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Merko Ehitus 2014 net profit is EUR 12.4 million, proposal to pay EUR 0.41 per share in dividends

12.02.2015

The Q4 2014 sales revenue of Merko Ehitus was EUR 70.1 million, with a figure of EUR 252.3 million for the financial year. Net profit grew by 96% in the fourth quarter to EUR 4.8 million and for the financial year by 19% to EUR 12.4 million. The Management Board of AS Merko Ehitus proposes that the shareholders be paid 0.41 euros per share in dividends from retained earnings of previous periods and to reduce the share capital by 0.23 euros per share in 2015.

In 2014, Merko earned 32% of its sales revenue from outside Estonia – Lithuanian sales doubled and Latvian sales increased by more than half compared to 2013. Merko sold 395 apartments in 2014 – 132 apartments more than the year before – as a result of which sales revenue in the real estate development segment increased by 48%.

“We can be satisfied with the 2014 results, which were achieved in what continues to be a complicated market situation. Above all, improved profit figures, growth in Latvia and Lithuania and apartment sales in Estonia are reason to cheer. As expected, the decline in construction volumes in the engineering and road construction sectors continued, due to the decreased amount of EU-funded projects, even though the profitability of these segments exceeded our expectations,” said AS Merko Ehitus Chairman of Management Board Andres Trink.

“2015 will be a difficult year in terms of public sector orders, a certain pickup can be expected starting in 2016. For that reason, our priority in all three Baltic states is good cooperation with private sector customers, to whom we want to offer high-quality and optimum construction solutions and an efficient construction process. The overall weak economic growth and low investor confidence in the Baltic states and the region also leaves an imprint on the construction market. We see growth opportunities for Merko opening up in 2015 mainly on the Lithuanian construction market, and also in apartment development, where we plan to invest about EUR 45 to 55 million in the coming year. The volume of orders will presumably not decline in electrical construction either, which is an important sector for us,” said Trink.

In the fourth quarter, group companies signed new agreements worth EUR 62.9 million and the volume of new contracts in 2014 totalled at EUR 170.4 million. In the fourth quarter of 2013, EUR 48.6 million worth of new agreements were signed and total of EUR 254.3 million in 2013. As of 31 December 2014, the group had a secured order book balance of EUR 179.1 million.

The Merko Ehitus group had a 12-month gross margin of 9.8% and net profit margin of 4.9%, which are both better than last year. 2014 profit before taxes was EUR 13.3 million; and EUR 5.3 million in the fourth quarter. The company’s net profit for 2014 was EUR 12.4 million and EUR 4.8 million in the fourth quarter, representing growth of 19% and 96%, respectively, compared to the previous year.

The Management Board of AS Merko Ehitus proposes to pay shareholders EUR 7.3 million (0.41 euros per share) in dividends from retained earnings of previous periods, resulting in a dividend rate of 58% in 2014. Considering the outlook for 2015 and to support the return on equity, the Management Board also proposes reducing share capital by a total EUR 4.1 million by way of reducing the book value of shares (0.23 euros per share). These proposals will be submitted to the annual general meeting of shareholders for approval to be held on 29 April 2015.

“The growth of sales revenue in the real estate segment as well as the proportional growth went according to plan and is the result of the investments made into the segment in the past few years. In 2015, we expect the apartment market to maintain a stable price level, buyers will continue to be selective and focus on quality offers, where we consider our position to be strong. We also take into consideration the lengthening of apartments sale periods,” said Trink.

In 2014, Merko sold 395 apartments with a total price of EUR 39.4 million; including 160 apartments worth EUR 16.0 million in Q4 (both figures exclusive of VAT). The sales revenue in the real estate development segment has grown 48% compared to the same period last year and the share of the segment’s sales revenue in the group’s total revenue has increased to 18%.

Major projects in progress in the fourth quarter included the construction of Hilton Tallinn Park Hotel in Tallinn, the renovation of the Mustamäe blocks of the North Estonia Medical Centre, design and renovation of tram line no. 4 infrastructure, construction of the Marupes Polpaks NT manufacturing and logistics centre and the construction of a multipurpose concert centre in Liepaja. In the fourth quarter, the five-year operation to close the semi-coke hills in Kohtla-Järve was completed, as a result of which this environmental liability for Ida-Viru County has now been closed pursuant to the requirements.