2023 12 months and IV quarter consolidated unaudited interim report
February 08 2024 - 1:00AM
UK Regulatory
2023 12 months and IV quarter consolidated unaudited interim report
COMMENTARY FROM MANAGEMENT
Merko Ehitus revenue was EUR 126 million in Q4
2023, and the revenue for 12 months amounted to EUR 466 million,
while the respective figures for net profit were EUR 13.9 million
and 12 months was EUR 46.0 million. Merko delivered 948 apartments
and 27 commercial units to buyers in 12 months this year.
According to the management of Merko Ehitus, the
solid results for 2023 were mainly delivered by Merko teams, who
have made good decisions in the last few tumultuous years and
adapted to market demand in the field of both construction service
and real estate development. Construction and real estate
development projects generally span more than one reporting period
and the final results become evident at the end of the
projects. The 12-month and Q4 results in 2023 show that
several important factors coincided in the same time period. In the
past few years, Merko group had the capability for launching large
construction projects, of which the Kapitel’s contracts are the
most extensive, totalling more than EUR 200 million. The Kapitel
contracts refer to two high-rise offices in Riga and the majority
of the construction on three high-rise buildings in the Arter
Quarter in central Tallinn, which Merko completed for Kapitel at
the end of the year. The results were clearly supported by the real
estate development business area, where in 2023, Merko companies
handed over to the buyers nearly 1,000 apartments that had been
presold during the last two years.
An era in real estate development is over – i.e.
pre-sold apartments have been completed and delivered to customers,
and now we are operating in a much more difficult market situation.
The apartment market in the Baltics is uncertain, interest rates
have risen and the pace of sales of new apartments has slowed
significantly due to the new market situation. We have launched
construction of a smaller number of apartment developments and in
the near future there is no grounds for expecting results
comparable to 2023 in real estate development. Over 12 months of
2023 the group has invested a total of EUR 86 million into ongoing
development projects and acquisitions of new properties.
The group’s secured order-book continued growth
in Q4 and is exceeding previous expectations, which does partially
counterbalance the negative impacts of the slumping apartment
market on our construction volumes and revenue. Yet profitability
of construction service is under constant strain and the
risks persist – supply chains are seeing another price rise
and macroeconomic problems have made private sector customers
cautious about investments. Many defence and energy projects are in
progress currently but these, too, will decline in volume in the
medium to long term. Thus, risk management for the group companies
– above all hedging price risks – is under continued scrutiny. In
2023, the group's companies signed new construction contracts worth
501 million euros, or 58% more than a year ago, and the secured
orderbook increased by more than 60% compared to a year ago to 477
million euros.
In the 12 months of 2023, Merko delivered 948
apartments and 27 commercial units to buyers. As of year-end, the
group’s companies had 697 apartments on its balance sheet. At the
end of the year, approximately 5% of the 393 apartments in the
construction phase were covered by preliminary sale contracts. The
largest apartment developments were Uus-Veerenni, Noblessner and
Lahekalda in Tallinn, Erminurme in Tartu, Viesturdarzs, Mežpilseta
and Magnolijas in Riga, and Vilneles Skverai in Vilnius.
In Q4 of 2023, the largest sites under
construction in Estonia were the Rae state gymnasium, Hampton by
Hilton and Hyatt hotel buildings, Arter Quarter, the logistics
centre for Tallinn Kaubamaja Group, barracks at the Defence Forces’
Ämari base, the infrastructure along the south-eastern border of
the Republic of Estonia, the Rail Baltica road viaducts in
Harjumaa, a tram line between Old City Harbour and Rail Baltica
Ülemiste passenger terminal, as well the first phase of Ülemiste
terminal. In Latvia, the Elemental Business Centre office buildings
were in progress. Projects in Lithuania were wind farm
infrastructure works in Kelme and Pagėgiai regions, and various
buildings and infrastructure for NATO training centres.
OVERVIEW OF THE IV QUARTER AND 12 MONTHS
RESULTS
PROFITABILITY
2023 12 months’ pre-tax profit was EUR 52.0 million and Q4 2023 was
EUR 18.1 million (12M 2022: EUR 37.1 million and Q4 2022 was EUR
18.4 million), which brought the pre-tax profit margin to 11.1%
(12M 2022: 9.1%).
Net profit attributable to shareholders for 12 months 2023 was EUR
46.0 million (12M 2022: EUR 34.6 million) and for Q4 2023 net
profit attributable to shareholders was EUR 13.9 million (Q4 2022:
EUR 17.6 million). 12 months net profit margin was 9.9% (12M 2022:
8.5%).
REVENUE
Q4 2023 revenue was EUR 126.5 million (Q4 2022: EUR 143.4 million)
and 12 months’ revenue was EUR 466.3 million (12M 2022: EUR 409.6
million). 12 months’ revenue increased by 13.8% compared to same
period last year. The share of revenue earned outside Estonia in 12
months 2023 was 39.3% (12M 2022: 50.1%).
SECURED ORDER BOOK
As of 31 December 2023, the group’s secured order book was EUR
477.5 million (31 December 2022: EUR 297.2 million). In 12 months
2023, group companies signed contracts in the amount of EUR 500.8
million (12M 2022: EUR 317.9 million). In Q4 2023, new contracts
were signed in the amount of EUR 121.4 million (Q4 2022: EUR 27.5
million).
REAL ESTATE DEVELOPMENT
In 12 months 2023, the group sold a total of 948 apartments; in 12
months 2022, the group sold 923 apartments. The group earned a
revenue of EUR 137.5 million from sale of own developed apartments
in 12 months 2023 and EUR 127.0 million in 12 months 2022. In Q4 of
2023 a total of 283 apartments were sold, compared to 467
apartments in Q4 2022, and earned a revenue of EUR 31.4 million
from sale of own developed apartments (Q4 2022: EUR 70.2
million).
CASH POSITION
At the end of the reporting period, the group had EUR 77.3 million
in cash and cash equivalents, and equity of EUR 212.1 million
(49.9% of total assets). Comparable figures as of 31 December 2022
were EUR 17.7 million and EUR 184.2 million (47.5% of total
assets), respectively. As of 31 December 2023, the group’s net debt
was negative EUR 22.5 million (31 December 2022: EUR 74.3
million).
PROPOSAL FOR DISTRIBUTION OF PROFITS
The Management Board proposes to the Supervisory Board to
distribute to shareholders EUR 17.7 million in dividends (1 euro
per share) from retained earnings in 2024. This is equivalent to a
38% dividend rate for 2023.
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
unaudited
in thousand euros
|
2023
12 months |
2022
12 months |
2023
IV quarter |
2022
IV quarter |
Revenue |
466,304 |
409,633 |
126,466 |
143,427 |
Cost of
goods sold |
(401,267) |
(355,975) |
(104,625) |
(120,852) |
Gross
profit |
65,037 |
53,658 |
21,841 |
22,575 |
|
|
|
|
|
Marketing
expenses |
(4,312) |
(4,077) |
(1,299) |
(1,132) |
General
and administrative expenses |
(19,423) |
(15,860) |
(6,527) |
(4,449) |
Other
operating income |
4,171 |
3,144 |
772 |
718 |
Other
operating expenses |
(991) |
(1,834) |
(377) |
(1,187) |
Operating profit |
44,482 |
35,031 |
14,410 |
16,525 |
|
|
|
|
|
Finance
income/costs |
7,500 |
2,067 |
3,735 |
1,899 |
incl. finance income/costs from joint ventures |
10,220 |
3,516 |
4,159 |
2,423 |
interest expense |
(2,697) |
(1,180) |
(686) |
(510) |
foreign exchange gain (loss) |
(153) |
(138) |
39 |
14 |
other financial income (expenses) |
130 |
(131) |
223 |
(28) |
Profit
before tax |
51,982 |
37,098 |
18,145 |
18,424 |
|
|
|
|
|
Corporate
income tax expense |
(6,081) |
(2,995) |
(4,254) |
(1,084) |
|
|
|
|
|
Net
profit for financial year |
45,901 |
34,103 |
13,891 |
17,340 |
incl. net profit attributable to equity holders of the parent |
46,048 |
34,640 |
13,900 |
17,617 |
net profit attributable to non-controlling interest |
(147) |
(537) |
(9) |
(277) |
Other
comprehensive income, which can subsequently be classified in the
income statement |
|
|
|
|
Currency
translation differences of foreign entities |
(41) |
30 |
(25) |
19 |
Comprehensive income for the period |
45,860 |
34,133 |
13,866 |
17,359 |
incl. net profit attributable to equity holders of the parent |
45,993 |
34,648 |
13,877 |
17,628 |
net profit attributable to non-controlling interest |
(133) |
(515) |
(11) |
(269) |
Earnings
per share for profit attributable to equity holders of the parent
(basic and diluted, in EUR) |
2.60 |
1.96 |
0.79 |
1.00 |
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION
unaudited
in thousand euros
|
31.12.2023 |
31.12.2022 |
ASSETS |
|
|
Current assets |
|
|
Cash
and cash equivalents |
77,330 |
17,665 |
Trade
and other receivables |
68,754 |
77,959 |
Prepaid
corporate income tax |
2 |
38 |
Inventories |
195,435 |
225,661 |
|
341,521 |
321,323 |
Non-current assets |
|
|
Investments in joint ventures |
21,915 |
12,895 |
Other
shares and securities |
80 |
- |
Other
long-term loans and receivables |
24,490 |
22,982 |
Deferred income tax assets |
3,298 |
693 |
Investment property |
16,823 |
11,485 |
Property, plant and equipment |
16,613 |
17,452 |
Intangible assets |
520 |
582 |
|
83,739 |
66,089 |
|
|
|
TOTAL ASSETS |
425,260 |
387,412 |
|
|
|
LIABILITIES |
|
|
Current liabilities |
|
|
Borrowings |
19,673 |
49,687 |
Payables and prepayments |
133,898 |
96,248 |
Income
tax liability |
4,260 |
1,241 |
Short-term provisions |
10,451 |
9,820 |
|
168,282 |
156,996 |
Non-current liabilities |
|
|
Long-term borrowings |
35,142 |
42,236 |
Deferred income tax liability |
4,441 |
2,355 |
Other
long-term payables |
5,495 |
2,133 |
|
45,078 |
46,724 |
|
|
|
TOTAL LIABILITIES |
213,360 |
203,720 |
|
|
|
EQUITY |
|
|
Non-controlling interests |
(155) |
(495) |
Equity attributable to equity holders of the parent |
|
|
Share
capital |
7,929 |
7,929 |
Statutory reserve capital |
793 |
793 |
Currency translation differences |
(838) |
(783) |
Retained earnings |
204,171 |
176,248 |
|
212,055 |
184,187 |
TOTAL EQUITY |
211,900 |
183,692 |
|
|
|
TOTAL LIABILITIES AND EQUITY |
425,260 |
387,412 |
Interim report is attached to the announcement
and is also published on NASDAQ Tallinn and Merko’s web page
(group.merko.ee).
Urmas Somelar
Head of Finance
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. As at the end of 2023, the
group employed 638 people, and the group’s revenue for 2023 was EUR
466 million.
- Merko_Ehitus_2023_12M_interim_report
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