Merko Ehitus sales revenue supported in 2015 by growth on foreign markets and in real estate development

Merko Ehitus posted revenue of EUR 66 million in Q4 2015 and a 12-month figure of EUR 251 million, thus remaining on par with 2014. The group earned a net profit of EUR 4.4 million in Q4, with a figure of EUR 10 million for the entire year. Profit before taxes made up EUR 11.7 million. The drop in government contracts for infrastructure has been compensated by private sector orders in the field of buildings and real estate development projects. The share of revenue earned outside Estonia grew to 38% and real estate development revenue increased to 28%. The Management Board of Merko Ehitus proposes to pay shareholders 90% of last year’s profit in dividends, which amounts to 0.51 euros per share.

“With the slump in the Baltic construction market, the group’s result for the year, and particularly the Q4 profit, exceeded our expectations to some extent. The growth of sales revenue and profit in Lithuania was positive. The results of the real estate development sector can also be considered satisfactory. Considering the slump in government contracts, the share of public sector orders in our order book has dropped below 20% and we continue to focus on the comprehensive supply of design and construction contracts to private sector customers, including to international companies. Last year, we were able to strengthen our secured order book as a whole, above all in Estonia, where noteworthy orders accrued in the last quarter as well. In Latvia, we weren’t able to conclude contracts in a volume comparable to the large projects that have been in progress in the past few years, yet we continue to be active on the Latvian market,” said Andres Trink, Chairman of the management board of AS Merko Ehitus.

“The volume of construction orders has clearly dropped in the field of engineering construction, as a result of which we have scaled down our workforce in the field of external networks. At the same time, the total number of the group’s employees has grown, above all on the account of additional personnel in Lithuania. We have kept sales revenue at last year’s levels above all with the support of general construction and apartment development. The sales revenue in the real estate development sector has grown by 54%, making up 28% of the group’s sales revenue. We have invested EUR 42 million into new and ongoing development projects in 2015 and we will continue investments in 2016 as well,” added Trink.

In the fourth quarter of 2015, Merko companies signed new contracts worth EUR 95 million and the total volume of new contracts during the year was EUR 247 million. As at 31 December 2015, the group had a secured order book balance of EUR 247 million. The gross profit margin for Merko Ehitus for the 12-month period was 9.1% and the net profit margin was 4.0%; the 2015 profit before taxes was EUR 11.7 million and in the fourth quarter alone, EUR 4.7 million. In 2015, the group sold 403 apartments at the total value of EUR 61 million compared to the 395 apartments sold in 2014 for EUR 39 million (excl. VAT). In Q4, 155 apartments were sold at the total value of EUR 19 million (excl. VAT).

The Management Board of Merko Ehitus proposes to pay shareholders 9 million euros (0.51 euros per share) in dividends in 2016 from retained earnings of previous periods, which translates into a dividend rate of 90% in 2015. “We have made a proposal to pay shareholders dividends over our 50-70% target level as we see that orders on the Baltic construction market continue to be in a slump, with the prices down while the supply is also increasing on the apartment market. In this market situation, it will be complicated to improve profitability,” Trink added.

Major projects in progress for Merko in Q4 included the construction of Hilton Tallinn Park in Tallinn, the design and construction of the T1 shopping centre and the Öpiku Maja building, the renovation of the Mustamäe blocks of the North Estonia Medical Centre in Tallinn, and the design and renovation of tram line No. 4 in Tallinn. Projects completed in Latvia in Q4 were the Liepaja concert hall and Dzintaru 28 apartment buildings; in Lithuania, the foundations of Šilute wind farm and general construction works of Nordbalt’s Klaipeda transformer substation.

AS Merko Ehitus (www.group.merko.ee) consists of Estonia’s leading construction company AS Merko Ehitus Eesti, the Latvian-market-oriented SIA Merks, UAB Merko Statyba that is operating on the Lithuanian market and the real estate development business unit along with real estate holding companies. As at the end of 2015, the group employed 791 people and the company’s 2015 revenue was EUR 251 million.