2024 12 months and IV quarter consolidated unaudited interim report
COMMENTARY FROM MANAGEMENT
Merko Ehitus posted revenue of EUR 160.4 million and net profit of EUR 19.9
million in Q4 of 2024. The respective figures for the entire year 2024 were EUR
539 million and EUR 64.7 million. Approximately 90% of revenue came from sales
of construction services and 53% was earned in Lithuania. In coordination with
the supervisory board, the management board of Merko Ehitus proposes to the
general shareholder meeting to pay out EUR 1.90 per share as dividends.
According to the management of Merko Ehitus, the solid results of 2024 stemmed
from the right decisions in terms of focusing on selected sectors and specific
projects, and the teams' superb work both in terms of efficient implementation
of projects and management of risks and expenses. In 2024, contracts signed in
the turbulent 2021-2022 period, the bulk of the construction on Arter Quarter,
the tram line to Old City Harbour, TKM Group logistics centre, the third stage
of Vilneles Skverai apartment development in Vilnius and construction of the
large-scale Lithuanian wind energy infrastructure were completed. A joint
venture in which the group has a 50% holding, Connecto Infra, delivered a strong
performance in whole year of 2024. The Merko Group's financial position is
strong and net debt negative; and the lower need for loans translated into
savings on financial expenses during a period of higher interest rates.
During the last two years, the group's Lithuanian team started work on a large
number of complicated wind farm infrastructure projects. They were able to tap
into the economy of scale effect and build a record 87 turbine foundations using
what was effectively an industrial production process, at a consistent pace and
record speed. In addition, risks were avoided, and all of it together yielded
significant savings on expenses. Expenses were also reduced by the fact that
work on a national defence site in Lithuania are executed ahead of schedule.
During 2024, the group's companies entered into close to one-third fewer new
contracts than in 2023 and the secured order book was significantly lower than
the previous year. Construction contracts generally have a term of 18-24 months,
and considering the economic climate, low investments and procurements being won
with very low prices seen since 2023 a complicated 2025 and 2026 for the
Estonian and Latvian construction sector can be expected. As for developments in
Lithuania, there are grounds for much greater optimism there. In 2024, companies
of Merko Group signed new construction contracts worth EUR 338 million, which is
nearly one-third less than in 2023 (EUR 501 million). As at the end of the year,
the group's balance of secured order-book was EUR 341 million.
Due to the changed market situation, the results of real estate development
division are significantly more modest than in previous years. The 2024 revenue
was only 40% of that of 2023, yet Merko has managed to retain profitability in
this business area. Despite the softer real estate market, the default rate on
obligational contracts did not increase and it has been succeeded in reducing
balance of apartments still waiting to be sold. The weakest economic sentiment
is seen in Estonia and the strongest sentiment is in Lithuania, where the market
for new apartments is active and we are increasing our supply. In Latvia, it is
hoped to stay at the current market levels and in Estonia, buoyed by the more
active real estate aftermarket, there are looking ahead to growth in sales of
new real estate.
In 2024, Merko delivered 323 apartments and 11 commercial units to buyers. In
the course of the year, Merko launched construction and sales of 259 new
apartments, and as of the end of the year, our balance stood at 633 apartments,
of which 17% were covered by preliminary sale contracts. The largest development
projects in progress were, in Tallinn, Uus-Veerenni, Noblessner and Lahekalda;
in Tartu, Erminurme; while in Riga the leaders were Lucavsala, Arena Garden
Towers, Viesturd?rzs, Mezhpils?ta and Magnolijas; and in Vilnius, Vilnel?s
Skverai.
In 2024, the largest projects in progress in Estonia were the TKM Group
logistics centre, the Hampton by Hilton and Hyatt hotel buildings, Arter
Quarter, the City Plaza 2 office building in Tallinn, the Estonian Defence
Forces buildings at Ämari base, a tram line between Old City Harbour and Rail
Baltica Ülemiste passenger terminal, the first stage of the Ülemiste multimodal
transport junction and the Rail Baltica's Tõdva highway overpasses. In
Lithuania, the largest sites under way were the wind farm infrastructure
projects in Kelm?, Pag?giai and Telshiai regions, a substation in Kelm? and
various national defence buildings and infrastructure. In Latvia, a solar energy
farm in V?rme municipality and a student hotel in Riga were under construction.
OVERVIEW OF THE IV QUARTER AND 12 MONTHS RESULTS
PROFITABILITY
2024 12 months' pre-tax profit was EUR 76.4 million and Q4 2024 was EUR 26.8
million (12M 2023: EUR 52.0 million and Q4 2023 was EUR 18.1 million), which
brought the pre-tax profit margin to 14.2% (12M 2023: 11.1%).
Net profit attributable to shareholders for 12 months 2024 was EUR 64.7 million
(12M 2023: EUR 46.0 million) and for Q4 2024 net profit attributable to
shareholders was EUR 19.9 million (Q4 2023: EUR 13.9 million). 12 months net
profit margin was 12.0% (12M 2023: 9.9%).
REVENUE
Q4 2024 revenue was EUR 160.4 million (Q4 2023: EUR 126.5 million) and 12
months' revenue was EUR 539.0 million (12M 2023: EUR 466.3 million). 12 months'
revenue increased by 15.6% compared to same period last year. The share of
revenue earned outside Estonia in 12 months 2024 was 58.3% (12M 2023: 39.3%).
SECURED ORDER BOOK
As of 31 December 2024, the group's secured order book was EUR 340.6 million (31
December 2023: EUR 477.5 million). In 12 months 2024, group companies signed
contracts in the amount of EUR 338.0 million (12M 2023: EUR 500.8 million). In
Q4 2024, new contracts were signed in the amount of EUR 45.9 million (Q4 2023:
EUR 121.4 million).
REAL ESTATE DEVELOPMENT
In 12 months 2024, the group sold a total of 323 apartments; in 12 months 2023,
the group sold 948 apartments. The group earned a revenue of EUR 58.9 million
from sale of own developed apartments in 12 months 2024 and EUR 137.5 million in
12 months 2023. In Q4 of 2024 a total of 129 apartments were sold, compared to
283 apartments in Q4 2023, and earned a revenue of EUR 22.9 million from sale of
own developed apartments (Q4 2023: EUR 31.4 million).
CASH POSITION
At the end of the reporting period, the group had EUR 91.9 million in cash and
cash equivalents, and equity of EUR 254.3 million (56.9% of total assets).
Comparable figures as of 31 December 2023 were EUR 77.3 million and EUR 212.1
million (49.9% of total assets), respectively. As of 31 December 2024, the
group's net debt was negative EUR 58.5 million (31 December 2023: negative EUR
22.5 million).
PROPOSAL FOR DISTRIBUTION OF PROFITS
The Management Board proposes to the Supervisory Board to distribute to
shareholders EUR 33.6 million in dividends (1.90 euros per share) from retained
earnings in 2025. This is equivalent to a 52% dividend rate for 2024.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros
2024 2023 2024 2023
12 months 12 months IV quarter IV quarter
Revenue 539,049 466,304 160,373 126,466
Cost of goods sold (443,162) (401,267) (127,565) (104,625)
Gross profit 95,887 65,037 32,808 21,841
Marketing expenses (5,030) (4,312) (1,664) (1,299)
General and administrative expenses (21,908) (19,423) (6,793) (6,527)
Other operating income 5,724 4,171 759 772
Other operating expenses (2,190) (991) 322 (377)
Operating profit 72,483 44,482 25,432 14,410
Finance income/costs 3,931 7,500 1,407 3,735
incl. finance income/costs from
investments in subsidiaries (5,087) - (1,968) -
finance income/costs from joint
ventures 9,951 10,220 3,317 4,159
interest expense (1,823) (2,697) (354) (686)
foreign exchange gain (loss) (948) (153) (17) 39
other financial income (expenses) 1,838 130 429 223
Profit before tax 76,414 51,982 26,839 18,145
Corporate income tax expense (11,820) (6,081) (6,953) (4,254)
Net profit for financial year 64,594 45,901 19,886 13,891
incl. net profit attributable to
equity holders of the parent 64,668 46,048 19,887 13,900
net profit attributable to non-
controlling interest (74) (147) (1) (9)
Other comprehensive income, which
can subsequently be classified in
the income statement
Currency translation differences of
foreign entities 105 (41) (24) (25)
Comprehensive income for the period 64,699 45,860 19,862 13,866
incl. net profit attributable to
equity holders of the parent 64,764 45,993 19,862 13,877
net profit attributable to non-
controlling interest (65) (133) - (11)
Earnings per share for profit
attributable to equity holders of
the parent (basic and diluted, in
EUR) 3.65 2.60 1.12 0.79
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros
31.12.2024 31.12.2023
ASSETS
Current assets
Cash and cash equivalents 91,879 77,330
Short-term deposits 10,000 -
Trade and other receivables 51,419 68,754
Prepaid corporate income tax 270 2
Inventories 196,521 195,435
350,089 341,521
Non-current assets
Investments in joint ventures 21,571 21,915
Other shares and securities 80 80
Other long-term loans and receivables 40,196 24,490
Deferred income tax assets 5,056 3,298
Investment property 12,606 16,823
Property, plant and equipment 17,147 16,613
Intangible assets 350 520
97,006 83,739
TOTAL ASSETS 447,095 425,260
LIABILITIES
Current liabilities
Borrowings 21,303 19,673
Payables and prepayments 129,786 133,898
Income tax liability 7,101 4,260
Short-term provisions 7,678 10,451
165,868 168,282
Non-current liabilities
Long-term borrowings 12,102 35,142
Deferred income tax liability 6,148 4,441
Other long-term payables 8,719 5,495
26,969 45,078
TOTAL LIABILITIES 192,837 213,360
EQUITY
Non-controlling interests - (155)
Equity attributable to equity holders of the parent
Share capital 7,929 7,929
Statutory reserve capital 793 793
Currency translation differences (41) (838)
Retained earnings 245,577 204,171
254,258 212,055
TOTAL EQUITY 254,258 211,900
TOTAL LIABILITIES AND EQUITY 447,095 425,260
Interim report is attached to the announcement and is also published on NASDAQ
Tallinn and Merko's web page (group.merko.ee (https://group.merko.ee/en/)).
Urmas Somelar
Head of Finance
AS Merko Ehitus
+372 650 1250
[email protected] (mailto:[email protected])
AS Merko Ehitus (group.merko.ee (https://group.merko.ee/en/)) group companies
construct buildings and infrastructure and develop real estate. We create a
better living environment and build the future. We operate in Estonia, Latvia
and Lithuania. As at the end of 2024, the group employed 605 people, and the
group's revenue for 2024 was EUR 539 million.