Börsiteade

Pealkiri

2024 9 months and III quarter consolidated unaudited interim report

Teade

COMMENTARY FROM MANAGEMENT

Merko Ehitus revenue for the 9 months of 2024 was EUR 379 million and net profit
was  EUR 44.8 million. Third-quarter revenue was EUR 175 million; net profit EUR
27.3 million.  Sales of construction  services made up  about 90% of the 9-month
revenue.

According  to the management of Merko  Ehitus, the construction of some projects
was  accelerated  at  the  request  of  the  clients,  which  increased  current
construction volumes, helped reduce costs and increase efficiency.  As a result,
Merko  ended the 9 months  with a stronger  result than planned. Group companies
reached  the home stretch for several  large and complex projects, including the
largest  construction project in  Merko's history, Arter  quarter, with close to
80% of  its 150-million-euro volume now completed. One of the Arter buildings is
finished,  interior works on the second building are being completed and work on
the  interior of the highest building is continuing. According to the management
of Merko Ehitus, the group's companies had been conservative in cost forecasting
and  assessment of risks, managed to avoid  realisation of the latter during the
long construction period. Thus,  the sales revenue and profit of several ongoing
projects  budgeted for next year materialised in the current year. Merko secured
order-book  is  at  a  good  level,  remaining  above  more than EUR 400 million
throughout  this year. The market is still tight and competition is intense, and
there  is a  significant increase  in risk  appetite in  the bid  prices of some
construction service providers.

The  company's strong financial position and the launch of fewer new development
projects  have helped  Merko keep  interest costs  low during high-interest-rate
period. The rapid growth of construction prices has subsided and been supplanted
by  a moderate  annual 1-2% growth  as per  earlier forecast.  Until there is no
foreseeable  drop in energy prices  and wages, there is  no reason to expect the
construction  price index to decrease.  An increasingly stronger contribution to
the  group's results comes from the  joint enterprise Connecto Eesti, dealing in
energy  infrastructure construction and maintenance. Connecto's business volumes
are high due to major investments being channelled into this field.

The  results  in  the  real  estate  development business area are, as expected,
significantly  more modest than last year,  but still clearly more positive than
expected  in the start of this year. A  livelier market can be noticed in all of
home markets; with Lithuania clearly standing out with its long-lasting positive
economic  sentiment. Success in apartment sales in Estonia, Latvia and Lithuania
is  quite  clearly  linked  to  consumer  confidence.  The group's management is
moderately  optimistic  about  the  future  and  assesses  Merko's  inventory of
finished  apartments as appropriate  to market needs  - besides apartments under
construction, ready-to-move-in homes can also be purchased.

In  the nine months  of 2024, the group  companies entered into new construction
contracts  worth EUR  292 million and  the secured  order-book as  of the end of
September  stood at EUR 431 million. The largest contracts signed in Q3 were for
the  Tartu mnt 1 office building (the future  headquarters of LHV Group) and the
fourth  stage of  the mainline  of Rail  Baltica in  Harju County  in Estonia; a
student  hotel in Riga, Latvia; and additional  work on a wind farm in Pag?giai,
Lithuania.

The  largest sites  under construction  in Q3  were, in  Estonia, the  TKM Group
logistics  centre,  the  Hampton  by  Hilton  and  Hyatt  hotel buildings, Arter
Quarter,  Estonian Defence Forces  buildings on Ämari  base, a tram line between
Old  City Harbour  and Rail  Baltica Ülemiste  passenger terminal  and the first
stage  of Ülemiste  multimodal transport  junction and  the Rail Baltica's Tõdva
highway  overpasses. In Lithuania, the largest construction sites were wind farm
infrastructure in Kelm?, Pag?giai and Telshiai regions, a substation in Kelm? and
various  national defence buildings and infrastructure.  In Latvia, a solar farm
in V?rme Municipality was under construction.

In the first nine months of current year, Merko has delivered 194 apartments and
11 commercial  units to buyers and invested EUR 31  million into the real estate
business.  As  of  the  end  of  September,  the  group companies had 591 unsold
apartments  which  were  either  ready  or under construction, and 87 apartments
covered  by preliminary sale contracts. Merko  launched the construction of 175
apartments  and sales  in four  projects this  year: a  new phase of Veerenni in
Tallinn,  Õielehe in Jüri, a new phase of Erminurme in Tartu and the first phase
of  Lucavsala in Riga. The largest  development projects under construction were
Uus-Veerenni,   Noblessner   and  Lahekalda  in  Tallinn,  Erminurme  in  Tartu;
Viesturd?rzs,  Mezhpils?ta  and  Magnolijas  in  Riga;  and  Vilnel?s  Skverai in
Vilnius.

OVERVIEW OF THE III QUARTER AND 9 MONTHS RESULTS

PROFITABILITY
2024 9 months'  pre-tax profit  was EUR  49.6 million and  Q3 2024 was EUR 31.3
million  (9M  2023: EUR  33.8 million  and  Q3 2023 was EUR 13.6 million), which
brought the pre-tax profit margin to 13.1% (9M 2023: 10.0%).
Net  profit attributable to shareholders  for 9 months 2024 was EUR 44.8 million
(9M   2023: EUR  32.1 million)  and  for  Q3  2024 net  profit  attributable  to
shareholders  was  EUR  27.3 million  (Q3  2023: EUR 12.7 million). 9 months net
profit margin was 11.8% (9M 2023: 9.5%).

REVENUE
Q3 2024 revenue was EUR 175.1 million (Q3 2023: EUR 122.5 million) and 9 months'
revenue  was EUR  378.7 million (9M  2023: EUR 339.8 million). 9 months' revenue
increased  by  11.4% compared  to  same  period  last year. The share of revenue
earned outside Estonia in 9 months 2024 was 60.1% (9M 2023: 34.5%).

SECURED ORDER BOOK
As  of 30 September 2024, the  group's secured order  book was EUR 430.9 million
(30 September 2023: EUR 448.6 million). In 9 months 2024, group companies signed
contracts in the amount of EUR 292.1 million (9M 2023: EUR 379.4 million). In Q3
2024, new contracts were signed in the amount of EUR 152.6 million (Q3 2023: EUR
124.7 million).

REAL ESTATE DEVELOPMENT
In  9 months 2024, the group sold a  total of 194 apartments; in 9 months 2023,
the  group sold 665 apartments.  The group earned  a revenue of EUR 36.0 million
from  sale of own developed apartments in 9 months 2024 and EUR 106.1 million in
9 months  2023. In Q3  of 2024 a  total of  74 apartments were sold, compared to
153 apartments in Q3 2023, and earned a revenue of EUR 14.6 million from sale of
own developed apartments (Q3 2023: EUR 25.5 million).

CASH POSITION
At  the end of the reporting period, the  group had EUR 61.1 million in cash and
cash  equivalents,  and  equity  of  EUR  234.6 million (51.3% of total assets).
Comparable  figures as of 30 September 2023 were EUR 31.3 million and EUR 198.4
million  (49.7%  of  total  assets),  respectively. As of 30 September 2024, the
group's  net debt was negative EUR 22.2 million (30 September 2023: positive EUR
28.4 million).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros

                             2024      2023         2024         2023      2023
                         9 months  9 months  III quarter  III quarter 12 months

 Revenue                  378,676   339,838      175,108      122,491   466,304

 Cost of goods sold     (315,597) (296,642)    (135,738)    (105,114) (401,267)

 Gross profit              63,079    43,196       39,370       17,377    65,037



 Marketing expenses       (3,366)   (3,013)      (1,073)        (918)   (4,312)

 General and
 administrative
 expenses                (15,115)  (12,896)      (6,485)      (4,635)  (19,423)

 Other operating income     4,965     3,399          572          621     4,171

 Other operating
 expenses                 (2,512)     (614)         (46)        (467)     (991)

 Operating profit          47,051    30,072       32,338       11,978    44,482



 Finance income/costs       2,524     3,765      (1,071)        1,639     7,500

 incl. finance
 income/costs from
 investments in
 subsidiaries             (3,119)         -      (3,119)            -         -

 finance income/costs
 from joint ventures        6,634     6,061        2,979        2,242    10,220

 interest expense         (1,469)   (2,011)        (353)        (674)   (2,697)

 foreign exchange gain
 (loss)                     (931)     (192)        (875)           98     (153)

 other financial income
 (expenses)                 1,409      (93)          297         (27)       130

 Profit before tax         49,575    33,837       31,267       13,617    51,982



 Corporate income tax
 expense                  (4,867)   (1,827)      (4,004)        (898)   (6,081)



 Net profit for
 financial year            44,708    32,010       27,263       12,719    45,901

 incl. net profit
 attributable to equity
 holders of the parent     44,781    32,148       27,302       12,698    46,048

 net profit
 attributable to non-
 controlling interest        (73)     (138)         (39)           21     (147)



 Other comprehensive
 income, which can
 subsequently be
 classified in the
 income statement

 Currency translation
 differences of foreign
 entities                     129      (16)          105         (88)      (41)

 Comprehensive income
 for the period            44,837    31,994       27,368       12,631    45,860

 incl. net profit
 attributable to equity
 holders of the parent     44,902    32,116       27,401       12,626    45,993

 net profit
 attributable to non-
 controlling interest        (65)     (122)         (33)            5     (133)

 Earnings per share for
 profit attributable to
 equity holders of the
 parent (basic and
 diluted, in EUR)            2.53      1.82         1.54         0.72      2.60



CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros

                                               30.09.2024 30.09.2023 31.12.2023

 ASSETS

 Current assets

 Cash and cash equivalents                         61,115     31,282     77,330

 Short-term deposits                                5,000          -          -

 Trade and other receivables                      108,930     86,895     68,754

 Prepaid corporate income tax                         377          2          2

 Inventories                                      199,628    206,603    195,435

                                                  375,050    324,782    341,521

 Non-current assets

 Investments in joint ventures                     25,549     17,756     21,915

 Other shares and securities                           80         80         80

 Other long-term loans and receivables             21,580     21,104     24,490

 Deferred income tax assets                         5,849      1,852      3,298

 Investment property                               12,645     15,534     16,823

 Property, plant and equipment                     16,609     17,238     16,613

 Intangible assets                                    466        508        520

                                                   82,778     74,072     83,739



 TOTAL ASSETS                                     457,828    398,854    425,260



 LIABILITIES

 Current liabilities

 Borrowings                                        11,541     23,325     19,673

 Payables and prepayments                         161,699    124,285    133,898

 Income tax liability                               6,838      1,846      4,260

 Short-term provisions                              7,325     10,268     10,451

                                                  187,403    159,724    168,282

 Non-current liabilities

 Long-term borrowings                              27,357     36,377     35,142

 Deferred income tax liability                      1,715      1,878      4,441

 Other long-term payables                           6,925      2,841      5,495

                                                   35,997     41,096     45,078



 TOTAL LIABILITIES                                223,400    200,820    213,360



 EQUITY

 Non-controlling interests                          (220)      (380)      (155)

 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                    (16)      (815)      (838)

 Retained earnings                                225,942    190,507    204,171

                                                  234,648    198,414    212,055

 TOTAL EQUITY                                     234,428    198,034    211,900



 TOTAL LIABILITIES AND EQUITY                     457,828    398,854    425,260

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 Finance
AS Merko Ehitus
+372 650 1250
[email protected] (mailto:[email protected])

AS Merko Ehitus (group.merko.ee (https://group.merko.ee/en/)) group companies
construct buildings and infrastructure and develop real estate. We create a
better living environment and build the future. We operate in Estonia, Latvia
and Lithuania. As at the end of 2023, the group employed 635 people, and the
group's revenue for 2023 was EUR 466 million.