COMMENTARY FROM MANAGEMENT
Merko Ehitus revenue was EUR 81.2 million in Q1 2024, representing 7.2% growth compared to the same period a year ago. Net profit for the quarter was EUR 4.4 million. Merko delivered 59 apartments and 7 commercial units to buyers in 3 months this year.
According to the management of Merko Ehitus, the apartment market behaved as expected in the first quarter and Merko group figures for first sales reflected that and there is no basis for expecting results comparable to 2023 in real estate development. In the new and different market situation, Merko has successfully refocused its activities and been able to compensate the drop in volumes from residential development with construction service sales. Merko Ehitus net profit decreased, but the result was better than anticipated based on the changes in the proportion of our core business.
In Q1 2024, the group companies entered into new construction contracts worth EUR 10.5 million and the balance of secured order-book was EUR 419 million at quarter’s end. In the first three months of the year, construction service business area accounted for 83.7% of the group’s revenue. Private sector clients have grown somewhat more active on the construction services market, apparently accustomed to new building price levels, and are again contemplating expansion of their business. Contracts for defence facilities and energy infrastructure are active and hopefully the next Rail Baltica projects will come up for procurement soon. Merko’s secured order book is strong and in April, a noteworthy energy infrastructure contract in Latvia and a contract for additional work on the NATO training centre in Lithuania were added.
In Q1, Merko delivered 59 apartments and 7 commercial units to buyers, invested a total of EUR 11.6 million into development projects, and launched construction and sales of 112 new apartments in three new development projects: Õielehe in Jüri, the new phase of Erminurme in Tartu and Lucavsala in Riga. As of the end of Q1, the group companies had 450 apartments under construction, 9% of which were covered by preliminary sale contracts. The largest projects in progress were Uus-Veerenni, Noblessneri and Lahekalda in Tallinn, Erminurme in Tartu, Viesturdārzs, Mežpilsēta and Magnolijas in Riga and Vilnelės Skverai in Vilnius.
In Q1 of 2024, the largest sites under construction in Estonia were Hampton by Hilton and Hyatt hotel buildings, Arter Quarter, the logistics centre for TKM Group, barracks at the Defence Forces’ Ämari base, the Rail Baltica road viaducts in Harjumaa, a tram line between Old City Harbour and Rail Baltica Ülemiste passenger terminal, as well the first phase of Ülemiste terminal. Projects in Lithuania were wind farm infrastructure works in Kelme and Pagėgiai regions, and various buildings and infrastructure for NATO training centres.
OVERVIEW OF THE 3 MONTHS RESULTS
PROFITABILITY
2024 3 months’ pre-tax profit was EUR 5.2 million (3M 2023: EUR 6.1 million), which brought the pre-tax profit margin to 6.4% (3M 2023: 8.0%).
Net profit attributable to shareholders for 3 months 2024 was EUR 4.4 million (3M 2023: EUR 5.9 million) and 3 months net profit margin was 5.5% (3M 2023: 7.8%).
REVENUE
2024 3 months’ revenue was EUR 81.2 million (3M 2023: EUR 75.8 million). 3 months’ revenue increased by 7.2% compared to same period last year. The share of revenue earned outside Estonia in 3 months 2024 was 62.3% (3M 2023: 46.7%).
SECURED ORDER BOOK
As of 31 March 2024, the group’s secured order book was EUR 419.0 million (31 March 2023: EUR 412.2 million). In 3 months 2024, group companies signed contracts in the amount of EUR 10.5 million (3M 2023: EUR 170.3 million).
REAL ESTATE DEVELOPMENT
In 3 months 2024, the group sold a total of 59 apartments; in 3 months 2023, the group sold 145 apartments. The group earned a revenue of EUR 10.8 million from sale of own developed apartments in 3 months 2024 and EUR 19.4 million in 3 months 2023.
CASH POSITION
At the end of the reporting period, the group had EUR 88.4 million in cash and cash equivalents, and equity of EUR 216.6 million (50.8% of total assets). Comparable figures as of 31 March 2023 were EUR 14.3 million and EUR 190.1 million (50.0% of total assets), respectively. As of 31 March 2024, the group’s net debt was negative EUR 39.6 million (31 March 2023: EUR 72.8 million).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros
| 2024 3 months |
2023 3 months |
2023 12 months |
|
| Revenue | 81,185 | 75,751 | 466,304 |
| Cost of goods sold | (72,301) | (65,776) | (401,267) |
| Gross profit | 8,884 | 9,975 | 65,037 |
| Marketing expenses | (1,068) | (1,077) | (4,312) |
| General and administrative expenses | (4,142) | (3,965) | (19,423) |
| Other operating income | 1,324 | 817 | 4,171 |
| Other operating expenses | (953) | (62) | (991) |
| Operating profit | 4,045 | 5,688 | 44,482 |
| Finance income/costs | 1,157 | 391 | 7,500 |
| incl. finance income/costs from joint ventures | 1,568 | 1,280 | 10,220 |
| interest expense | (655) | (655) | (2,697) |
| foreign exchange gain (loss) | (190) | (210) | (153) |
| other financial income (expenses) | 434 | (24) | 130 |
| Profit before tax | 5,202 | 6,079 | 51,982 |
| Corporate income tax expense | (818) | (292) | (6,081) |
| Net profit for financial year | 4,384 | 5,787 | 45,901 |
| incl. net profit attributable to equity holders of the parent | 4,427 | 5,880 | 46,048 |
| net profit attributable to non-controlling interest | (43) | (93) | (147) |
| Other comprehensive income, which can subsequently be classified in the income statement | |||
| Currency translation differences of foreign entities | 106 | 53 | (41) |
| Comprehensive income for the period | 4,490 | 5,840 | 45,860 |
| incl. net profit attributable to equity holders of the parent | 4,526 | 5,910 | 45,993 |
| net profit attributable to non-controlling interest | (36) | (70) | (133) |
| Earnings per share for profit attributable to equity holders of the parent (basic and diluted, in EUR) | 0.25 | 0.33 | 2.60 |
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros
| 31.03.2024 | 31.03.2023 | 31.12.2023 | |
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 88,353 | 14,295 | 77,330 |
| Trade and other receivables | 58,929 | 54,206 | 68,754 |
| Prepaid corporate income tax | 6 | 89 | 2 |
| Inventories | 196,518 | 244,549 | 195,435 |
| 343,806 | 313,139 | 341,521 | |
| Non-current assets | |||
| Investments in joint ventures | 23,483 | 14,175 | 21,915 |
| Other shares and securities | 80 | – | 80 |
| Other long-term loans and receivables | 20,427 | 22,685 | 24,490 |
| Deferred income tax assets | 4,998 | 873 | 3,298 |
| Investment property | 16,740 | 11,460 | 16,823 |
| Property, plant and equipment | 16,093 | 17,287 | 16,613 |
| Intangible assets | 487 | 564 | 520 |
| 82,308 | 67,044 | 83,739 | |
| TOTAL ASSETS | 426,114 | 380,183 | 425,260 |
| LIABILITIES | |||
| Current liabilities | |||
| Borrowings | 12,909 | 59,753 | 19,673 |
| Payables and prepayments | 134,216 | 88,907 | 133,898 |
| Income tax liability | 6,335 | 1,290 | 4,260 |
| Short-term provisions | 10,551 | 8,973 | 10,451 |
| 164,011 | 158,923 | 168,282 | |
| Non-current liabilities | |||
| Long-term borrowings | 35,882 | 27,347 | 35,142 |
| Deferred income tax liability | 4,489 | 2,327 | 4,441 |
| Other long-term payables | 5,342 | 2,054 | 5,495 |
| 45,713 | 31,728 | 45,078 | |
| TOTAL LIABILITIES | 209,724 | 190,651 | 213,360 |
| EQUITY | |||
| Non-controlling interests | (191) | (565) | (155) |
| Equity attributable to equity holders of the parent | |||
| Share capital | 7,929 | 7,929 | 7,929 |
| Statutory reserve capital | 793 | 793 | 793 |
| Currency translation differences | (739) | (753) | (838) |
| Retained earnings | 208,598 | 182,128 | 204,171 |
| 216,581 | 190,097 | 212,055 | |
| TOTAL EQUITY | 216,390 | 189,532 | 211,900 |
| TOTAL LIABILITIES AND EQUITY | 426,114 | 380,183 | 425,260 |
