OREANDA-NEWS. At the meeting held the Management Board and the Supervisory Board of AS Merko Ehitus reviewed the company’s strategic development directions and approved long-term financial objectives until 2018.

The Supervisory Board admitted that the financial objectives established in 2010 in regard to the share of revenue earned outside Estonia and return on equity have not been achieved in the past three years.

Considering the weak growth perspective of the Baltic construction and real estate market in the coming few years, the overall low interest environment and the company’s high equity base, the strategy and the financial objectives are focussed on improving the return on invested capital and increasing the efficiency of the balance structure. Among other things, the objectives include:

To gradually reduce the percentage of immovable properties in the company’s assets;

To increase the rate of dividends from the current average of 20%, provided that there are sufficient financial resources for financing core activities and making investments;

To find additional sources of revenue besides construction and real estate development in order to balance the negative effects of the economic cycle and reduce dependence on public procurements, as well as to find possibilities for acquiring strategic holdings in companies strengthening the growth prospects of AS Merko Ehitus.

The objectives are based on the following assumptions concerning the external environment:

The Baltic construction market will not experience considerable growth in the coming two years;

The share of public procurements in construction contracts will remain high, but their volume will temporarily decrease as of the second half of 2013 due to the end of the current EU funding period. On the whole, the financial resources allocated to economy will remain at the same level in the new EU funding period (2014-2020), but the structure thereof will change. The activity of private clients in developing and launching larger construction projects will recover slowly.

The number of service providers in the construction sector exceeds the demand and there is still a surplus capacity of property, plant and equipment. The tightening competition in the construction market puts increasing pressure on the profit margins of construction companies.

The Baltic apartment market will continue to see a moderate growth in transaction activity and prices, particularly in capital cities.

The long-term financial objectives of AS Merko Ehitus cover the period until 2018 and will be reviewed annually based on the market situation, the company’s financial standing and strategy:

The minimum period average return on equity (ROE): 10%

Dividend pay-out ratio: 50-70% of the annual profit

Equity ratio: at least 40%