2018 sales revenue of Merko Ehitus above EUR 400 million mark
Merko Ehitus posted revenue of EUR 119.2 million in Q4 of 2018 and the 12-month revenue figure was EUR 418 million. The group’s net profit for Q4 of 2018 was EUR 7 million and the 12-month net profit was EUR 19.3 million. Both the 12-month revenue as well as net profit grew by 32%, compared to 2017 figures. As discussed with the supervisory board, the group’s management board proposes to pay shareholders a dividend of 92% of last year’s profit, which amounts to 1 euro per share.
“In recent years, we have implemented a strategy by which one-half of our business would be located outside Estonia. Also, we have increased investments into apartment development. 2018 was an exceptional year in regard to construction volumes, with the group’s revenue on the upswing in all Baltic states, and doubling in Latvia. The growth in revenue was supported by several major ongoing projects in Latvia and Estonia on which construction work was completed in 2018 or is set to be completed in the first half of 2019,” said AS Merko Ehitus management board chairman Andres Trink. “All of the group’s countries and main areas of activity made a profit and the growth in revenue also increased the group’s net profit.”
Because of the rise in construction input prices and higher wages, in Andres Trink’s evaluation the situation on the construction market continued to be complicated in 2018, especially in regard to contracts concluded by the group at a fixed price in earlier years. In addition, the problems of availability of building design and subcontracting resources exacerbated risks related to on-time completion of construction and financial risks. “The rise in construction prices began slowing the growth in the volume of new orders on the market, which also resulted in stiffer competition between main contractors vying for construction orders and applied pressure on profit margins. The launch of new commercial real estate projects is also now being slowed by the large volume of retail and office space accruing in recent years and the more complicated financing conditions. The group’s secured order book shrank by about one-third in 2018, which will likely affect our construction volumes in 2019,” added Andres Trink.
In addition to providing construction services to customers, a strategic business area for Merko Ehitus is apartment development, into which the group invested EUR 35 million in 2018. Last year, Merko launched the construction of a total of more than 1,000 new apartments in Tallinn, Riga and Vilnius, most of which will be completed in 2020. The largest projects are the Uus-Veerenni and Pikaliiva residential environments in Tallinn, the Gaiļezers and Viesturdārzs developments in Riga and the Vilneles slenis and Rinktinės Urban developments in Vilnius. In Q4 of 2018, Merko sold 227 apartments; for the entire year, sales totalled 482 apartments.
“The apartment market in the Baltics in 2018 was stable and demand remained healthy. As the supply of new apartments has increased, the price level has stabilized and sales periods are somewhat longer. The trend can be expected to continue this year, especially in case of apartments in the above-average price segment. On the other hand, the apartment market is supported by low prime interest rates, high employment and economic growth. Large development areas occupy a more central position in the group’s apartment development strategy, allowing us to shape an integral living environment and launch development projects stage-by-stage in response to demand,” commented Andres Trink on the results posted in the apartment development.
In Q4 of 2018, Merko Ehitus posted revenue of EUR 119.2 million with EBITDA of EUR 7.6 million and a net profit of EUR 7.0 million. For 2018 overall, sales revenue was EUR 418 million, EBITDA was 21.9 million and net profit was EUR 19.3 million. The growth of net profit was supported not only by the rise in revenue but the lower expense on income tax compared to 2017, as dividends were paid out in 2018 from dividends received from subsidiaries outside Estonia. At the same time, 2018 did not see real estate transactions of a one-off nature, which had a positive influence on the Q4 2017 profit.
In the 12 months of 2018, the group signed new contracts totalling EUR 246 million, and in Q4 alone, EUR 89 million, including for the design and construction of an office building at Pärnu mnt 186 in Tallinn and Tesla service centre in Oslo, the construction of a student home in Rakvere, laying of undersea cables under the Suur and Väike Väin straits in western Estonia, and road maintenance in the city of Tallinn.
As at 31 December 2018, Merko Ehitus group´s secured order book amounted to EUR 229 million, compared to EUR 344 million as at the same date in the previous year. In Q4, the largest projects in progress in Estonia were T1 Mall of Tallinn shopping centre, Maakri Kvartal business complex, Öpiku Office Building tower B, Noblessner residential district, Tallink office building, and renovation and dredging work at the Port of Hundipea. In Latvia, the largest projects in progress were Akropole and Alfa shopping centres, Z‑Towers business complex and Ventspils Music School and Concert Hall; and in Lithuania, they were Hotel Neringa, Quadrum office building and two school buildings. In Norway, the biggest projects in progress in Q4 were the design and construction of Tesla customer service centre and renovation of an office building at Møllergata 23-25 in Oslo.
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 operating on the Lithuanian market, and the Norwegian construction company Peritus Entreprenør AS. Besides provision of construction service as a main contractor, the group’s other major area of activity is apartment development. As at the end of 2018, the group employed 764 people, and the group’s revenue for 2018 was EUR 418 million.