OREANDA-NEWS.  Merko Ehitus posted revenue of EUR 46.8 million in Q1 2016, EBIDTA of EUR 1.2 million and profits before taxes of EUR 0.3 million. Merko continues to focus on private sector customers and real estate development, and the share of revenue from the latter increased to 42% of the group’s total Q1 revenue. Merko sold 101 apartments in the first quarter compared to 62 in the same period last year.

Due to the recent developments on the Baltic construction market, the management of the group is not satisfied with the results of the first quarter. Civil engineering construction volumes are in a slump, which has affected profitability, and the volume of government orders in general is down. While at the end of 2014, government contracts made up close to half of the Merko portfolio, today the figure is only 20%. The first quarter results were also impacted by the slower than planned launch of construction of several large-scale projects, due to changes in project design solutions and delays in getting approvals.

According to the management the goal continues to be to strengthen the group’s positions on the general contracting and residential real estate market in Latvia and Lithuania, where similarly to Estonia, there are currently few public sector orders and the realisation of private sector commercial real estate projects takes a long time. In the first quarter, we acquired a majority holding in a Norwegian construction company with the objective to form the basis for the operations in the Norwegian construction market. Merko has continued investing into real estate development as planned and the apartment sales results are satisfactory in all three Baltic capitals. The management hopes that similarly to Vilnius and Tallinn, the Riga apartment market will also become active, as there has recently clearly been an undersupply of new apartments in the biggest city in the Baltics. For the first time, sales revenue in the real estate segment made up over 40% of the group’s total revenue, which includes the sale of strategically non-core immovable properties for the group. In apartment development, the group will continue investing into quality product development and construction.

In Q1, Merko sold 101 apartments with a total price of EUR 11.4 million (not including VAT), compared to the 62 apartments sold in the first three months of 2015. In the first quarter, Merko launched construction of the second Paepargi high-rise in Tallinn and the last apartment building in the Kaupmehe project in Tartu. The group will continue investing into residential real estate projects and similarly to last year, plans to start construction of more than 500 new apartments in 2016.

Merko Ehitus posted revenue of EUR 46.8 million in Q1 2016, which includes sale of non-strategic immovable properties. Q1 EBITDA was EUR 1.2 million, profit before taxes was EUR 0.3 million and the net profit was EUR 0.1 million.

In Q1 2016, the group’s companies entered into new contracts totalling EUR 22.4 million, including the BAUHAUS department store in Rocca al Mare and Tallink tennis centre. As at 31 March 2016, the group had a secured order book balance of EUR 243.5 million. Major projects in progress in Tallinn for Merko in Q1 included the construction of Hilton Tallinn Park Hotel, the design and construction of Maakri Quarter, ?piku Building, T1 shopping centre and the design and construction of a tram line that will serve the airport. In Latvia and Lithuania, the largest projects in progress are the Riga Airport passenger terminal, the Kauno/Algirdo residential and commercial quarter and the Narbuto 5 office building. 

OVERVIEW OF THE 3 MONTHS RESULTS

PROFITABILITY

Profit before tax in 3M 2016 was EUR 0.3 million (3M 2015: EUR 0.8 million), which is equivalent to a profit before tax margin of 0.6% (3M 2015: 1.8%). Gross margin in 3M was 6.5% (3M 2015: 7.8%). Net margin in 3M 2016 decreased to 0.2% (3M 2015: 1.8%) and net profit was EUR 0.1 million (3M 2015: EUR 0.8 million), having decreased by 86.2% compared to the same period last year.

REVENUE

Revenue in 3M 2016 was EUR 46.8 million (3M 2015: EUR 45.6 million), which has increased by 2.7% compared to last year. The share of revenue earned outside Estonia has decreased in 3M 2016 to 33% (3M 2015: 42%) and the share of revenue earned in Estonia has accordingly increased to 67% (3M 2015: 58%). The number of apartments (101 units) sold in 3 months of 2016 has increased by 62.9% and the revenue from apartment sales (EUR 11.4 million) by 5.4% (3 months of 2015: 62 units, revenues of EUR 10.8 million).

CASH POSITION

At the end of the reporting period, the group had EUR 34.4 million in cash and cash equivalents and equity EUR 125.8 million (62.3% of total assets). Comparable figures as at 31 March 2015 were accordingly EUR 40.9 million and EUR 127.8 million (53.1% of total assets). As at 31 March 2016 the group had net debt of negative EUR 8.2 million (31 March 2015: negative EUR 5.8 million).

SECURED ORDER BOOK

In Q1 2016, group companies signed new contracts in the amount of EUR 22.4 million (Q1 2015: EUR 22.4 million). As at 31 December 2016, the group’s secured order book stood at EUR 243.5 million (31 March 2015: EUR 167.2 million).

DISTRIBUTION OF PROFITS

The general meeting of shareholders held on 27 April 2016 resolved to approve the profit allocation proposal for 2015 and to distribute EUR 9.0 million (EUR 0.51 per share) in dividends from retained earnings. This is equivalent to a 90% dividend rate for 2015.

 

    3M 2016 3M 2015 Variance 12M 2015
Revenue million EUR 46.8 45.6 +2.7% 251.0
Gross profit million EUR 3.1 3.6 -14.0% 23.0
Gross profit margin % 6.5 7.8 -16.3% 9.1
EBITDA million EUR 1.2 1.9 -36.6% 15.5
EBITDA margin % 2.5 4.1 -38.3% 6.2
Profit before tax million EUR 0.3 0.8 -63.7% 11.7
PBT margin % 0.6 1.8 -64.7% 4.7
Net profit (parent) million EUR 0.1 0.8 -86.2% 10.0
Net profit margin % 0.2 1.8 -86.6% 4.0
EPS EUR 0.01 0.05 -86.2% 0.56

 

    31.03.2016 31.03.2015 Variance 31.12.2015
ROE (on yearly basis) % 7.5 10.1 -25.5% 8.0
Equity ratio % 62.3 53.1 +17.3% 59.5
Secured order book million EUR 243.5 167.2 +45.6% 246.9
Total assets million EUR 202.0 240.8 -16.1% 211.1
Number of employees people 782 776 +0.8% 791

 

OPERATING RESULTS

Revenue and gross profit

Merko Ehitus group generated a total of EUR 46.8 million in revenue in 3 months of 2016 (3 months of 2015: EUR 45.6 million). 40.7% of the revenue was generated in Estonian construction service, 17.0% in Latvian and Lithuanian construction service and 42.3% in and real estate development segment (3 months of 2015: 37.5% in Estonian construction service, 38.2% in Latvian and Lithuanian construction service and 24.3% in real estate development segment). Compared to the 3 months of 2015 the group revenue has increased by 2.7%. Compared to the 3 months of the previous year in the 3 months of 2016 the share of Latvian and Lithuanian construction service revenue in the group’s revenue has decreased from 38.2% to 17.0% and the share of real estate development revenues has increased from 24.3% to 42.3%. The main changes in the revenue structure compared to the same period last year lie in a one-off increase in the sales revenue from immovable properties in the real estate development segment and the growth in revenue from Estonian construction services’ general construction projects. At the same time, revenue is down in the Latvian and Lithuanian constructions service segment. This trend has been in line with the group’s expectations, considering the distribution of the secured order book as at the end of 2015.

In 3 months of 2016 the group’s gross profit from development and construction activities totalled EUR 3.1 million (3 months of 2015: EUR 3.6 million). The 3 months gross profit margin (6.5%) has decreased by 1.3 pp compared to the same period last year (3 months of 2015: 7.8%). Comparing the three-month results, it has been important for the group to preserve profitability in the construction service domain in all three Baltic countries in spite of the prevailing competition situation on the construction market and the decrease in sales volumes in regard to higher-margin civil engineering projects, which was supported by somewhat of a drop in input prices, which may not continue in 2016. Gross profit margin has also been impacted by the decreased profitability in the real estate development segment, which depends largely on the price of the land as part of the total specific project expenses and is thus different on a project basis, but also by sold immovable properties with lower margin than average for the segment. The scarcity of projects and the ever-tightening competition in the construction sector poses a great challenge in the maintaining of the current gross profit margin for new procurements in all segments. The number of companies participating in tenders and the risk of low pricing bids is high in all three Baltic states.

Profit before tax and net profit

In 3 months of 2016, the group’s profit before tax totalled EUR 0.3 million and net profit attributable to equity holders of the parent was EUR 0.1 million as compared to the pre-tax profit or EUR 0.8 million and net profit attributable to equity holders of the parent of EUR 0.8 million in 3 months of 2015. Group’s profit before tax margin was 0.6% (3 months of 2015: 1.8%) and the net profit margin was 0.2% (3 months of 2015: 1.8%). Both the group’s profit before tax (EUR 0.3 million) and the profit before tax margin (0.6%) have decreased compared to the same period last year (3 months of 2015: EUR 0.8 million and 1.8%, respectively).

 

Business segments

The group operates mainly in Estonian, Latvian and Lithuanian market through its subsidiaries. By purchasing a majority shareholding the group has formed the basis for entering the Norwegian market starting from Q1 2016. Depending on the country the group provides construction services and real estate development services across the following business segments: Estonian construction service (incl. construction services on project basis in Finland), Latvian and Lithuanian construction service (incl. construction services in Norway) and real estate development. The group’s segment structure is alined with group’s management structure.

Estonian construction service (incl. construction services on project basis in Finland) and Latvian and Lithuanian construction service service (incl. construction services in Norway) segments include all projects of the respective countries pertaining to construction services:

  • General construction consists of the construction of different buildings, from commercial and office buildings, retail and entertainment centres to public sector and residential and specialised industrial buildings. Group companies provide strategic consulting and quality complete solutions as part of the general contracting service of construction according to the customer's requirements: preparation, design, construction, interior and warranty service. In the field of general construction the group operates in all three Baltic countries and Norway.
  • The civil engineering p?rojects the group constructs include port, waste management and road structures (bridges, tunnels, overpasses, roads), electrical construction of up to 330 kV, various environmental protection structures, water treatment plants, both open-cut and trenchless construction of water and sewerage pipelines and other various engineering projects. Complex and unique engineering projects require specialised knowledge and a good partnership with the customer and local authorities. In this area the group operates in Estonia and Latvia.
  • In the road construction division, the group carries out road construction and builds the associated infrastructure, road maintenance and maintenance repair. In the area or road construction the group operates only in Estonia.

Real estate development is based on the development of real estate in the ownership of the group, encompassing development of apartment projects, long-term investments into real estate and real estate projects executed for business purposes, and to a minor extent also real estate maintenance and lease. In this segment, similarly to before, the group recognises projects being developed in all of the different countries.

Estonian construction service

The Estonian construction services segment consists of various services in the field of general construction, civil engineering (including construction of electrical and external networks) and road construction.

In the 3 months of 2016, the revenue of the Estonian construction service segment was EUR 19.0 million (3 months of 2015: EUR 17.1 million), having decreased by 11.4% from the same period last year. The 3 months revenue also includes revenue from Finnish projects in the amount of EUR 0.4 million (3 months of 2015: EUR 0.0 million). The revenues have clearly decreased in the field of civil engineering and increased in the field of general construction. The increase in revenue in the field is primarily due to the fact that large-scale general construction projects launched in 2015 – where previously design development took place – are gradually starting to reach a stage of more extensive construction activity. If the revenue of the Estonian construction service segment have formed the largest proportion in the group’s revenue in the previous periods, then in the 3 months of 2016 the Estonian construction service segment revenues formed a 40.7% share, having decreased by 8.4% in the yearly comparison.

In this segment, the group earned a gross profit of EUR 1.0 million for 3 months (3 months of 2015: EUR 1.4 million). In 3 months of 2016, the gross margin of the Estonian construction service segment was 4.9%, which decreased by 3.3 pp compared to the 3 months of 2015 (8.2%), mainly due to the scarcity of projects in the field of civil engineering. In light of the close competition on the Estonian construction services market and the drop in volumes of work for nearly all market participants, we consider this as a satisfactory result. Due to the decrease in the volume of public procurements, we are critically monitoring any changes in the volume of work-in-progress and also constantly improving the efficiencies of internal project management processes. We have reduced and re-allocated staff within the group and, in order to maintain the efficiency of the cost base, made preparations for responding to further market changes.

Our major projects in the first quarter included the construction works of Hilton Tallinn Park hotel, the design and construction works of ?pik Office Building in Tallinn, the design and construction works of T1 shopping centre in Tallinn, the reconstruction work an office building located at Mustam?e tee 3, Tallinn and the road maintenance works done under the service agreement with Tallinn.

Latvian and Lithuanian construction service

The Latvian and Lithuanian construction service segment consists of general construction work in both of the aforementioned Baltic countries and stating from the first quarter of 2016 also in Norway and provision of civil engineering services in Latvia.

The revenue of the Latvian and Lithuanian construction service segment amounted to EUR 8.0 million in the 3 months of 2016 (3 months of 2015: EUR 17.4 million), which is 54.3% less than in the 3 months of 2015. If the Latvian and Lithuanian construction service segment revenues of 3 months of 2015 formed 38.2% of the group’s revenue, then during 3 months of the current year the segments revenues have decreased to 17.0%. The change in this percentage was in line with expectations, considering the lower level of new contracts signed in Latvia and Lithuania during 2015 and the 2015 comparison base, where large-scale projects were in progress in Latvia, such as the construction of Liepaja Concert Hall and Polipaks NT manufacturing and logistics centre. The group’s continued focus is on increasing the revenues outside Estonia. The 3 month gross profit of the Latvian and Lithuanian construction service segment amounted to EUR 0.3 million (3 months of 2015: EUR 1.0 million) and the gross profit margin was 3.9% (3 months of 2015: 5.7%), which decreased by 31.8% compared to the same period previous year.

In the first quarter of 2016, the main ongoing projects included were the construction of kindergarten and school buildings complex near Riga in Pinki, the construction works of the second phase of the passanger terminal in Riga International Airport and the construction works of Kauno/Algirdo residential complex with office premises in Vilnius.

Real estate development

The real estate development segment includes residential construction, the development of apartment projects, long-term real estate investments and commercial real estate projects.

The group sold a total of 101 apartments in 3 months of 2016 at the total value of EUR 11.4 million (excl. VAT), compared to 62 apartments and EUR 10.8 million in 3 months of 2015. In 3 months of 2016, the group has earned EUR 7.5 million of revenue from the sale of immovable properties (3 months of 2015: EUR 0.0 million). In 3 months of 2016 real estate development segment revenues have increased 79.0% compared to the same period last year. This is mainly because of the one-time effect of revenues from the sale of immovable properties that are strategically not needed by the group, the profitability of which is not comparable with a situation where the value of land is increased by passing through all phases of the development process.. The share of revenue from the real estate development segment has increased as anticipated in the 3 months to 42.3% of the group’s total revenue (3 months of 2015: 24.3%), forming the the largest proportion in the group’s revenue having increased by 74.3%.

The 3 month gross profit of the segment amounted to EUR 1.8 million (3 months of 2015: EUR 1.2 million) and the gross profit margin was 9.2% (3 months of 2015: 10.5%), which decreased by 12.8% compared to the same period previous year. The profitability of the apartment development projects varies by project and depends greatly on the cost structure of the specific project, incl. the land acquisition price. The sector’s gross profit of the first three months was also significantly influenced by the fact that revenue from the sale of immovable properties with lower than average profitability made up a noteworthy share of total revenue in the segment.

At the end of the period, group’s inventory comprised 217 apartments where a preliminary agreement had been signed: 34 completed apartments (26 in Estonia, 5 in Latvia, 1 in Lithuania and 2 in Finland) and 183 apartments under construction (136 in Estonia, 8 in Latvia and 39 in Lithuania). The sale of these apartments had not yet been finalised and delivered to customers, because the development site is still under construction or the site was completed at the end of the reporting period and the sales transactions have not all been finalised yet.

As at 31 March 2016, Merko Ehitus group had a total of 457 apartments for active sale (as at 31 March 2015: 361 apartments), for which there are no pre-sale agreements and of which 73 have been completed (23 in Estonia, 27 in Latvia, 16 in Lithuania and 7 in Finland) and 384 are under construction (281 in Estonia, 44 in Lithuania and 59 in Lithuania). The number of apartments on sale as at 31 March 2016 has increased, compared to 31 March 2015, mainly due to the volume of projects launched in the fourth quarter of 2015 and the first quarter of 2016: launch of construction of 278 new apartments, compared to the 162 new apartments in the reference period.

In 3 months of 2016, we launched the construction of a total of 90 new apartments in the Baltic states (3 months of 2015: 103 apartments). In the 3 months of this year, the group has invested a total of EUR 10.1 million (3 months of 2015: EUR 10.7 million) in new development projects launched in 2016 as well as projects already in progress from previous year.

We will continue to invest in residential real estate projects and depending on the apartment market developments in 2016, the group will launch the construction of approximately 500-550 new apartments in the Baltic states (2015: construction of 574 new apartments launched). In 2016, the group’s investments in both development projects initiated in the previous years and new projects to be launched in 2016 will be in the range of EUR 40-45 million (2015: EUR 42.4 million invested).

One of our objectives is to keep a moderate portfolio of land plots to ensure stable inventory of property development projects considering the market conditions. At 31 March 2016, the group's inventories included land plots with the development potential, where the construction works have not started, of EUR 50.5 million (31.03.2015: EUR 59.5 million; 31.12.2015: EUR 58.0 million).

In the 3 months of 2016, the group has not purchased any new land plots for real estate development pruposes (3 months of 2015: different new land plots in Tallinn, Estonia acquired at an acquisition cost of EUR 5.1 million). Also the group signed a notarised contract of sale of registered immovables, under which all of the real estate governed by an option agreement in Tallinn were realised for total of EUR 4.0 million. The group is searching for new land plots for real estate development purposes primarily in Estonian and Lithuania. 

Secured order book

As at 31 March 2016, the group’s secured order book (without own developments) amounted to EUR 243.5 million as compared to EUR 167.2 million as at 31 March 2015. The secured order book excludes the group's own residential development projects and construction work related to developing real estate investments.

In first quarter of 2016, EUR 22.4 million worth of new contracts were signed (without own developments) as compared to EUR 22.4 million in same period last year.

After the balance sheet date, the group concluded one large construction contract:

  • On 7 April 2016, SIA Merks – a subsidiary of AS Merko Ehitus – signed a contract with SIA Decco Centrs to perform the design and construction works of warehouse complex, located at Katlakalna street 6D, Riga, Latvia. The value of the contract is approximately EUR 4.8 million. The works are scheduled for completion by June of 2017.

Of the contracts signed in the 3 months of 2016, private sector orders accounted for the majority proportion, which is also represented in the group’s secured order book as at the end of the reporting period, where private sector orders from projects in progress constitute 80% (31.03.2015: approximately 60%; 31.12.2015: approximately 80%). Apart from a few large-scale procurements where Merko companies were not as optimistic as our competitors in bidding at a low price, the share of government contracts in the 3 months of 2015 has been modest. The group continues to focus on comprehensive design and construction contracts. In this regard, two important contracts were signed in Estonia in the first three months of 2016.

The portfolio of contracts stands strong, especially in Estonia. At the same time, the group has not managed to conclude new contracts in the estimated volume, especially in Latvia and Lithuania. This is due to a lower-than-estimated number of orders on the market, which will also affect the volumes for 2016. Considering the beginning phase of the current EU funding period, one can forecast the volume of public procurements to stay at the previous years level. We forecast that the volume of public procurements will start to increase in the second half of 2016. In this respect, it will not be easy to maintain the secured order book at the level of 2015 or growing it.

Traditionally the share of Estonian construction activity has been the highest in the group's revenues. Given the weak growth outlook of the Estonian construction market, the group's goal is to increase the volume of construction orders from outside Estonia. Thus, we will continue to identify and strengthen the groups competitive advantages and are closely monitoring the development and opportunities both in the Baltic states and the Nordic countries. Starting from 2014 AS Merko Ehitus Eesti has selectively and on project basis participated in procurements in Finland, Sweden and Norway in order to gain experience and sufficient knowledge in the qualification conditions, requirements established and risks associated in these countries. As a result of this activity, the group has carried out its first projects in Finland in 2015 and as a follow-up to this, in March 2016, a controlling holding was acquired in Peritus Entrepren?r AS, a Norwegian construction company that provides general construction services. The group will continue to implement the chosen strategy and to pursue revenue from new markets also in 2016. 

Cash flows

As at 31 March 2016 the group had cash equivalents in the amount of EUR 34.4 million (31.03.2015: EUR 40.9 million; 31.12.2015: EUR 39.9 million). The group's cash level is lower compared to the same period last year; still, the financial position is strong, as the group has not utilized its credit lines of existing overdrafts and loan agreements and has not concluded loan agreements for financing all of the projects in development.

The 3-month cash flow from operating activity was negative at EUR 1.6 million (3 months of 2015: negative EUR 7.9 million), cash flow from investing activity was positive at EUR 0.9 million (3 months of 2015: negative EUR 0.2 million) and the cash flow from financing activity was negative at EUR 4.8 million (3 months of 2015: negative EUR 2.6 million).

The cash flow from operating activity was mostly influenced by the EBITDA (operating profit adjusted with depreciation and amortisation) EUR 1.2 million (3 months of 2015: EUR 1.9 million), by the negative change in receivables and liabilities related to construction contracts recognised under the stage of completion method EUR 3.5 million (3 months of 2015: negative change of EUR 4.6 million), by the negative change in the provisions EUR 2.8 million (3 months of 2015: negative change of EUR 4.6 million), by the positive change in trade and other receivables related to operating activities EUR .4 million, incl. a negative change in financing co-financed projects of EUR 1.6 million (3 months of 2015: positive change of EUR 5.0 million, incl. a negative change in financing co-financed projects of EUR 0.0 million), by the positive change in inventory EUR 6.6 million, incl. positive cash flow from sale of immovable properties in the amount of EUR 7.5 million (3 months of 2015: negative change of EUR 2.3 million, incl. negative cash flow from purchase of new land plots in the amount of EUR 5.1 million), by the negative change in trade and other payables related to operating activities EUR 2.9 million (3 months of 2015: negative change of EUR 3.5 million, incl. significant negative outflow from the realization of an option agreement in the amount of EUR 4.0 million but also from the advances for real estate development projects).

To support cash flows arising from operating activity, the group has been cautious in raising additional external capital, including factoring. At the same time, the debt ratio has remained at a moderate level (12.9% as at 31.03.2016; 14.6% as at 31.03.2015; 14.8% as at 31.12.2015).

Cash flows from investment activities include negative cash flow from the acquisition of non-current asset in the amount of EUR 0.5 million (3 months of 2015: EUR 0.3 million) and the positive cash flow from the sale of non-current assets in the amount of EUR 0.1 million (3 months of 2015: EUR 0.1 million). The group mainly invested in non-current assets for the purpose of renewing its fleet of machinery in the road construction segment. Cash flows from investment activities in 3 months of 2015 was also positively impacted by the acquisition of majority shareholding in subsidiary Peritus Entrepren?r AS (related to the offering of construction services on Norwegian market) in the amount of EUR 1.2 million.

Project specific loans obtained using investment property as collateral were repaid in the amount of EUR 0.1 million (3 months of 2015: negative cash flow in the amount of EUR 0.1 million). Net of loans received and loans repaid in connection with development projects amounted to negative cash flow of EUR 2.7 million (3 months of 2015: negative cash flow of EUR 2.1 million) and finance lease principal repayments of EUR 0.2 million (3 months of 2015: EUR 0.4 million). In addition, over the first three months of 2016, the group made repayments in the amount of EUR 1.0 million to related party AS J?rvevana pursuant to the terms and conditions of an overdraft agreement between the parties. The group has not used bank loans to finance all ongoing development projects – and this is the case particularly in Estonia, where many advance sales were agreed in the early phase of construction. 

Dividends and dividend policy

The distribution of dividends to the shareholders of the company is recorded as a liability in the financial statements as of the moment when the payment of dividends is approved by the company’s shareholders.

At the meeting held on 8 April 2013, the Management Board and Supervisory Board of AS Merko Ehitus reviewed the company’s strategic development trends and approved the long-term financial objectives until 2018, under which a new objective of paying the shareholders 50-70% of the annual profit as dividends was established. The achievement of this objective is an important priority for the group.

The annual general meeting of shareholders of AS Merko Ehitus held at 27 April 2016 approved the Supervisory Board’s proposal to pay the shareholders the total amount of EUR 9.0 million (EUR 0.51 per share) as dividends from net profit brought forward, which is equivalent to a 90% dividend rate and a 6.0% dividend yield for the year 2015 (using the share price as at 31 December 2015), (comparable figures in 2015 were accordingly: EUR 7.3 million (EUR 0.41 per share) as dividends, which is equivalent to a 58% dividend rate and a 5.7% dividend yield (using the share price as at 31 December 2014)).

According to the Estonian Income Tax Law §50 section 11 AS Merko Ehitus can pay certain portion of dividends without any additional income tax expense and liabilities occurring due to previously received and taxed distribution of profits from subsidiaries. Taking into account the dividends already paid to the parent company by the subsidiaries during 2016, the group will incur additional income tax expense in connection with the disbursement of dividends of approximately EUR 0.7 million (2015: EUR 0.9 million) in Estonia in the second quarter of 2016.The dividend payment to the shareholders will take place on 20 May 2016.

 

Ratios
(attributable to equity holders of the parent)

    3M ‘16 3M ‘15 3M ‘14 12M ‘15
Income statement summary          
Revenue million EUR 46.8 45.6 48.9 251.0
Gross profit million EUR 3.1 3.6 3.9 23.0
Gross profit margin % 6.5 7.8 8.1 9.1
Operating profit million EUR 0.5 1.0 1.3 12.5
Operating profit margin % 1.0 2.2 2.7 5.0
Profit before tax million EUR 0.3 0.8 1.1 11.7
PBT margin % 0.6 1.8 2.3 4.7
Net profit million EUR 0.0 0.7 0.6 9.8
attributable to equity holders of the parent million EUR 0.1 0.8 0.7 10.0
attributable to non-controlling interest million EUR (0.1) (0.1) (0.1) (0.2)
Net profit margin % 0.2 1.8 1.5 4.0
           
Other income statement indicators          
EBITDA million EUR 1.2 1.9 1.9 15.5
EBITDA margin % 2.5 4.1 3.8 6.2
General expense ratio % 6.8 6.5 6.1 4.8
Labour cost ratio % 14.2 13.7 13.9 12.2
Revenue per employee thousand EUR 62 62 61 322

 

Other significant indicators   31.03.2016 31.03.2015 31.03.2014 31.12.2015
Return on equity % 7.5 10.1 7.8 8.0
Return on assets % 4.3 5.0 3.9 4.4
Return on invested capital % 7.8 8.5 7.3 7.9
Equity ratio % 62.3 53.1 51.0 59.5
Debt ratio % 12.9 14.6 13.4 14.8
Current ratio times 3.4 2.6 2.0 3.2
Quick ratio times 1.3 1.1 1.1 1.2
Accounts receivable turnover days 35 51 59 39
Accounts payable turnover days 35 41 41 39
Average number of employees people 755 742 800 779
Secured order book million EUR 243.5 167.2 224.0 246.9

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited

in thousand euros

  2016
3 months		 2015
3 months		 2015
12 months
Revenue 46,820 45,599 251,012
Cost of goods sold (43,758) (42,038) (228,044)
Gross profit 3,062 3,561 22,968
Marketing expenses (768) (779) (3,230)
General and administrative expenses (2,417) (2,193) (8,907)
Other operating income 648 428 1,943
Other operating expenses (42) (17) (278)
Operating profit 483 1,000 12,496
Finance income/costs (180) (164) (804)
incl. finance income/costs from joint ventures (17) (44) (138)
finance income/costs from other long-term investments - - 3
interest expense (156) (150) (756)
foreign exchange gain (loss) (8) 3 (3)
other financial income (expenses) 1 27 90
Profit before tax 303 836 11,692
Corporate income tax expense (274) (95) (1,857)
Net profit for financial year 29 741 9,835
incl. net profit attributable to equity holders of the parent 112 809 10,000
net profit attributable to non-controlling interest (83) (68) (165)
Other comprehensive income      
Currency translation differences of foreign entities (2) (2) 2
Comprehensive income for the period 27 739 9,837
incl. net profit attributable to equity holders of the parent 110 807 10,002
net profit attributable to non-controlling interest (83) (68) (165)
Earnings per share for profit attributable to equity holders of the parent (basic and diluted, in EUR) 0.01 0.05 0.56

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited

in thousand euros

  31.03.2016 31.03.2015 31.12.2015
ASSETS      
Current assets      
Cash and cash equivalents 34,400 40,912 39,905
Trade and other receivables 24,947 43,587 24,854
Prepaid corporate income tax 543 26 421
Inventories 102,532 123,222 109,090
  162,422 207,747 174,270
Non-current assets      
Long-term financial assets 19,506 11,425 16,703
Deferred income tax assets 1,423 1,580 1,423
Investment property 4,309 4,557 4,371
Property, plant and equipment 13,375 14,614 13,442
Intangible assets 948 907 879
  39,561 33,083 36,818
       
TOTAL ASSETS 201,983 240,830 211,088
       
LIABILITIES      
Current liabilities      
Borrowings 3,119 11,516 5,525
Payables and prepayments 38,360 62,932 43,266
Income tax liability 1,021 478 711
Short-term provisions 4,764 4,889 5,013
  47,264 79,815 54,515
Non-current liabilities      
Long-term borrowings 23,035 23,600 25,660
Deferred income tax liability 978 751 788
Other long-term payables 989 4,442 1,159
  25,002 28,793 27,607
       
TOTAL LIABILITIES 72,266 108,608 82,122
       
EQUITY      
Non-controlling interests 3,928 4,388 3,268
Equity attributable to equity holders of the parent      
Share capital 7929 12,000 7929
Statutory reserve capital 1,200 1,200 1,200
Currency translation differences (665) (667) (663)
Retained earnings 117,325 115,301 117,232
  125,789 127,834 125,698
TOTAL EQUITY 129,717 132,222 128,966
       
TOTAL LIABILITIES AND EQUITY 201,983 240,830 211,088

 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 and the real estate development business unit along with real estate holding companies. As at the end of 2015, the group employed 791 people and the company’s 2015 revenue was EUR 251 million.