2021 3 months consolidated unaudited interim report
COMMENTARY FROM MANAGEMENT
In Q1 2021, Merko Ehitus posted revenue of EUR 60 million and net profit of EUR 3.4 million, increasing by 7% and 67%, respectively, compared to the previous year. In three months, Merko sold 90 apartments and started construction of more than 560 apartments. The volume of the new construction contracts and secured order book also increased in the first quarter.
The management of Merko Ehitus is satisfied with the financial results of the first quarter. Despite the lack of new commercial real estate projects, the construction market in the Baltic Republics is currently quite active. At the same time, prospects remain unclear due to the continuing pandemic and the global rise in material prices.
In the first quarter, Merko sold 90 apartments in Tallinn, Tartu, Riga and Vilnius. The apartment market is relatively active in all three Baltic capitals. In the first quarter Merko group launched construction work on six development projects with a total of 567 apartments and 20 commercial premises. Most of the apartments under construction and for sale today will be completed in 2022. Merko’s largest apartment development projects were Noblessner, Uus-Veerenni, Metsatuka, Lahekalda and Pikaliiva, in Tallinn; Gaiļezers and Viesturdārzs, in Riga; and Vilneles Skverai, in Vilnius.
In Q1 2021, Merko entered into new contracts worth 97 million euros, the largest of which were for the construction of the second development phase of Noblessner and the Liivalaia Quarter, in Estonia, and for the construction of Tondiraba Park. The group’s companies signed in Latvia a contract for the construction of Kauguri City Park and Youth House, as well as in Lithuania a production building in Kaunas and a car maintenance centre in Vilnius. As at the end of the first quarter, the secured order book increased by 45% year-on-year to 281 million euros.
In the first 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, the renovation of the Nordic Hotel Forum and Tallink City Hotel, and the design and construction of infrastructure of the Republic of Estonia’s southeast land border. In Latvia, the construction of the Orkla waffle and biscuit factory, in Ādaži, and the reconstruction of the Riga University of Technology faculty building were in progress; in Lithuania, construction of wind farm infrastructure facilities in the Telšiai district, the Kaunas district police headquarters building, and NATO barracks were in progress.
OVERVIEW OF THE 3 MONTHS RESULTS
PROFITABILITY
2021 3 months’ profit before tax was EUR 3.7 million (3M 2020: EUR 2.1 million), which brought the profit before tax margin to 6.2% (3M 2020: 3.7%).
Net profit attributable to equity holders of the parent in 3 months 2021 was EUR 3.4 million (3M 2020: EUR 2.0 million) and 3 months net profit margin was 5.6% (3M 2020: 3.6%).
REVENUE
2021 3 months’ revenue was EUR 60.1 million (3M 2020: EUR 55.9 million). 3 months’ revenue increased by 7.6% compared to same period last year. The share of revenue earned outside Estonia in 3 months 2021 was 36.9% (3M 2020: 53.5%).
SECURED ORDER BOOK
As at 31 March 2021, the group’s secured order book was EUR 281.2 million (31 March 2020: EUR 193.0 million). In 3 months 2021, group companies signed new contracts in the amount of EUR 97.4 million (3M 2020: EUR 87.2 million).
REAL ESTATE DEVELOPMENT
In 3 months 2021, the group sold a total of 90 apartments (incl. 1 apartments in a joint venture); in 3 months 2020, the group sold 133 apartments (incl. 2 apartments in a joint venture). The group earned a revenue of EUR 14.8 million from sale of own developed apartments in 3 months 2021 and EUR 18.6 million in 3 months 2020.
CASH POSITION
At the end of the reporting period, the group had EUR 54.8 million in cash and cash equivalents, and equity of EUR 156.6 million (58.1% of total assets). Comparable figures as at 31 March 2020 were EUR 37.1 million and EUR 132.2 million (45.7% of total assets), respectively. As at 31 March 2021, the group’s net debt was EUR -22.4 million (negative) (31 March 2020: EUR 29.8 million).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros
| 2021 3 months | 2020 3 months | 2020 12 months | |
| Revenue | 60,107 | 55,872 | 315,918 |
| Cost of goods sold | (53,133) | (50,398) | (272,169) |
| Gross profit | 6,974 | 5,474 | 43,749 |
| Marketing expenses | (947) | (948) | (4,212) |
| General and administrative expenses | (2,715) | (2,805) | (13,412) |
| Other operating income | 675 | 508 | 2,320 |
| Other operating expenses | (54) | (63) | (2,979) |
| Operating profit | 3,933 | 2,166 | 25,466 |
| Finance income/costs | (184) | (99) | (1,009) |
| incl. finance income/costs from joint venture | 7 | 90 | (144) |
| interest expense | (146) | (172) | (719) |
| foreign exchange gain (loss) | - | - | (7) |
| other financial income (expenses) | (45) | (17) | (139) |
| Profit before tax | 3,749 | 2,067 | 24,457 |
| Corporate income tax expense | (429) | (138) | (1,954) |
| Net profit for financial year | 3,320 | 1,929 | 22,503 |
| incl. net profit attributable to equity holders of the parent | 3,368 | 2,019 | 22,994 |
| net profit attributable to non-controlling interest | (48) | (90) | (491) |
| Other comprehensive income, which can subsequently be classified in the income statement | |||
| Currency translation differences of foreign entities | 23 | (188) | (115) |
| Comprehensive income for the period | 3,343 | 1,741 | 22,388 |
| incl. net profit attributable to equity holders of the parent | 3,392 | 1,823 | 22,890 |
| net profit attributable to non-controlling interest | (49) | (82) | (502) |
| Earnings per share for profit attributable to equity holders of the parent (basic and diluted, in EUR) | 0.19 | 0.11 | 1.30 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros
| 31.03.2021 | 31.03.2020 | 31.12.2020 | |
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 54,792 | 37,056 | 47,480 |
| Trade and other receivables | 35,362 | 42,133 | 32,657 |
| Prepaid corporate income tax | 320 | 91 | 306 |
| Inventories | 126,748 | 168,833 | 126,332 |
| 217,222 | 248,113 | 206,775 | |
| Non-current assets | |||
| Investments in joint venture | 2,361 | 2,588 | 2,354 |
| Other long-term loans and receivables | 20,457 | 11,991 | 17,979 |
| Deferred income tax assets | 623 | - | 653 |
| Investment property | 13,897 | 14,021 | 13,922 |
| Property, plant and equipment | 14,484 | 11,699 | 14,521 |
| Intangible assets | 721 | 724 | 711 |
| 52,543 | 41,023 | 50,140 | |
| TOTAL ASSETS | 269,765 | 289,136 | 256,915 |
| LIABILITIES | |||
| Current liabilities | |||
| Borrowings | 13,626 | 21,496 | 13,649 |
| Payables and prepayments | 63,196 | 73,488 | 55,846 |
| Income tax liability | 1,429 | 816 | 1,202 |
| Short-term provisions | 5,366 | 6,866 | 6,347 |
| 83,617 | 102,666 | 77,044 | |
| Non-current liabilities | |||
| Long-term borrowings | 18,767 | 45,355 | 15,409 |
| Deferred income tax liability | 3,032 | 1,655 | 3,001 |
| Other long-term payables | 3,570 | 3,164 | 4,026 |
| 25,369 | 50,174 | 22,436 | |
| TOTAL LIABILITIES | 108,986 | 152,840 | 99,480 |
| EQUITY | |||
| Non-controlling interests | 4,159 | 4,135 | 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 | (790) | (906) | (814) |
| Retained earnings | 148,688 | 124,345 | 145,320 |
| 156,620 | 132,161 | 153,228 | |
| TOTAL EQUITY | 160,779 | 136,296 | 157,435 |
| TOTAL LIABILITIES AND EQUITY | 269,765 | 289,136 | 256,915 |
Interim report is attached to the announcement and is also published on NASDAQ Tallinn and Merko’s web page ().
Priit Roosimägi
Head of Group Finance Unit
AS Merko Ehitus
AS Merko Ehitus () 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 main 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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