Merko Ehitus posted six months’ revenue of EUR 154 million
Merko Ehitus posted revenue of EUR 77 million in Q2 and EUR 154 million for the first six months of 2019. The group’s profit before taxes in Q2 was EUR 4.5 million and profit before taxes for six months was EUR 7.5 million; net profit amounted to EUR 1.7 million and EUR 4.5 million, respectively. Net profit in Q2 was impacted by income tax expenses on dividends paid and a lower number of apartments sold due to the cyclical nature of the completion of development projects. This year, Merko has invested around EUR 50 million into real estate development, with over 1,000 apartments currently under construction in the three Baltic capitals.
“As expected, sales revenue decreased in the second quarter compared to the same period a year ago, as a number of Estonian and Latvian subsidiaries’ major projects have been completed and due to the general market situation, the secured order book is smaller than it was a year ago. At the same time, in the first half-year we concluded new construction contracts in the amount of EUR 86 million, which is more than the respective figure a year ago. On a market with very strong competition between main contractors, we are trying to focus above all on projects where we can generate value added for customers in terms of quality of project management, where pricing is fair and transparent and contractual risks are distributed in a reasonable manner,” said the chairman of the management board of AS Merko Ehitus, Andres Trink.
Merko Ehitus posted revenue of EUR 77 million for the second quarter and EUR 154 million for the first six months, representing a decrease of 16% compared to the year before. Sales revenue for six months decreased year-over-year in Estonia and Latvia, but increased in Lithuania and Norway. The group’s profit before taxes in Q2 was EUR 4.5 million and for the first half-year EUR 7.5 million – an increase of 6.7% from the year before. Net profit in Q2 was EUR 1.7 million and for the first half-year EUR 4.5 million.
“I am pleased that we have been able to improve our operating profit margin, which was 6.1% in Q2 and 4.9% in first half-year. Net profit in Q2 was impacted by income tax expenses, in the amount of EUR 2.7 million, on dividends paid, and a lower number of apartments sold. Previous larger development projects have been completed and the apartments largely sold; the new projects are in the construction phase and we will start selling some of them as they are finished at the end of this year and most of them next year, in 2020. Preliminary sales are going according to plan and the number of apartments to be handed over to buyers in the second half-year on the basis of preliminary sale contract is growing,” commented Trink on the results in the residential development field. In Q2 of this year, Merko sold 37 apartments compared to 117 in Q2 last year.
This year Merko plans to invest up to EUR 100 million into residential real estate development. In the first half-year, a total of EUR 40 million was invested into development projects in progress, with an additional EUR 13 million for acquiring a development area in Vilnius. Trink said the apartment markets in Tallinn and Vilnius continue to favour well-prepared projects with high-quality execution, which offer integral living environments. In Riga’s less active apartment market, the sales potential is higher for projects that are more precisely targeted to market expectations; the greatest activity is currently seen in the least expensive price category. In Estonia, Latvia and Lithuania, Merko currently has a total of more than 1,000 apartments in development. The biggest projects in Tallinn are the Uus-Veerenni and Pikaliiva residential projects, in Riga, the Gaiļezers and Viesturdārzs development projects and, in Vilnius, the Vilneles slenis and Rinktinės Urban developments.
Merko Ehitus posted revenue of EUR 77 million in Q2 of 2019 (Q2 of 2018: EUR 103 million), EBITDA of EUR 5.3 million (Q2 of 2018: 6.4 million), and net profit of EUR 1.7 million (Q2 of 2018: 5.6 million). New construction contracts signed in Q2 2019 amounted to EUR 54 million, and EUR 86 million in first half of 2019. The largest contracts in Estonia were the renovation of the Aaspere-Haljala road section and Türi Basic School and, in Latvia, the construction of Laima chocolate factory.
As of 30 June 2019, Merko Ehitus group’s secured order book amounted to EUR 172 million, compared to EUR 247 million on the same date last year. The largest projects in progress for Merko in Q2 in Estonia were construction works of water supply and sewerage piping in Metsanurme, Kasemetsa and Üksnurme area, the commercial building at Pärnu mnt 186, construction of undersea electric power cables of Suur Väin and Väike Väin straits, the student home for Rakvere Vocational School and the reconstruction and dredging of the Port of Hundipea; in Latvia, Lidl’s logistics centre and Alfa shopping centre; in Lithuania, Neringa hotel, Quadrum office building, and a private school; and in Norway, the Tesla service centre and the renovation of the office building at Møllergata 23-25.