Tallinn, Estonia, 2017-05-11 07:00 CEST (GLOBE NEWSWIRE) --
COMMENTARY OF THE CHAIRMAN OF THE MANAGEMENT BOARD
In Q1 of 2017, Merko Ehitus posted revenue of EUR 58 million and a net profit of EUR 1.0 million. Revenue grew both in Estonia and in other home markets, apartment sales picked up as well. The first quarter revenue generally met the managements expectations, yet profitability is still under pressure due to the thin margin on construction contracts. The management estimates, that to improve profitability, we need to come up with greater internal efficiency. The volume of new construction contracts signed in Q1 was close to EUR 60 million that can be considered an average figure and includes the first significant contract in Norway. In early April, we were able to add to our portfolio a EUR 100 million contract for building the Akropole Centre in Riga.
With regard to market demand, the management notes that the construction volumes of new commercial buildings in Tallinn and Vilnius are stabilising, and the past growth rate is also becoming calmer in residential construction. Road and infrastructure procurements are on the way in Estonia; in Lithuania we expect more public sector building procurements, which there have been surprisingly few so far. In Latvia, we see room for new commercial buildings and apartment development, but the economic growth rate as a whole remains a question.
In Q1, the group sold 141 apartments with a total price of EUR 16 million (excluding VAT); compared to the 101 apartments sold in the first three months of 2016. In the apartment development sector, we will continue implementing our strategy – we plan to invest about EUR 45 million into real estate development this year and start construction of 650 new apartments. In Q1, Merko launched four apartment development projects in the Baltic capital cities: the Staapli 3 building in Noblessner in Tallinn, with 105 apartments, and two buildings in Paepargi with 66 apartments. In Riga, the first phase of the Gailezers development with 96 apartments was started, and in Vilnius, the Rinktines Urban project with 141 apartments, hotel and an underground parking garage connecting the whole development area. In the first quarter, we added to our development projects portfolio a development area on Rūpniecības street in immediate proximity to the city centre of Riga that will accommodate construction of around 350 apartments.
The group's Q1 2017 revenue was EUR 58.1 million, EBITDA was EUR 1.9 million, profit before taxes was EUR 1.1 million and net profit was EUR 1.0 million. In comparison, the group’s revenue in Q1 2016 was EUR 46.8 million, EBITDA was EUR 1.2 million, profit before taxes was EUR 0.3 million and net profit was EUR 0.1 million. In Q1 2017, the group signed new construction contracts in the total amount of EUR 59 million, including the tower B of the Öpiku Maja office building, the Staapli 3 apartment building in the Noblessner development in Tallinn, the Šaltiniu Namai apartment building complex in Vilnius and Blakstad Hospital in Norway.
As at 31 March 2017, the group's secured order book amounted to EUR 288 million, compared to EUR 243 million in the same period in the previous year. Major projects in progress for Merko in Q1 included, in Tallinn, the construction of T1 shopping centre, Maakri Kvartal, Öpiku Maja office building’s tower B, and the tram line that will serve the airport. In Latvia, the largest projects in progress are the Ventspils music school and concert hall; in Lithuania, Radisson Blu Hotel Lietuva, the Philip Morris plant and a hotel and residential building complex in the Rinktines Urban development project.
OVERVIEW OF THE 3 MONTHS RESULTS
PROFITABILITY
Net profit in 3M 2017 was EUR 1.0 million (3M 2016: EUR 0.1 million), having increased by 822.8% compared to the same period last year and net profit margin increased to 1.8% (3M 2016: 0.2%). Profit before tax in 3M 2017 was EUR 1.1 million (3M 2016: EUR 0.3 million), which is equivalent to a profit before tax margin of 1.9% (3M 2016: 0.6%).
REVENUE
Revenue in 3M 2017 was EUR 58.1 million (3M 2016: EUR 46.8 million), which has increased by 24.2% compared to last year. The number of apartments (141 units, incl. 1 apartment in a joint venture) sold in 3 months of 2017 has increased by 39.6% compared to last year and the revenue from apartment sales (EUR 16.3 million) has increased by 43.6% (3 months of 2016: 101 units, revenues of EUR 11.4 million).
CASH POSITION
At the end of the reporting period, the group had EUR 33.8 million in cash and cash equivalents and equity EUR 123.8 million (53.6% of total assets). Comparable figures as at 31 March 2016 were accordingly EUR 34.4 million and EUR 125.8 million (62.3% of total assets). As at 31 March 2017 the group had net debt of EUR 6.9 million (31 March 2016: negative EUR 8.2 million).
SECURED ORDER BOOK
As at 31 March 2017, the group’s secured order book had grown to EUR 287.7 million (31 March 2016: EUR 243.5 million). In 3M 2017, group companies signed new contracts in the amount of EUR 58.6 million (3M 2016: EUR 22.4 million).
DISTRIBUTION OF PROFITS
The general meeting of shareholders held on 28 April 2017 resolved to approve the profit allocation proposal for 2016 and to distribute EUR 7.3 million (EUR 0.41 per share) in dividends from retained earnings. This is equivalent to a 119% dividend rate for 2016.
| 3M 2017 | 3M 2016 | Variance | 12m 2016 | ||
| Revenue | million EUR | 58.1 | 46.8 | +24.2% | 252.0 |
| EBITDA | million EUR | 1.9 | 1.2 | +60.8% | 11.2 |
| EBITDA margin | % | 3.3 | 2.5 | +29.5% | 4.4 |
| EBIT | % | 1.3 | 0.5 | +159.6% | 7.7 |
| EBIT margin | % | 2.2 | 1.0 | +109.0% | 3.1 |
| Profit before tax | million EUR | 1.1 | 0.3 | +261.7% | 7.3 |
| PBT margin | % | 1.9 | 0.6 | +191.2% | 2.9 |
| Net profit (parent) | million EUR | 1.0 | 0.1 | +822.8% | 6.1 |
| Net profit margin | % | 1.8 | 0.2 | +643.1% | 2.4 |
| EPS | EUR | 0.06 | 0.01 | +822.8% | 0.35 |
| 31.03.2017 | 31.03.2016 | Variance | 31.12.2016 | ||
| ROE (on yearly basis) | % | 5.8 | 7.5 | -23.0% | 5.0 |
| Equity ratio | % | 53.6 | 62.3 | -13.9% | 51.6 |
| Secured order book | million EUR | 287.7 | 243.5 | +18.2% | 269.6 |
| Total assets | million EUR | 231.0 | 202.0 | +14.4% | 237.8 |
| Number of employees | people | 799 | 782 | +2.2% | 797 |
OPERATING RESULTS
Revenue and operating profit
Merko Ehitus group generated a total of EUR 58.1 million in revenue in 3 months of 2017 (3 months of 2016: EUR 46.8 million). 46.0% of the revenue was generated in Estonian construction service, 19.2% in other home markets construction service and 34.8% in real estate development segment (3 months of 2016: 40.7% in Estonian construction service, 17.0% in other home markets construction service and 42.3% in real estate development segment). Compared to the 3 months of 2016 the group revenue has increased by nearly a quarter. The revenue growth was boosted as several large-scale projects that lagged in the last year gained momentum in the first quarter of the year, as well by the increase of apartments sales. Compared to the 3 months of the previous year in the 3 months of 2017 the share of other home markets construction service revenue in the group’s revenue has increased from 17.0% to 19.2% and the share of Estonian construction service from 40.7% to 46.0%. The main changes in the revenue structure compared to the same period last year lie in the growth in revenue from Estonian construction services’ general construction projects, in the increase in the sales revenue of construction services from joint venture projects and the increase in revenues from apartment sales in the real estate development segment. This trend has been in line with the group’s expectations, considering the distribution of the secured order book as at the end of 2016.
In 3 months of 2017 the group’s operating profit from development and construction activities totalled EUR 1.3 million (3 months of 2016: EUR 0.5 million). The 3 months operating profit margin (2.2%) has increased by 1.2 pp compared to the same period last year (3 months of 2016: 1.0%). The group’s aim is to preserve the profitability both in the Estonian but also other home markets construction service domain in spite of the prevailing competition situation on the construction market and the decrease in sales volumes in regard to previously higher-margin civil engineering projects, which was so far been supported by stable input prices, but which in on an upward trend in the medium time horizon. Considering the small size of the Estonian market, the current situation – where several large-scale building construction projects are simultaneously in works – means occasionally limited capability for subcontractors to carry out work or to do so under reasonable conditions, which in turn puts pressure on the general contractors’ margins. Operating profit margin has also been impacted to some extent by the recovery in profitability in the real estate development segment, which depends largely on the price of the land as part of the total specific project expenses and is thus different on a project basis. The level of operating profit compared to that of last year was additionally influenced by higher marketing, general and administrative expenses, mainly due to the increase in the labour cost bonuses.
The scarcity of projects and the ever-tightening competition in the construction sector poses a great challenge in the maintaining of the current level of operating profit in all segments. The number of companies participating in tenders and the risk of low pricing bids is high in all three Baltic states.
Profit before tax and net profit
In 3 months of 2017, the group’s profit before tax totalled EUR 1.1 million (3 months of 2016: EUR 0.3 million) and net profit attributable to equity holders of the parent was EUR 1.0 million (3 months of 2016: EUR 0.1 million). Group’s profit before tax margin was 1.9% (3 months of 2016: 0.6%) and the net profit margin was 1.8% (3 months of 2016: 0.2%). Both the group’s profit before tax (EUR 1.1 million) and the profit before tax margin (1.9%) have increased compared to the same period last year (3 months of 2016: EUR 0.3 million and 0.6%, respectively).
Business segments
The group operates in Estonian, Latvian, Lithuanian and Norwegian market through its subsidiaries, the reporting of which is divided into following business segments: Estonian construction service (incl. construction services on project basis in Finland), other home markets construction service (incl. construction services in Latvia, Lithuania and Norway) and real estate development. The group’s segment structure is aligned with group’s management structure.
Estonian construction service
The Estonian construction services segment consists of various services in the field of general construction, civil engineering, electricity and road construction and construction services on project basis in Finland.
In the 3 months of 2017, the revenue of the Estonian construction service segment was EUR 26.7 million (3 months of 2016: EUR 19.0 million), having increased by 40.6% from the same period last year. The 3 months revenue includes revenue from Finnish projects in the amount of EUR 0.02 million (3 months of 2016: EUR 0.4 million). The revenues have clearly increased in the field of general construction. The increase in revenue in the segment is primarily influenced by the fact that several large-scale general construction projects launched in 2016 have continued to progress. The Estonian construction service segment revenues for 3 months 2017 were 46.0% of the group’s revenue, forming the largest proportion in the group’s revenue, having increased by 13.2% in the yearly comparison.
Our major projects in the first quarter in Tallinn included the design and construction works of Maakri Kvartal business complex, office building located at Mustamäe tee 3, T1 shopping centre, Pärnu mnt 22 office building and BAUHAUS DIY store, construction of the airport tram line infrastructure and construction work on the passenger walkway at Vanasadama Harbour quay No 5, in Tapa construction works of the barracks in military campus depot and Viru Infantry Battalion technology park buildings and facilities. Additionally the construction works of Juuliku road junction and road section at Tallinn roundabout and the road maintenance works done under the service agreement with Tallinn and Viljandi county had a significant impact.
Other home markets construction service
The Other home markets construction service segment consists of general construction work in Latvia, Lithuania and Norway and provision of civil engineering and electricity services in Latvia.
The revenue of the other home markets construction service segment amounted to EUR 11.2 million in the 3 months of 2017 (3 months of 2016: EUR 8.0 million), which is 40.3% more than in the 3 months of 2016. If the other home markets construction service segment revenues of 3 months of 2016 formed 17.0% of the group’s revenue, then during 3 months of the current year the segments revenues have increased to 19.2%. The change in this percentage has been in line with expectations, considering the level of new contracts signed in Latvia and Lithuania at the end of 2016 and the low comparison base of 2016, where there were less large-scale projects in works in Latvia and Lithuania.
Merko’s position among Latvia general contractors is currently strong and we see opportunities for growing our business volumes. In Lithuania, we are continuing our strategic plan to focus on external customers who make up the predominant part of the group’s Lithuanian construction contracts portfolio. In Lithuania, we have also entered more widely the public procurement sphere in the field of general construction. In Norway, the group is mainly performing smaller-scale agreements, while actively working on building project management capability and systems to conclude larger general contracting agreements. The group’s Norwegian subsidiary concluded the first major construction contract at the end of the first quarter. The group’s continued focus is on increasing the revenues outside Estonia.
In the first quarter of 2017, the main ongoing projects included in the other home markets construction service segment were in Vilnius the construction works of Narbuto 5 office building, the construction works of Kauno/Algirdo residential complex with office premises and the design and construction works of Radisson Blu Hotel Lietuva extension, in Klaipeda the reconstruction and extension construction works of Philip Morris plant, in Riga the construction works of apartment building Magdalēnas nami, the construction works of the British International School, the construction works of Cēsu 9 apartment building, In Jurmala the construction works of Jasmīnu 10 residential complex and in Ventspils the construction works of music school and concert hall.
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 Estonia, Latvia and Lithuania.
The group sold a total of 141 apartments (incl. 1 apartment in a joint venture) in 3 months of 2017 at the total value of EUR 16.3 million (excl. VAT), compared to 101 apartments and EUR 11.4 million in 3 months of 2016. In 3 months of 2017, the group has earned EUR 0.0 million of revenue from the sale of immovable properties (3 months of 2016: EUR 7.5 million). The construction service revenue from projects developed by joint ventures in 3 months of 2017 was EUR 2.5 million (3 months of 2016: EUR 0.6 million).
In 3 months of 2017 real estate development segment revenues have increased by 2.0% compared to the same period last year, The growth is primarily influenced by the increase of revenues from the sale of apartments in the current period, especially considering that in the reference period the group sold immovable properties that were strategically not needed by the group.
In the 3 months of 2017 the share of revenue from the real estate development segment formed 34.8% of the group’s total revenue (3 months of 2016: 42.3%).
At the end of the period, group’s inventory comprised 202 apartments where a preliminary agreement had been signed: 71 completed apartments (60 in Estonia, 1 in Latvia and 10 in Lithuania) and 131 apartments under construction (77 in Estonia, 29 in Latvia and 25 in Lithuania). The sale of these apartments had not yet been finalised and delivered to customers, because the development site is still under construction or the site was completed at the end of the reporting period and the sales transactions have not all been finalised yet.
As at 31 December 2017, the group had a total of 598 apartments for active sale (as at 31 March 2016: 457 apartments; as at 31 December 2016: 497 apartments), for which there are no pre-sale agreements and of which 109 have been completed (75 in Estonia, 15 in Latvia and 19 in Lithuania) and 489 are under construction (220 in Estonia, 153 in Latvia and 116 in Lithuania). The increase in the number of apartments on active sale as at 31 March 2017, compared to 31 March 2016 is mainly due to the higher volume of projects launched in the 3 months of the current year.
In 3 months of 2017, we launched the construction of a total of 408 new apartments in the Baltic states (3 months of 2016: 90 apartments):
- the construction of Gaiļezera nami residential development with 96 apartments at Mežciems district in Riga, located between Līduma, Gaiļezera and Hipokrāta streets;
- the construction of Rinktinės Urban residential development project with 141 apartments in the city centre of Vilnius, located at the corner of Rinktinės and Ceikiniu streets;
- In Tallinna, the construction of the second stage of Noblessner residential development project with 105 apartments located at Staapli 3;
- In Tallinna, the construction of 66 apartments in the new phase of Paepargi development project located at Paepargi 43 and 47.
In the 3 months of this year, the group has invested a total of EUR 7.5 million (3 months of 2016: EUR 10.1 million; 12 months of 2016: EUR 53.6 million) in new development projects launched in 2017 as well as projects already in progress from previous year.
We will continue to invest in residential real estate projects and in 2017, the group plans to launch the construction of approximately 650-700 (incl. 60-160 apartments in joint ventures) new apartments in the Baltic states. In 2016, construction was started on 344 apartments. The investment level in 2017 in both development projects initiated in the previous years and new projects to be launched in 2017 is in the range of EUR 45 million (2016: EUR 53.6 million invested).
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. At 31 March 2017, the group's inventories included land plots with the development potential, where the construction works have not started, of EUR 67.0 million (31.03.2016: EUR 50.5 million; 31.12.2016: EUR 63.2 million).
In the 3 months of 2017, the group has purchased new land plots at an acquisition cost of EUR 4.1 million purposes (3 months of 2016: no new land plot acquisitions; 12 months of 2016: acquired different new land plots in Tallinn, Estonia at an acquisition cost of EUR 16.8 million and in Vilnius, Lithuania at an acquisition cost of EUR 2.3 million). In Q1 of 2017, the group acquired an approximately 1.5-hectare development area between Rūpniecības and Pētersalas streets in the heart of Riga at an acquisition cost of EUR 4.1 million, allowing to build nearly 350 apartments in the upcoming years. According to a preliminary agreement with a credit institution the acquisition of the development area is planned to be financed with a bank loan in the second quarter of 2017.
Based on its long-term strategy, the group will continue investing in land plots, and is searching for new land plots with development potential, in 2017 above all, in Estonia and Lithuania.
Secured order book
As at 31 March 2017, the group’s secured order book (without own developments) amounted to EUR 287.7 million as compared to EUR 243.5 million as at 31 March 2016, having increased by approximately 20% in the annual comparison. The secured order book excludes the group's own residential development projects and construction work related to developing real estate investments.
In 3 months of 2017, EUR 58.6 million worth of new contracts were signed (without own developments) as compared to EUR 22.4 million in same period last year.
After the balance sheet date, the group concluded one large construction contracts:
- On 7 April 2017, SIA Merks – a subsidiary of AS Merko Ehitus – signed a contract with SIA M257, to perform the construction works of Multifunctional Centre Akropole located at 257 Maskavas street, Riga, Latvia. The main general contractor SIA Merks has decided to engage UAB Mitnija as project management partner with a share of 50:50. The given contract is recognised 100% in the secured order book, as SIA Merks bears the sole liability to the customer. The value of the contract is approximately EUR 100 million. The works are scheduled for completion in January of 2019.
Of the contracts signed in the 3 months of 2017, private sector orders accounted for the majority proportion, which is also represented in the group’s secured order book as at the end of the reporting period, where private sector orders from projects in progress constitute approximately 70% (31.03.2016: approximately 80%; 31.12.2016: approximately 70%). Apart from a few large-scale procurements where Merko companies were not as optimistic as our competitors in bidding at a low price, the share of government contracts has continuingly been very modest. The group continues to focus on comprehensive design and construction contracts. In this regard, four important design and construction contracts were signed in the first 3 months of 2017.
The portfolio of contracts has increased compared to the same period of the last few years (31.03.2016: EUR 243.5 million; 31.03.2015: EUR 167.2 million). Yet aside from individual larger-scale agreements in Estonia, the secured order book balance is not satisfactory. This is particularly the case in regard to public procurements. Considering the beginning phase of the current EU funding period, the volume of public procurements has stayed at the previous year’s level and at the moment we predict that the volume of public procurements will start to increase in 2017.
Traditionally the share of Estonian construction activity has been the highest in the group's revenues. Given the growth outlook of the Estonian construction market, the group's goal is to increase the volume of construction orders from outside Estonia. Thus, we will continue to identify and strengthen the groups competitive advantages and are closely monitoring the development and opportunities both in the Baltic states and Norway, where the group concluded a transaction through which it acquired a controlling holding in Peritus Entreprenør AS, a Norwegian construction company that provides general construction services. The long-term objective of the group in Norway is to gradually build the capacity to undertake bigger projects, to operate as a Norwegian company and to gain the trust of local customers, whilst exploiting Merko's experience in quality and project management and the network of partners. In 2017, the group will continue to take part in various individual Finnish and Swedish construction procurements in a selective and project-based manner in order to gain experience and regarding the conditions and requirements set out in these countries for qualifying for construction company procurements, as well as assess the risks so as to evaluate potential competitive advantages for entering these markets, but focusing above all in the Nordic countries on the Norwegian market.
Cash flows
As at 31 December 2016 the group had cash equivalents in the amount of EUR 33.8 million (31.03.2016: EUR 34.4 million; 31.12.2016: EUR 33.5 million). The group's cash level is slightly lower compared to the same period last year; still, the financial position is continually strong, as the group has not utilised its credit lines of existing overdrafts and loan agreements.
The 3-month cash flow from operating activity was positive at EUR 5.6 million (3 months of 2016: negative EUR 1.6 million), cash flow from investing activity was negative at EUR 0.1 million (3 months of 2016: positive EUR 0.9 million) and the cash flow from financing activity was negative at EUR 5.2 million (3 months of 2016: negative EUR 4.8 million).
The cash flow from operating activity was mostly influenced by the EBITDA (operating profit adjusted with depreciation and amortisation) EUR 1.9 million (3 months of 2016: EUR 1.2 million), by the negative change in receivables and liabilities related to construction contracts recognised under the stage of completion method EUR 2.0 million (3 months of 2016: negative change of EUR 3.5 million), by the negative change in the provisions EUR 2.0 million (3 months of 2016: negative change of EUR 2.8 million), by the positive change in trade and other receivables related to operating activities EUR 10.8 million, incl. the return of VAT prepayment related to Veerenni development area aquisition in January of 2017 in the amount of EUR 3.4 million (3 months of 2016: positive change of EUR 0.4 million, incl. a negative change in financing co-financed projects of EUR 1.6 million), by the positive change in inventory EUR 2.6 million, incl. negative cash flow from purchase of new land plots in the amount of EUR 4.1 million (3 months of 2016: positive change of EUR 6.6 million, incl. positive cash flow from sale of immovable properties in the amount of EUR 7.5 million) and by the positive change in trade and other payables related to operating activities EUR 5.0 million (3 months of 2016: negative change of EUR 2.9 million).
To support cash flows arising from operating activity, the group has been cautious in raising additional external capital, including factoring. At the same time, the debt ratio has remained at a moderate level (17.7% as at 31.03.2017; 12.9% as at 31.03.2016; 19.3% as at 31.12.2016).
Cash flows from investment activities include negative cash flow from the acquisition of non-current asset in the amount of EUR 0.4 million (3 months of 2016: EUR 0.5 million) and the positive cash flow from the sale of non-current assets in the amount of EUR 0.3 million (3 months of 2016: EUR 0.1 million). The group mainly invested in non-current assets for the purpose of renewing its fleet of machinery in the road construction segment. Cash flows from investment activities in the reference period was also positively impacted by the acquisition of majority shareholding in subsidiary Peritus Entreprenør AS (related to the offering of construction services on Norwegian market) in the amount of EUR 1.2 million.
Project specific loans obtained using investment property as collateral, included under cash flows from financing activities, were repaid in the amount of EUR 0.1 million (3 months of 2016: negative cash flow in the net amount of EUR 0.1 million). Net of loans received and loans repaid in connection with development projects amounted to positive cash flow of EUR 9.1 million (3 months of 2016: net negative cash flow of EUR 2.7 million) and finance lease principal repayments of EUR 0.2 million (3 months of 2016: EUR 0.2 million). In addition, over the 3 months of 2016, the group made repayments in the amount of EUR 1.0 million to related party Järvevana OÜ pursuant to the terms and conditions of an overdraft agreement between the parties. The group has not used bank loans to finance all ongoing development projects – and this is the case particularly in Estonia, where many advance sales were agreed in the early phase of construction. At the end of 2016 EUR 12.5 million was engaged in short-term loan from the parent company AS Riverito to purchase the Veerenni development area. The loan was refinanced at the beginning of 2017 with long-term loans from various credit institutions. In analogous fashion, the group plans to take a bank loan in Q2 2017 for financing the development area located between Rūpniecības and Pētersalas streets in Riga, Latvia, which was acquired in Q1 2017.
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 28 April 2017 approved the Supervisory Board’s 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 90% dividend rate and a 4.5% dividend yield for the year 2016 (using the share price as at 31 December 2016). Comparable figures in 2015 were accordingly: EUR 9.0 million (EUR 0.51 per share) as dividends, which is equivalent to a 90% dividend rate and a 6.0% dividend yield (using the share price as at 31 December 2015).
According to the Estonian Income Tax Law §50 section 11 AS Merko Ehitus can pay certain portion of dividends without any additional income tax expense and liabilities occurring due to previously received and taxed distribution of profits from subsidiaries. Taking into account the dividends already paid to the parent company by the subsidiaries during 2017, the group will incur additional income tax expense in connection with the disbursement of dividends of EUR 0.9 million (Q2 2016: EUR 0.6 million) in Estonia in the second quarter of 2017.The dividend payment to the shareholders will take place on 26 May 2017.
Ratios
(attributable to equity holders of the parent)
| 3M 2017 | 3M 2016 | 3M 2015 | 12M 2016 | ||
| Income statement summary | |||||
| Revenue | million EUR | 58.1 | 46.8 | 45.6 | 252.0 |
| Gross profit | million EUR | 4.1 | 3.1 | 3.6 | 19.0 |
| Gross profit margin | % | 7.1 | 6.5 | 7.8 | 7.5 |
| Operating profit | million EUR | 1.3 | 0.5 | 1.0 | 7.7 |
| Operating profit margin | % | 2.2 | 1.0 | 2.2 | 3.1 |
| Profit before tax | million EUR | 1.1 | 0.3 | 0.8 | 7.3 |
| PBT margin | % | 1.9 | 0.6 | 1.8 | 2.9 |
| Net profit | million EUR | 1.0 | 0.0 | 0.7 | 6.0 |
| attributable to equity holders of the parent | million EUR | 1.0 | 0.1 | 0.8 | 6.1 |
| attributable to non-controlling interest | million EUR | (0.0) | (0.1) | (0.1) | (0.1) |
| Net profit margin | % | 1.8 | 0.2 | 1.8 | 2.4 |
| Other income statement indicators | |||||
| EBITDA | million EUR | 1.9 | 1.2 | 1.9 | 11.2 |
| EBITDA margin | % | 3.3 | 2.5 | 4.1 | 4.4 |
| General expense ratio | % | 5.8 | 6.8 | 6.5 | 5.3 |
| Labour cost ratio | % | 13.2 | 14.2 | 13.7 | 11.7 |
| Revenue per employee | thousand EUR | 77 | 62 | 62 | 325 |
| Other significant indicators | 31.03.2017 | 31.03.2016 | 31.03.2015 | 31.12.2016 | |
| Return on equity | % | 5.8 | 7.5 | 10.1 | 5.0 |
| Return on assets | % | 3.1 | 4.3 | 5.0 | 2.8 |
| Return on invested capital | % | 5.5 | 7.8 | 8.5 | 5.1 |
| Equity ratio | % | 53.6 | 62.3 | 53.1 | 51.6 |
| Debt ratio | % | 17.7 | 12.9 | 14.6 | 19.3 |
| Current ratio * | times | 2.7 | 3.4 | 2.6 | 2.9 |
| Quick ratio * | times | 1.1 | 1.3 | 1.1 | 1.1 |
| Accounts receivable turnover | days | 39 | 35 | 51 | 37 |
| Accounts payable turnover | days | 38 | 35 | 41 | 38 |
| Average number of employees | people | 759 | 755 | 742 | 776 |
| Secured order book | million EUR | 287.7 | 243.5 | 167.2 | 269.6 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros
|
2017 3 months |
2016 3 months |
2016 12 months |
|
| Revenue | 58,147 | 46,820 | 251,970 |
| Cost of goods sold | (54,026) | (43,758) | (232,961) |
| Gross profit | 4,121 | 3,062 | 19,009 |
| Marketing expenses | (860) | (768) | (3,281) |
| General and administrative expenses | (2,518) | (2,417) | (10,076) |
| Other operating income | 567 | 648 | 2,466 |
| Other operating expenses | (57) | (42) | (399) |
| Operating profit | 1,253 | 483 | 7,719 |
| Finance income/costs | (156) | (180) | (440) |
| incl. finance income/costs from joint ventures | 28 | (17) | 163 |
| finance income/costs from other long-term investments | - | - | 2 |
| interest expense | (173) | (156) | (610) |
| foreign exchange gain (loss) | 2 | (8) | (6) |
| other financial income (expenses) | (13) | 1 | 11 |
| Profit before tax | 1,097 | 303 | 7,279 |
| Corporate income tax expense | (118) | (274) | (1,275) |
| Net profit for financial year | 979 | 29 | 6,004 |
| incl. net profit attributable to equity holders of the parent | 1,029 | 112 | 6,122 |
| net profit attributable to non-controlling interest | (50) | (83) | (118) |
| Other comprehensive income, which can subsequently be classified in the income statement | |||
| Currency translation differences of foreign entities | (3) | (2) | 19 |
| Comprehensive income for the period | 976 | 27 | 6,023 |
| incl. net profit attributable to equity holders of the parent | 1,025 | 110 | 6,140 |
| net profit attributable to non-controlling interest | (49) | (83) | (117) |
| Earnings per share for profit attributable to equity holders of the parent (basic and diluted, in EUR) | 0.06 | 0.01 | 0.35 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros
| 31.03.2017 | 31.03.2016 | 31.12.2016 | |
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 33,839 | 34,400 | 33,544 |
| Trade and other receivables | 45,414 | 24,947 | 45,566 |
| Prepaid corporate income tax | 528 | 543 | 617 |
| Inventories | 120,838 | 102,532 | 123,364 |
| 200,619 | 162,422 | 203,091 | |
| Non-current assets | |||
| Long-term financial assets | 11,922 | 19,506 | 15,805 |
| Deferred income tax assets | 1,326 | 1,423 | 1,325 |
| Investment property | 4,043 | 4,309 | 4,108 |
| Property, plant and equipment | 12,456 | 13,375 | 12,838 |
| Intangible assets | 668 | 948 | 673 |
| 30,415 | 39,561 | 34,749 | |
| TOTAL ASSETS | 231,034 | 201,983 | 237,840 |
| LIABILITIES | |||
| Current liabilities | |||
| Borrowings | 14,586 | 3,119 | 21,485 |
| Payables and prepayments | 54,909 | 38,360 | 56,259 |
| Income tax liability | 103 | 1,021 | 278 |
| Short-term provisions | 4,633 | 4,764 | 5,637 |
| 74,231 | 47,264 | 83,659 | |
| Non-current liabilities | |||
| Long-term borrowings | 26,196 | 23,035 | 24,516 |
| Deferred income tax liability | 1,149 | 978 | 1,122 |
| Other long-term payables | 2,000 | 989 | 2,061 |
| 29,345 | 25,002 | 27,699 | |
| TOTAL LIABILITIES | 103,576 | 72,266 | 111,358 |
| EQUITY | |||
| Non-controlling interests | 3,643 | 3,928 | 3,692 |
| Equity attributable to equity holders of the parent | |||
| Share capital | 7,929 | 7929 | 7,929 |
| Statutory reserve capital | 793 | 1,200 | 793 |
| Currency translation differences | (649) | (665) | (645) |
| Retained earnings | 115,742 | 117,325 | 114,713 |
| 123,815 | 125,789 | 122,790 | |
| TOTAL EQUITY | 127,458 | 129,717 | 126,482 |
| TOTAL LIABILITIES AND EQUITY | 231,034 | 201,983 | 237,840 |
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) group consists of Estonia’s leading construction company AS Merko Ehitus Eesti, the Latvian-market-oriented SIA Merks, UAB Merko Statyba that is operating on the Lithuanian market, Peritus Entreprenør AS construction company in Norway and the real estate development business unit along with real estate holding companies. As at the end of 2016, the group employed 797 people and the company’s 2016 revenue was EUR 252 million.
