Published: 2018-08-09 07:00:00 CEST
Merko Ehitus
Half Year financial report

2018 6 months and II quarter consolidated unaudited interim report


Merko Ehitus increased revenue and net profit figures in Q2 as well as six months. The group’s revenue in Q2 was EUR 103.3 million and in first half-year EUR 183.7 million; Q2 net profit was EUR 5.6 million and 6-month net profit EUR 6.7 million. The group earned over half of its 6-month sales revenue outside Estonia.

The growth of revenue, which continued in Q2, was expected, based on the volume of construction contracts concluded in the last few years. The volumes of construction works grew the most in Latvia. In both the first and second quarter, the group companies’ volume of work performed outside Estonia exceeded the amount performed in Estonia. Due to a rise in the construction input prices and tight competition on the general contracting market, it is not a goal unto itself to grow construction volumes – we are focusing on the quality of construction services and improving profitability. In the second quarter, the group’s profitability increased above all thanks to improved profitability of construction service, and the growth of net profitability was supported by the fact that income tax expenses were lower by EUR 0.9 million compared to last year.

The volume of Merko Ehitus group new construction contracts in the first half-year was lower than the volume of works performed, and the secured construction order book shrank. As many commercial real estate projects have been launched in the Baltics in recent years and construction has become more expensive, customers have become more cautious about new business projects. We still have not had particular success in public procurements and it is very difficult to forecast the volume of new contracts here as the preparation of projects spans a very long period, often construction tenders exceed the financial means of the customer, as a result of which procurements are cancelled or postponed. This will definitely affect the volumes of construction services offered to our customers in 2019.

In the second quarter, no major changes took place on the apartment market in the Baltic states’ capitals: new development projects continue to be launched in quite a large volume in Tallinn and Vilnius. Also, in Riga the apartment market is showing signs of becoming more active, but more so in a cheaper price segment. Apartment development continues to be our central business area, which we invest in. In the first six months of 2018, Merko Ehitus sold 168 apartments with a total price of EUR 16.3 million (excluding VAT), including 117 apartments in Q2 with a total price of EUR 12.0 million (excluding VAT). This year, Merko has launched the construction of six development projects with a total of 349 apartments and invested EUR 13.6 million into development projects launched this year and already in progress.

In Q2 of 2018, Merko Ehitus posted revenue of EUR 103.3 million (Q2 2017: EUR 70.7 million), and a six-month revenue of EUR 183.7 million (H1 2017: EUR 128.8 million, growth of 42.6%). The share of revenue from outside Estonia for six months was 52.6% (H1 2017: 30.9%). In Q2 of 2018, Merko Ehitus posted a net profit of EUR 5.6 million (Q2 2017: EUR 2.2 million), and a six-month figure of EUR 6.7 million (H1 2017: EUR 3.2 million, growth of 107.7%). Q2 EBITDA for the group was EUR 6.4 million, and H1 EBITDA was EUR 8.2 million. Q2 profit before tax was EUR 5.8 million and the same for H1 was EUR 7.1 million. In the first six months of 2018, the group entered into a total of EUR 67.5 million in new contracts, including construction works on Hundipea port, Tsirguliina substation and phase II of the Tallink office building. As of 30 June 2018, the Merko Ehitus Group’s secured order book amounted to EUR 247 million.

Among major projects in progress in Q2 in Estonia were the construction of T1 Mall of Tallinn shopping centre, Maakri Kvartal, Öpiku Maja’s building B, Tallink office building, residence of the Embassy of the People’s Republic of China, expansion of Wendre production facility, Viimsi State Gymnasium, apartment building at Toom-Kuninga 21, phase I of Tartu mnt 80 office building, and central square in Kuressaare, as well as renovation work on Tsirguliina 330 kV substation, cleanup of residual pollution at Maadevahe and Priimetsa asphalt-concrete plant and renovation and dredging at Hundipea port. The largest projects under construction in Q2 in Latvia were Akropole multifunctional centre, Alfa shopping centre and Z-Towers complex in Riga and Ventspils Music School and Concert Hall. In Vilnius, the largest projects were the expansion of Radisson Blu Hotel Lietuva, Hotel Neringa and apartment building complex in the Šaltiniu Namai quarter; and, in Klaipeda, the reconstruction and expansion of Philip Morris plant.




Q2 2018 net profit was EUR 5.6 million (Q2 2017: EUR 2.2 million) and net profit margin 5.4% (Q2 2017: 3.1%). Net profit in 6 months 2018 was EUR 6.7 million (6M 2017: EUR 3.2 million), having increased by 107.7% compared to the same period last year. Net profit margin increased to 3.6% (6M 2017: 2.5%). Increase in net profitability was influenced by the fact that, in 2017, AS Merko Ehitus incurred income tax costs of EUR 0.9 million in connection with dividend payments, while in 2018, dividend payments did not carry income tax cost – the dividends were paid out from dividends paid to the parent company by foreign subsidiaries.
Q2 2018 Profit before tax was EUR 5.8 million (Q2 2017: EUR 3.3 million) and 6M 2018 profit before tax was EUR 7.1 million (6M 2017: EUR 4.4 million), which brought the profit before tax margin to 3.8% (6M 2017: 3.4%).


Q2 2018 revenue was EUR 103.3 million (Q2 2017: EUR 70.7 million) and 6M 2018 revenue was EUR 183.7 million (6M 2017: EUR 128.8 million). 6M revenue has increased by 42.6% compared to same period last year. The share of revenue earned outside Estonia in 6M 2018 was 52.6% (6M 2017: 30.9%).


As at 30 June 2018, the group’s secured order book was EUR 247.0 million (30 June 2017: EUR 387.5 million). In 6M 2018, group companies signed new contracts in the amount of EUR 67.5 million (6M 2017: EUR 216.6 million). In Q2 2018, new contracts were signed in the amount of EUR 45.3 million (Q2 2017: EUR 158.0 million).


The group sold a total of 168 apartments (incl. 34 apartments in a joint venture) in 6 months of 2018 at a total value of EUR 16.3 million (excluding VAT). During 6 months of 2017, 239 apartments (incl. 1 apartment in a joint venture) were sold at a total value of EUR 26.9 million. In Q2 of 2018 a total of 117 apartments (incl. 9 apartment in a joint venture) were sold at a total value of EUR 12.0 million (excluding VAT) compared to Q2 2017 of 98 apartments and EUR 10.5 million.


At the end of the reporting period, the group had EUR 27.2 million in cash and cash equivalents, and equity EUR 119.1 million (42.8% of total assets). Comparable figures as at 30 June 2017 were EUR 25.9 million and EUR 118.7 million (49.3% of total assets), respectively. As at 30 June 2018, the group had net debt of EUR 26.9 million (30 June 2017: EUR 19.4 million).



in thousand euros 

6 months
6 months
 II quarter
 II quarter
12 months
Cost of goods sold(170,621)(118,627)(94,394)(64,601)(286,747)
Gross profit13,02910,1808,9466,05930,851
Marketing expenses(1,729)(1,638)(923)(778)(3,215)
General and administrative expenses(5,664)(4,918)(2,845)(2,400)(11,289)
Other operating income1,6951,2268436593,793
Other operating expenses(105)(133)(73)(76)(601)
Operating profit 7,2264,7175,9483,46419,539
Finance income/costs(171)(362)(145)(206)(767)
incl. finance income/costs from sale of subsidiary(59)-(59)-14
finance income/costs from joint ventures226(2)90(30)64
finance income/costs from other long-term investments----2
interest expense(309)(347)(156)(174)(745)
foreign exchange gain (loss)(1)(1)-(3)(1)
other financial income (expenses)(28)(12)(20)1(101)
Profit before tax7,0554,3555,8033,25818,772
Corporate income tax expense(201)(1,113)(111)(995)(3,020)
Net profit for financial year6,8543,2425,6922,26315,752
incl. net profit attributable to equity holders of the parent6,6693,2115,5652,18214,694
net profit attributable to non-controlling interest18531127811,058
Other comprehensive income, which can subsequently be classified in the income statement     
Currency translation differences of foreign entities28(30)15(27)(74)
Comprehensive income for the period6,8823,2125,7072,23615,678
incl. net profit attributable to equity holders of the parent6,6963,1825,5792,15714,637
net profit attributable to non-controlling interest18630128791,041
Earnings per share for profit attributable to equity holders of the parent (basic and diluted, in EUR)0.380.180.310.120.83



in thousand euros

Current assets   
Cash and cash equivalents27,23025,86439,210
Trade and other receivables91,54163,77575,844
Prepaid corporate income tax163625492
Non-current assets   
Long-term financial assets15,16712,88117,242
Deferred income tax assets51,3255
Investment property13,7483,97915,719
Property, plant and equipment9,45411,7159,665
Intangible assets574571497
TOTAL ASSETS278,349240,991277,095
Current liabilities   
Payables and prepayments92,63866,07974,972
Income tax liability375161413
Short-term provisions4,4873,8854,569
Non-current liabilities   
Long-term borrowings37,89441,15835,138
Deferred income tax liability1,3351,1651,259
Other long-term payables1,5002,0391,789
TOTAL LIABILITIES154,431118,554142,358
Non-controlling interests4,7893,7224,567
Equity attributable to equity holders of the parent   
Share capital7,9297,9297,929
Statutory reserve capital793793793
Currency translation differences(675)(674)(702)
Retained earnings111,082110,667122,150
TOTAL EQUITY123,918122,437134,737

Interim report and the investor presentation are attached to the announcement and are also published on NASDAQ Tallinn and Merko’s web page (

Priit Roosimägi
Head of Group Finance Unit
AS Merko Ehitus
+372 650 1250

AS Merko Ehitus ( group 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, Peritus Entreprenør AS construction company in Norway and the real estate development business unit along with real estate holding companies. As at the end of 2017, the group employed 757 people and the company’s 2017 revenue was EUR 317.6 million.