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
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Revenue million EUR 418.0 317.6 +31.6%
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Operating profit million EUR 19.9 19.5 +1.7%
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Operating profit margin % 4.8 6.2
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Net profit attributable to equity
holders of the parent million EUR 19.3 14.7 +31.6%
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Net margin % 4.6 4.6
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31.12.2018 31.12.2017 CHANGE
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Equity ratio % 48.9 47.0
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Number of employees people 764 757 +0.9%
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
in thousand euros
2018 2017
-------------------------------------------------------------------------------
Revenue 418,011 317,598
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Cost of goods sold (384,962) (286,747)
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Gross profit 33,049 30,851
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Marketing expenses (3,285) (3,215)
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General and administrative expenses (12,304) (11,289)
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Other operating income 3,527 3,793
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Other operating expenses (1,115) (601)
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Operating profit 19,872 19,539
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Finance income 8 4
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Finance costs (696) (849)
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Profit (loss) from sale and liquidation of subsidiary (62) 14
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Profit (loss) from joint ventures 653 64
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Profit before tax 19,775 18,772
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Corporate income tax expense (375) (3,020)
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Net profit for financial year 19,400 15,752
-------------------------------------------------------------------------------
incl. net profit attributable to equity holders of the
parent 19,343 14,694
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net profit attributable to non-controlling interest 57 1,058
-------------------------------------------------------------------------------
Other comprehensive income (loss), which can subsequently
be classified in the income statement
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Currency translation differences of foreign entities (6) (74)
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Comprehensive income for the period 19,394 15,678
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incl. attributable to equity holders of the parent 19,324 14,637
-------------------------------------------------------------------------------
attributable to non-controlling interest 70 1,041
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Earnings per share for profit attributable to equity
holders of the parent (basic and diluted, in EUR) 1.09 0.83
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
in thousand euros
31.12.2018 31.12.2017
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ASSETS
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Current assets
--------------------------------------------------------------------------
Cash and cash equivalents 39,978 39,210
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Trade and other receivables 76,183 75,844
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Prepaid corporate income tax 224 492
--------------------------------------------------------------------------
Inventories 117,992 118,421
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234,377 233,967
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Non-current assets
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Investments in joint ventures 732 79
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Other long-term loans and receivables 10,391 17,163
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Deferred income tax assets - 5
--------------------------------------------------------------------------
Investment property 13,771 15,719
--------------------------------------------------------------------------
Property, plant and equipment 9,715 9,665
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Intangible assets 671 497
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35,280 43,128
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TOTAL ASSETS 269,657 277,095
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LIABILITIES
--------------------------------------------------------------------------
Current liabilities
--------------------------------------------------------------------------
Borrowings 19,900 24,218
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Payables and prepayments 77,016 74,972
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Income tax liability 381 413
--------------------------------------------------------------------------
Short-term provisions 8,100 4,569
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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
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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
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Statutory reserve capital 793 793
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Currency translation differences (721) (702)
--------------------------------------------------------------------------
Retained earnings 123,756 122,150
--------------------------------------------------------------------------
131,757 130,170
--------------------------------------------------------------------------
TOTAL EQUITY 136,334 134,737
--------------------------------------------------------------------------
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TOTAL LIABILITIES AND EQUITY 269,657 277,095
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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)
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