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Long-term financial objectives of AS Merko Ehitus until 2018

Teade

Tallinn, Estonia, 2013-04-09 15:01 CEST (GLOBE NEWSWIRE) --


At the meeting held on 8 April 2013, the Management Board and the Supervisory
Board of AS Merko Ehitus reviewed the company’s strategic development
directions and approved long-term financial objectives until 2018. 

The Supervisory Board admitted that the financial objectives established in
2010 in regard to the share of revenue earned outside Estonia and return on
equity have not been achieved in the past three years. 

Considering the weak growth perspective of the Baltic construction and real
estate market in the coming few years, the overall low interest environment and
the company’s high equity base, the strategy and the financial objectives are
focussed on improving the return on invested capital and increasing the
efficiency of the balance structure. Among other things, the objectives
include: 

  -- To gradually reduce the percentage of immovable properties in the company’s
     assets;
  -- To increase the rate of dividends from the current average of 20%, provided
     that there are sufficient financial resources for financing core activities
     and making investments;
  -- To find additional sources of revenue besides construction and real estate
     development in order to balance the negative effects of the economic cycle
     and reduce dependence on public procurements, as well as to find
     possibilities for acquiring strategic holdings in companies strengthening
     the growth prospects of AS Merko Ehitus.

The objectives are based on the following assumptions concerning the external
environment: 

  -- The Baltic construction market will not experience considerable growth in
     the coming two years;
  -- The share of public procurements in construction contracts will remain
     high, but their volume will temporarily decrease as of the second half of
     2013 due to the end of the current EU funding period. On the whole, the
     financial resources allocated to economy will remain at the same level in
     the new EU funding period (2014-2020), but the structure thereof will
     change. The activity of private clients in developing and launching larger
     construction projects will recover slowly.
  -- The number of service providers in the construction sector exceeds the
     demand and there is still a surplus capacity of property, plant and
     equipment. The tightening competition in the construction market puts
     increasing pressure on the profit margins of construction companies.
  -- The Baltic apartment market will continue to see a moderate growth in
     transaction activity and prices, particularly in capital cities.

The long-term financial objectives of AS Merko Ehitus cover the period until
2018 and will be reviewed annually based on the market situation, the company’s
financial standing and strategy: 

  -- The minimum period average return on equity (ROE): 10%
  -- Dividend pay-out ratio: 50-70% of the annual profit
  -- Equity ratio: at least 40%


Andres Trink
Chairman of Management Board of AS Merko Ehitus
+372 650 1250
[email protected]