Published: 2020-05-07 07:00:00 CEST
Merko Ehitus
Quarterly report

2020 3 months consolidated unaudited interim report


Merko Ehitus posted revenue of EUR 56 million and net profit of EUR 2.0 million in Q1 of 2020. Construction services made up 62% and real estate development 38% of the group’s revenue. New construction contracts worth EUR 87 million in total were signed, and the volume of the secured order-book at the end of the quarter was EUR 193 million, of which close to three-quarters were public sector contracts. In Q1, 133 apartments were handed over to apartment buyers.

The decrease in revenue by about a quarter compared to the same period last year was to be expected – there were fewer major projects in progress and the construction market was seeing a cooling trend. Starting from March, business activity began to be affected by pandemic related restrictions, but the impact of the pandemic on the group’s operations and results will start to show up more extensively in the quarters ahead.

The outlook for the construction and real estate sector in all of group’s home markets became negative in March, and the possibility that the impact of the economic crisis will be long in duration. Due to that, the group cancelled its initial dividend proposal and suspended the launch of new apartment developments at first for three months until there is greater clarity on further developments. Therefore, the supply of group’s apartments will decrease from the planned level for both 2020 and 2021. The group’s companies have started gradually implementing cost control measures to ensure efficient functioning and strong capability for operating both during and after the crisis.

Most of the commercial real estate projects have been placed on hold. Private sector clients have practically disappeared from the construction market and public sector procurements will play a commanding role in new construction tenders. It will definitely take time for private sector clients’ confidence to recover and adjust to the new conditions. Management hopes that state investments into buildings and infrastructure will continue and project preparations will speed up to support the vitality of the construction sector and prevent job losses. Due to the projected drop in construction volumes, price competition in construction tenders has become even more aggressive. A positive aspect is that work is continuing on the group’s construction sites and new construction contracts worth EUR 87 million were signed in the first quarter. Owing to that the volume of secured order-book at the end of the quarter was even slightly greater than a year ago.

In Q1 of 2020, Merko Ehitus handed over 133 apartments to home buyers (Q1 2019: 63 apartments) and 3 commercial premises. Merko’s biggest projects in Tallinn are Uus-Veerenni and Pikaliiva residential projects, Gaiļezers and Viesturdārzs developments in Riga and Vilneles slenis and Rinktinės Urban developments in Vilnius.

In connection with the pandemic, the sales of new apartments slowed down starting in March in Estonia, Latvia and Lithuania. The number of applications for home loans is down; the number of apartments to rent is up, and unemployment has increased in the economic sectors hit hardest by the pandemic. As the apartment market was fairly well balanced before the beginning of the crisis – supply, price level, purchasing power and loan burden were at a reasonable level – going through the current crisis may turn out to be less of an ordeal than the one that started in 2008. Considering the nature of the current economic crisis, it is essential not only that government support measures arrive quickly, but that banks do not overreact in terms of tightening financing conditions, including issuing home loans.

People and companies must quickly learn to operate in conditions of higher health risks and restrictions on everyday activities. Group’s companies are taking the necessary safety measures in the apartment sale process and use digital channels to execute transactions. In current situation, home buyers put even more importance on a trustworthy developer and integrally developed living environments. The group will complete the developments in progress and assess possibilities of launching new projects based on the market situation. The management also analyses how the current crisis could impact the real estate market in the future.

Merko Ehitus posted revenue of EUR 56 million in Q1 2020 (Q1 2019: EUR 77 million), an EBITDA of EUR 2.8 million (Q1 2019: EUR 3.5 million), and net profit of EUR 2.0 million (Q1 2019: EUR 2.8 million). In the first quarter of this year, new construction contracts worth EUR 87 million were signed (Q1 2019: EUR 32 million), the largest of these being the construction of Tallinn Music and Ballet School, Tallinn Arte Gymnasium, new public water supply and sewerage pipeline in Kohila Parish and a data centre in Harju County.

The largest projects in progress for Merko in Q1 in Estonia were the construction of Terminal D parking house at the Tallinn passenger port, Türi Basic School, the commercial building at Pärnu mnt 186 and high-voltage power cables in Tallinn, and the reconstruction of Aaspere-Haljala road section. In Latvia, the largest projects in progress were the construction of the school building and dormitory in Pinki, Lidl’s logistics centre and Laima chocolate factory, as well as the reconstruction of the Riga Technical University Civil Engineering Faculty building. In Lithuania, projects in progress were the construction of Hotel Neringa and Kaunas district police headquarters building.


2020 3 months’ profit before tax was EUR 2.1 million (3M 2019: EUR 3.0 million), which brought the profit before tax margin to 3.7% (3M 2019: 3.9%).

Net profit attributable to equity holders of the parent in 3 months 2020 was EUR 2.0 million (3M 2019: EUR 2.8 million) and 3 months’ net profit margin was 3.6% (3M 2019: 3.6%).

2020 3 months’ revenue was EUR 55.9 million (3M 2019: EUR 76.8 million). 3 months’ revenue decreased by 27.3% compared to same period last year. The share of revenue earned outside Estonia in 3 months 2020 was 53.5% (3M 2019: 60.8%).

As at 31 March 2020, the group’s secured order book was EUR 193.0 million (31 March 2019: EUR 190.0 million). In 3 months 2020, group companies signed new contracts in the amount of EUR 87.2 million (3M 2019: EUR 32.2 million).

In 3 months 2020, the group sold a total of 133 apartments (incl. 2 apartments in a joint venture); in 3 months 2019, the group sold 63 apartments (incl. 29 apartments in a joint venture). The group earned a revenue of EUR 18.6 million from sale of own developed apartments in 3 months 2020 and EUR 4.6 million in 3 months 2019.

At the end of the reporting period, the group had EUR 37.1 million in cash and cash equivalents, and equity of EUR 132.2 million (45.7% of total assets). Comparable figures as at 31 March 2019 were EUR 33.0 million and EUR 134.6 million (48.7% of total assets), respectively. As at 31 March 2020, the group had net debt of EUR 29.8 million (31 March 2019: EUR 9.9 million).

in thousand euros

3 months
3 months
12 months
Revenue 55,872 76,845 326,779
Cost of goods sold (50,398) (70,639) (291,958)
Gross profit 5,474 6,206 34,821
Marketing expenses (948) (851) (4,260)
General and administrative expenses (2,805) (3,124) (12,988)
Other operating income 508 701 2,983
Other operating expenses (63) (35) (1,318)
Operating profit 2,166 2,897 19,238
Finance income/costs (99) 83 1,085
incl. finance income/costs from joint venture 90 222 1,766
interest expense (172) (135) (656)
other financial income (expenses) (17) (4) (25)
Profit before tax 2,067 2,980 20,323
Corporate income tax expense (138) (75) (3,833)
Net profit for financial year 1,929 2,905 16,490
incl. net profit attributable to equity holders of the parent 2,019 2,778 16,270
net profit attributable to non-controlling interest (90) 127 220
Other comprehensive income, which can subsequently be classified in the income statement      
Currency translation differences of foreign entities (188) 32 13
Comprehensive income for the period 1,741 2,937 16,503
incl. net profit attributable to equity holders of the parent 1,823 2,808 16,281
net profit attributable to non-controlling interest (82) 129 222
Earnings per share for profit attributable to equity holders of the parent (basic and diluted, in EUR) 0.11 0.16 0.92

in thousand euros

  31.03.2020 31.03.2019 31.12.2019
Current assets      
Cash and cash equivalents 37,056 32,970 24,749
Trade and other receivables 42,133 75,297 50,413
Prepaid corporate income tax 91 224 104
Inventories 168,833 130,019 166,226
  248,113 238,510 241,492
Non-current assets      
Investments in joint venture 2,588 954 2,498
Other long-term loans and receivables 11,991 11,043 11,094
Investment property 14,021 14,140 14,047
Property, plant and equipment 11,699 10,853 11,919
Intangible assets 724 700 777
  41,023 37,690 40,335
TOTAL ASSETS 289,136 276,200 281,827
Current liabilities      
Borrowings 21,496 15,624 20,725
Payables and prepayments 73,488 82,764 69,585
Income tax liability 816 420 812
Short-term provisions 6,866 7,081 7,976
  102,666 105,889 99,098
Non-current liabilities      
Long-term borrowings 45,355 27,220 43,001
Deferred income tax liability 1,655 1,521 1,682
Other long-term payables 3,164 2,299 3,491
  50,174 31,040 48,174
TOTAL LIABILITIES 152,840 136,929 147,272
Non-controlling interests 4,135 4,706 4,217
Equity attributable to equity holders of the parent      
Share capital 7,929 7,929 7,929
Statutory reserve capital 793 793 793
Currency translation differences (906) (691) (710)
Retained earnings 124,345 126,534 122,326
  132,161 134,565 130,338
TOTAL EQUITY 136,296 139,271 134,555
TOTAL LIABILITIES AND EQUITY 289,136 276,200 281,827

Interim report is 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 AS Merko Ehitus Eesti in Estonia, SIA Merks in Latvia, UAB Merko Statyba in Lithuania and Peritus Entreprenør AS in Norway. Besides providing construction service as a main contractor, the group’s other major area of activity is apartment development. As at the end of 2019, the group employed 694 people, and the group’s revenue for 2019 was EUR 327 million.