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Merko Ehitus Interim / Quarterly Report 2021
2220_ir_2021-11-04_0a99f6bb-ff8c-44e0-8331-7d1f8057d58e.pdf
Interim / Quarterly Report
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AS MERKO EHITUS GROUP
2021 9 months and III quarter consolidated unaudited interim report
Business name: AS Merko Ehitus
AS MERKO EHITUS CONSOLIDATED INTERIM REPORT
Commercial Register No.: 11520257
Phone: +372 650 1250 Fax: +372 650 1251 Web site: group.merko.ee
Main activities: Holding companies General contracting of construction Real estate development
Address: Järvevana tee 9G, 11314 Tallinn Postal address: Pärnu mnt 141, 11314 Tallinn E-mail: [email protected]
Financial year: 01.01.2021 – 31.12.2021 Reporting period: 01.01.2021 – 30.09.2021
Supervisory Board: Toomas Annus, Teet Roopalu, Indrek Neivelt Management Board: Andres Trink, Tõnu Toomik
Auditor: AS PricewaterhouseCoopers
1
| BRIEF OVERVIEW OF THE GROUP 3 | |
|---|---|
| MANAGEMENT REPORT 5 | |
| MANAGEMENT BOARD'S DECLARATION20 | |
| INTERIM FINANCIAL STATEMENTS 21 | |
| CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 21 | |
| CONSOLIDATED STATEMENT OF FINANCIAL POSITION22 | |
| CONSOLIDATED STATEMENT OF CHANGES IN EQUITY23 | |
| CONSOLIDATED CASH FLOW STATEMENT24 | |
| NOTES 25 | |
| NOTE 1 ACCOUNTING POLICIES USED25 | |
| NOTE 2 OPERATING SEGMENTS 25 | |
| NOTE 3 COST OF GOODS SOLD 29 | |
| NOTE 4 EARNINGS AND DIVIDENDS PER SHARE29 | |
| NOTE 5 CASH AND CASH EQUIVALENTS30 | |
| NOTE 6 TRADE AND OTHER RECEIVABLES30 | |
| NOTE 7 INVENTORIES 31 | |
| NOTE 8 OTHER LONG-TERM LOANS AND RECEIVABLES 31 | |
| NOTE 9 INVESTMENT PROPERTY 31 | |
| NOTE 10 PROPERTY, PLANT AND EQUIPMENT 32 | |
| NOTE 11 INTANGIBLE ASSETS 32 | |
| NOTE 12 BORROWINGS 33 | |
| NOTE 13 PAYABLES AND PREPAYMENTS 34 | |
| NOTE 14 SHORT-TERM PROVISIONS 34 | |
| NOTE 15 OTHER LONG-TERM PAYABLES34 | |
| NOTE 16 RELATED PARTY TRANSACTIONS 35 | |
| NOTE 17 CONTINGENT LIABILITIES39 | |
| DEFINITION OF RATIOS 40 |
BRIEF OVERVIEW OF THE GROUP
General construction Civil engineering Residential real estate development and investments
AS Merko Ehitus is a construction and real estate development group operating in Estonia, Latvia, Lithuania and Norway.
General construction Civil engineering Road construction Residential real estate development and investments
BUSINESS SEGMENTS ESTONIA LATVIA LITHUANIA NORWAY
General construction Residential real estate development and investments
General construction
The construction company with the largest equity in the Baltics, long-term capability to self-finance its projects A strong position on the Baltic construction market, the leading residential real estate developer International quality, environmental protection and occupational safety certificates ISO 9001, ISO 14001, ISO 45001
SHARES
The shares are listed in the Main List of NASDAQ Tallinn since 1997. The main shareholder is AS Riverito (72%)
2020 KEY FIGURES
Revenue 315.9 million euros Net profit 23.0 million euros 666 employees
STRATEGY
AS Merko Ehitus subsidiaries provide construction services in the field of building and infrastructure construction and develop residential real estate in their main home markets of Estonia, Latvia, Lithuania, and Norway. We want to be the preferred partner for those who value quality, both in the performance of construction works and in the development and sale of apartments, as well as in contributing to society. As a caring and development oriented employer, we ensure that our employees are professional and motivated, each of whom contributes to the joint result of each company, each unit and Merko itself. By focusing on profitability, cost base efficiency and the best employees, we ensure the investor a long-term profitable investment.
MANAGEMENT REPORT COMMENTARY FROM MANAGEMENT
Third-quarter revenue for Merko Ehitus was EUR 81 million and net profit for the same period was EUR 5.5 million. The revenue for the first nine months of 2021 grew by 8% to EUR 227 million and net profit by 17% to over EUR 15 million. This year in the three Baltics, Merko has launched construction of more than 1,300 apartments due to be completed in the next two years.
According to the management of Merko Ehitus, the situation on the general construction contracting market continues to be complicated due to global supply chain problems. There has also been a jump in the prices of materials and there is a major shortage of qualified workforce. The risks to on-time completion of projects and staying within budget are quite sizeable today and unfortunately we are also seeing them be realized on some sites. There are fewer new projects and actual orders on the market, since customers have not managed to adapt to the changes and higher prices on the construction market. These problems are more manageable in the apartment development sector, where we have greater control of the development and construction process.
The share of apartment developments in the group's nine-month revenue is, as expected, lower because of the timing of the completion of projects and delivery to buyers. The delivery of presold apartments to buyers continues in the following quarters, which is also reflected in the group's financial result. New sales of apartments are going according to plan – most of the finished apartments have been sold and a large part of the apartments under construction are reserved under preliminary contracts of sale.
In the first nine months of 2021, Merko delivered 197 apartments and 7 commercial units to buyers and launched construction of 1,300 apartments expected to be completed in 2022 and 2023. The largest residential developments are Noblessner, Uus-Veerenni, Odra, Metsatuka and Lahekalda, in Tallinn; Erminurme, in Tartu; Viesturdārzs and Mežpilsēta, in Riga; and Vilneles Skverai, in Vilnius.
2021 9M REVENUE 227 MILLION EUROS
PROFIT BEFORE TAX 16.6 MILLION EUROS
Considering the changes that have taken place in the last few years on the construction and real estate market, it can be said that the group's companies have adjusted rapidly. Merko group companies have been able to maintain and even increase profitability despite the supply chain problems and rise in input prices. A greater strategic focus on residential real estate development has also paid off so far. Many thanks to the company's employees and all partners who have to contend with the extremely fraught situation. Unfortunately, the latest developments regarding the coronavirus in the Baltic countries are very negative, and the group must be prepared that high morbidity and restrictions will pose new obstacles to the normal course of processes in construction and real estate development in the coming months.
The Merko group's secured order-book balance grew to EUR 314 million as of the end of Q3. In Q3 of 2021, Merko entered into new contracts worth EUR 138 million of which the biggest were a contract for the construction of the Elemental Skanste office buildings and GUSTAVS business centre in Riga and construction of wind farm infrastructure in the Akmenė and Šilalė region in Lithuania.
In the third quarter, Merko had under construction in Estonia the third development phase of the Mustamäe medical campus of the North-Estonia Medical Centre, the Tallinn School of Music and Ballet, the Liivalaia business and residential complex and the construction of infrastructure segments of the Republic of Estonia's southeast land border. In Latvia, the works in progress were the Orkla wafer and biscuit production plant and NATO facilities in Ādaži, and the Kauguri city park and youth house. In Lithuania, infrastructure for a number of wind farms and the Kaunas district police headquarters building, NATO barracks and a production building for Continental Automotive.
OVERVIEW OF THE III QUARTER AND 9 MONTHS RESULTS
PROFITABILITY
2021 9 months' pre-tax profit was EUR 16.6 million and Q3 2021 was EUR 6.1 million (9M 2020: EUR 13.9 million and Q3 2020 was EUR 5.1 million), which brought the pre-tax profit margin to 7.3% (9M 2020: 6.6%).
Net profit attributable to shareholders for 9 months 2021 was EUR 15.3 million (9M 2020: EUR 13.1 million) and for Q3 2021 net profit attributable to shareholders was EUR 5.5 million (Q3 2020: EUR 4.9 million). 9 months net profit margin was 6.7% (9M 2020: 6.2%).
REVENUE
Q3 2021 revenue was EUR 80.7 million (Q3 2020: EUR 79.7 million) and 9 months' revenue was EUR 226.5 million (9M 2020: EUR 209.5 million). 9 months' revenue increased by 8.1% compared to same period last year. The share of revenue earned outside Estonia in 9 months 2021 was 38.8% (9M 2020: 47.6%).
SECURED ORDER BOOK
As of 30 September 2021, the group's secured order book was EUR 314.4 million (30 September 2020: EUR 251.2 million). In 9 months 2021, group companies signed new contracts in the amount of EUR 272.9 million (9M 2020: EUR 248.0 million). In Q3 2021, new contracts were signed in the amount of EUR 137.7 million (Q3 2020: EUR 72.9 million).
REAL ESTATE DEVELOPMENT
In 9 months 2021, the group sold a total of 197 apartments; in 9 months 2020, the group sold 534 apartments. The group earned a revenue of EUR 33.3 million from sale of own developed apartments in 9 months 2021 and EUR 67.0 million in 9 months 2020. In Q3 of 2021 a total of 52 apartments were sold, compared to 165 apartments in Q3 2020, and earned a revenue of EUR 7.5 million from sale of own developed apartments (Q3 2020: EUR 21.0 million).
CASH POSITION
At the end of the reporting period, the group had EUR 19.6 million in cash and cash equivalents, and equity of EUR 150.8 million (50.9% of total assets). Comparable figures as of 30 September 2020 were EUR 25.4 million and EUR 143.3 million (53.0% of total assets), respectively. As of 30 September 2021, the group's net debt was EUR 20.6 million (30 September 2020: EUR 25.2 million).
OUTLOOK OF CONSTRUCTION AND REAL ESTATE MARKET CONSTRUCTION SERVICES
Construction volumes in the Baltic countries remained on an upward trend from the end of 2016 until the arrival of the pandemic. The restrictions put in place significantly affected the first three quarters of 2020, but construction volumes started to recover from the 4th quarter of 2020. The decline was the steepest in Estonia and the post-restriction rise the fastest, raising construction volumes even higher than before the pandemic. In Latvia, the decline was the smallest, without taking into account the extraordinarily high volume in the 1st quarter of 2020. Lithuania is noteworthy for the fact that in the first half of 2021, construction volumes still remained below the peak achieved in the 3rd quarter of 2019, and the volumes had already started declining before the beginning of the pandemic. It is not very likely that after the majority of working-age people have been vaccinated any future restrictions affecting significantly construction activities will be established. Positive effect of the stimulus measures of the EU recovery package is expected to stimulate further growth in construction volumes.
Current construction activities are being mainly influenced by the sudden increases in the prices of construction services that began in the 2nd quarter of 2021, as well as the uncertainty of delivery of supplies. Although the results for the 3rd quarter are not yet reflected in the statistics of all the groups' home markets, the available data show a continued price increase. Experts expect the price increase and supply chain problems to continue, which will cause many clients to critically review the feasibility calculations of their planned investments. A broad-based inflation expectation and the recent decisions of the central
banks of several countries to start to reduce money printing and increase the base interest rates have created an expectation for similar developments in the euro area. Such an expectation will reduce the possibility of the input prices of construction activities falling to their former levels in the foreseeable future. Uncertainty and volatility will definitely last for some time in the markets. In such an environment, public sector demand and the volume of own developments will continue to be important for the construction sector, offering relative stability and protection from the increased volatility.
DEVELOPMENT OF APARTMENTS
The economic activities of Merko Ehitus group continue to be influenced the most by the high activity of the new apartments market in the entire Baltic region. This is in spite of the opinion of many experts that a further price increase is not sustainable and will reduce the affordability of new apartments for people. The apartments of the new projects launched in 2021 will be reflected in statistics as reach real right contracts in 2022 and 2023, so it is expected that the positive growth of both sales volume and prices will continue for some time. The heightened inflation expectations and the related interest of investors in increasing the proportion of a secure asset class in their portfolios may keep the market of new apartments active for a long time.
In 2017-2021, the prices of apartments have unwaveringly remained on an upward trend, with
NE ELLIN UARTERL OU E RI E IN E Eurostat
quarterly fluctuations within the bounds of statistical error. The increase in construction prices that started from materials will definitely shift the sales prices of new developments upwards at an advanced pace, and the prices will probably remain at the new levels. The average salary increase may not necessarily seem equivalent, but as inflation expectations grow, it would be appropriate to assume that salary levels will grow in the coming periods rather than the price levels of new apartments fall.
BUSINESS ACTIVITIES
The group business reporting is divided into two business segments:
- construction service;
- real estate development.
CONSTRUCTION SERVICE
The construction service in Estonia consists of services in the field of general construction, civil engineering, external networks and road construction, as well as concrete works: in Latvia general construction and provision of civil engineering services; and in Lithuania and Norway general construction works.
million EUR
| 9M 2021 | 9M 2020 | VARIANCE | Q3 2021 | Q3 2020 | VARIANCE | 12M 2020 | |
|---|---|---|---|---|---|---|---|
| Revenue | 175.9 | 134.1 | +31.1% | 70.4 | 56.4 | +24.8% | 186.8 |
| % of total revenue | 77.6% | 64.0% | 87.3% | 70.8% | 59.1% | ||
| Operating profit | 6.9 | 3.1 | +119.5% | 4.1 | 2.1 | +91,5% | 4.6 |
| Operating profit margin | 3.9% | 2.3% | 5.8% | 3.8% | 2.4% |
In the 9 months of 2021, the revenue of the construction service segment was EUR 175.9 million (9M 2020: EUR 134.1 million). The sales revenue of construction service has increased by 31.1% compared to the same period last year. The construction service segment revenue for 9 months 2021 made up 77.6% of the group's total revenue (9M 2020: 64.0%). In this segment, the group earned an operating profit of EUR 6.9 million for 9 months (9M 2020: EUR 3.1 million). The operating profit margin was 3.9% (9M 2020: 2.3%).
Larger projects in progress in the third quarter in construction service segment in Estonia included the third development stage of the Mustamäe medical campus of the North Estonia Medical entre, Tallinn School of Music and Ballet, t John's chool and zero cycle construction works of Liivalaia business and residential complex as well as construction works of water supply and sewerage piping in Kohila Parish and construction works of the Republic of Estonia's southeast land border. In Latvia, larger ongoing projects in the third quarter included the construction works of reconstruction of Riga Technical University Civil Engineering Faculty building as well as the constructions of the Orkla wafer and biscuits production plant and NATO base in Ādaži and kindergarten in Salaspils. In Lithuania, larger projects were construction of wind farm balance of plants in Mažeikiai and Jonava districts, and, in Kaunas, the district Police headquarters building, NATO barracks and Continental Automotive production building were underway. In Norway, the group worked on the reconstruction of smaller scale contracts.
REAL ESTATE DEVELOPMENT
The real estate development segment includes residential real estate development and construction of joint venture projects, long-term real estate investments and commercial real estate projects in Estonia, Latvia and Lithuania. In the interests of ensuring the finest quality, as well as maximum convenience and assurance for buyers, Merko handles all phases of development: acquisition of the real estate, planning, design of the development project, construction, marketing and sales, and warranty-period customer service.
| million EUR | ||||
|---|---|---|---|---|
| 9M 2021 | 9M 2020 | VARIANCE | Q3 2021 | Q3 2020 | VARIANCE | 12M 2020 | |
|---|---|---|---|---|---|---|---|
| Revenue | 50.6 | 75.3 | -32.8% | 10.3 | 23.3 | -56.0% | 129.1 |
| incl. revenue from sale of apartments |
33.3 | 67.0 | 7.5 | 21.0 | 116.6 | ||
| incl. construction service from public-private partnerships |
6.6 | 4.2 | 0.2 | 1.7 | 6.4 | ||
| incl. construction service to joint venture projects |
3.5 | 1.0 | 2.1 | 0.3 | 1.6 | ||
| incl. revenue from immovable properties |
4.2 | 0.7 | - | - | 1.0 | ||
| % of total revenue | 22.4% | 36.0% | 12.7% | 29.2% | 40.9% | ||
| Operating profit | 11.5 | 12.8 | -10.0% | 2.4 | 3.9 | -39.2% | 23.7 |
| Operating profit margin | 22.8% | 17.0% | 23.3% | 16.9% | 18.4% |
In 9 months 2021, the group sold a total of 197 apartments and 7 commercial premises; in 9 months 2020, 534 apartments and 5 commercial premises. The group earned a revenue of EUR 33.3 million (VAT not included) from sale of developed apartments in 9 months 2021 and EUR 67.0 million (VAT not included) in 9 months 2020. In the revenue and operating profit of the real estate development segment also are reflected the sales of commercial premises and parking spaces of the real estate development projects and the result of public-private-partnership contracts, based on which the group companies provide construction service and property management services.
In the case of projects developed in joint ventures, the real estate development business segment revenue reflects the construction services provided to the project by the group and the operating profit includes the realised construction profit for the period. The profit from development gained from sale of those apartments to end-customers is recognised in the group's reporting based on the equity method.
In 9 months of 2021, real estate development segment revenues decreased by 32.8% compared to the same period last year and formed 22.4% of the group's total revenue (9 months of 2020: 36.0%).
The segment's operating profit for the 9 months of 2021 amounted to EUR 11.5 million (9 months of 2020: EUR 12.8 million) and the operating profit margin was 22.8% (9 months of 2020: 17.0%). The profitability of the apartment development projects varies by project and depends greatly on the cost structure of the specific project, including the land acquisition price.
In 9 months of 2021, the group launched the construction of a total of 1,365 new apartments in the Baltic states (9 months of 2020: 109 apartments). In the 9 months,the group invested a total of EUR 47.2 million (9 months of 2020: EUR 43.0 million) in the ongoing development projects.
After the reporting date, the group has started the construction of 98 apartments in the fourth phase of the Lahekalda residential development project in Tallinn.
Revenue from apartment sales came in lower compared to the same period of previous year mainly because last year the group had more apartments ready to be sold by deed of sale. The market has recovered quickly from the pandemic, demand is high, and apartments are reaching readiness for final sales according to construction schedule.
One of the group's objectives is to keep a sufficient portfolio of land plots to ensure stable inventory of property development projects, which considers the market conditions. As of 30 September 2021, the group's inventories included land plots with development potential, where the construction works have not started, in the amount of EUR 58.9 million (30.09.2020: EUR 69.4 million).
ROU ' INVENTORIE IT EVELO MENT POTENTIAL BY COUNTRY
million EUR 30.09.2021 30.09.2020 31.12.2020 Estonia 19.7 28.6 24.9 Latvia 25.0 26.9 25.4 Lithuania 12.6 13.9 10.4 Norway 1.6 - - Total 58.9 69.4 60.7
In the 9 months of 2021, the group purchased new land plots at the acquisition cost of EUR 7.7 million (9 months of 2020: the group did not purchase new land plots for real estate development purposes).
SECURED ORDER BOOK
As of 30 September 2021, the group's secured order book amounted to EUR 314.4 million, compared to EUR 251.2 million as of 30. September 2020, having increased by 25.2% in the annual comparison. The secured order book excludes the group's own residential development projects and construction works related to developing real estate investments.
In 9 months of 2021, EUR 272.9 million worth of new contracts were signed, which is increased by 10.0% compared to the same period of the previous year (9 months of 2020: EUR 248.0 million). The value of new contracts signed in the third quarter of 2021 amounted to EUR 137.7 million; in the third quarter of 2020 the value of new contracts signed amounted to EUR 72.9 million.
LARGEST CONSTRUCTION CONTRACTS SIGNED IN THE THIRD QUARTER OF 2021
| BRIEF DESCRIPTION OF CONTRACT | COUNTRY | COMPLETION TIME | VALUE MILLION EUR |
|---|---|---|---|
| Construction contract to perform construction works of Elemental Skanste office buildings in Riga |
Latvia | Spring of 2023 | 49.0 |
| Construction contract for construction of GUSTAVS business center in Riga |
Latvia | December of 2022 | 22.0 |
| Construction contract to perform the wind farm balance of plant construction works in Akmenė district |
Lithuania | Q3 of 2022 | 19.0 |
| Construction contract to perform the wind farm balance of plant construction works in Šilalė district |
Lithuania | Q1 of 2023 | 15.0 |
| Construction contract to perform wind farm foundation construction works in Mažeikiai district |
Lithuania | Q1 of 2022 | 7.0 |
| Construction contract to design and construct the second stage of a Tesla service centre in Oslo |
Norway | February of 2022 | 4.1 |
| Construction contract to perform the construction of wind farm foundations in Jonava district |
Lithuania | December of 2021 | 4.0 |
As of 30 September 2021, the private sector orders accounted for approximately 72% of the total balance in the group's secured order book (30.09.2020: approximately 39%). Both the public and private sectors are re-evaluating the justification and profitability of investments in an environment of rapidly changing input prices. In such circumstances, the group continues to be selective in signing new contracts in order to ensure a proper risk and reward ratio.
The group is focusing on the existing home markets, keeping a diversified operating portfolio as a strategic aim, balancing construction activities with real estate development in different countries. The group has gained a strong foothold in all the Baltic states and continues a gradual growth in Norway.
CASH FLOWS
At the end of reporting period, the group had cash and cash equivalents in the amount of EUR 19.6 million (30.09.2020: EUR 25.4 million). As the group's cash position continues to be strong, the group has not utilised its credit lines of existing overdrafts and loan agreements within reporting period. As of the end of the reporting period, the group entities had concluded overdraft contracts with banks in a total amount of EUR 53.1 million, which was almost entirely unused at the end of current period (30.09.2020: EUR 37.6 million of which EUR 29.8 was unused).
The 9-month cash flow from operating activity was negative at EUR 14.4 million (9 months of 2020: positive EUR 17.0 million), cash flow from investing activity was negative at EUR 5.5 million (9 months of 2020: negative EUR 2.3 million) and the cash flow from financing activity was negative at EUR 8.0 million (9 months of 2020: negative EUR 13.9 million).
The cash flow from operating activities had positive effect from EBITDA of EUR 18.8 million (9 months of 2020: positive effect of EUR 16.4 million) and change in trade and other payables related to operating activities of EUR 32.4 million (9 months of 2020: negative effect of EUR 9.1 million). The negative effects to cash flow from operating activities came from the changes in receivables and liabilities related to construction contracts of EUR 8.2 million (9 months 2020: positive effect of EUR 7.6 million), from the changes in trade and other receivables related to operating activities of EUR 22.5 million (9 months of 2020: negative effect of EUR 4.1 million), from change in the provisions of EUR 1.9 million (9 months of 2020: negative effect of EUR 5.0 million) and from the change in inventories of EUR 28.3 million (9 months of 2020: positive effect of EUR 13.1 million). The cash flows from inventories are mainly affected by the construction and sales phases of own developed apartments, while the negative cash flow is due to the increase in the volume of inventories related to the construction of apartments, then the positive cash flow is due to the decrease in inventories in the sale of the apartments. Interest was paid EUR 0.6 million (9 months of 2020: EUR 0.8 million) and corporate income tax was paid at EUR 2.8 million (9 months of 2020: EUR 0.9 million).
To support cash flows from operating activities, including increased volumes in apartment development, the group has raised additional external capital. At the same time, the debt ratio has remained at a moderate level (13.6% as of 30.09.2021; 18.7% as of 30.09.2020; 11.3% as of 31.12.2020).
Cash flows from investing activities include negative effect from the acquisition of non-current assets in the amount of EUR 1.5 million, which is mainly related to the renewal of equipment in the field of construction (9 months of 2020 EUR 2.5 million), and the acquisition of an associated company in the net amount of EUR 4.1 million (9 months of 2020: no acquisitions) and positive effect from the sale of non-current assets in the amount of EUR 0.1 million (9 months of 2020: EUR 0.2 million).
In cash flows from financing, the larger negative factors were dividend payment of EUR 17.7 million (9 months of 2020: EUR 0.1 million), repayments of lease liabilities in the amount of EUR 0.7 million (9 months of 2020: net negative cash flow of EUR 0.7 million). Positive cash flow from financing activity was gained from the change in loans related to net amount of loans received and repaid of project specific loans obtained using investment property as collateral in the amount of EUR 9.1 million (9 months of 2020: negative cash flow in the net amount of EUR 0.4 million) and the net change in loans received and repaid in connection with development projects in the amount of EUR 1.3 million (9 months of 2020: net negative cash flow of EUR 12.9 million).
The Q3 2021 cash flow from operating activity was positive at EUR 1.1 million (Q3 2020: positive EUR 9.8 million), cash flow from investing activity was negative at EUR 4.7 million (Q3 2020: negative EUR 0.7 million) and the cash flow from financing activity was positive at EUR 1.4 million (Q3 2020: negative EUR 7.5 million).
RATIOS
(attributable to equity holders of the parent)
| INCOME STATEMENT SUMMARY | 9M 2021 |
9M 2020 |
9M 2019 |
Q3 2021 |
Q3 2020 |
Q3 2019 |
12M 2020 |
|
|---|---|---|---|---|---|---|---|---|
| Revenue | million EUR | 226.5 | 209.5 | 227.6 | 80.7 | 79.7 | 73.4 | 315.9 |
| Gross profit | million EUR | 26.5 | 25.2 | 20.9 | 9.2 | 8.7 | 6.2 | 43.7 |
| Gross profit margin | % | 11.7 | 12.0 | 9.2 | 11.4 | 10.9 | 8.5 | 13.8 |
| Operating profit | million EUR | 16.9 | 14.3 | 9.9 | 6.0 | 5.2 | 2.3 | 25.5 |
| Operating profit margin | % | 7.5 | 6.8 | 4.4 | 7.4 | 6.5 | 3.2 | 8.1 |
| Pre-tax profit | million EUR | 16.6 | 13.9 | 10.3 | 6.1 | 5.1 | 2.8 | 24.5 |
| Pre-tax profit margin | % | 7.3 | 6.6 | 4.5 | 7.5 | 6.4 | 3.8 | 7.7 |
| Net profit | million EUR | 15.2 | 12.6 | 7.3 | 5.5 | 4.7 | 2.7 | 22.5 |
| attributable to equity holders of the parent |
million EUR | 15.3 | 13.1 | 7.0 | 5.5 | 4.9 | 2.5 | 23.0 |
| attributable to non-controlling interest |
million EUR | (0.1) | (0.4) | 0.3 | 0.0 | (0.2) | 0.1 | (0.5) |
| Net profit margin | % | 6.7 | 6.2 | 3.1 | 6.8 | 6.1 | 3.5 | 7.3 |
| Other income statement indicators | 9M 2021 |
9M 2020 |
9M 2019 |
Q3 2021 |
Q3 2020 |
Q3 2019 |
12M 2020 |
|
| EBITDA | million EUR | 18.8 | 16.4 | 11.7 | 6.6 | 5.9 | 2.9 | 28.2 |
| EBITDA margin | % | 8.3 | 7.8 | 5.2 | 8.2 | 7.4 | 4.0 | 8.9 |
| General expense ratio | % | 5.2 | 5.4 | 5.0 | 5.2 | 5.1 | 4.7 | 5.6 |
| Labour cost ratio | % | 11.8 | 11.4 | 12.0 | 11.3 | 10.5 | 11.9 | 11.5 |
| Revenue per employee | thousand EUR |
347 | 316 | 318 | 124 | 120 | 102 | 478 |
| OTHER SIGNIFICANT INDICATORS | 30.09.2021 | 30.09.2020 | 30.09.2019 | 31.12.2020 | |
|---|---|---|---|---|---|
| Return on equity | % | 16.6 | 16.4 | 11.1 | 16.2 |
| Return on assets | % | 9.2 | 8.0 | 4.9 | 8.4 |
| Return on invested capital | % | 15.1 | 12.6 | 9.8 | 13.1 |
| Assets | million EUR | 296.3 | 270.1 | 307.1 | 256.9 |
| Equity | million EUR | 154.9 | 147.1 | 126.0 | 157.4 |
| Equity attributable to equity holders of the parent |
million EUR | 150.8 | 143.3 | 121.1 | 153.2 |
| Equity ratio | % | 50.9 | 53.0 | 39.4 | 59.6 |
| Debt ratio | % | 13.6 | 18.7 | 27.5 | 11.3 |
| Current ratio | times | 2.2 | 2.4 | 2.0 | 2.7 |
| Quick ratio | times | 0.8 | 0.8 | 0.6 | 1.0 |
| Accounts receivable turnover | days | 29 | 39 | 45 | 35 |
| Accounts payable turnover | days | 37 | 40 | 52 | 37 |
| Average number of employees | people | 652 | 663 | 717 | 661 |
| Secured order book | million EUR | 314.4 | 251.2 | 152.2 | 225.1 |
Ratio definitions are provided on page 40 of the report.
RISK MANAGEMENT
Risk management is part of strategic management and is inseparable from daily operations of the company. In managing risks, the main objective of the company is to determine significant risks and to optimally manage risks so that the company achieves its strategic and financial objectives.
Merko Ehitus divides risks into four main categories: business risk, market risk (incl. interest risk and foreign exchange risk), financial risk (incl. credit risk and liquidity risk) and operational risk (incl. health and safety risk and environmental risk). The topic of risk management has been thoroughly covered on the group's website: group.merko.ee/en/investors/risk-management/.
Legal risk
ue to different interpretations of contracts, regulations and laws related to group's principal activities, there is a risk that some buyers, contractors or supervisory authorities evaluate the company's activities from the perspective of laws or contracts from a different position and dispute the legitimacy of the company's activities.
As of 30 September 2021, no provision has been formed (30.09.2020: EUR 0.2 million) for covering potential claims and legal costs.
Below an overview of the key legal disputes and proceedings, which have taken place or ended during 2021 or are ongoing as of 30 September 2021 and which concern group entities is presented:
Estonia
Appeal for the revocation of the order of the Minister of the Environment
The court cases in connection with Minister of the Environment regulation No 22 of 27 March 2015, which redrew the boundaries of species protection sites to exclude properties on Paekalda street owned by AS Merko Ehitus subsidiaries Suur- aekalda OÜ and Väike- aekalda OÜ now merged with A Merko Ehitus Eesti, part of A Merko Ehitus group). On 2 February 2016, AS Merko Ehitus group companies filed a complaint in Tallinn Administrative Court for compensation of damage. The claims consist of direct patrimonial damage (reduction in the value of immovable property and expenditures made on development activity) and claims for revenue foregone (failed development activity in 2005-2007). On 22 April 2019 the Tallinn Administrative Court partially satisfied the appeal and ordered the Republic of Estonia to pay AS Merko Ehitus Eesti EUR 760 thousand and late interest until the principal claim is duly discharged. The court also ordered that procedural costs of EUR 12 thousand be paid to AS Merko Ehitus Eesti. Both sides filed an appeal to the Tallinn District Court, which partially annulled the decision of the Tallinn Administrative Court and sent the case back to Administrative Court to determine the amount of compensation. Both parties to the dispute filed cassation appeals with the Supreme Court. By a decision of 5 March 2021, the Supreme Court dismissed the cassation appeal of AS Merko Ehitus Eesti, but sent the appeal regarding the claim for compensation for direct property damage caused by the lawful activities of the Republic of Estonia to the Tallinn Administrative Court for reconsideration. The impact of this claim has not been taken into account in the group's reporting.
Latvia
Lawsuit against former employee
On May , IA Merks filed suit in Riga istrict ourt against former IA Merks employee Rolands Mēnesis in a claim for the compensation of damage amounting to EUR 337 thousand. The object of the statement of claim is damage deliberately caused by project manager Rolands Mēnesis by entering into fictitious transactions on behalf of IA Merks and purchase of items not necessary for contractual work. The court hearing, which was scheduled for 3 December 2020, was cancelled due to the COVID-19 pandemic. In August 2021, the parties submitted a request to the court to postpone the next hearing, as the parties are trying to reach an out-of-court settlement by 31 December 2021. The possible effect of the potential positive outcome of this claim has not been taken into account in the group's financial reporting.
Latvian Competition Council administrative proceeding
On 9 August 2021, SIA Merks, a subsidiary of AS Merko Ehitus, received the decision of the Latvian Competition Council in the administrative proceedings initiated with regard to the company in 2019. The Group has disclosed information about the proceedings on an ongoing basis in stock market notices and annual and interim reports.
According to the decision of 30 July 2021, the Latvian Competition Council considers SIA Merks as one of the nine companies that are parties to prohibited cooperation in dividing contract volumes (the market) between Latvian construction companies in 2015- 2019, which constitutes a violation of subsection 11 (1) of Latvian Competition Law. With the decision, the Competition Council imposes a monetary fine on SIA Merks in the amount of 5.4% of the 2020 sales revenue of SIA Merks, i.e., 2,689 thousand euros in total. Pursuant to the decision, AS Merko Ehitus as the parent company of SIA Merks bears joint liability, if SIA Merks itself fails to fulfil or is unable to fulfil its obligations. The text of the decision (only in Latvian) is available at https://lemumi.kp.gov.lv/files/documents/21210809_L%C4%93mums_Publiskojam%C4%81_versija.pdf .
On 13 September 2021, SIA Merks and AS Merko Ehitus contested the decision of the Latvian Competition Council in the Latvian administrative court. The fine imposed by the Competition Council will not become payable and the possible claims for damages of third persons will not be subject to review nor other possible consequences arising from law will be applicable before the court decision enters into force.
The Latvian Competition Council asked the court for an extension for submitting its arguments against the opinions of the plaintiffs and the Latvian administrative court respectively established 15 December 2021 as the new term for replying. The extension of the process terms means that no court sessions will be held and no timetable will be set for hearing the appeal in court in 2021.
AS Merko Ehitus continues to hold the conclusions of the Latvian Competition Council with regard to the business activities of SIA Merks both factually and legally unjustified and will use all the possibilities granted under the rule of law to overturn such conclusions.
Considering the as yet unestablished terms for the court proceedings and the fact that the amount of the fine that would be applied under the most adverse scenario of these proceedings has a limited effect on the financial standing of the Merko Ehitus group, the Group has not formed any provisions.
SIA Ostas Celtnieks
On 6 November 2019, SIA Merks filed an action against IA "Ostas eltnieks" in an amount of EUR thousand and additional EUR 21 thousand for late interests. The basis for this claim is the loss incurred from the construction of Ventspils music school and concert hall carried out as per consortium contract of which % is to be covered by IA "Ostas eltnieks" according to its share in the consortium. o far, IA "Ostas eltnieks" has not covered its share of the loss. The court took the evidence from both parties to the proceedings and advised the parties to enter into a suitable arrangement for both parties. No agreement was reached, SIA "Ostas eltnieks" filed a counterclaim against IA Merks for lost profits, which prolongs the process. SIA Merks submitted an application to transfer the court proceedings from Liepāja ircuit ourt to Riga Economic ourt, which was established and opened in 2021. The application was satisfied and the court session scheduled for 7 September was transferred to 1 December 2021. The impact of this claim has not been taken into account in the group's reporting.
EMPLOYEES AND LABOUR COSTS
As of 30 September 2021, Merko Ehitus group employed 673 people (including temporary and part-time staff). Compared to the same period last year, the number of group's employees decreased by 4 (-0.6%). The number of employees increased in Latvia and Lithuania and decreased in Estonia in connection with the sale of the electrical engineering business area of AS Merko Infra to Connecto Eesti AS.
Professionals with longstanding experience are the company's key value. The group's objective is to pay its employees competitive salary. The interests of employees and the company are balanced by performance-based remuneration.
The group defines labour cost as salary (incl. fixed salary, additional pay, holiday pay, and performance pay), taxes based on salary, fringe benefits and taxes on fringe benefits. In 9 months 2021, the labour cost was EUR 26.8 million (9 months 2020: EUR 23.9 million), which increased by 12.3% compared to the same period previous year. The labour cost ratio increased by 0.4 pp from 11.4% to 11.8% in comparable periods.
During 9 months of 2021, AS Merko Ehitus Eesti, one of the largest Estonian construction companies, part of AS Merko Ehitus group, paid EUR 5.6 million in labour taxes in Estonia, being one ofthe largest labour tax payer in the construction sector (9 months 2020: EUR 5.8 million).
ETHICAL BUSINESS PRACTICES
roup's core values include ethical business practices, considered a long-term important success factor. By following highly ethical principles, we promote profitable growth, gain the trust of our stakeholders, and support fair competition and equal treatment.
We conduct business honestly, follow ethical principles in our activities and make sure our employees know and follow business ethics standards in their everyday work. To embed the principles the Group has established a Code of Business Ethics.
The topic of business ethics has been thoroughly covered on the group's website: group.merko.ee/en/corporate-responsibility/.
SHARE AND SHAREHOLDERS
| Issuer | AS Merko Ehitus |
|---|---|
| Name of security | Share of Merko Ehitus |
| Ticker | MRK1T |
| Residency of issuer | Estonia |
| Stock Exchange List | Nasdaq Tallinn, Baltic Main List |
| Industry | Construction |
| ISIN | EE3100098328 |
| Nominal value | Without nominal value |
| Number of issued securities | 17,700,000 |
| Number of listed securities | 17,700,000 |
| Currency | EUR |
| Listing date | 11 August 2008 |
INFORMATION ON SECURITY
The shares of Merko Ehitus are listed in the Main List of Nasdaq Tallinn. As of 30 September 2021, the company has 17,700,000 shares. The number of shares has not changed during 2021.
A total of 38,554 transactions were conducted with the shares of Merko Ehitus in 9 months of 2021, with 1.83 million shares (10.3% of total shares) traded, generating a turnover of EUR 26.3 million (comparable figures in 9 months 2020 were accordingly: 17,335 transactions with 1.32 million shares traded (7.4% of total shares), generating a turnover of EUR 11.2 million). The lowest valueper-share transaction was recorded at the price of EUR 9.48 and the highest at EUR 17.14 per share (9 months of 2020: EUR 6.56 and EUR 10.60, accordingly). On 30 September 2021, the closing price of the share was EUR 14.80 (30.09.2020: EUR 8.62). As of 30 September 2021, by the Nasdaq Baltic stock exchange, the market capitalisation of AS Merko Ehitus was EUR 262.0 million, up 71.7% compared to the end of the equivalent period of the prior year (30.09.2020: EUR 152.6 million).
| 30.09.2021 | 30.09.2020 | 30.09.2019 | 31.12.2020 | |
|---|---|---|---|---|
| Number of shares | 17,700,000 | 17,700,000 | 17,700,000 | 17,700,000 |
| Earnings per share (EPS), euros | 0.86 | 0.74 | 0.40 | 1.30 |
| Equity per share, euros | 8.56 | 7.69 | 7.15 | 8.01 |
| P/B ratio | 1.73 | 1.12 | 1.28 | 1.18 |
| P/E ratio | 10.40 | 6.83 | 11.58 | 7.28 |
| Market value, million EUR | 262.0 | 152.6 | 162.5 | 167.4 |
Ratio definitions are provided on page 40 of the report.
CHANGE IN THE PRICE AND TRANSACTION VOLUME OF MERKO EHITUS SHARE AT NASDAQ TALLINN STOCK EXCHANGE IN 2021
STRUCTURE OF SHAREHOLDERS ACCORDING TO NUMBER OF SHARES AS OF 30.09.2021
| NUMBER OF SHARES | NUMBER OF SHAREHOLDERS | % OF SHAREHOLDERS | NUMBER OF SHARES | % OF SHARES |
|---|---|---|---|---|
| 1,000,001 - … | 1 | 0.01% | 12,742,686 | 71.99% |
| 100,001 – 1,000,000 | 7 | 0.08% | 1,357,537 | 7.67% |
| 10,001 – 100,000 | 51 | 0.59% | 1,113,166 | 6.29% |
| 1,001-10,000 | 518 | 5.98% | 1,482,498 | 8.38% |
| 101-1,000 | 2,359 | 27.21% | 835,741 | 4.72% |
| 1-100 | 5,732 | 66.13% | 168,372 | 0.95% |
| Total | 8,668 | 100% | 17,700,000 | 100% |
SHAREHOLDERS OF AS MERKO EHITUS AS OF 30.09.2021 AND CHANGE COMPARED TO THE PREVIOUS QUARTER
| NUMBER OF SHARES |
% OF TOTAL 30.09.2021 |
% OF TOTAL 30.06.2021 |
CHANGE | |
|---|---|---|---|---|
| AS Riverito | 12,742,686 | 71.99% | 71.99% | - |
| OÜ Midas Invest | 370,250 | 2.09% | 2.07% | 4,250 |
| Firebird Republics Fund Ltd | 315,056 | 1.78% | 1.79% | (1,944) |
| Firebird Avrora Fund Ltd | 176,043 | 0.99% | 1.01% | (2,024) |
| SEB Life and Pension Baltic SE Estonian Branch | 148,787 | 0.84% | 0.84% | - |
| iseinfo OÜ | 130,000 | 0.73% | 0.73% | - |
| Clearstream Banking AG | 113,680 | 0.64% | 0.64% | (350) |
| Firebird Fund L.P. | 103,721 | 0.59% | 0.59% | - |
| Seitse amuraid OÜ | 100,000 | 0.56% | 0.56% | - |
| Sven Einar Stefan Andersson | 80,000 | 0.45% | 0.45% | - |
| Total largest shareholders | 14,280,223 | 80.68% | 80.67% | (68) |
| Total other shareholders | 3,419,777 | 19.32% | 19.33% | 68 |
| Total | 17,700,000 | 100% | 100% | - |
PERFORMANCE OF THE SHARE OF MERKO EHITUS AND COMPARISON INDEX OMX TALLINN IN 2021
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.
According to the current dividends policy the objective is paying the shareholders 50-70% of the annual profit.
On 5 May 2021, the shareholders of AS Merko Ehitus approved the upervisory Board's proposal to the shareholders to pay out the total amount of EUR 17.7 million (EUR 1.00 per share) as dividends from net profit brought forward, which is equivalent to a 77% dividend rate and a 10.6% dividend yield for the year 2020 (using the share price as of 31 December 2020). No comparable data for 2020 were available since the general meeting of shareholders held on 6 May 2020 confirmed the upervisory Board's proposal not to pay dividends from net profit brought forward to shareholders.
While the group did not incur income tax expenses arising in connection with disbursement of dividends in Estonia in 2018 and 2020, it did incur these in 2019 in the case of EUR 10.3 million of paid dividends. Due to that, in 2021, the group applied the 14/86 income tax rate on regularly payable dividends on one third of the EUR 10.3 million, i.e. EUR 3.4 million of the (net) dividends paid. The group withheld an additional 7% income tax from dividends paid to shareholders that were natural persons and on which the 14/86 income tax rate had been applied.
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE AND STRUCTURE
AS Merko Ehitus operates as a holding company to a group, the companies of which in Estonia, Latvia, Lithuania and Norway offer complete solutions in the field of construction and real estate development. The group's largest companies are A Merko Ehitus Eesti (100%), Tallinna Teede AS (100%), SIA Merks (100%), UAB Merko Statyba (100%), UAB Merko Bustas (100%), Peritus Entreprenør A % .
The main area of activity of the holding company is developing and implementing strategies for the Merko Ehitus group's various business segments by way of planning resources, deciding on major investments, targeting and overseeing the activity of subsidiaries and coordinating partner relations. The holding company AS Merko Ehitus has a two-member Management Board: Andres Trink and Tõnu Toomik.
The overview of the Management Board and Supervisory Board have been presented on pages 18-19 and in Note 16 of the interim financial statements, and published, together with the track record and photographs, on the company's website at group.merko.ee/en/corporate-governance-2/.
It is important to maintain a simple organisational structure in the group and in management to be guided primarily by the group's objectives and requirements. For the purposes of maximum efficiency in the group management, we in some cases differentiate the management structure and legal structure. Management of the group's operating activity takes place in a country-specific manner and is coordinated at the level of the holding company.
As of 30 September 2021, the management structure is as follows:
GROUP'S LEGAL STRUCTURE
As of 30 September 2021, in addition to AS Merko Ehitus, the group comprises 32 companies (30.09.2020: 32). The group's legal structure is predominantly based on economic and legal rationality and does not in all cases conform one-to-one to the group's management structure. The detailed list of group companies is provided in Note 16 of the interim financial statements.
Changes in the legal structure of the group
On 6 November 2020, AS Merko Ehitus launched a process for restructuring its 100% subsidiary in Lithuania, UAB Merko Bustas. Under the restructuring plan, UAB Merko Bustas's % owned subsidiary UAB Jurininku Aikštele was merged into its parent. It is planned to complete the restructuring and make the respective entry into the Commercial Register during the 2021.
In connection with the change in the structure of the AS Merko Ehitus group, a contract for the sale of shares of Tallinna Teede AS was concluded on 15 December 2020 between AS Merko Ehitus and AS Merko Ehitus Eesti, where under the latter transferred its 100% stock holding to AS Merko Ehitus on 1 January 2021.
On 18 February 2021, Merko Investments AS, a fully owned subsidiary of AS Merko Ehitus, acquired a 56% holding in a Norwegian company Løkenskogen Bolig A with a share capital of NOK 30 thousand (EUR 2,884) at the purchase price of EUR 2 thousand for the purpose of real estate development.
On 2 June 2021, AS Merko Ehitus Eesti, subsidiary of AS Merko Ehitus group, signed a contract with Aardekapp OÜ to acquire a 35% holding (192,500 shares) in Connecto Eesti AS, which designs, builds and maintains electrical, gas and telecommunications networks. After acquisition of the shares, the electrical construction business line of AS Merko Infra, 100% daughter company of AS Merko Ehitus Eesti, merged with Connecto Eesti AS. Estonian Competition Authority granted the needed approval on 25 June 2021. The transfer of shares and completion of the transactions took place on 01July 2021. In August, transactions were completed in which A Merko Infra and OÜ Elrek-Mont merged with AS Connecto Eesti. In the future the services will be provided under Connecto brand.
On 3 September 2021, the name change of SIA Merks Investicijas, a 100% subsidiary of SIA Merks, a AS Merko Ehitus group company, was registered in the Latvian ommercial Register, and the new name of the company is IA Merks Mājas. On eptember , IA Merks Mājas acquired a % holding in real estate development subsidiaries IA Ropažu riedes and IA Zakusala Estates from the parent company in intra-group transactions. The development of Latvian real estate in the Merko Ehitus group will in the future take place under the trademark of Merks Mājas and apartment development projects will be carried out through SIA Merks Mājas.
After the balance sheet date, on 21 October 2021, A Merko Infra and OÜ Merko Kaevandused, both belonging to AS Merko Ehitus group, signed a merger agreement. The acquiring company is OÜ Merko Kaevandused. AS Merko Infra will be acquired by OÜ Merko Kaevandused and as a result of the merger, the company being acquired will wind up without liquidation proceedings and OÜ Merko Kaevandused will become the legal successor of AS Merko Infra. The merger date is 1st of January 2022, after which all transactions of the acquired company will be deemed to be made on the account of OÜ Merko Kaevandused.
GENERAL MEETING OF SHAREHOLDERS
The company's highest governing body is the eneral Meeting of hareholders, the competencies of which are established by legislation and the articles of association of the company.
In order to avoid physical gatherings during the COVID-19 corona pandemic, shareholders' decisions were adopted on 5 May 2021 without convening a general meeting. The annual report for 2020 and the profit allocation proposal were confirmed by vote. The dividends in the amount of EUR 17.7 million (EUR 1 per share) paid out to the shareholders on 18 June 2021.
In addition, the shareholders decided to appoint the audit firm AS PricewaterhouseCoopers as the auditor of AS Merko Ehitus for the financial years of 2021 and 2022 and to pay to the audit firm for auditing as per contract to be entered into with AS PricewaterhouseCoopers.
SUPERVISORY BOARD
The Supervisory Board plans the activities of the company, organises the management of the company and supervises the activities of the Management Board. The Supervisory Board notifies the general meeting of shareholders of the results of a review. The Chairman of the Supervisory Board organises the work of the Supervisory Board. The main duties of the Supervisory Board are to approve the group's material strategic and tactical decisions and to supervise the activities of the group's Management Board. The Supervisory Board's actions are guided by the company's articles of association, guidelines of the general meeting, and law.
According to the Articles of Association of AS Merko Ehitus, the Supervisory Board has 3 to 5 members who shall be elected for the term of three years.
As of 30 September 2021, the Supervisory Board of AS Merko Ehitus had three members, of whom, in accordance with the requirements of the Corporate Governance Recommendations, Indrek Neivelt was an independent member.
MANAGEMENT BOARD
The Management Board is a governing body, which represents and manages AS Merko Ehitus in its daily activities in accordance with the law and the Articles of Association. The Management Board has to act in the most economically purposeful manner, taking into consideration the best interests of the company and all shareholders, while ensuring the company's sustainable development in accordance with set objectives and strategy. To ensure that the company's interests are met in the best way possible, the Management and Supervisory Boards shall extensively collaborate. At least once a quarter, a joint meeting of the Supervisory and Management Boards shall take place, in which the Management Board shall inform the Supervisory Board of significant issues regarding the company's business operations, the fulfilment of the company's short and long-term goals and the risks possibly influencing it. For every meeting of the Supervisory Board, the Management Board shall prepare a management report and submit it well in advance of the meeting so that the Supervisory Board can study it. The Management Board prepares reports for the Supervisory Board also in between the meetings, if it is considered necessary by the Supervisory Board or its Chairperson.
Pursuant to the Articles of Association approved at the general meeting of shareholders in 2012, the Management Board may have up to three members.
The responsibilities of Andres Trink, Chairman of the Management Board, include, among others, fulfilling daily obligations of the CEO of AS Merko Ehitus, managing and representing the company, ensuring compliance with the Articles of Association, legal acts, organising the work of the Management Board and supervisory boards of the more important subsidiaries, coordinating the development of strategies and providing for their implementation, being responsible for business development and finance. Tõnu
Toomik is responsible for the management of the portfolio of properties and coordination of construction segment development activities across the whole group.
The Supervisory Board of AS Merko Ehitus decided to extend the powers of the Chairman of the Management Board of the company, Mr. Andres Trink, starting from 1 January 2021 for the next three years. The Management Board of AS Merko Ehitus will continue with two members: Mr. Andres Trink hairman and Mr. Tõnu Toomik.
SUPERVISORY AND MANAGEMENT BOARDS OF SUBSIDIARIES
Authorisation and responsibility of supervisory boards of subsidiaries of AS Merko Ehitus are based on their Articles of Association and intergroup rules. Generally, Supervisory Boards of subsidiaries consist of members of the Management Board and Supervisory Board of the company that is the main shareholder of the specific subsidiary. Supervisory Board meetings of the most significant subsidiaries are held usually once a month, otherwise according to the group's needs, Articles of Association of subsidiaries and legal provisions. Generally, no separate fee is paid to members of the Supervisory Board of subsidiaries. Members of the Supervisory Board will also receive no termination benefit in case their contract of service is terminated before due date or not extended. The chairman or member of the Management Board of the subsidiary shall be named by the subsidiary's upervisory Board.
Below are the supervisory boards and management boards of the significant subsidiaries that are wholly-owned by AS Merko Ehitus as of 30 September 2021:
| COMPANY | SUPERVISORY BOARD | MANAGEMENT BOARD |
|---|---|---|
| AS Merko Ehitus Eesti | Andres Trink (Chairman), Tõnu Toomik, Martin Rebane |
Ivo Volkov (Chairman), Jaan Mäe, Veljo Viitmann |
| Tallinna Teede AS | Tõnu Toomik Chairman), Ivo Volkov, Andres Trink |
Jüri Läll Chairman), Marek Rand |
| OÜ Merko Investments | - | Andres Trink, Urmas Somelar |
| SIA Merks | Andres Trink (Chairman), Tõnu Toomik, Urmas Somelar |
Andris Bišmeistars (Manager) |
| UAB Merko Statyba | Andres Trink (Chairman), Tõnu Toomik, Urmas Somelar |
Saulius Putrimas (Chairman) Jaanus Rästas |
| UAB Merko Bustas | Andres Trink (Chairman), Tõnu Toomik, Urmas Somelar |
Saulius Putrimas (Manager) |
Changes in the management of group subsidiaries
The powers of the management board member of Tallinna Teede A , a subsidiary of A Merko Ehitus, Mr. Jüri elila expired on 30 January 2021. On 19 January 2021, the supervisory board of Tallinna Teede AS decided to appoint Mr. Marek Rand as management board member starting from 1 February 2021 until 31 January 2024. The management board of Tallinna Teede AS continues with two members: Mr. Jüri Läll the hairman and Mr. Marek Rand.
As per the decision of AS Merko Ehitus Management Board on 9 July 2021, starting from 16 July 2021, Mr. Urmas Somelar will be a Member of the Supervisory Boards of group companies UAB Merko tatyba, UAB Merko Būstas and IA Merks, and a Member of the Management Board of group company OÜ Merko Investments, replacing the current member, Mr. riit Roosimägi.
MANAGEMENT BOARD'S DECLARATION
Members of the Management Board of AS Merko Ehitus declare and confirm that the consolidated unaudited interim report for the 9 months of 2021, which consists of the management report and the interim financial statements, prepared according to the current International Financial Reporting Standards as adopted by the European Union, provides, to the best of their knowledge, a true and fair view of the development of business operations, assets, liabilities, financial position, results of the operations, cash flows, and profit or loss of AS Merko Ehitus and the consolidated undertakings as a whole, includes a description of the principal risks and uncertainties, and reflects transactions with related parties. The parent company and the companies, which are part of the consolidation group, are going concerns.
Andres Trink Chairman of the Management Board 04.11.2021
Tõnu Toomik Member of the Management Board 04.11.2021
INTERIM FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros
| Note | 2021 9 months |
2020 9 months |
2021 III quarter |
2020 III quarter |
2020 12 months |
|---|---|---|---|---|---|
| Revenue 2 |
226,533 | 209,480 | 80,673 | 79,747 | 315,918 |
| Cost of goods sold 3 |
(200,064) | (184,268) | (71,442) | (71,018) | (272,169) |
| Gross profit | 26,469 | 25,212 | 9,231 | 8,729 | 43,749 |
| Marketing expenses | (2,632) | (3,157) | (802) | (1,284) | (4,212) |
| General and administrative expenses | (9,098) | (8,148) | (3,392) | (2,755) | (13,412) |
| Other operating income | 2,511 | 1,714 | 1,197 | 592 | 2,320 |
| Other operating expenses | (328) | (1,316) | (235) | (64) | (2,979) |
| Operating profit | 16,922 | 14,305 | 5,999 | 5,218 | 25,466 |
| Finance income/costs | (351) | (432) | 90 | (122) | (1,009) |
| incl. finance income/costs from associate and joint venture |
384 | 204 | 381 | 112 | (144) |
| interest expense | (548) | (530) | (232) | (200) | (719) |
| foreign exchange gain (loss) | (39) | (12) | - | (8) | (7) |
| other financial income (expenses) | (148) | (94) | (59) | (26) | (139) |
| Profit before tax | 16,571 | 13,873 | 6,089 | 5,096 | 24,457 |
| Corporate income tax expense | (1,426) | (1,227) | (570) | (441) | (1,954) |
| Net profit for financial year | 15,145 | 12,646 | 5,519 | 4,655 | 22,503 |
| incl. net profit attributable to equity holders of the parent | 15,277 | 13,071 | 5,514 | 4,896 | 22,994 |
| net profit attributable to non-controlling interest | (132) | (425) | 5 | (241) | (491) |
| Other comprehensive income, which can subsequently be classified in the income statement |
|||||
| Currency translation differences of foreign entities | 14 | (117) | (2) | 11 | (115) |
| Comprehensive income for the period | 15,159 | 12,529 | 5,517 | 4,666 | 22,388 |
| incl. net profit attributable to equity holders of the parent | 15,292 | 12,939 | 5,513 | 4,895 | 22,890 |
| net profit attributable to non-controlling interest | (133) | (410) | 4 | (229) | (502) |
| Earnings per share for profit attributable to equity holders 4 of the parent (basic and diluted, in EUR) |
0.86 | 0.74 | 0.31 | 0.28 | 1.30 |
The notes set out on pages 25-39 are an integral part of these interim financial statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
| in thousand euros | ||||
|---|---|---|---|---|
| Note | 30.09.2021 | 30.09.2020 | 31.12.2020 | |
| ASSETS Current assets |
||||
| Cash and cash equivalents | 5 | 19,581 | 25,353 | 47,480 |
| Trade and other receivables | 6 | 59,665 | 44,518 | 32,657 |
| Prepaid corporate income tax | 3 | 91 | 306 | |
| Inventories | 7 | 154,688 | 153,433 | 126,332 |
| 233,937 | 223,395 | 206,775 | ||
| Non-current assets | ||||
| Investments in associates and joint ventures | 7,288 | 2,702 | 2,354 | |
| Other long-term loans and receivables | 8 | 23,832 | 16,238 | 17,979 |
| Deferred income tax assets | 1,120 | - | 653 | |
| Investment property | 9 | 13,847 | 13,955 | 13,922 |
| Property, plant and equipment | 10 | 15,624 | 13,152 | 14,521 |
| Intangible assets | 11 | 684 | 664 | 711 |
| 62,395 | 46,711 | 50,140 | ||
| TOTAL ASSETS | 296,332 | 270,106 | 256,915 | |
| LIABILITIES | ||||
| Current liabilities | ||||
| Borrowings | 12 | 9,355 | 24,221 | 13,649 |
| Payables and prepayments | 13 | 88,394 | 60,916 | 55,846 |
| Income tax liability | 997 | 1,325 | 1,202 | |
| Short-term provisions | 14 | 6,318 | 5,775 | 6,347 |
| 105,064 | 92,237 | 77,044 | ||
| Non-current liabilities | ||||
| Long-term borrowings | 12 | 30,826 | 26,365 | 15,409 |
| Deferred income tax liability | 1,986 | 1,635 | 3,001 | |
| Other long-term payables | 15 | 3,553 | 2,785 | 4,026 |
| 36,365 | 30,785 | 22,436 | ||
| TOTAL LIABILITIES | 141,429 | 123,022 | 99,480 | |
| EQUITY | ||||
| Non-controlling interests | 4,083 | 3,807 | 4,207 | |
| 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 | (799) | (842) | (814) | |
| Retained earnings | 142,897 | 135,397 | 145,320 | |
| 150,820 | 143,277 | 153,228 | ||
| TOTAL EQUITY | 154,903 | 147,084 | 157,435 | |
| TOTAL LIABILITIES AND EQUITY | 296,332 | 270,106 | 256,915 | |
The notes set out on pages 25-39 are an integral part of these interim financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
unaudited
in thousand euros
| Equity attributable to equity holders of the parent | Non | ||||||
|---|---|---|---|---|---|---|---|
| Share capital |
Statutory reserve capital |
Currency translation differences |
Retained earnings |
Total | control ling interest |
Total | |
| Balance as of 31.12.2019 | 7,929 | 793 | (710) | 122,326 | 130,338 | 4,217 | 134,555 |
| Profit (loss) for the reporting period | - | - | - | 13,071 | 13,071 | (425) | 12,646 |
| Other comprehensive income | - | - | (132) | - | (132) | 15 | (117) |
| Total comprehensive income (loss) for the reporting period |
- | - | (132) | 13,071 | 12,939 | (410) | 12,529 |
| Transactions with owners | |||||||
| Option over shares relating to non controlling interests |
- | - | - | - | - | 133 | 133 |
| Dividends (Note 4) | - | - | - | - | - | (133) | (133) |
| Total transactions with owners | - | - | - | - | - | - | - |
| Balance as of 30.09.2020 | 7,929 | 793 | (842) | 135,397 | 143,277 | 3,807 | 147,084 |
| Balance as of 31.12.2020 | 7,929 | 793 | (814) | 145,320 | 153,228 | 4,207 | 157,435 |
| Profit (loss) for the reporting period | - | - | - | 15,277 | 15,277 | (132) | 15,145 |
| Other comprehensive income | - | - | 15 | - | 15 | (1) | 14 |
| Total comprehensive income (loss) for the reporting period |
- | - | 15 | 15,277 | 15,292 | (133) | 15,159 |
| Transactions with owners | |||||||
| Non-controlling interests of purchased subsidiary |
- | - | - | - | - | 1 | 1 |
| ontribution to subsidiary's share capital |
- | - | - | - | - | 8 | 8 |
| Dividends (Note 4) | - | - | - | (17,700) | (17,700) | - | (17,700) |
| Total transactions with owners | - | - | - | (17,700) | (17,700) | 9 | (17,691) |
| Balance as of 30.09.2021 | 7,929 | 793 | (799) | 142,897 | 150,820 | 4,083 | 154,903 |
The share capital of AS Merko Ehitus consists of 17,700,000 shares without nominal value.
The notes set out on pages 25-39 are an integral part of these interim financial statements.
CONSOLIDATED CASH FLOW STATEMENT
unaudited
in thousand euros
| Note | 2021 9 months |
2020 9 months |
2020 12 months |
|---|---|---|---|
| Cash flows from operating activities | |||
| Operating profit | 16,922 | 14,305 | 25,466 |
| Adjustments: | |||
| Depreciation and impairment | 1,898 | 2,103 | 2,751 |
| (Profit)/loss from sale of non-current assets | (85) | (165) | (250) |
| (Profit)/loss from sale of a business unit | (500) | - | - |
| Change in receivables and liabilities related to construction contracts |
(8,152) | 7,588 | 2,794 |
| Interest income from operating activities | (1,578) | (1,085) | (1,499) |
| Change in provisions | (1,903) | (4,963) | (1,072) |
| Change in trade and other receivables related to operating activities |
(22,505) | (4,098) | 7,017 |
| Change in inventories | (28,302) | 13,109 | 40,231 |
| Change in trade and other payables related to operating activities | 32,371 | (9,075) | (11,937) |
| Interest received | 994 | 1,058 | 1 349 |
| Interest paid | (581) | (832) | (1,068) |
| Other finance income (costs) | (168) | (95) | (139) |
| Corporate income tax paid | (2,807) | (868) | (1,132) |
| Total cash flows from operating activities | (14,396) | 16,982 | 62,511 |
| Cash flows from investing activities | |||
| Acquisition of subsidiaries | (1) | - | - |
| Acquisition of associate | (4,550) | - | - |
| Purchase of investment property | (1) | (7) | (7) |
| Purchase of property, plant and equipment (excl. leased assets) | (1,359) | (2,482) | (4,321) |
| Proceeds from sale of property, plant and equipment | 100 | 206 | 289 |
| Purchase of intangible assets | (167) | (49) | (143) |
| Sale of business unit | 500 | - | - |
| Interest received | 11 | - | 1 |
| Total cash flows from investing activities | (5,467) | (2,332) | (4,181) |
| Cash flows from financing activities | |||
| Proceeds from borrowings | 12,302 | 29,205 | 20,433 |
| Repayments of borrowings | (1,965) | (42,275) | (54,911) |
| Repayments of lease liabilities ontributions to the subsidiary's share capital from non |
(679) | (713) | (922) |
| controlling shareholder | 8 | - | - |
| Dividends paid | (17,686) | (133) | (133) |
| Total cash flows from financing activities | (8,020) | (13,916) | (35,533) |
| Net increase/decrease in cash and cash equivalents | (27,883) | 734 | 22,797 |
| Cash and cash equivalents at the beginning of the period 5 |
47,480 | 24,749 | 24,749 |
| Effect of exchange rate changes | (16) | (130) | (66) |
| Cash and cash equivalents at the end of the period 5 |
19,581 | 25,353 | 47,480 |
The notes set out on pages 25-39 are an integral part of these interim financial statements.
NOTES
NOTE 1 ACCOUNTING POLICIES USED
The consolidated interim financial statements of the AS Merko Ehitus group for 9 months 2021 were prepared in accordance with the requirements of IAS 34 "Interim Financial Reporting" for condensed interim financial statements. The interim financial statements follow the same accounting principles and methods used in the 2020 financial statements. The accounting methods used to prepare the interim financial statements are in conformity with the International Financial Reporting Standards as they were adopted by the European Union. 2020 audited annual report and 2020 9 months unaudited interim report comparative figures are presented in the present financial report.
According to the best knowledge of the Management Board, the consolidated interim financial statements for the 9 months 2021 presents a true and fair view of the group's economic results based on the principle of going concern. The influence of seasonality of construction and the influence of the cyclical nature of development activity on the period's results can be considered insignificant.
NOTE 2 OPERATING SEGMENTS
in thousand euros
The chief operating decision-maker, i.e. the Management Board of parent company AS Merko Ehitus, monitors the business operations of the group by operating segments and countries.
Reporting of the group's operations are segmented as:
- construction service,
- real estate development.
Construction service segment includes all projects of the home markets in general construction, civil engineering and road construction. Other operating areas (managerial services, supervision service, etc.) are insignificant to the group and they are reported within the construction service segment. The real estate development segment primarily consists of the group's own real estate development – construction and sale; to a lesser degree, it also includes real estate maintenance and leasing.
The business result of a segment is assessed based on external revenue, operating profit and profit before tax of the business segment. The operating profit and profit before tax of the segment is composed of the income and expenditure related to the segment. Other income and expenses not related to the segments are attributable to the activities of holding companies and are monitored at group level.
Additional information on the segments is provided in the Business activities chapter of the Management report.
In the segment reporting, all inter-segment income and expenses have been eliminated from the pre-tax profit of the segments and all unrealised internal profits have been eliminated from the segment assets.
AS MERKO EHITUS CONSOLIDATED INTERIM REPORT
| 2021 9 months | Construction service | Real estate development |
Total segments |
|---|---|---|---|
| Revenue | 178,145 | 79,899 | 258,044 |
| Inter-segment revenue | (2,258) | (29,253) | (31,511) |
| Revenue from clients | 175,887 | 50,646 | 226,533 |
| incl. timing of revenue recognition at a point in time | 1,384 | 39,806 | 41,190 |
| timing of revenue recognition over time | 174,503 | 10,840 | 185,343 |
| Operating profit (loss) | 6,878 | 11,531 | 18,409 |
| Profit (loss) before tax | 7,109 | 11,109 | 18,218 |
| incl. interest income from operating activities | 97 | 1,481 | 1,578 |
| depreciation | (1,571) | (327) | (1,898) |
| recognition of provisions | (3,559) | (200) | (3,759) |
| reversal of provisions | 101 | 101 | 202 |
| profit (loss) from associate and joint venture | 390 | (6) | 384 |
| other finance income (costs) | (34) | (374) | (408) |
| incl. interest expenses | (25) | (248) | (273) |
| Assets 30.09.2021 | 69,912 | 198,204 | 268,116 |
| incl. associate and joint venture | 4,940 | 2,348 | 7,288 |
| 2020 9 months | Construction service | Real estate development |
Total segments |
|---|---|---|---|
| Revenue | 134,688 | 89,956 | 224,644 |
| Inter-segment revenue | (544) | (14,620) | (15,164) |
| Revenue from clients | 134,144 | 75,336 | 209,480 |
| incl. timing of revenue recognition at a point in time | 1,018 | 69,306 | 70,324 |
| timing of revenue recognition over time | 133,126 | 6,030 | 139,156 |
| Operating profit (loss) | 3,134 | 12,817 | 15,951 |
| Profit (loss) before tax | 2,981 | 12,730 | 15,711 |
| incl. interest income from operating activities | 18 | 1,067 | 1,085 |
| depreciation | (1,766) | (337) | (2,103) |
| recognition of provisions | (1,396) | (315) | (1,711) |
| reversal of provisions | 3 | - | 3 |
| profit from joint venture | - | 204 | 204 |
| other finance income (costs) | (17) | (209) | (226) |
| incl. interest expenses | (17) | (169) | (186) |
| Assets 30.09.2020 | 55,573 | 189,190 | 244,763 |
| incl. joint venture | - | 2,702 | 2,702 |
AS MERKO EHITUS CONSOLIDATED INTERIM REPORT
| 2021 III quarter | Construction service | Real estate development |
Total segments |
|---|---|---|---|
| Revenue | 70,989 | 19,616 | 90,605 |
| Inter-segment revenue | (572) | (9,360) | (9,932) |
| Revenue from clients | 70,417 | 10,256 | 80,673 |
| incl. timing of revenue recognition at a point in time | 465 | 7,762 | 8,227 |
| timing of revenue recognition over time | 69,952 | 2,494 | 72,446 |
| Operating profit (loss) | 4,100 | 2,390 | 6,490 |
| Profit (loss) before tax | 4,399 | 2,230 | 6,629 |
| incl. interest income from operating activities | 44 | 529 | 573 |
| depreciation | (525) | (111) | (636) |
| recognition of provisions | (1,788) | (192) | (1,980) |
| reversal of provisions | - | - | - |
| profit from associate and joint venture | 390 | (9) | 381 |
| other finance income (costs) | (19) | (137) | (156) |
| incl. interest expenses | (16) | (97) | (113) |
| ' III quarter |
523 | 20,193 | 20,716 |
| incl. associate and joint venture | 4,940 | (9) | 4,931 |
| 2020 III quarter | Construction service | Real estate development |
Total segments |
|---|---|---|---|
| Revenue | 56,975 | 26,943 | 83,918 |
| Inter-segment revenue | (533) | (3,638) | (4,171) |
| Revenue from clients | 56,442 | 23,305 | 79,747 |
| incl. timing of revenue recognition at a point in time | 352 | 21,038 | 21,390 |
| timing of revenue recognition over time | 56,090 | 2,267 | 58,357 |
| Operating profit (loss) | 2,141 | 3,928 | 6,069 |
| Profit (loss) before tax | 2,119 | 3,900 | 6,019 |
| incl. interest income from operating activities | 5 | 371 | 376 |
| depreciation | (602) | (88) | (690) |
| recognition of provisions | (788) | (44) | (832) |
| reversal of provisions | - | - | - |
| profit from joint venture | - | 112 | 112 |
| other finance income (costs) | (7) | (103) | (110) |
| incl. interest expenses | (7) | (80) | (87) |
| ' III quarter |
(3,296) | (4,255) | (7,551) |
| incl. joint venture | - | 112 | 112 |
| 2020 12 months | Construction service | Real estate development |
Total segments |
|---|---|---|---|
| Revenue | 188,735 | 147,891 | 336,626 |
| Inter-segment revenue | (1,888) | (18,820) | (20,708) |
| Revenue from clients | 186,847 | 129,071 | 315,918 |
| incl. timing of revenue recognition at a point in time | 1,381 | 119,915 | 121,296 |
| timing of revenue recognition over time | 185,466 | 9,156 | 194,622 |
| Operating profit (loss) | 4,561 | 23,710 | 28,271 |
| Profit (loss) before tax | 4,385 | 23,122 | 27,507 |
| incl. interest income from operating activities | 23 | 1,476 | 1,499 |
| depreciation | (2,245) | (506) | (2,751) |
| impairment of inventories | (382) | (222) | (604) |
| recognition of provisions | (1,806) | (1,430) | (3,236) |
| reversal of provisions | 79 | - | 79 |
| profit (loss) from joint venture | - | (144) | (144) |
| other finance income (costs) | (27) | (353) | (380) |
| incl. interest expenses | (29) | (288) | (317) |
| Assets 31.12.2020 | 52,239 | 163,083 | 215,322 |
| incl. joint venture | - | 2,354 | 2,354 |
In addition to the segment assets, as of 30.09.2021 the group holds assets in the amount of EUR 28,216 thousand (30.09.2020: EUR 25,343 thousand; 31.12.2020: EUR 41,593 thousand) that cannot be associated with a specific segment or the allocation of which to segments would be impracticable. The unallocated assets of the group comprise cash and cash equivalents, deposits, tax prepayments, other receivables and an unallocated portion of property, plant and equipment.
RECONCILIATION OF THE PRE-TAX PROFIT OF SEGMENTS AND THE GROUP
| in thousand euros | |||||
|---|---|---|---|---|---|
| 2021 | 2020 | 2021 | 2020 | 2020 | |
| 9 months | 9 months | III quarter | III quarter | 12 months | |
| Pre-tax profit from reporting segments | 18,218 | 15,711 | 6,629 | 6,019 | 27,507 |
| Other operating profit (loss) | (1,487) | (1,645) | (491) | (851) | (2,805) |
| incl. recognition of provisions | - | - | - | - | (9) |
| finance income (costs) | (160) | (193) | (49) | (72) | (245) |
| incl. interest expenses | (98) | (138) | (33) | (47) | (176) |
| Total profit before tax | 16,571 | 13,873 | 6,089 | 5,096 | 24,457 |
Other income and expenses, which are not directly associated with segments, are associated with holding companies.
REVENUE BY CLIENT LOCATION
in thousand euros and percentages
| 2021 9 months | 2020 9 months | 2021 III quarter | 2020 III quarter | 2020 12 months | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Estonia | 138,542 | 61% | 109,673 | 52% | 48,039 | 60% | 45,243 | 57% | 177,344 | 56% |
| Latvia | 37,693 | 17% | 40,083 | 19% | 15,606 | 18% | 14,835 | 19% | 49,735 | 16% |
| Lithuania | 43,703 | 19% | 51,576 | 25% | 14,931 | 19% | 16,169 | 20% | 77,173 | 24% |
| Norway | 6,595 | 3% | 8,148 | 4% | 2,097 | 3% | 3,500 | 4% | 11,666 | 4% |
| Total | 226,533 | 100% | 209,48 0 |
100% | 80,673 | 100% | 79,747 | 100% | 315,918 | 100% |
CONTRACT ASSETS AND LIABILITIES
| in thousand euros | |||
|---|---|---|---|
| -- | -- | ------------------- | -- |
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
|---|---|---|---|
| Accrued income from construction services (Note 6) | 17,477 | 7,034 | 7,741 |
| Prepayments for construction services (Note 13) | (8,481) | (11,023) | (6,926) |
| Advance payments received for construction contract works (Notes 13, 15) | (14,064) | (3,661) | (8,576) |
| Recognised provision for onerous construction contracts (Note 14) | (288) | (779) | (312) |
NON-CURRENT ASSETS (EXCEPT FOR FINANCIAL ASSETS) BY LOCATION OF ASSETS
in thousand euros
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
|---|---|---|---|
| Estonia | 23,169 | 16,832 | 17,896 |
| Latvia | 13,141 | 13,095 | 13,096 |
| Lithuania | 997 | 429 | 383 |
| Norway | 136 | 117 | 133 |
| Total | 37,443 | 30,473 | 31,508 |
NOTE 3 COST OF GOODS SOLD
| in thousand euros | |||||
|---|---|---|---|---|---|
| 2021 9 months |
2020 9 months |
2021 III quarter |
2020 III quarter |
2020 12 months |
|
| Construction services and properties purchased for resale |
121,003 | 109,387 | 43,294 | 40,022 | 174,208 |
| Materials | 37,022 | 35,017 | 12,541 | 15,834 | 42,526 |
| Labour costs | 18,486 | 16,622 | 6,145 | 5,921 | 24,509 |
| Construction mechanisms and transport |
7,571 | 9,553 | 3,125 | 4,336 | 11,687 |
| Design | 3,165 | 3,858 | 1,037 | 1,398 | 5,103 |
| Real estate management costs | 268 | 239 | 100 | 88 | 323 |
| Depreciation | 1,266 | 1,403 | 419 | 458 | 1,815 |
| Impairment of inventories | - | - | - | - | 604 |
| Provisions | 3,759 | 1,708 | 1,980 | 832 | 3,100 |
| Other expenses | 7,524 | 6,481 | 2,801 | 2,129 | 8,294 |
| Total cost of goods sold | 200,064 | 184,268 | 71,442 | 71,018 | 272,169 |
NOTE 4 EARNINGS AND DIVIDENDS PER SHARE
Basic earnings per share for profit attributable to equity holders of the parent have been derived by dividing the net profit attributable to shareholders by the weighted average number of shares.
| 2021 9 months |
2020 9 months |
2021 III quarter |
2020 III quarter |
2020 12 months |
|
|---|---|---|---|---|---|
| Net profit (loss) attributable to shareholders (in thousand EUR) | 15,277 | 13,071 | 5,514 | 4,896 | 22,994 |
| Weighted average number of ordinary shares (thousand pcs) | 17,700 | 17,700 | 17,700 | 17,700 | 17,700 |
| Earnings (loss) per share (in euros) | 0.86 | 0.74 | 0.31 | 0.28 | 1.30 |
The group did not have any potential ordinary shares to be issued; therefore the diluted earnings per share equal the basic earnings per share.
Dividends payable are recognised after the approval of profit allocation by the shareholders. In accordance with the profit allocation decision, in 2021 the parent company AS Merko Ehitus paid dividends of EUR 17,700 thousand, i.e. EUR 1.00 per share (no dividends were paid in 2020). The income tax expense related to payment of dividends, 1,334 thousand euros, of which 1,368 thousand euros was recognized as the group's deferred tax expense in , paid in third quarter. The group withheld an additional 7% income tax, 14 thousand euros, on the part of the dividends paid to private shareholders taxable at 14/86 income tax rate.
Pursuant to IAS 12, the deferred income tax expense and liability will be recognized in AS Merko Ehitus group consolidated financial statements based on the share of net profit in the year ended that is planned to be paid out as dividends in the foreseeable future.
As of 30.09.2021 the balance of deferred income tax liability includes deferred income tax on dividends in the amount of 307 thousand euros (30.09.2020: EUR 0 euros; 31.12.2020: EUR 1,368 thousand euros).
As of 30.09.2021, the parent company AS Merko Ehitus has no previously taxed dividends and income received from abroad on which income tax has been withheld (30.09.2020: EUR 3,507 thousand; 31.12.2020: EUR 3,507 thousand), on which income tax has been withheld.
As of 30.09.2021, it is possible to pay out dividends to shareholders from retained earnings in the amount of EUR 113,678 thousand (30.09.2020: EUR 108,586; 31.12.2020: EUR 116,547 thousand). Considering the dividends received and income tax withheld on foreign income totalling EUR 0 (30.09.2020: EUR 877 thousand; 31.12.2020: EUR 877 thousand), the corresponding income tax on dividends would amount to EUR 28,420 thousand (30.09.2020: EUR 25,969 thousand; 31.12.2020: EUR 27,959 thousand). Regarding the additional income tax on dividends, the 14% tax rate on regularly payable dividends (14/86 on net dividends), which is applied on the average amount of the paid dividends taxed in Estonia during the previous 3 years, has been taken into consideration. Above that sum, a regular 20% tax rate is applied to the dividends (i.e. a 20/80 tax rate applied to the sum paid out as net dividends). The income tax related to disbursement of dividends is recognised as a liability and income tax expense upon the announcement of dividends.
NOTE 5 CASH AND CASH EQUIVALENTS
| in thousand euros | |||
|---|---|---|---|
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
| Bank accounts | 19,581 | 25,353 | 47,480 |
| Total cash and cash equivalents | 19,581 | 25,353 | 47,480 |
NOTE 6 TRADE AND OTHER RECEIVABLES
| in thousand euros | |||
|---|---|---|---|
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
| Trade receivables | |||
| Accounts receivable | 38,061 | 36,965 | 25,391 |
| Allowance for doubtful receivables | (3,461) | (1,979) | (3,525) |
| 34,600 | 34,986 | 21,866 | |
| Tax prepayments excluding corporate income tax | |||
| Value added tax | 862 | 683 | 585 |
| Other taxes | 12 | 26 | 35 |
| 874 | 709 | 620 | |
| Accrued income form construction services | 17,477 | 7,034 | 7,741 |
| Other short-term receivables | |||
| Short-term loans | - | 51 | 371 |
| Interest receivables | 51 | 23 | 1 |
| Other short-term receivables | 189 | 121 | 118 |
| 240 | 195 | 490 | |
| Prepayments for services | |||
| Prepayments for construction services | 5,830 | 1,258 | 1,570 |
| Prepaid insurance | 196 | 143 | 137 |
| Other prepaid expenses | 448 | 193 | 233 |
| 6,474 | 1,594 | 1,940 | |
| Total trade and other receivables | 59,665 | 44,518 | 32,657 |
| incl. other short-term receivables and prepayments to related parties (Note 16) |
1,716 | 283 | 369 |
NOTE 7 INVENTORIES
| in thousand euros | ||||
|---|---|---|---|---|
| ------------------- | -- | -- | -- | -- |
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
|---|---|---|---|
| Materials | 330 | 350 | 351 |
| Work-in-progress | 83,018 | 49,366 | 38,626 |
| Finished goods | 8,225 | 32,610 | 25,210 |
| Goods for resale | |||
| Registered immovables purchased for resale/development | 58,945 | 69,439 | 60,667 |
| Other goods purchased for resale | 114 | 133 | 87 |
| 59,059 | 69,572 | 60,754 | |
| Prepayments for inventories | |||
| Prepayments for real estate properties | 3,900 | - | - |
| Prepayments for other inventories | 156 | 1,535 | 1,391 |
| Total inventories | 154,688 | 153,433 | 126,332 |
NOTE 8 OTHER LONG-TERM LOANS AND RECEIVABLES
| in thousand euros | |||
|---|---|---|---|
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
| Long-term loans | 1,115 | 1,115 | 1,115 |
| Long-term bank deposit | 2 | 2 | 2 |
| Long-term receivables from customers of construction services | 22,715 | 15,121 | 16,862 |
| Total other long-term loans and receivables | 23,832 | 16,238 | 17,979 |
| incl. long-term loan receivables from related parties (Note 16) | 1,115 | 1,115 | 1,115 |
NOTE 9 INVESTMENT PROPERTY
| in thousand euros | |||
|---|---|---|---|
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
| Land | 12,408 | 12,407 | 12,407 |
| Right of superficies at carrying amount | |||
| Cost | 29 | 29 | 29 |
| Accumulated depreciation | (14) | (13) | (13) |
| 15 | 16 | 16 | |
| Buildings at carrying amount | |||
| Cost | 2,631 | 2,631 | 2,631 |
| Accumulated depreciation | (1,207) | (1,099) | (1,132) |
| 1,424 | 1,532 | 1,499 | |
| Total investment property | 13,847 | 13,955 | 13,922 |
NOTE 10 PROPERTY, PLANT AND EQUIPMENT
| in thousand euros | |||
|---|---|---|---|
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
| Land | 712 | 712 | 712 |
| Buildings at carrying amount* | |||
| Cost | 7,951 | 6,386 | 6,040 |
| Accumulated depreciation | (2,952) | (2,845) | (2,689) |
| 4,999 | 3,541 | 3,351 | |
| Machinery and equipment at carrying amount* | |||
| Cost | 14,918 | 14,344 | 14,377 |
| Accumulated depreciation | (9,256) | (8,560) | (8,760) |
| 5,662 | 5,784 | 5,617 | |
| Other fixtures at carrying amount | |||
| Cost | 4,228 | 4,011 | 4,027 |
| Accumulated depreciation | (3,231) | (3,167) | (3,145) |
| 997 | 844 | 882 | |
| Prepayments for property, plant and equipment | 3,254 | 2,271 | 3,959 |
| Total property, plant and equipment | 15,624 | 13,152 | 14,521 |
* As of 30 September 2021 the balance of buildings at carrying amount includes leased assets in a sum of EUR 585 thousand (30.09.2020: 333 thousand; 31.12.2020: EUR 186 thousand). The balance of machinery and equipment at carrying amount includes leased assets in a sum of EUR 2,828 thousand (30.09.2020: EUR 2,505 thousand; 31.12.2020: EUR 2,487 thousand).
NOTE 11 INTANGIBLE ASSETS
in thousand euros
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
|---|---|---|---|
| Goodwill | |||
| Cost | 72 | 65 | 69 |
| 72 | 65 | 69 | |
| Software at carrying amount | |||
| Cost | 2,032 | 2,000 | 2,122 |
| Accumulated depreciation | (1,568) | (1,446) | (1,495) |
| 464 | 554 | 627 | |
| Prepayments for intangible assets | 148 | 45 | 15 |
| Total intangible assets | 684 | 664 | 711 |
NOTE 12 BORROWINGS
| in thousand euros | |||||
|---|---|---|---|---|---|
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |||
| Lease liabilities* | |||||
| Lease liabilities balance | 3,488 | 2,822 | 2,703 | ||
| incl. current portion | 888 | 857 | 790 | ||
| non-current portion 25 years | 2,600 | 1,965 | 1,913 | ||
| Bank loans | |||||
| Loan balance | 30,613 | 41,764 | 20,299 | ||
| incl. current portion | 8,443 | 17,364 | 6,859 | ||
| non-current portion 25 years | 22,170 | 24,400 | 13,440 | ||
| Loans from entities under common control | |||||
| Loan balance (Note 16) | 6,000 | 6,000 | 6,000 | ||
| incl. current portion | - | 6,000 | 6,000 | ||
| non-current portion 25 years | 6,000 | - | - | ||
| Loans from other entities | |||||
| Loan balance (Note 16) | 80 | - | 56 | ||
| incl. current portion | 24 | - | - | ||
| non-current portion … years | 56 | - | 56 | ||
| Total loans | |||||
| Loans balance | 36,693 | 47,764 | 26,355 | ||
| incl. current portion | 8,467 | 23,364 | 12,859 | ||
| non-current portion … years | 28,226 | 24,400 | 13,496 | ||
| Total borrowings | 40,181 | 50,586 | 29,058 | ||
| incl. current portion | 9,355 | 24,221 | 13,649 | ||
| non-current portion 25 years | 30,826 | 26,365 | 15,409 |
* As of 30 September 2021 the lease liabilities include a balance of EUR 44 thousand to related parties (30.09.2020: EUR 95 thousand; 31.12.2020: EUR 82 thousand) (Note 16).
NOTE 13 PAYABLES AND PREPAYMENTS
| in thousand euros | |||
|---|---|---|---|
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
| Trade payables | 35,704 | 25,151 | 20,948 |
| Payables to employees | 9,641 | 7,940 | 11,788 |
| Tax liabilities, except for corporate income tax | |||
| Value added tax | 1,567 | 2,556 | 3,199 |
| Personal income tax | 415 | 408 | 470 |
| Social security tax | 1,113 | 1,090 | 1,180 |
| Unemployment insurance tax | 45 | 37 | 50 |
| Contributions to mandatory funded pension | 26 | 28 | 36 |
| Other taxes | 127 | 277 | 98 |
| 3,293 | 4,396 | 5,033 | |
| Prepayments for construction services | 8,481 | 11,023 | 6,926 |
| Other liabilities | |||
| Interest liabilities | 11 | 19 | 1 |
| Dividends payables | - | 128 | - |
| Other liabilities | 480 | 432 | 592 |
| 491 | 579 | 593 | |
| Prepayments received * | 30,784 | 11,827 | 10,558 |
| Total payables and prepayments | 88,394 | 60,916 | 55,846 |
| incl. payables to related parties (Note 16) | 2,569 | 152 | 3 |
* As of 30 September 2021,the balance of prepayments received consists of prepayments received in connection with construction contracts (advance payments received for construction contract works) in a sum of EUR 12,777 thousand (30.09.2020: EUR 3,661 thousand; 31.12.2020: EUR 6,997 thousand) and of prepayments received in connection with residential properties (apartment buyers) in a sum of EUR 18,007 thousand (30.09.2020: EUR 8,166 thousand; 31.12.2020: EUR 3,561 thousand) (Note 2).
NOTE 14 SHORT-TERM PROVISIONS
in thousand euros
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
|---|---|---|---|
| Provision for warranty obligation for construction | 3,323 | 3,620 | 3,448 |
| Provision for costs of projects sold and work-in-progress projects | 2,707 | 1,174 | 2,319 |
| Provision for onerous construction contracts | 288 | 779 | 312 |
| Provision for legal costs and claims filed | - | 202 | 202 |
| Other provisions | - | - | 66 |
| Total short-term provisions | 6,318 | 5,775 | 6,347 |
NOTE 15 OTHER LONG-TERM PAYABLES
in thousand euros
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
|---|---|---|---|
| Trade payables | 1,927 | 2,140 | 2,120 |
| Prepayments received * | 1,287 | - | 1,579 |
| Interest liabilities | 2 | - | - |
| Other long-term liabilities | 337 | 645 | 327 |
| Other long-term payables total | 3,553 | 2,785 | 4,026 |
| incl. other long-term payables to related parties (Note 16) | 339 | 645 | 327 |
* As of 30 September 2021,the balance of prepayments received consists of prepayments received in connection with construction contracts (advance payments received for construction contract works) in a sum of EUR 1,287 thousand (30.09.2020: EUR 0; 31.12.2020: EUR 1,579 thousand) (Note 2).
NOTE 16 RELATED PARTY TRANSACTIONS
In compiling the group report, the following entities have been considered as related parties:
- parent company AS Riverito;
- shareholders of AS Riverito with significant influence over AS Merko Ehitus through AS Riverito;
- other shareholders with significant influence;
- other subsidiaries of AS Riverito or so-called sister companies, in the Note 'Entities under common control'
- associates and joint ventures;
- key members of the management (supervisory and management board), their close relatives and entities under their control or significant influence.
Significant influence is presumed to exist when the person has more than 20% of the voting power.
The parent of AS Merko Ehitus is AS Riverito. As of 30.09.2021; 30.09.2020 and 31.12.2020, AS Riverito owned 71.99% of the shares of AS Merko Ehitus. The ultimate controlling party of the group is Mr. Toomas Annus.
AS MERKO EHITUS SUBSIDIARIES AND JOINT VENTURES
| 30.09.2021 | |||||
|---|---|---|---|---|---|
| 30.09.2020 | 31.12.2020 | ||||
| Subsidiaries | |||||
| AS Merko Ehitus Eesti | 100 | 100 | 100 | Estonia, | Construction |
| Tallinna Teede AS | - | 100 | 100 | Tallinn Estonia, |
Road construction |
| AS Merko Infra | 100 | 100 | 100 | Tallinn Estonia, |
Construction |
| OÜ Tähelinna Kinnisvara | 100 | 100 | 100 | Tallinn Estonia, |
Real estate |
| OÜ Vahi Lastehoid | 100 | 100 | 100 | Tallinn Estonia, |
Real estate |
| OÜ Merko Kaevandused | 100 | 100 | 100 | Tallinn Estonia, |
Mining |
| Tallinna Teede AS | 100 | - | - | Tallinn Estonia, |
Road construction |
| UAB Merko Statyba | 100 | 100 | 100 | Tallinn Lithuania, |
Construction |
| UAB tatinių riežiūra ir Administravimas |
- | 100 | - | Vilnius Lithuania, Vilnius Real estate |
|
| UAB Timana | 100 | 100 | 100 | Lithuania, Vilnius Real estate | |
| UAB VPSP 2 | 100 | 100 | 100 | Lithuania, Vilnius Real estate | |
| UAB VPSP Projektas | 100 | 100 | 100 | Lithuania, Vilnius Real estate | |
| OÜ Merko roperty | 100 | 100 | 100 | Estonia, | Real estate |
| UAB Balsiu Mokyklos SPV | 100 | 100 | 100 | Tallinn Lithuania, |
Real estate |
| UAB Merko Bustas | 100 | 100 | 100 | Vilnius Lithuania, Vilnius Real estate |
|
| UAB MN Projektas | 100 | 100 | 100 | Lithuania, Vilnius Real estate | |
| UAB Jurininku Aikštele | - | 100 | - | Lithuania, Vilnius | Real estate (merged with UAB Merko Bustas, in process of deletion from the commercial register) |
| UAB MB Projektas | 100 | 100 | 100 | Lithuania, Vilnius Real estate | |
| UAB tatinių riežiūra ir Administravimas |
100 | - | 100 | Lithuania, Vilnius Real estate | |
| OÜ Merko Investments | 100 | 100 | 100 | Estonia, | Holding |
| SIA Merks | 100 | 100 | 100 | Tallinn Latvia, Riga |
Construction |
| SIA SK Viesturdarzs | 100 | 100 | 100 | Latvia, Riga | Real estate |
| IA Merks Mājas | 100 | 100 | 100 | Latvia, Riga | Real estate |
| SIA Industrialais Parks | 100 | 100 | 100 | Latvia, Riga | Real estate |
| IA Ropažu Priedes | 100 | - | - | Latvia, Riga | Real estate |
| SIA Zakusala Estates | 75 | - | - | Latvia, Riga | Real estate |
| IA Ropažu riedes | - | 100 | 100 | Latvia, Riga | Real estate |
| PS Merko-Merks | 100 | 100 | 100 | Latvia, Riga | Construction |
| SIA Zakusala Estates | - | 75 | 75 | Latvia, Riga | Real estate |
| PS Merks-Ostas Celtnieks | 65 | 65 | 65 | Latvia, Riga | Construction |
| PS Merks Merko Infra | 100 | 100 | 100 | Latvia, Riga | Construction |
| Merko Finland Oy | 100 | 100 | 100 | Finland, | Construction |
| Merko Investments AS | 100 | 100 | 100 | Helsinki Norway, |
Holding |
| eritus Entreprenør A | 56 | 56 | 56 | Sofiemyr Norway, |
Construction |
| Løkenskogen Bolig A | 56 | - | - | Sofiemyr Norway, |
Real estate |
| Sofiemyr | |||||
| Associate | |||||
| Connecto Eesti AS | 35 | - | - | Estonia, Tallinn | Construction |
| Ownership and voting rights % | Location | Area of operation | |||
|---|---|---|---|---|---|
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |||
| Joint venture | |||||
| Kodusadam OÜ | 50 | 50 | 50 | Estonia, Tallinn |
Real estate |
Additional information on the changes during the reporting period is provided in chapter Corporate Governance in Management report.
On 2 June 2021, AS Merko Ehitus Eesti, subsidiary of AS Merko Ehitus group, signed a contract with Aardekapp OÜ to acquire a % holding (192,500 shares) in Connecto Eesti AS, which designs, builds and maintains electrical, gas and telecommunications networks. The transfer of shares and completion of the transactions took place in July 2021. Upon the acquisition of the holding, the electrical construction business area of AS Merko Infra, a 100% subsidiary of AS Merko Ehitus, was sold to Connecto Eesti AS. In August, transactions were completed in which A Merko Infra and OÜ Elrek-Mont merged with AS Connecto Eesti. In the future the services will be provided under Connecto brand.
ACQUISITION OF ASSOCIATE
| Name of company acquired | Connecto Eesti AS |
|---|---|
| Share % | 35 |
| Acquisition date | 01.07.2021 |
| in thousand euros | Fair value |
| Cash | 1,373 |
| Receivables | 3,528 |
| Non-current assets | 987 |
| Borrowings | (482) |
| Other liabilities | (3,062) |
| Fair value of net assets | 2,344 |
| Acquisition cost | 4,550 |
| Goodwill | 2,206 |
| Paid for share of associate in cash | (4,550) |
| Received from sale of Merko Infra electrical unit in cash | 500 |
| Net outflow of cash – investing activities | (4,050) |
The investment into the associated company includes a goodwill of EUR 2,206 thousand as determined upon acquisition, which is largely related to the company's ability to jointly win repeated long-term contracts in procurements under the Connecto trademark as well as its readiness to participate in large-scale projects both in Estonia and abroad.
The investment into the associated company is initially recorded at acquisition cost, and from July using the equity method.
GOODS AND SERVICES
in thousand euros 2021 9 months 2020 9 months 2020 12 months Provided services and goods sold Parent company 10 10 13 Associate and joint venture 2,886 1,275 1,494 Entities under common control 12,187 342 844 Members of the management 164 549 838 Total services provided and goods sold 15,247 2,176 3,189 Interest income Joint venture 51 57 74
| 2021 9 months | 2020 9 months | 2020 12 months | |
|---|---|---|---|
| Purchased services and goods | |||
| Parent company | 68 | 68 | 90 |
| Associate | 82 | - | - |
| Entities under common control | 46 | 43 | 68 |
| Members of the management | 1 | 2 | 3 |
| Total purchased services and goods | 197 | 113 | 161 |
| Interest expense | |||
| Entities under common control | 97 | 106 | 142 |
| Other related parties | 11 | - | - |
| Total interest expense | 108 | 106 | 142 |
BALANCES WITH RELATED PARTIES
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
|---|---|---|---|
| Receivables from related parties | |||
| Loans granted (Notes 6,8) | |||
| Joint ventures | 1,115 | 1,115 | 1,115 |
| Receivables and prepayments (Note 6) | |||
| Parent company | 4 | 4 | 4 |
| Associate and joint venture | 978 | 22 | 25 |
| Entities under common control | 734 | - | 340 |
| Members of the management | - | 257 | - |
| Total receivables and prepayments | 1,716 | 283 | 369 |
| Total receivables from related parties | 2,831 | 1,398 | 1,484 |
| Payables to related parties | |||
| Lease liabilities (Note 12) | |||
| Entities under common control | 44 | 95 | 82 |
| Short-term loans received (Note 12) | |||
| Entities under common control | - | 6,000 | 6,000 |
| Other related parties | 24 | - | - |
| Total short-term loans received | 24 | 6,000 | 6,000 |
| Payables and prepayments (Note 13) | |||
| Parent company | 9 | 9 | - |
| Associate and joint venture | 28 | - | - |
| Entities under common control | 2,476 | 15 | 3 |
| Members of the management | 56 | - | - |
| Other related parties | - | 128 | - |
| Total payables and prepayments | 2,569 | 152 | 3 |
| Long-term loans received (Note 12) | |||
| Entities under common control | 6,000 | - | - |
| Other related parties | 56 | - | 56 |
| Total long-term loans received | 6,056 | - | 56 |
| Other long-term payables (Note 15) | |||
| Other related parties | 339 | 645 | 327 |
| Total payables to related parties | 9,032 | 6,892 | 6,468 |
REMUNERATION OF THE MEMBERS OF THE SUPERVISORY AND MANAGEMENT BOARDS
The gross remuneration to members of the Supervisory Board and Management Board of AS Merko Ehitus group and the members of the Management Board of major subsidiaries for the 9 months of 2021 was EUR 1,831 thousand (9 months of 2020: EUR 1,518 thousand; 12 months of 2020: EUR 3,857 thousand).
TERMINATION BENEFITS OF MEMBERS OF THE SUPERVISORY AND MANAGEMENT BOARDS
Authorization agreements have been entered into with the Supervisory Board members, according to which no termination benefits are paid to them upon termination of the contract. In the 9 months of 2021, the Management Board members of major subsidiaries received EUR 105 thousand in compensation (9 months of 2020: EUR 131 thousand; 12 months of 2020: EUR 157 thousand).
MEMBERS OF THE SUPERVISORY AND MANAGEMENT BOARD
Track record and photographs of the members of the Supervisory Board can be found on AS Merko Ehitus website at group.merko.ee/en/management-and-supervisory-board/.
Shares held by members of the Supervisory Board of AS Merko Ehitus as of 30.09.2021:
| NO OF SHARES | % OF SHARES | ||
|---|---|---|---|
| Toomas Annus (AS Riverito) * | Chairman of the Supervisory Board | 12,742,686 | 71.99% |
| Indrek Neivelt OÜ Trust IN | Member of the Supervisory Board | 31,635 | 0.18% |
| Teet Roopalu | Member of the Supervisory Board | - | - |
| 12,774,321 | 72.17% |
* Toomas Annus controls through a holding company the majority of the votes determined by shares in AS Riverito. Thus the shares of AS Riverito and the votes determined by it in AS Merko Ehitus (12,742,686 shares) are considered to be under the control of Toomas Annus.
The Management Board of the holding company A Merko Ehitus has two members: Andres Trink and Tõnu Toomik.
Shares held by members of the Management Board of AS Merko Ehitus as of 30.09.2021:
| NO OF SHARES | % OF SHARES | ||
|---|---|---|---|
| Andres Trink | Chairman of the Management Board | 1,100 | 0.01% |
| Tõnu Toomik | Member of the Management Board | - | - |
| 1,100 | 0.01% |
NOTE 17 CONTINGENT LIABILITIES
in thousand euros
The group has obtained the following guarantees from financial institutions and issued sureties to guarantee the group's obligations to third parties. These amounts represent the maximum right of claim by third persons against the group in case the group is unable to meet its contractual obligations. Management estimates that additional expenses related to these guarantees are unlikely.
| 30.09.2021 | 30.09.2020 | 31.12.2020 | |
|---|---|---|---|
| erformance period's warranty to the customer | 27,292 | 24,725 | 24,901 |
| Tender warranty | 55 | 1,563 | 669 |
| Guarantee for warranty period | 19,945 | 22,435 | 22,253 |
| Prepayment guarantee | 11,819 | 9,752 | 11,589 |
| Payment guarantee | 817 | - | 516 |
| Contracts of surety | 1,466 | 1,945 | 1,834 |
| Total contingent liabilities | 61,394 | 60,420 | 61,762 |
' – warranty provider guarantees to the customer that the contractor's obligations arising from construction contract will be adequately fulfilled.
Tender warranty – warranty provider guarantees to the customer arranging the tender process that the tenderer will sign a contract as per tender conditions.
Guarantee for warranty period – guarantee provider guarantees to the customer that the construction defects discovered during the warranty period will be eliminated.
Prepayment guarantee – guarantee provider guarantees to the customer that advances will be reimbursed, if contractor fails to deliver goods or services agreed.
Payment guarantee – guarantee provider guarantees repayments of the customer's developer's loan and/or guarantee provider guarantees to the customer payment for goods or services.
Contracts of surety – the group guarantees the timely fulfilment of group member's liabilities towards a third party e.g. providing services by a certain date in the agreed amount).
DEFINITION OF RATIOS
| Gross profit margin (%) | = | Gross profit |
|---|---|---|
| Revenue | ||
| Operating profit margin (%) | = | Operating profit |
| Revenue | ||
| EBT margin (%) | = | Pre-tax profit |
| Revenue | ||
| Net profit margin (%) | = | Net profit (attributable to equity holders of the parent) |
| Revenue | ||
| Return on equity, ROE (%) | = | Net profit (attributable to equity holders of the parent) of the current 4 quarters |
| Shareholders equity (average of the current 4 quarters) | ||
| Return on assets, ROA (%) | = | Net profit (attributable to equity holders of the parent) of the current 4 quarters |
| Total assets (average of the current 4 quarters) | ||
| Return on invested capital, ROIC (%) | = | (Profit before tax + interest expense - foreign exchange gain (loss) + other financial income) of the current 4 quarters |
| (Shareholders equity (average) + interest-bearing liabilities (average)) of the current 4 quarters | ||
| Equity ratio (%) | = | hareholders' equity |
| Total assets | ||
| Debt ratio (%) | = | Interest-bearing liabilities |
| Total assets | ||
| Current ratio | = | Current assets Current liabilities |
| Quick ratio | = | Current assets - inventories Current liabilities |
| Accounts receivable turnover(days) | = | Trade receivables of the current 4 quarters (average) x 365 Revenue of the current 4 quarters |
| Payables to suppliers of the current 4 quarters (average) x 365 | ||
| Accounts payable turnover (days) | = | Cost of goods sold of the current 4 quarters |
| EBITDA (million EUR) | = | Operating profit + depreciation |
| Operating profit + depreciation | ||
| EBITDA margin (%) | = | Revenue |
| General expense ratio (%) | = | Marketing expenses + General and administrative expenses |
| Revenue | ||
| Labour cost ratio (%) | = | Labour costs |
| Revenue | ||
| Revenue per employee (EUR) | = | Revenue |
| Number of employees (average) | ||
| Earnings per share, EPS (EUR) | = | Net profit (attributable to equity holders of the parent) |
| Number of shares | ||
| Equity/share (EUR) | = | Shareholders equity (average of the current 4 quarters) |
| Number of shares | ||
| Dividend per share (EUR) | = | Payable dividends |
| Number of shares | ||
| Dividend rate (%) | = | Payable dividends x 100 |
| Net profit (attributable to equity holders of the parent) | ||
| Dividend yield (%) | = | Dividends payable per share |
| Share price 31.12 | ||
| P/E | = | Share price 30.09 |
| Earnings per share of the current 4 quarters | ||
| P/B | = | Share price 30.09 Equity per share (average of the current 4 quarters) |
Market value = Share price 30.09 x Number of shares