Merko Ehitus posted EUR 252 million in revenue in 2016, proposing to pay EUR 0.41 in dividends per share
Merko Ehitus posted revenue of EUR 252 million in 2016, remaining on par with the last year; the net profit amounted to EUR 6.1 million. The group continued to implement its long-term apartment-building strategy, investing a total of EUR 73 million in residential development. The company’s Management Board proposes to pay 119% of retained earnings – EUR 0.41 per share – in dividends to shareholders.
“We had a complicated year. Despite active residential construction in the Baltic capitals, the construction market as a whole failed to show any growth. Public investments in infrastructure objects have also remained in a slump for several years. Our infrastructure construction volumes were lagging behind expectations in 2016. To cover the expenditure, the prices bid in procurements are very low in the current market situation, and do not endorse any growth in the construction capacity of civil engineering projects on the construction market in general. The growth in residential development and private sector orders allowed us to maintain revenue on last year’s level, but we are not satisfied with the profitability on the construction service segment,“ said Andres Trink, chairman of the management board of AS Merko Ehitus. “Price competition in buildings construction procurements is extremely tight, slimming down the margins and forcing both main contractors and contracting entities to take huge risks. Efficiency and management of contractual risks is becoming increasingly important. The group’s results for 2016 were also affected by the delay in the launch of construction on several major objects. We were only able to actively continue with these projects at the end of the year.”
“We make an effort to maintain lead position in Estonia in terms of both main contracting and apartment development, and we see opportunities to boost profit by enhancing internal efficiency. We will also continue pursuing our strategy of growing beyond Estonian borders – while nearly one-third of our business is currently carried out abroad, we have set our sights on the corresponding target of 50%. Even though the construction service revenue posted in the Latvian and Lithuanian market in 2016 has decreased to some extent, compared to the previous period – a circumstance attributable to the completion of several major projects at the end of 2015 – we have gradually enhanced our capacity and improved our position on the main contracting markets of these countries. In Latvia, we remain competitive in most private and public sector procurements. In Lithuania, we hold the biggest market share among international orders, and are planning active participation in public procurements. In Norway, our long-term objective is to develop the capacity for major construction projects and gain the clients’ trust as a company operating on the local market,” Trink said.
In 2016, the group posted revenue of EUR 252.0 million, net profit of EUR 6.1 million and profit before taxes of EUR 7.3 million. The revenue for Q4 2016 amounted to EUR 78.6 million, net profit to EUR 1.4 million and profit before taxes to EUR 1.6 million. In 2016, the group signed new construction contracts in the total amount of EUR 202.4 million, of which EUR 61.9 million in Q4. As at 31 December 2016, the group’s secured order book amounted to EUR 269.6 million. Major objects still in progress in Q4 included T1 shopping centre, Maakri Quarter, Telia’s head office in WoHo Quarter and the Tallinn Airport tramway in Tallinn, passenger terminal of Riga International Airport in Riga and Kauno/Algirdo residential and office complex in Vilnius.
“Real estate development remains a key business area for Merko, generating nearly 30% of the group’s revenue in 2016. In 2016, we invested a total of nearly EUR 73 million in residential development, including EUR 53.6 million in apartment construction and EUR 19.1 million in new land plots in order to secure our long-term apartment-building strategy. We acquired new land plots in the heart of Tallinn and Vilnius in Q4. The apartment markets of Tallinn and Vilnius continue to be in a good shape. Riga has yet to achieve the expected potential, but we remain relatively well-positioned for any growth in demand. In general, we can be very pleased with the results of apartment sales, having gained the apartment buyers trust and demonstrated the value of the Merko brand as the developer, builder and seller of living environments and apartments,” Trink said. Depending on the market dynamics, Merko is planning to launch the construction of 650–700 new apartments in the Baltic countries this year, investing nearly EUR 45 million in work-in-progress and new development projects.
In 2016, the group sold 493 apartments for a total of EUR 56.6 million (w/o VAT), compared to the 403 apartments and EUR 61.4 million (w/o VAT) in 2015. In Q4, 225 apartments were sold in the total amount of EUR 27.0 million (w/o VAT). Merko launched the construction of 344 apartments in 2016, plus the Galiezers and Rinktines projects launched at the beginning of 2017, with a total of 216 apartments. Major development projects currently under construction by Merko include Tartu mnt 52, Noblessner Homeport and Paepargi apartment buildings in Tallinn, Skanstes Parks and Gaiļezers in Riga and the Rinktines Urban in Vilnius.
The Management Board of AS Merko Ehitus proposes to pay EUR 7.3 million (EUR 0.41 per share) in dividends to shareholders at the expense of retained earnings, with the dividend rate for 2016 thus amounting to 119%. “We have made the proposal to pay dividends to shareholders above the current dividend policy rate, considering the return on equity posted in 2016, the group’s investment capacity and the outlook for growth of the construction market. We remain hopeful that the engineering construction volumes will continue to grow, even though the projects will not be actually launched before the second half of 2017, or later,” Trink added.