Tallinn, Estonia, 2014-11-06 15:30 CET (GLOBE NEWSWIRE) --
MANAGEMENT REPORT
Overview of the 9 months and III quarter results
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REVENUE Revenue in 9M 2014 was EUR 182.2 million (9M 2013: EUR 197.8 million), which has decreased by 7.9% compared to the same period last year. Q3 revenue was EUR 68.5 million (Q3 2013: EUR 84.1 million). The share of revenue earned outside of Estonia has incresed in 9M 2014 to 31.5% (9M 2013: 17.4%) and the number of apartments sold in 9 months of 2014 (235 pcs, revenues of EUR 23.8 million) has increased by 42.4% (9 months of 2013: 165 apartments, revenues of EUR 17.4 million). PROFITABILITY Gross margin in 9M was 8.9% (9M 2013: 8.8%), which has increased by 1.6% compared to the same period last year. Net margin increased to 4.2% (9M 2013: 4.0%). Net profit in 9M was EUR 7.6 million (9M 2013: EUR 7.9 million). Q3 net profit was EUR 3.3 million (Q3 2013: EUR 3.9 million). CASH POSITION At the end of the reporting period, the group had EUR 40.3 million in cash and cash equivalents and equity EUR 122.2 million (47.5% of total assets). Comparable figures as at 30 September 2013 were accordingly EUR 39.1 million and EUR 119.4 million (48.1% of total assets). As at 30 September 2014 the group had net debt of EUR 0.1 million (30 September 2013: negative EUR 5.4 million), which has grown mainly due to loans taken to finance the increased development activities. SECURED ORDER BOOK In Q3 2014, group companies signed new contracts in the amount of EUR 37.2 million (Q3 2013: EUR 109.8 million). 9M 2014 new contracts signed in amount of EUR 107.5 million (9M 2013: EUR 205.7 million). As at 30 September 2014, the group’s secured order book stood at EUR 166.4 million (30 September 2013: EUR 218.1 million). |
| 9M ’14 | 9M ’13 | Variance | Q3 ’14 | Q3 ’13 | Variance | 12M ‘13 | ||
| Revenue | million EUR | 182.2 | 197.8 | -7.9% | 68.5 | 84.1 | -18.5% | 262.7 |
| Gross profit | million EUR | 16.3 | 17.4 | -6.4% | 6.2 | 7.5 | -18.1% | 22.7 |
| Gross profit margin | % | 8.9 | 8.8 | +1.6% | 9.0 | 9.0 | +0.6% | 8.6 |
| Net profit (parent) | million EUR | 7.6 | 7.9 | -4.1% | 3.3 | 3.9 | -16.3% | 10.4 |
| Net profit margin | % | 4.2 | 4.0 | +4.1% | 4.8 | 4.6 | +2.7% | 4.0 |
| EPS | EUR | 0.43 | 0.45 | -4.1% | 0.18 | 0.22 | -16.3% | 0.59 |
| 30.09.14 | 30.09.13 | Variance | 31.12.13 | ||
| ROE (on yearly basis) | % | 8.3 | 10.5 | -21.1% | 8.8 |
| Equity ratio | % | 47.5 | 48.1 | -1.2% | 50.9 |
| Secured order book | million EUR | 166.4 | 218.1 | -23.7% | 213.7 |
| Total assets | million EUR | 257.3 | 248.3 | +3.6% | 239.2 |
| Number of employees | people | 804 | 902 | -10.9% | 860 |
OPERATING RESULTS
Business activities
Key financial indicators (in million euros)
| 9 months 2014 | 9 months 2013 | III quarter 2014 | III quarter 2013 | 12 months 2013 | |
| Revenue | |||||
| Estonia | 124.8 | 163.4 | 46.0 | 70.6 | 211.9 |
| Latvia | 47.8 | 29.4 | 18.6 | 11.9 | 44.4 |
| Lithuania | 9.6 | 5.0 | 3.9 | 1.6 | 6.4 |
| Revenue total | 182.2 | 197.8 | 68.5 | 84.1 | 262.7 |
| Gross profit | 16.3 | 17.4 | 6.2 | 7.5 | 22.7 |
| EBITDA | 10.2 | 11.6 | 4.1 | 5.3 | 15.1 |
| Operating profit (EBIT) | 8.5 | 9.5 | 3.5 | 4.4 | 12.3 |
| Net profit | |||||
| attributable to equity holders of the parent | 7.6 | 7.9 | 3.3 | 3.9 | 10.4 |
| attributable to non-controlling interest | (0.2) | 0.0 | (0.1) | 0.0 | 0.0 |
| Net profit total | 7.4 | 7.9 | 3.2 | 3.9 | 10.4 |
| Earnings per share (EPS), euros | 0.43 | 0.45 | 0.18 | 0.22 | 0.59 |
| Cash and cash equivalents closing position | 40.3 | 39.1 | 40.3 | 39.1 | 46.6 |
Revenue and gross profit
Merko Ehitus group generated a total of EUR 182.2 million in revenue in 9 months of 2014 (9 months of 2013: EUR 197.8 million). 68.5% of the revenue was generated in Estonia, 26.2% in Latvia and 5.3% in Lithuania (9 months of 2013: 82.6% in Estonia, 14.9% in Latvia and 2.5% in Lithuania). Compared to the 9 months of 2013 the group revenue has decreased by 7.9%. In the 9 months of 2014 the share of Latvian revenue has increased from 14.9% to 26.2%, which is an ongoing trend in 2014. Revenue in Q3 2014 was EUR 68.5 million, which has decreased 18.5% compared to the previous year (Q3 2013: EUR 84.1 million).The main changes in the revenue structure compared to the same period last year, can be mainly attributed to projects pursued in the general construction and real estate development segment. At the same time there has been a significant reduction in sales revenue from engineering construction and road construction segments, which is primarily due to the end of major projects financed from EU structural funds and the reduced project volumes. A similar trend was already seen in the first half of 2014.
In 9 months of 2014 the group’s gross profit from development and construction activities totalled EUR 16.3 million (9 months of 2013: EUR 17.4 million) and in Q3 2014 EUR 6.2 million (Q3 2013: EUR 7.5 million). The 9 months gross profit margin (8.9%) has increased compared to the same period last year (9 months of 2013: 8.8%). The growth of the profit margin has been supported by growth in the volumes of the real estate development segment. Simultaneously profitability has been negatively impacted by a growth in volumes in the lower-profitability general construction segment. Additionally maintaining the stability of profit margins during the 9 months of 2014 both in the road construction and civil engineering segments has been important, despite the decline in sales volumes. The scarcity of projects and the ever-tightening competition in the construction sector poses a great challenge in the maintaining of the current gross profit margin for new procurements in all segments, but especially in general construction, where the number of companies participating in tenders and the risk of low pricing bids is high.
Net profit
In 9 months of 2014, the group’s profit before tax totalled EUR 8.0 million and net profit attributable to equity holders of the parent was EUR 7.6 million as compared to the pre-tax profit or EUR 8.7 million and net profit attributable to equity holders of the parent of EUR 7.9 million in 9 months of 2013. Group’s net profit margin was 4.2% (9 months of 2013: 4.0%). The net profit for the 9 months of 2014 was affected by the income tax expenses paid in the first quarter of 2014 on the dividends received from OÜ Gutsaf Tallinn in the amount of EUR 0.3 million. This increases the income tax expenses as extraordinary one-off item, compared to the 9 months of 2013.
In Q3 of 2014, the group’s pre-tax profit totalled EUR 3.3 million and net profit was EUR 3.3 million as compared to the pre-tax profit or EUR 4.2 million and net profit of EUR 3.9 million in Q3 of 2013. If the group’s quarterly net profit (EUR 3.3 million) has decreased compared to the same period last year (9 months of 2013: EUR 3.9 million), then the quarterly net profit margin (4.8%) has decreased increased compared to the same period last year (9 months of 2013: 4.6%).
In the second quarter of 2014, the group paid EUR 7.3 million in dividends, which incurred no additional income tax expense in connection with previously received and taxed distribution of profits from subsidiaries. The situation in the third quarter of 2013 was alike, when the group paid EUR 5.3 million in dividends.
Business segments
The group operates mainly in Estonian, Latvian and Lithuanian market through its subsidiaries and depending on the country provide services across the following business segments: general construction, civil engineering (including electrical and external networks), road construction, real estate development (including apartment development and sales, long-term real estate investments and commercial real estate projects) and other comprising sale of raw materials obtained from pit mining, equipment lease, consulting and construction supervision. The groups management structure is country based and is in turn divided by business segments.
General construction
General construction consists of the construction of different buildings, from commercial and office buildings, retail and entertainment centres to public sector and residential and specialised industrial buildings. Group companies provide strategic consulting and quality complete solutions as part of the general contracting service of construction according to the customer's requirements: preparation, design, construction, interior and warranty service.
million EUR
| 9 months 2014 | 9 months 2013 | Change | III quarter 2014 | III quarter 2013 | Change | 12 months 2013 | |
| Revenue | 85.8 | 59.9 | +43.3% | 28.9 | 26.4 | +9.5% | 86.6 |
| % of total revenue | 47.1% | 30.3% | +55.6% | 42.2% | 31.4% | +34.3% | 32.9% |
| Gross profit (loss) | 3.4 | 1.5 | +121.9% | 1.9 | 0.3 | +557.1% | (0.5) |
| Gross profit margin | 3.9% | 2.6% | +54.8% | 6.5% | 1.1% | +550.4% | -0.6% |
In the 9 months of 2014, the revenue of the general construction segment was EUR 85.8 million (9 months of 2013: EUR 59.9 million), having increased by 43.3% from the same period last year. The segments gross profit has increased by 121.9% and the segments overall gross profit for the period is EUR 3.4 million (9 months of 2013: EUR 1.5 million). The segment continues to be mainly influenced by the pressure on the margins exerted by tightening competition. In the 9 months the revenue of the general construction segment formed the largest proportion in the group’s revenue with a 47.1% share. This proportional increase was expected, especially given the knowledge that the volumes in the civil engineering and road construction segments were decreasing.
The tight competition in the general construction segment has left it’s mark on the segments gross margin (9 months of 2014: 3.9%), which has increased by 54.8% compared to the same period last year, but mainly due the non-realisation of the previously forecasted risks in projects nearly or fully completed in the reporting period and therefore having a one-off effect in the results. While we saw a rise in the proportion of private sector orders starting in 2013, unfortunately the same tendency has not continued in the 9 months of 2014. Nevertheless, with regard to projects in progress in the general construction segment, private sector orders still outstrip public procurements as at the end of the quarter.
Our major projects in the third quarter included the construction workw of Hilton Tallinna Park hotel and Tondiraba ice arena in Tallinn, the reconstruction work at the North-Estonia Medical Centre in Mustamäe in Tallinn, the construction of Polipaks NT manufacturing and logistics centre in Marupe and the construction of multifunctional concert hall in Liepaja.
Among the projects completed and delivered to the customer in 9 months of 2014 the ones to highlight are the Tondiraba ice arena and the Nurmevälja logistics centre.
Civil engineering
The civil engineering segment includes port, waste management and road structures (bridges, tunnels, overpasses, roads), electrical construction of up to 330 kV, various environmental protection structures, water treatment plants, both open-cut and trenchless construction of water and sewerage pipelines and other various engineering projects. Complex and unique engineering projects require specialised knowledge and a good partnership with the customer and local authorities.
million EUR
| 9 months 2014 | 9 months 2013 | Change | III quarter 2014 | III quarter 2013 | Change | 12 months 2013 | |
| Revenue | 45.4 | 74.1 | -38.8% | 21.1 | 28.6 | -26.4% | 94.5 |
| % of total revenue | 24.9% | 37.5% | -33.6% | 30.8% | 34.0% | -9.6% | 36.0% |
| Gross profit | 5.0 | 7.6 | -34.8% | 1.8 | 3.6 | -50.8% | 12.5 |
| Gross profit margin | 10.9% | 10.2% | +6.6% | 8.5% | 12.7% | -33.2% | 13.2% |
The revenue of the civil engineering segment amounted to EUR 45.4 million in the 9 months of 2014 (9 months of 2013: EUR 74.1 million), which is 38.8% less than in 2013. The decrease from the previous year is mainly due to a drop in the volume of pipeline projects. If the civil engineering segment revenues of 9 months of 2013 formed the largest proportion in the group’s revenue (9 months of 2013: 37.5%), then during 9 months of the current year the segments revenues formed 24.9% of total revenue being down 33.6% compared to the previous year. The 9 month gross profit of the civil engineering segment amounted to EUR 5.0 million (9 months of 2013: EUR 7.6 million) and the gross profit margin was 10.9% (9 months of 2013: 10.2%), which increased by 6.6% compared to the same period previous year. The increase in the gross margin has been achieved mainly due to cost savings through an early completion of some projects as well as the risks previously forecasted not materialised in some nearly completed projects. Considering the declining volumes in the segment we see this as a very good and strong outcome. We continue to closely monitor the changes in the volumes, to maintain an effective cost base.
In the third quarter of 2014, the main ongoing projects included were the design and renovation of the infrastructure of Tallinn tram line No. 4, the reconstruction of pipelines in Narva-Jõesuu and the closing of industrial waste and semi-coke landfill in Kohtla-Järve and the re-cultivation and construction works of waste recycling site at A. Deglava Street in Riga.
The civil engineering segment includes challenges, primarily in connection with the end of the 2007-2013 EU budgeting period and due to the fact that the pace of launching new projects has decreased, this applies particularly to water management projects.
Road construction
In the road construction segment, the company carries out road construction and builds the associated infrastructure, road maintenance and maintenance repair.
million EUR
| 9 months 2014 | 9 months 2013 | Change | III quarter 2014 | III quarter 2013 | Change | 12 months 2013 | |
| Revenue | 23.6 | 43.5 | -45.7% | 12.4 | 21.0 | -40.7% | 49.5 |
| % of total revenue | 12.9% | 22.0% | -41.1% | 18.1% | 24.9% | -27.3% | 18.8% |
| Gross profit | 3.6 | 5.6 | -35.1% | 2.0 | 2.8 | -29.3% | 5.9 |
| Gross profit margin | 15.4% | 12.9% | +19.7% | 16.2% | 13.6% | +19.3% | 12.0% |
The revenue of the road construction segment amounted to EUR 23.6 million in the 9 months of 2014 (9 months of 2013: EUR 43.5 million), which means a 45.7% decrease from the same period 2013. In the 9 months of 2014, the segment earned a gross profit of EUR 3.6 million (9 months of 2013: EUR 5.6 million), which yields a gross profit margin of 15.4% (9 months of 2013: 12,9%). The drop in revenue has been affected the most by the lack of large-scale construction projects (such as the last year’s Ülemiste junction in Tallinn) in the contracts portfolio of the group in 2014. In the 9 months of 2014, the growth of profitability in the road construction segment was supported largely by an increase in the volume of small-scale road construction and repair works with higher-than-average profitability compared to the same period last year when the number of similar contracts was smaller.
The largest projects in work in the third quarter were the maintenance works done under the service agreement with Tallinn and Jõgeva County and the surfacing works on the road of Harju and Rapla County.
Real estate development
The real estate development segment includes residential construction, the development of apartment projects, long-term real estate investments and commercial real estate projects.
million EUR
| 9 months 2014 | 9 months 2013 | Change | III quarter 2014 | III quarter 2013 | Change | 12 months 2013 | |
| Revenue | 26.4 | 19.4 | +36.3% | 5.8 | 7.7 | -25.2% | 31.0 |
| % of total revenue | 14.5% | 9.8% | +47.9% | 8.4% | 9.2% | -8.3% | 11.8% |
| Gross profit | 4.3 | 2.9 | +49.2% | 0.6 | 1.0 | -41.5% | 5.1 |
| Gross profit margin | 16.4% | 15.0% | +9.5% | 10.5% | 13.4% | -21.8% | 16.5% |
A total of 235 apartments were sold in 9 months of 2014 at the total value of EUR 23.8 million (excl. VAT), (9 months of 2013: 165 apartments and EUR 17.4 million, respectively). In Q3 of 2014 a total of 37 apartments were sold at the total value of EUR 5.2 million (excl. VAT), (Q3 2013: 71 apartments and EUR 6.6 million). 9 months real estate development segment revenues have increased 36.3% compared to the same period last. The share of revenue from the real estate development segment also increased in the 9 months to 14.5% of the group’s total revenue (9 months of 2013: 9.8%), which has been planned and occasioned by the strategic decisions made in 2013 to increase the segment’s investments into various new real estate development projects.
In 9 months of 2014, the group has earned EUR 1.4 million of revenue from the sale of properties (9 months of 2013: EUR 0.3 million). Q3 revenue from the sale of properties was EUR 0.0 million (Q3 2013: EUR 0.1 million).
At the end of the period, Merko Ehitus group’s inventory comprised 15 completed but not yet sold apartments (7 in Estonia, 1 in Latvia and 7 in Lithuania) and 6 completed and pre-sold apartments (all in Estonia).
As at 30 September 2014, Merko Ehitus group had a total of 366 apartments for active sale (as at 30 September 2013: 385 apartments), for which there are no pre-sale agreements and the vast majority is under construction.
Apartment projects in progress and indicative date of completion
| Project | Municipality/Country | Completion date | No of apartments * |
| Pärna avenue 7 | Tartu municipality, Estonia | Completed | 3 |
| Grostonas 17 | Riga, Latvia | Completed | 1 |
| Mokslininku stage I | Vilnius, Lithuania | Completed | 2 |
| Mokslininku stage II | Vilnius, Lithuania | Completed | 5 |
| Vana-Kalamaja 31+Suur-Laagri 2 ** | Tallinn, Estonia | Completed | 10 |
| 21 | |||
| Grostonas 19 | Riga, Latvia | Autumn 2014 | 82 |
| Paepargi 17, 19, 21 ** | Tallinn, Estonia | Autumn 2014 | 54 |
| Kentmanni 6 | Tallinn, Estonia |
End of 2014 / Beginning of 2015 |
93 |
| Pärna avenue 10 ** | Tartu municipality, Estonia | End of 2014 | 42 |
| Pärna avenue 9 ** | Tartu municipality, Estonia | End of 2014 | 28 |
| Grostonas 21 | Riga, Latvia | Spring 2015 | 125 |
| 424 | |||
| Started in Q3 2014 | |||
| Rästa 18 | Tallinn, Estonia | End of 2015 | 47 |
| Fizikų | Vilnius, Lithuania | End of 2015 | 38 |
| Kraziu | Vilnius, Lithuania | End of 2015 | 29 |
| Paepargi 49 | Tallinn, Estonia | End of 2015 | 60 |
| 174 | |||
| Total | 619 |
* The completed apartments indicate the number of apartments that are unsold and where possession has not been given to consumers.
** Project launched in 2014.
In 9 months of 2014, we launched the construction of a total of 310 new apartments in the Baltic States (9 months of 2013: 396 apartments). In 2013 we launched the construction of a total of 409 new apartments. We will continue to invest in residential real estate projects and depending on the apartment market developments in 2014, the group plans to launch the construction of approximately 500-550 new apartments in the Baltic States. Group is considering potential launch of Tartu mnt 50/52 stage II (185 apartments) development project in Tallinn as one of the largest projects in the last quarter. In 2014, the group’s planned investments in both development projects initiated in the previous years and new projects to be launched in 2014 will be in the range of EUR 45-50 million. In the 9 months of this year, the group has invested a total of EUR 33.5 million in new development projects launched in 2014 as well as projects already in progress from previous year.
As at 30 September 2014, the group has 60 apartments in Tartu where the construction activity has been frozen (as at 30 September 2013, the respective number in Tallinn and Tartu was 158 apartments). During 2014, we have re-launched two development projects that were frozen in prior years:
- Development of Pärna avenue 10 in Tartu municipality in the 1st quarter (the number of apartments for sale is 42);
- Development of Pärna avenue 9 in Tartu municipality in the 2nd quarter (the number of apartments for sale is 28).
One of our objectives is to keep a moderate portfolio of land plots to ensure stable inventory of property development projects considering the market conditions. The group is searching for new land plots for real estate development purposes in Estonian and Lithuania. The real estate portfolio in Latvia is extensive enough. In the 9 months of 2014, the group has purchased new land plots in Lithuania at an acquisition cost of EUR 3.2 million (9 months of 2013: EUR 1.2 million). Also in the second quarter, the group realized an option agreement to acquire the Rästa 18 land plot in Tallinn in the amount of EUR 1.2 million.
The real estate market has not changed significantly over the last 9 months, even though the events in Ukraine are likely to have somewhat slowed down customers' investment decisions. At the same time the supply of apartments has increased, which allows the customers to take more time in making their purchase decisions. Customers have become more knowledgeable as to what they desire, and thus project location, development volume, design solutions and target consumer group play an important role for the group before launching each project and in the course of assessing the risks. Taking into account low interest rates on loans and limited supply on the market of new apartments, in the recent years the demand and transaction activity on the apartment market has grown moderately. The number of transactions and the average price per square meter of new apartments have shown a marginal growth trend. There is still room for new development projects in the Baltic capital cities, though one should proceed with care in Vilnius. The increased supply of apartments will result in the stabilisation of prices and the pro-longing of sale periods, which the group needs to consider while launching new developments.
Other
The segment other includes the sale of raw materials obtained from pit mining, equipment lease, consulting, construction supervision and other non-core activities.
million EUR
| 9 months 2014 | 9 months 2013 | Change | III quarter 2014 | III quarter 2013 | Change | 12 months 2013 | |
| Revenue | 1.0 | 0.9 | +9.0% | 0.3 | 0.4 | -7.8% | 1.1 |
| % of total revenue | 0.6% | 0.4% | +18.3% | 0.5% | 0.5% | +13.1% | 0.5% |
| Gross profit (loss) | (0.0) | (0.2) | -78.8% | (0.1) | (0.2) | -57.2% | (0.3) |
| Gross profit margin | -5.2% | -26.6% | -80.6% | -31.9% | -68.6% | -53.6% | -29.9% |
Secured order book
As at 30 September 2014, the group’s secured order book (without own developments) amounted to EUR 166.4 million as compared to EUR 218.1 million as at 30 September 2013. The secured order book excludes the group's own residential development projects and work related to developing real estate investments.
In third quarter of 2014, EUR 37.2 million worth of new contracts were signed (without own developments) as compared to EUR 109.8 million in same period last year. The value of new contracts signed (without own developments) in the 9 months of 2014 amounted to EUR 107.5 million (9 months of 2013: EUR 205.7 million).
Largest construction contracts signed in the third quarter of 2014
| Brief description of contract | Country | Completion time |
Cost million EUR |
| Design and construction works of apartment building in Saltiniu Namai residential building complex | Lithuania | December 2015 | 2.9 |
| Construction works of sports hall of The American International School of Vilnius | Lithuania | August 2015 | 2.2 |
| Reconstruction of E20 main road Tallinn-Narva Kodasoo-Läsna sections | Estonia | September 2015 | 5.7 |
| Reconstruction of Suur-Sõjamäe Street in Tallinn | Estonia | June 2015 | 2.9 |
After the balance sheet date, a contract was concluded on 3 November 2014 between AS Merko Ehitus Eesti, which is a part of AS Merko Ehitus group, and AS Mainor Ülemiste, to perform the design and construction works of a 13-storey office building located in Tallinn Estonia, at the Ülemiste City, in the amount of EUR 17.4 million.
Whereas the share of public procurements was still predominant among new construction contracts at the start of 2013, the private customer segment became more active in the construction markets of all three Baltic countries in the second half of 2013. Of the contracts signed in 2013, at 31 December close to half were connected to private contracting entities. The majority of the contracts signed in the 9 months of the current year were public tenders and the company did not manage to garner as much work from private sector customers as it had envisaged. It is the general construction segment that is seeing the stiffest competition and where competitors are making aggressive offers that the construction companies in the Merko Ehitus group have thus far not gone along with. As at 30 September 2014, the group’s secured order book was dominated by public sector orders, which made up nearly two-thirds of the portfolio. Considering the end of the previous EU funding period and the beginning phase of the current EU funding period, one can forecast continued decline in the volume of public procurements for 2014. In this respect, it continues to be a great challenge to maintain the group’s secured order book at the level of 2013 or growing it.
Traditionally the share of Estonian construction activity has been the highest in the group's revenues. Given the weak growth outlook of the Estonian construction market, the group's goal is to continue to look for construction orders from outside Estonia. Thus, we are closely monitoring the development and opportunities in the neighbouring markets. AS Merko Ehitus Eesti has selectively and on project basis started to participate in public procurements in Finland, Sweden and Norway in order to gain experience and sufficient knowledge in the qualification conditions, requirements established and risks associated in these countries.
Cash flows
The liquidity of the group is strong and the cash position is stable. As at 30 September 2014 the group had cash equivalents in the amount of EUR 40.3 million (30.09.2013: EUR 39.1 million). Compared to the same period last year, the group's strategic cash level and investment capacity have strengthened.
The 9-month cash flow from operating activity was negative at EUR 0.2 million (9 months of 2013: positive EUR 11.8 million), cash flow from investing activity was negative at EUR 1.6 million (9 months of 2013: negative EUR 0.2 million) and the cash flow from financing activity was negative at EUR 4.4 million (9 months of 2013: negative EUR 7.8 million).
The cash flow from operating activity was mostly influenced by the operating profit EUR 8.5 million (9 months of 2013: EUR 9.5 million), by the positive change in receivables and liabilities related to construction contracts recognised under the stage of completion method EUR 2.3 million (9 months of 2013: negative change of EUR 1.4 million), by the negative change in provisions EUR 0.3 million (9 months of 2013: positive change of EUR 0.1 million), by the negative change in trade and other receivables related to operating activities EUR 5.6 million (9 months of 2013: negative change of EUR 14.6 million), by the negative change in inventory EUR 16.0 million (9 months of 2013: negative change of EUR 5.9 million), and by the positive change in trade and other payables related to operating activities EUR 10.1 million (9 months of 2013: positive change of EUR 22.5 million, incl. significant positive inflow from the advances for real estate development projects). The cash flows from operating activities of the reporting period were negatively influenced mainly by changes in inventories (EUR 16.0 million) which are due to group’s increased apartment development volumes and the gradual completing thereof (Grostonas 21 in Riga and Kentmanni 6 in Tallinn) as well as from the acquisition of new land plots. The negative impact is partly positively offset from the prepayments received from pre-sales of apartments and from construction service customers, which still remain EUR 12.4 million lower than in the same period last year.
The group’s cash flows from operating activities continue to have contracts (incl. both government and private sector) with long payment terms (by contract, an average of 56 days after registered delivery of the work) and there is an persistent burden on working capital, including optimal management of cash flows. This is especially true, considering the increase in Latvian construction volumes and the need for additional working capital. To support cash flows arising from operating activity, the group has been prudent in raising additional external capital, including factoring. At the same time, the debt ratio has remained at a moderate level (15.7% as at 30.09.2014; 13.9% as at 30.09.2013).
Cash flows from investment activities include negative cash flow from the cash balance excluded from the group in connection with the sale of subsidiary Gustaf Tallinn OÜ in the amount of EUR 0.4 million, but also negative cash flow from the acquisition of minority shareholding in subsidiary AS Gustaf in the amount of EUR 0.1 million and the acquisition of subsidiary UAB Timana (related to the purchase of a new land plot in Lithuania) in the amount of EUR 0.3 million. Cash flows from investment activities was additionally influenced by the negative cash flow from the acquisition of non-current asset in the amount of EUR 1.1 million (9 months of 2013: EUR 0.6 million) and the positive cash flow from the sale of non-current assets in the amount of EUR 0.1 million (9 months of 2013: EUR 0.8 million). Cash flows from investment activities in 9 months of 2013 was negatively impacted by the acquisition of other investments in the amount of EUR 0.3 million. The group mainly invested in non-current assets for the purpose of renewing its fleet of machinery in the road construction segment.
The largest single negative item in cash flows from financing was the dividend payment of EUR 7.3 million (9 months of 2013: EUR 5.3 million) and the premature repayment of a working capital loan in the amount of EUR 3.5 million, instead of which the group entered into an overdraft contract with an overall limit of EUR 3.5 million. Project specific loans obtained using investment property as collateral were repaid in the amount of EUR 0.4 million (9 months of 2013: positive cash flow in net amount of EUR 1.7 million), net of loans received and loans repaid in connection with development projects amounted to positive cash flow of EUR 7.5 million (9 months of 2013: negative cash flow of EUR 1.3 million), factoring in the amount of EUR 0.0 million (9 months of 2013: negative cash flow of EUR 1.5 million) and finance lease principal repayments of EUR 0.7 million (9 months of 2013: EUR 0.9 million). The group has not used bank loans to finance all of the ongoing development projects – and this is the case particularly in Estonia, where many advance sales were agreed in the early phase of construction.
The Q3 2014 cash flow from operating activity was negative at EUR 6.9 million (Q3 2013: positive EUR 8.6 million), cash flow from investing activity was negative at EUR 0.8 million (Q3 2013: positive EUR 3.0 million) and the cash flow from financing activity was positive at EUR 4.6 million (Q3 2013: negative EUR 3.9 million).
The quarterly cash flows from operating activities were negative primarily as a result of the need for working capital to cover large-scale development projects. Cash flow from operating activities was also impacted negatively by the acquisition cost of land plots for development activity in the amount of EUR 2.0 million.
Cash flows from investment activities was negative primarily due to the acquisition of non-current asset in the amount of EUR 0.5 million, which is mainly related to the renewal of equipment in the road construction segment. Cash flow from investment activities was also negatively effected by the acquisition of shareholdings in subsidiaries AS Gustaf and UAB Timana total in the amount of EUR 0.4 million.
Cash flow from financing activities was positive primarily due the net positive cash flow of EUR 4.7 million of loans received and loans repaid to finance the construction costs of development projects.
Ratios
(attributable to equity holders of the parent)
| 9M ‘14 | 9M ‘13 | 9M ‘12 | Q3 ‘14 | Q3 ‘13 | Q3 ‘12 | 12M ‘13 | ||
| Income statement summary | ||||||||
| Revenue | million EUR | 182.2 | 197.8 | 177.7 | 68.5 | 84.1 | 70.9 | 262.7 |
| Gross profit | million EUR | 16.3 | 17.4 | 10.7 | 6.2 | 7.5 | 5.6 | 22.7 |
| Gross profit margin | % | 8.9 | 8.8 | 6.0 | 9.0 | 9.0 | 7.9 | 8.6 |
| Operating profit | million EUR | 8.5 | 9.5 | 4.0 | 3.5 | 4.4 | 2.9 | 12.3 |
| Operating profit margin | % | 4.7 | 4.8 | 2.3 | 5.1 | 5.3 | 4.1 | 4.7 |
| Profit before tax | million EUR | 8.0 | 8.7 | 3.5 | 3.3 | 4.2 | 2.6 | 11.1 |
| EBT margin | % | 4.4 | 4.4 | 1.9 | 4.8 | 5.0 | 3.7 | 4.2 |
| Net profit | million EUR | 7.4 | 7.9 | 3.1 | 3.2 | 3.9 | 2.6 | 10.4 |
| attributable to equity holders of the parent | million EUR | 7.6 | 7.9 | 3.2 | 3.3 | 3.9 | 2.6 | 10.4 |
| attributable to non-controlling interest | million EUR | (0.2) | 0.0 | (0.1) | (0.1) | 0.0 | 0.0 | 0.0 |
| Net profit margin | % | 4.2 | 4.0 | 1.8 | 4.8 | 4.6 | 3.7 | 4.0 |
| Other income statement indicators | ||||||||
| EBITDA | million EUR | 10.2 | 11.6 | 5.9 | 4.1 | 5.3 | 3.6 | 15.1 |
| EBITDA margin | % | 5.6 | 5.9 | 3.3 | 5.9 | 6.3 | 5.1 | 5.7 |
| General expense ratio | % | 4.9 | 4.7 | 4.5 | 4.5 | 4.2 | 4.4 | 4.7 |
| Labour cost ratio | % | 12.1 | 12.1 | 11.0 | 11.3 | 11.2 | 10.5 | 11.8 |
| Revenue per employee | thousand EUR | 230 | 226 | 194 | 87 | 96 | 77 | 308 |
| Other significant indicators | 30.09.2014 | 30.09.2013 | 30.09.2012 | 31.12.2013 | |
| Return on equity | % | 8.3 | 10.5 | -3.2 | 8.8 |
| Return on assets | % | 4.1 | 5.3 | -1.6 | 4.4 |
| Return on invested capital | % | 7.1 | 9.4 | -1.7 | 8.0 |
| Equity ratio | % | 47.5 | 48.1 | 47.9 | 50.9 |
| Debt ratio | % | 15.7 | 13.9 | 17.6 | 14.8 |
| Current ratio | times | 2.2 | 2.0 | 1.9 | 2.0 |
| Quick ratio | times | 1.0 | 1.1 | 1.0 | 1.1 |
| Accounts receivable turnover | days | 61 | 55 | 60 | 58 |
| Accounts payable turnover | days | 38 | 43 | 51 | 43 |
| Average number of employees | people | 792 | 877 | 916 | 853 |
| Secured order book | million EUR | 166.4 | 218.1 | 199.5 | 213.7 |
Employees and labour costs
Compared to the same period last year, the number of group’s employees decreased by 98 (-10.9%) and as at 30 September 2014, the group had a total of 804 employees (including fixed-term and part-time employees). Compared to the end of the previous financial year the number of employees has decreased by 56 (-6.5%).
In 2014, the number of employees has declined because of the proportion of the civil engineering segment declined within the work volumes of the group, but also due to the sale of subsidiary Gustav Tallinn OÜ, the change of the principal area of activity of subsidiary AS Gustaf and the decrease of road maintenance works of subsidiary AS Vooremaa Teed. On the other hand the number of employees had increased at the expense of seasonal workers mainly in road construction segment. In 2014, the reduction in the number of employees will continue due to the streamlining of the group corporate structure and the decrease in ownership interest in immaterial subsidiaries.
The group’s objective is to pay its employees competitive salary. The interests of employees and the company are balanced by performance-based remuneration.
The group defines labour cost as salary (incl. fixed salary, additional pay (night work, overtime and public holidays), holiday pay and bonus), taxes based on salary, fringe benefits and taxes based on fringe benefits. In 9 months 2014, the labour cost was EUR 22.1 million (9 months 2013: EUR 24.0 million), down 7.8% from the previous year.
Share and shareholders
| INFORMATION ON SECURITY | |
| Issuer | AS Merko Ehitus |
| Name of security | Share of Merko Ehitus |
| Ticker | MRK1T |
| Residency of issuer | Estonia |
| Stock Exchange List | NASDAQ Tallinn, Baltic Main List |
| Industry | Construction |
| ISIN | EE3100098328 |
| Nominal value | without nominal value |
| Number of securities | 17,700,000 |
| Volume of issue | 12,000,000 |
| Currency | EUR |
| Listing date | 11.08.2008 |
The shares of Merko Ehitus are listed in the Main List of NASDAQ Tallinn. As at 30 September 2014, the company has 17,700,000 shares. The number of shares has not changed during 2014.
A total of 1,351 transactions were conducted with the shares of Merko Ehitus in 9 months of 2014, with 0.88 million shares (5.0% of total shares) traded, generating a turnover of EUR 6.57 million (comparable figures in 9 months 2013 were accordingly: 1,732 transactions with 0.59 million shares traded (3.3% of total shares) and generating a turnover of EUR 4.08 million). The lowest share price amounted to EUR 6.96 and the highest to EUR 7.99 per share (9 months of 2013: EUR 5.71 and EUR 7.70). The closing price of the share was EUR 7.15 on 30 September 2014 (30.09.2013: EUR 7.30). As at 30 September 2014, the market value of AS Merko Ehitus amounted to EUR 126.6 million, which has decreased by 2.1% compared to the same period end last year (as at 30 September 2013: EUR 129.2 million).
| 30.09.2014 | 30.09.2013 | 30.09.2012 | |
| Number of shares | 17,700,000 | 17,700,000 | 17,700,000 |
| Earnings per share (EPS), euros | 0.43 | 0.45 | 0.18 |
| Equity per share, euros | 6.86 | 6.64 | 6.23 |
| P/B ratio | 1.04 | 1.10 | 0.97 |
| P/E ratio | 12.56 | 10.44 | -29.99 |
| Market value, million EUR | 126.6 | 129.2 | 106.6 |
Structure of shareholders as at 30.09.2014
| Number of shares | Number of shareholders | % of shareholders | Number of shares | % of shares |
| 1,000,001 - … | 1 | 0.07% | 12,742,686 | 71.99% |
| 100,001 – 1,000,000 | 10 | 0.71% | 3,021,915 | 17.07% |
| 10,001 – 100,000 | 32 | 2.26% | 935,397 | 5.29% |
| 1,001-10,000 | 231 | 16.30% | 675,651 | 3.82% |
| 101-1,000 | 736 | 51.94% | 302,512 | 1.71% |
| 1-100 | 407 | 28.72% | 21,839 | 0.12% |
| Total | 1,417 | 100% | 17,700,000 | 100% |
Shareholders of AS Merko Ehitus as at 30.09.2014 and change compared to the previous quarter
| Number of shares | % of total 30.09.2014 | % of total 30.06.2014 | Change | |
| AS Riverito | 12,742,686 | 71.99% | 71.99% | - |
| ING Luxembourg S.A. AIF Account | 974,126 | 5.50% | 5.50% | - |
| Skandinaviska Enskilda Banken S.A. | 469,378 | 2.65% | 2.71% | -10,149 |
| Firebird Republics Fund Ltd | 375,704 | 2.12% | 1.71% | +73,309 |
| Skandinaviska Enskilda Banken AB, Swedish customers | 293,660 | 1.66% | 1.72% | -11,400 |
| Firebird Avrora Fund Ltd | 190,519 | 1.08% | 0.96% | +20,519 |
| Skandinaviska Enskilda Banken AB, Finnish customers | 154,804 | 0.87% | 0.74% | +23,112 |
| State Street Bank and Trust Omnibus Account a Fund No OM01 | 153,018 | 0.86% | 0.86% | - |
| SEB Elu- ja Pensionikindlustus AS | 148,020 | 0.84% | 0.84% | - |
| Clearstream Banking Luxembourg S.A. customers | 143,652 | 0.81% | 0.81% | - |
| Total largest shareholders | 15,645,567 | 88.38% | 87.84% | +95,391 |
| Total other shareholders | 2,054,433 | 11.62% | 12.16% | -95,391 |
| Total | 17,700,000 | 100% | 100% | - |
Dividends and dividend policy
The distribution of dividends to the shareholders of the company is recorded as a liability in the financial statements as of the moment when the payment of dividends is approved by the company’s shareholders.
At the meeting held on 8 April 2013, the Management Board and Supervisory Board of AS Merko Ehitus reviewed the company’s strategic development trends and approved the long-term financial objectives until 2018, under which a new objective of paying the shareholders 50-70% of the annual profit as dividends was established. The achievement of this objective is an important priority for the group.
The annual general meeting of shareholders of AS Merko Ehitus held at 30 April 2014 approved the Supervisory Boards proposal to pay the shareholders the total amount of EUR 7.3 million (EUR 0.41 per share) as dividends from net profit brought forward, which is equivalent to a 70% dividend rate and a 5.7% dividend yield for the year 2013 (using the share price as at 31 December 2013).
According to the Estonian Income Tax Law §50 section 11 AS Merko Ehitus can pay these dividends without any additional income tax expense and liabilities occurring due to previously received and taxed distribution of profits from subsidiaries. The dividend payment to the shareholders took place on 20 May 2014.
In 2013 the total amount of EUR 5.3 million (EUR 0.30 per share) was paid to shareholders as dividends, which is equivalent to a 70% dividend rate and a 5.1% dividend yield for the year 2012 (using the share price as at 31 December 2012).
In the past five years, the shareholders have received dividends from the net profit for the accounting year as follows:
Dividend payments are carried out in the next fiscal year in accordance with the decisions of the general meeting of the shareholders, regarding the previous fiscal year.
Corporate governance and structure
AS Merko Ehitus operates as a holding company whose companies in Estonia, Latvia and Lithuania offer complete solutions in the field of construction and real estate development. In the construction sector, the group’s largest companies are AS Merko Ehitus Eesti (100%), SIA Merks (100%), UAB Merko Statyba (100%) and the companies belonging to the AS Merko Ehitus Eesti group: Tallinna Teede AS (100%) and AS Merko Infra (100%).
The main activity of the holding company is development and implementation of the strategies of Merko Ehitus group’s separate business areas primarily through long-term planning of resources. The holding company AS Merko Ehitus has a two-member Management Board: Andres Trink and Tõnu Toomik.
It is important to maintain a simple organisational structure in the group and in management to be guided primarily by the group's objectives and requirements. For the purposes of maximum efficiency in the group management, we in some cases differentiate the management structure and legal structure. The groups management is carried out on a country basis.
Changes in the legal structure of the group
In 2014, AS Merko Ehitus has decided to streamline its group companies' structure to improve management effectiveness and produce administrative cost savings. As part of the action plan, ownership interests of insignificant subsidiaries are reviewed and potential mergers or disposals are decided. The action plan does not concern material subsidiaries of the group and does not have a material near-term effect on the group's financial results. First changes are under way and the implementation of the action plan will continue in 2014.
On 20 December 2013, AS Merko Ehitus initiated a process to merge its fully owned subsidiaries OÜ Woody, OÜ Metsailu and OÜ Käibevara, all engaged in real estate development, in order to have savings in administrative cost related to company management. The acquiring company is OÜ Metsailu. The companies being acquired will be merged into OÜ Metsailu and as a result of the merger the companies being acquired will wind up without liquidation proceedings and OÜ Metsailu will become the legal successor of the companies being acquired. As a result of the merger, AS Merko Ehitus will remain the sole shareholder in OÜ Metsailu, the acquiring company. The closing date of the merger was 1 January 2014 after which all transactions of the acquirees have been deemed to have been made on account of the acquirer. The final merger entry was made in the Commercial Register on 6 June 2014.
On 15 January 2014, a subsidiary of AS Merko Ehitus group, AS Merko Ehitus Eesti, signed an agreement for the transfer of its entire 80% holding in the subsidiary Gustaf Tallinn OÜ to the current co-shareholder and member of the management board Tiit Pomerants. The share capital of Gustaf Tallinn OÜ is EUR 23,967 of which the holding of AS Merko Ehitus Eesti with a nominal value of EUR 19,174 comprises 80% and the holding of Tiit Pomerants with a nominal value of EUR 4,793 made up 20%. The holding was transferred with the purpose of re-arranging the structure of the group companies and reducing holdings in non-significant subsidiaries. The principal area of activity of the construction company Gustaf Tallinn OÜ is construction and finishing work and the company offers prime contractor service for smaller renovations and repair jobs, which are not one of the strategically significant principal areas of activity of the AS Merko Ehitus group. On 15 January 2014, the buyer paid the seller EUR 20,000. The final sales price was 17,201 euros, which was calculated in accordance with the audited 2013 annual report of Gustaf Tallinn OÜ on the basis of the share of equity held by AS Merko Ehitus Eesti, adjusted by dividend payment of EUR 960 000 paid to the seller before transfer of the share as well as by the income tax expense of EUR 255 190 related to the paid dividend. On 2 May 2014, the seller returned the adjusted part of the sales price EUR 2,799 to the buyer’s bank account.
As a result of the sale of the ownership interest and the subsequent deconsolidation of Gustaf Tallinn OÜ, the estimated impact on the consolidated profit of AS Merko Ehitus group is EUR 0, the negative impact on assets and liabilities is EUR 967 thousand and EUR 945 thousand, respectively.
On 22 January 2014, fully owned subsidiary of AS Merko Ehitus, UAB Merko Bustas, formed a fully owned subsidiary in Lithuania, UAB VPSP 1 with a share capital of LTL 10,000 (EUR 2,896). The subsidiary was initially formed to participate in public-private partnership (PPP) procurements organised by the Lithuanian government and later changed to acquiring registered immovables for development purposes in Lithuania.
On 13 June 2014, fully owned subsidiary of AS Merko Ehitus, AS Merko Ehitus Eesti formed a 50% joint venture in Estonia, Kivimäe 32 OÜ with a share capital of EUR 2,600. The joint venture was formed to acquire a property for development in Tallinn, Estonia.
On July 30, fully owned subsidiary of AS Merko Ehitus, UAB Merko Bustas acquired a 100% subsidiary UAB Timana in Lithuania, with a share capital of LTL 10,000 (EUR 2,896) and a purchase price of LTL 1,100,000 (EUR 318,582). The subsidiary was acquired with the aim of acquiring registered immovables for development purposes in Vilnius.
On 31 July 2014, a subsidiary of AS Merko Ehitus group, AS Merko Ehitus Eesti, signed an agreement for the transfer of 7,5% holding in the subsidiary AS Gustaf from the former co-shareholders and members of the management board Raigo Jaanuste and Ago Randorg. After the acquisition of the minority share, AS Gustaf became a 100% subsidiary of AS Merko Ehitus Eesti. The holding was acquired with the purpose of re-arranging the structure of the group companies. The principal area of activity of the construction company AS Gustaf was general contracting of construction, mainly in the western and southern regions of Estonia. Following the acquisition of 100% shares in AS Gustaf, the principal area of activity of the company will be changed to real estate development. On 1 August 2014, AS Merko Ehitus Eesti paid the sellers 95% of the shares sales price of EUR 89,058. The final sales price will be calculated in accordance with the audited 2015 annual report of AS Gustav, on the basis of the designated equity. AS Merko Ehitus Group considers the additional influence of adjustments of the sales price to be immaterial.
On 5 August 2014, a subsidiary of AS Merko Ehitus group, SIA Merks, signed an agreement for the transfer of 25% holding (275 thousand shares) in the joint venture SIA Zakusala Estates from the current co-shareholder Tritan Group AS. After the acquisition of the additional shareholding, SIA Zakusala Estates became a 75% subsidiary of SIA Merks and the group will consolidate SIA Zakusala Estetes in its financial report on a line-by-line basis going forward (Note 16). The additional 25% holding was acquired with the purpose of gaining a greater control over the assets and the management of SIA Zakusala Estates. The principal area of activity of the real estate company SIA Zakusala Estates is the development of approximately 126 thousand square meters land located on the island Zakusala on Daugava river in Riga. With the increased control the group will be better positioned to lead the overall future development of the project. This is a long term investment for AS Merko Ehitus group. According to the agreement SIA Merks paid for the additional 25% holding the purchase prices of EUR 696,273, by assigning the corresponding part of a loan given by SIA Merks to SIA Zakusala Estates, to AS Tritan Group.
On 11 August 2014 the liquidation of SIA Merks’s 100% subsidiary SIA Polystar, which started in the first half of 2014, was finalised and the company was deleted from the business register.
On 15 August 2014, a subsidiary of AS Merko Ehitus group, AS Merko Ehitus Eesti, signed an agreement for the transfer of 49% holding in the subsidiary OÜ Heamaja from the former co-shareholder for the purchase price of EUR 1,225. After the acquisition of the minority share, OÜ Heamaja became a 100% subsidiary of AS Merko Ehitus Eesti.
On 16 September 2014, AS Merko Ehitus acquired a 100% shareholding in the subsidiary SIA Merko Investments (prev. SIA Skanstes Virsotnes) from the subsidiary SIA Merks in an intercompany transaction, with the purpose of re-arranging the structure of the group companies.
Changes in the Management structure of the group
Authorisation and responsibility of supervisory boards of subsidiaries of AS Merko Ehitus are based on their Articles of Association and intergroup rules. Generally, Supervisory Boards of subsidiaries consist of members of the Management Board and Supervisory Board of the company that is the main shareholder of the specific subsidiary. Supervisory Board meetings of the most significant subsidiaries are held usually once a month, otherwise according to the group’s needs, Articles of Association of subsidiaries and legal provisions. Generally, no separate fee is paid to members of the Supervisory Board of subsidiaries. Members of the Supervisory Board will also receive no termination benefit in case their contract of service is terminated before due date or not extended
In conjunction with a streamlining of the management structure, there was a change on 7 March 2014 in the composition of the Management Board of AS Merko Ehitus Eesti, a 100% subsidiary of AS Merko Ehitus. Andres Agukas, the Member of the Management Board was recalled. The Management Board will continue with four members: Tiit Roben (The Chairman), Jaan Mäe, Veljo Viitmann and Alar Lagus.
As a result of the departure of Andres Agukas, the composition of the Supervisory Boards of AS Merko Infra and Tallinna Teede AS, subsidiaries of the AS Merko Ehitus Eesti group, was changed. Effective 7 March 2014, Tiit Roben was appointed as Chairman of the Supervisory Board of AS Merko Infra to replace Andres Agukas. The Supervisory Board will continue with three members: Tiit Roben (Chairman), Veljo Viitmann and Mihkel Mugur. The Supervisory Board of Tallinna Teede AS will continue with three members after the departure of Andres Agukas: Tiit Roben (The Chairman), Alar Lagus and Veljo Viitmann.
The Supervisory Board of AS Merko Infra, a 100% subsidiary AS Merko Ehitus Eesti and with ultimate parent AS Merko Ehitus, decided to appoint Boris Tehnikov as an additional member of the Management Board and to elect the current member, Arno Elias, as the Chairman of the Management Board of AS Merko Infra as of 2 April 2014. The Management Board of AS Merko Infra will continue with three members: Arno Elias (The Chairman), Tarmo Pohlak and Boris Tehnikov.
AS Merko Ehitus board decided to recall a member of the Supervisory Board of UAB Merko Statyba Jaan Mäe and appoint Signe Kukin as the new member of the Supervisory Board as of 2 April 2014. The Supervisory Board will continue with three members: Andres Trink (The Chairman), Tõnu Toomik and Signe Kukin.
OÜ Merko Investments, part of AS Merko Ehitus group, which has 100% holding in SIA Merks, board decided to recall a member of the Supervisory Board of SIA Merks Jaan Mäe and appoint Signe Kukin as the new member of the Supervisory Board as of 2 April 2014. The Supervisory Board will continue with three members: Andres Trink (The Chairman), Tõnu Toomik and Signe Kukin.
On 30 July 2014, the Supervisory Board of Tallinna Teede AS – the subsidiary of AS Merko Ehitus Eesti, part of AS Merko Ehitus group – decided to extend the powers of the Chairman of the Management Board, Jüri Läll for three years, i.e. till 30 July 2017. The Management Board of Tallinna Teede AS will continue with two members: Jüri Läll (The Chairman) and Jüri Helila.
On 31 July 2014, the Supervisory Board of AS Merko Ehitus Eesti, part of AS Merko Ehitus group, decided to extend the powers of the Member of the Management Board, Alar Lagus for three years, i.e. till 31 July 2017. The Management Board of AS Merko Ehitus Eesti will continue with four members: Tiit Roben (The Chairman), Jaan Mäe, Veljo Viitmann and Alar Lagus.
On 8 September 2014, the Supervisory Board of AS Merko Ehitus decided to extend the powers of the Chairman of the Management Board, Andres Trink for three years, i.e. till 1 January 2018. The Management Board of AS Merko Ehitus will continue with two members: Andres Trink (The Chairman) and Tõnu Toomik.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros
|
2014 9 months |
2013 9 months |
2014 III quarter |
2013 III quarter |
2013 12 months |
|
| Revenue | 182,237 | 197,844 | 68,536 | 84,101 | 262,719 |
| Cost of goods sold | (165,979) | (180,479) | (62,357) | (76,561) | (239,996) |
| Gross profit | 16,258 | 17,365 | 6,179 | 7,540 | 22,723 |
| Marketing expenses | (2,290) | (2,229) | (781) | (838) | (3,041) |
| General and administrative expenses | (6,577) | (7,041) | (2,285) | (2,702) | (9,260) |
| Other operating income | 1,265 | 1,771 | 428 | 553 | 2,264 |
| Other operating expenses | (156) | (318) | (73) | (132) | (425) |
| Operating profit | 8,500 | 9,548 | 3,468 | 4,421 | 12,261 |
| Finance income/costs | (502) | (852) | (165) | (238) | (1,116) |
| incl. finance income/costs from joint ventures | (103) | (103) | (33) | (33) | (138) |
| finance income/costs from other long-term investments | 1 | 32 | - | 9 | 2 |
| interest expense | (482) | (615) | (149) | (199) | (814) |
| foreign exchange gain (loss) | (5) | (185) | (4) | (18) | (202) |
| other financial income (expenses) | 87 | 19 | 21 | 3 | 36 |
| Profit before tax | 7,998 | 8,696 | 3,303 | 4,183 | 11,145 |
| Corporate income tax expense | (558) | (847) | (76) | (326) | (791) |
| Net profit for financial year | 7,440 | 7,849 | 3,227 | 3,857 | 10,354 |
| incl. net profit attributable to equity holders of the parent | 7,621 | 7,947 | 3,261 | 3,897 | 10,399 |
| net profit attributable to non-controlling interest | (181) | (98) | (34) | (40) | (45) |
| Other comprehensive income | |||||
| Currency translation differences of foreign entities | - | (155) | - | (7) | (157) |
| Comprehensive income for the period | 7,440 | 7,694 | 3,227 | 3,850 | 10,197 |
| incl. net profit attributable to equity holders of the parent | 7,621 | 7,792 | 3,261 | 3,890 | 10,242 |
| net profit attributable to non-controlling interest | (181) | (98) | (34) | (40) | (45) |
| Earnings per share for profit attributable to equity holders of the parent (basic and diluted, in EUR) | 0.43 | 0.45 | 0.18 | 0.22 | 0.59 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros
| 30.09.2014 | 30.09.2013 | 31.12.2013 | |
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 40,332 | 39,082 | 46,633 |
| Trade and other receivables | 67,277 | 74,049 | 57,172 |
| Prepaid corporate income tax | 58 | 39 | 19 |
| Inventories | 118,917 | 88,614 | 87,451 |
| 226,584 | 201,784 | 191,275 | |
| Non-current assets | |||
| Long-term financial assets | 9,823 | 26,646 | 27,415 |
| Deferred income tax assets | 1,593 | 1,616 | 1,592 |
| Investment property | 4,498 | 3,396 | 4,672 |
| Property, plant and equipment | 13,774 | 13,630 | 13,117 |
| Intangible assets | 1,051 | 1,271 | 1,167 |
| 30,739 | 46,559 | 47,963 | |
| TOTAL ASSETS | 257,323 | 248,343 | 239,238 |
| LIABILITIES | |||
| Current liabilities | |||
| Borrowings | 15,655 | 11,312 | 18,916 |
| Payables and prepayments | 83,170 | 86,409 | 72,162 |
| Income tax liability | 93 | 184 | 62 |
| Short-term provisions | 5,770 | 4,281 | 5,906 |
| 104,688 | 102,186 | 97,046 | |
| Non-current liabilities | |||
| Long-term borrowings | 24,740 | 23,240 | 16,469 |
| Deferred income tax liability | 651 | 464 | 505 |
| Other long-term payables | 1,688 | 1,900 | 2,162 |
| 27,079 | 25,604 | 19,136 | |
| TOTAL LIABILITIES | 131,767 | 127,790 | 116,182 |
| EQUITY | |||
| Non-controlling interests | 3,329 | 1,140 | 1,193 |
| Equity attributable to equity holders of the parent | |||
| Share capital | 12,000 | 12,000 | 12,000 |
| Statutory reserve capital | 1,200 | 1,200 | 1,200 |
| Currency translation differences | (669) | (667) | (669) |
| Retained earnings | 109,696 | 106,880 | 109,332 |
| 122,227 | 119,413 | 121,863 | |
| TOTAL EQUITY | 125,556 | 120,553 | 123,056 |
| TOTAL LIABILITIES AND EQUITY | 257,323 | 248,343 | 239,238 |
Interim report and the investor presentation are attached to the announcement and are also published on NASDAQ Tallinn and Merko’s web page (group.merko.ee).
Signe Kukin
Group CFO
AS Merko Ehitus
+372 650 1250
signe.kukin@merko.ee
AS Merko Ehitus (group.merko.ee) comprises the leading Estonian construction company AS Merko Ehitus Eesti, the Latvian market based SIA Merks and the Lithuanian market based UAB Merko Statyba as well as the group’s real estate development business unit together with companies holding real estate properties. As at the end of 2013, the group employed 860 people and the 2013 revenue amounted to EUR 262.7 million.
