  main contractor, the group's  other major area of
activity  is apartment  development. As  at the  end of 2018, the group employed
764 people, and the group's revenue for 2018 was EUR 418 million.

Attachment

  * 2018 Merko Ehitus annual report (https://ml-
    eu.globenewswire.com/Resource/Download/ee6ab244-c121-45ac-8940-6e5e4817ca50)