2022 9 months and 3rd quarter consolidated unaudited interim report

2022 9 months and 3rd quarter consolidated unaudited interim report
Merko Ehitus AS

Merko Ehitus AS

MANAGEMENT COMMENT

Merko Ehitus revenue was €110 million in the third quarter of 2022 and revenue for the first nine months of the year amounted to €266 million, while the respective net profit figures were €9.8 million. and 17 million euros. Merko has delivered more than 450 apartments to buyers in 9 months this year.

According to the management of Merko Ehitus, the results of the 3Q reflect the growth of the investments made in the promotion of apartments in recent years, and a balanced management of the portfolio of construction projects in a complicated market situation.

The outlook for the next 12 months and years to come for the construction sector has sharply worsened during the current year. The slowdown in inflation and the expected adjustment of businesses and households to high energy prices is yet to come. In addition, interest rates continue to rise rapidly. Both clients of large construction projects and the apartment market are mired in great uncertainty. Under conditions of high inflation, price pressure continues even though demand has fallen. Since the construction and real estate development processes take time, the impact of the current economic and market situation will be fully manifested in the financial results of our sectors in 12 to 24 months.

In the nine months of the current year, the group’s companies signed new construction contracts worth 290 million euros and the balance of the guaranteed order book stood at 341 million euros at the end of September (273 million euros and 314 million euros respectively in 2021). Merko’s guaranteed order book is currently strong, which should help us get through the recessionary period of the next few years with a little less pain. The outlook for new construction orders in the market as a whole is extremely uncertain, but at the same time we are well positioned to invest in the energy sector.

In the first nine months of this year, Merko delivered 456 new apartments and four commercial units to buyers (first 9 months of 2021: 197 apartments and 7 commercial units). Despite the extremely difficult economic situation, Merko has continued to invest in apartment development and has launched new development projects, albeit at a more moderate pace than in previous years. According to the management of Merko Ehitus, under conditions of rapid inflation, construction will not be cheaper in the future.

During the first nine months of this year, the group launched four new development projects with approximately 280 apartments. At the end of the third quarter, there were 1,617 apartments under construction by the group, of which more than half have preliminary sales contracts. The largest apartment developments were Uus-Veerenni, Noblessneri and Lahekalda in Tallinn; Erminurme in Tartu; Viesturdarzs, Mežpilseta and Magnolijas in Riga, and Vilneles Skverai in Vilnius.

In the third quarter of 2022, the largest objects under construction in Estonia were the third phase of the Mustamäe medical campus of the North Estonian Medical Center, the state gymnasiums of Pelgulinna and Rae, the neighborhood of Arter, the construction of infrastructure segments of land in the southeast of the Republic of Estonia. border, the tram line between Old City Harbor and Rail Baltic’s Ülemiste passenger terminal, and the renovation of the Rannamõisa tee and Vana-Kalamaja street in Tallinn. In Latvia, ongoing projects include Orkla biscuit and wafer production plant, GUSTAVS business center, Elemental Skanste office buildings, NATO facility in Adaži; in Lithuania, several wind farm infrastructures and a car service center in Vilnius.

GENERAL VIEW OF THE RESULTS OF THE III QUARTER AND 9 MONTHS

COST EFFECTIVENESS
Profit before tax for 9 months 2022 was €18.7m and Q3 2022 was €10.3m (9M 2021: €16.6m and Q3 2021 was €6.1m), which increased profit margin before taxes at 7.0% (9M 2021: 7.3%).
Net profit attributable to shareholders for 9 months 2022 was EUR 17.0 million (9M 2021: EUR 15.3 million) and net profit attributable to shareholders for the third quarter of 2022 was EUR 9.8 million ( Q3 2021: €5.5 million). The 9-month net profit margin was 6.4% (9M 2021: 6.7%).

INCOME
Revenue for the third quarter of 2022 was €110.0 million (third quarter of 2021: €80.7 million) and revenue for 9 months was €266.2 million (9 months of 2021: €226, 5 million euros). 9-month revenue was up 17.5% compared to the same period last year. The share of income earned outside of Estonia in 9 months of 2022 was 53.4% ​​(9 months of 2021: 38.8%).

SECURE ORDER BOOK
As of September 30, 2022, the group’s guaranteed order book was EUR 341.0 million (September 30, 2021: EUR 314.4 million). In 9 months of 2022, the group companies signed contracts amounting to 290.4 million euros (9M 2021: 272.9 million euros). In the third quarter of 2022, new contracts were signed in the amount of €97.1 million (third quarter of 2021: €137.7 million).

REAL STATE DEVELOPMENT
In 9 months of 2022, the group sold a total of 456 apartments; In 9 months of 2021, the group sold 197 apartments. The group obtained revenues of €56.9 million from the sale of self-developed apartments in 9 months of 2022 and €33.3 million in 9 months of 2021. A total of 242 apartments were sold in the third quarter of 2022 , compared to 52 apartments in the third quarter of 2021, and obtained a revenue of EUR 29.8 million from the sale of self-developed apartments (Q3 2021: EUR 7.5 million).

CASH POSITION
At the end of the reporting period, the group had EUR 22.2 million in cash and cash equivalents and equity of EUR 166.6 million (40.9% of total assets). The comparable figures as of September 30, 2021 were €19.6 million and €150.8 million (50.9% of total assets), respectively. As of September 30, 2022, the group’s net debt was €88.3 million (September 30, 2021: €20.6 million).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousands of euros

2022
9 months

2021
9 months

2022
third fourth

2021
third fourth

2021
12 months

Income

266,206

226,533

110,008

80,673

339,375

cost of goods sold

(235,123)

(200,064)

(96,206)

(71,442)

(292,563)

Gross profit

31,083

26,469

13,802

9,231

46,812

marketing expenses

(2,945)

(2,632)

(776)

(802)

(3,611)

General and adminsitrative expenses

(11,411)

(9,098)

(3,889)

(3,392)

(13,925)

other operating income

2,426

2,511

1,004

1,197

3,508

Other operating expenses

(647)

(328)

(192)

(235)

(582)

Operating profit

18,506

16,922

9,949

5,999

32,202

Financial income/expenses

168

(351)

361

90

(75)

including financial income/costs of associates and joint ventures

1,093

384

765

381

799

interest expenses

(670)

(548)

(296)

(232)

(681)

foreign exchange gain (loss)

(152)

(39)

(85)

(8)

other financial income (expenses)

(103)

(148)

(23)

(59)

(185)

Profit before tax

18,674

16,571

10,310

6,089

32,127

Corporate tax expense

(1,911)

(1,426)

(735)

(570)

(3,104)

Net profit for the year

16,763

15,145

9,575

5,519

29,023

including net profit attributable to shareholders of the parent company

17,023

15,277

9,821

5,514

29,140

net profit attributable to non-controlling interest

(260)

(132)

(246)

5

(117)

Other comprehensive income, which can later be classified in the income statement

Currency translation differences of foreign entities

eleven

14

23

(two)

33

Comprehensive income for the period

16,774

15,159

9,598

5,517

29,056

including net profit attributable to shareholders of the parent company

17,020

15,292

9,831

5,513

29,163

net profit attributable to non-controlling interest

(246)

(133)

(233)

4

(107)

Earnings per share attributable to shareholders of the parent company (basic and diluted, in EUR)

0.96

0.86

0.55

0.31

1.65

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousands of euros

09.30.2022

30.09.2021

31.12.2021

ACTIVE

Current assets

Cash and cash equivalents

22,200

19,581

44,930

Trade and other accounts receivable

72,295

59,665

55,484

Company income tax paid in advance

5

3

114

inventories

243,222

154,688

160,593

337,722

233,937

261,121

non-current assets

Investments in associates and joint ventures

10,472

7,288

7,703

Other long-term loans and receivables

28,323

23,832

24,079

Deferred tax assets

1,155

1,120

622

investment property

11,511

13,847

13,828

Property, plant and equipment

17,527

15,624

16,350

intangible assets

592

684

669

69,580

62,395

63,251

TOTAL ASSETS

407,302

296,332

324,372

PASSIVE

current liabilities

loans

60,034

9,355

11,636

Accounts payable and prepayments

119,251

88,394

90,054

Income tax liability

1,830

997

681

Short-term provisions

5,584

6,318

7,976

186,699

105,064

110,347

non-current liabilities

long term loans

50,469

30,826

41,001

Deferred income tax liability

1,671

1,986

3,112

Other long-term accounts payable

2,377

3,553

2,900

54,517

36,365

47,013

FULL RESPONSIBILITY

241,216

141,429

157,360

EQUITY

no interest control

(473)

4,083

(227)

Equity attributable to shareholders of the parent company

Social capital

7,929

7,929

7,929

Statutory Reserve Capital

793

793

793

Currency conversion differences

(794)

(799)

(791)

Retained earnings

158,631

142,897

159,308

166,559

150,820

167,239

TOTAL EQUITY

166,086

154,903

167,012

TOTAL LIABILITIES AND EQUITY

407,302

296,332

324,372

The interim report is attached to the announcement and is also published on the NASDAQ Tallinn and Merko website (group.merko.ee).

Somelar Urmas
Chief financial officer
AS Merko Ehitus
+372 650 1250
urmas.somelar@merko.ee

AS Merko Ehitus (group.merko.ee) group companies develop real estate and construct buildings and infrastructure. We create a better living environment and build the future. We operate in Estonia, Latvia, Lithuania and Norway. At the end of 2021, the group employed 670 people and the group’s revenue for 2021 was €339 million.

Attached file

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