Merko Ehitus net profit for the fourth quarter of 2019 was EUR 9.3 million, proposing to pay 0.6 euros in dividends per share
In Q4 of 2019, Merko Ehitus posted revenue of EUR 99 million and a net profit of EUR 9.3 million, close to a one-third gain over the same period a year ago. In Q4, the revenue generated by the real estate development business area more than doubled compared to 2018 and made up approximately 47% of the group’s revenue as a whole. In 2019, the 12-month revenue of Merko Ehitus was EUR 327 million and net profit was EUR 16.3 million. As discussed with the supervisory board, the group’s management board proposes to pay shareholders 0.60 euros per share as dividends.
“As expected, Q4 was a strong one. The professional work of the group companies’ teams and timely completion of apartment development projects contributed to the result. We somewhat outperformed our own forecasts as some apartment development projects were completed earlier than planned and sales were faster thanks to greater interest from buyers,” said the chairman of AS Merko Ehitus management board, Andres Trink.
“The roughly 20% decrease in annual revenue was expected because of the extraordinarily high comparison base of 2018, which included the construction of some very large shopping centres in Tallinn and Riga. The group’s smaller secured order-book also reflects the situation on the market: fewer commercial real estate sites are being built because competition is stiffer, construction prices have risen and financing conditions have become more complicated. The price competition on the main contracting market continues to be tight. So it is all the more gratifying to note that in spite of the lower revenue, we were able to improve profitability through a more precise selection of construction projects and the team’s effectiveness. The year’s net profit figure was impacted by significantly higher income tax expenses compared to 2018 in connection with the payment of dividends,” said Andres Trink in commenting on the 2019 results. The group’s profit before taxes for the 12 months was EUR 20.3 million and increased by 2.8% from the year before.
The proportion of the real estate development business area has continued to increase, and in Q4 it made up close to 47% of the entire group’s revenue. The real estate development business area’s sales revenue was EUR 46.5 million in Q4 and totalled EUR 70.1 million for the 12 months. In Q4, Merko sold a total of 276 apartments, 482 for the entire year, and the respective figures for commercial areas sold were 13 and 24. “The apartment market in Tallinn, Riga and Vilnius is stable and our focus continues to be on large development areas where we can establish an integral residential environment and launch and build development projects stage by stage based on demand,” added Andres Trink.
In 2019, the group Invested EUR 87.4 million into new and ongoing development projects and started construction of a total of 368 new apartments in the Baltics. The largest projects were the Uus-Veerenni, Lahekalda and Pikaliiva residential projects in Tallinn; in Riga, the Gaiļezers and Viesturdārzs developments; and, in Vilnius, the Vilneles slenis and Rinktinės Urban developments.
Q4 2019 revenue of Merko Ehitus was EUR 99 million (Q4 of 2018: EUR 119 million), EBITDA was EUR 10.2 million (Q4 of 2018: 7.6 million), and net profit was EUR 9.3 million (Q4 of 2018: EUR 7.0 million). In Q4 2019, Merko subsidiaries signed new agreements worth EUR 42 million and the volume of new contracts over the 12 months of 2019 stood at EUR 170 million. As of 31 December 2019, the group’s secured order book amounted to EUR 141 million, compared to EUR 229 million on the same date in the previous year.
The largest projects in progress in Q4 in Estonia were the construction of Terminal D parking house at the Tallinn passenger port, Türi Basic School, the student home for Rakvere Vocational School and the commercial building at Pärnu mnt 186, as well as the reconstruction of the Aaspere-Haljala road section. In Latvia, the largest projects in progress were the construction of the Pinki school building and dormitory, Lidl’s logistics centre, Alfa shopping centre, and Laima chocolate factory, as well as the reconstruction of the Riga Technical University Civil Engineering Faculty building. In Lithuania, the larger projects were the construction of Neringa Hotel, Quadrum office building, and a private school in Vilnius.