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Merko Ehitus — Interim / Quarterly Report 2021
Aug 5, 2021
2220_ir_2021-08-05_fdce6541-9400-45a2-9371-c64823c2c01d.pdf
Interim / Quarterly Report
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AS MERKO EHITUS GROUP
2021 6 months and II quarter consolidated unaudited interim report
Business name: AS Merko Ehitus
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 – 30.06.2021
Supervisory Board: Toomas Annus, Teet Roopalu, Indrek Neivelt Management Board: Andres Trink, Tõnu Toomik
Auditor: AS PricewaterhouseCoopers
| BRIEF OVERVIEW OF THE GROUP 3 | |
|---|---|
| MANAGEMENT REPORT 5 | |
| MANAGEMENT BOARD'S DECLARATION 20 | |
| 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 LIABILITIES38 | |
| DEFINITION OF RATIOS39 |
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.
ESTONIA LATVIA LITHUANIA NORWAY
General construction Civil engineering Electrical construction Road construction Residential real estate development and investments
BUSINESS SEGMENTS
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
Second-quarter revenue for Merko Ehitus was EUR 86 million and net profit was EUR 6.4 million. The revenue for first half increased by 12% to EUR 146 million and net profit by 19% to EUR 9.8 million. This year, Merko has sold nearly 150 apartments this year and launched the construction of more than 800 apartments.
According to the management of Merko Ehitus, the construction sector is more and more influenced by the rapid price rise of materials and problems related to supply, as a result of which the risks related to on-time completion of construction objects and staying within budget have soared. Considering the current market situation, the management is satisfied with the results of the first half of the year. The group's revenue and net profit grew in both Q2 and in the first half of the year. The number of new construction contracts signed this year decreased somewhat, while the launch of new apartment development projects continued, which are not reflected in the portfolio of contracts.
The share of the apartment development sector segment in the group's revenue decreased in the first half-year due to the time timing of completion of the development projects. In the first half of the year, almost 150 apartments have been handed over to buyers and launched the construction of more than 800 new apartments, of which the majority will be completed in 2022. The number of apartments under construction is up significantly and apartment sales 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. As a whole, the apartment market in the Baltics has been active this year. Merko's largest apartment development projects were Noblessner, Uus-Veerenni, Odra, Metsatuka and Lahekalda, in Tallinn; Erminurme, in Tartu; Viesturdārzs and Mežpilsēta, in Riga; and Vilneles Skverai, in Vilnius.
REVENUE 146 MILLION EUROS PROFIT BEFORE TAX
10.5 MILLION EUROS
2021 6M
In Q2, AS Merko Ehitus Eesti entered into a contract for acquiring a 35% holding in the network construction and maintenance company Connecto Eesti AS, under which Merko Ehitus Eesti's electrical engineering unit will merge with Connecto Eesti AS. The management of Merko Ehitus considers that that investments into energy and communication infrastructure are continuing and Connecto has good prospects to be a part of these developments.
In Q2 of 2021, Merko entered into new contracts worth EUR 38 million of which the largest were a contract for the design and construction of the infrastructure of the Republic of Estonia's southeast land border sections 4–6 and a contract for the construction of St John's School in Tallinn. The Merko group's secured order book balance grew to EUR 250 million as of the end of the second quarter.
In the second quarter, the largest objects in Estonia were the third development phase of the Mustamäe medical campus of the North-Estonia Medical Centre, the Tallinn School of Music and Ballet, zero cycle construction works of 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 II QUARTER AND 6 MONTHS RESULTS
PROFITABILITY
2021 6 months' pre-tax profit was EUR 10.5 million and Q2 2021 was EUR 6.7 million (6M 2020: EUR 8.8 million and Q2 2020 was EUR 6.7 million), which brought the pre-tax profit margin to 7.2% (6M 2020: 6.8%).
Net profit attributable to shareholders for 6 months 2021 was EUR 9.8 million (6M 2020: EUR 8.2 million) and for Q2 2021 net profit attributable to shareholders was EUR 6.4 million (Q2 2020: EUR 6.2 million). 6 months net profit margin was 6.7% (6M 2020: 6.3%).
REVENUE
Q2 2021 revenue was EUR 85.8 million (Q2 2020: EUR 73.9 million) and 6 months' revenue was EUR 145.9 million (6M 2020: EUR 129.7 million). 6 months' revenue increased by 12.4% compared to same period last year. The share of revenue earned outside Estonia in 6 months 2021 was 38.0% (6M 2020: 50.3%).
SECURED ORDER BOOK
As of 30 June 2021, the group's secured order book was EUR 249.8 million (30 June 2020: EUR 236.7 million). In 6 months 2021, group companies signed new contracts in the amount of EUR 135.1 million (6M 2020: EUR 175.1 million). In Q2 2021, new contracts were signed in the amount of EUR 37.8 million (Q2 2020: EUR 87.8 million).
REAL ESTATE DEVELOPMENT
In 6 months 2021, the group sold a total of 145 apartments; in 6 months 2020, the group sold 369 apartments. The group earned a revenue of EUR 25.8 million from sale of own developed apartments in 6 months 2021 and EUR 46.0 million in 6 months 2020. In Q2 of 2021 a total of 55 apartments were sold, compared to 236 apartments in Q2 2020, and earned a revenue of EUR 11.0 million from sale of own developed apartments (Q2 2020: EUR 27.4 million).
CASH POSITION
At the end of the reporting period, the group had EUR 21.7 million in cash and cash equivalents, and equity of EUR 145.3 million (52.5% of total assets). Comparable figures as of 30 June 2020 were EUR 23.7 million and EUR 138.4 million (50.3% of total assets), respectively. As of 30 June 2021, the group's net debt was EUR 16.1 million (30 June 2020: EUR 34.2 million).
OUTLOOK OF CONSTRUCTION AND REAL ESTATE MARKET CONSTRUCTION SERVICES
Construction volumes in the Baltic states have been rising from the end of 2016 to Q1 of 2020. The pandemic and related restrictions had a clear impact on the first three quarters of 2020 but from Q4 of 2020 on, construction volumes began making up
information on potential restrictions is lacking or remains purely speculative.
The dramatic growth in the prices of construction services that emerged in Q2 of 2021 and the still unclear reliability of materials supply chain will surely have an impact, leading customers to postpone planned investments and to take a another look at their profitability calculations. On the other hand, there has been a massive increase of money supply worldwide, which is guiding market participants to make capital investments and has led to a broad-based inflation expectation, perhaps created the fear that in a few years from now, construction will cost even more. Thus, it continues to be hard to say which factor will outweigh the other at the given point in time. Uncertainty and volatility on the markets is bound to continue for some time before
new stability-instilling experiences make it possible to find a new equilibrium. In this environment, demand from the public sector will remain important for the construction sector, offering relative stability.
the lost ground. It would be difficult and unrewarding to try to forecast what the second half of 2021 will be like as long as
The stability seen in construction cost from 2018 to 2020 came to a clear end in Q2 of 2021. Although the actual numbers from June are not yet reflected in the official statistics on all Merko Group's home markets, based on the data for May we can see 5.5 to 6.5 percentage point quarterly cost growth. All of the major components in the price index (materials, labour, machinery) have increased, with materials making the biggest leap. At the same time, the deadlines for delivery of materials and intermediate products have become longer due to commodities shortages, leading to continuing cost pressure for construction contractors trying to stay on schedule. In this situation, it is impossible to say whether and when increased reliability of supply chain might reduce the upward pressure on prices of materials.
DEVELOPMENT OF APARTMENTS
In H1, high level of activity on the new apartments market continued across the Baltics. Only in June could signs of easing be seen, but it is unknown whether this was because of the unusually nice summer weather or if the demand accumulated during the lockdown had been satisfied by then. Apartments in new projects launched since H2 of 2020 will be reflected in official statistics on deeds of sale only in 2022, so we can expect statistics show increasing sales volumes and prices of new developments to continue for some time. Unfortunately, it is no known for how long the heightened demand will last and whether potential restrictions in the view of next waves of the pandemic will push people to continue improving their living conditions to make new lockdowns more tolerable.
NE ELLIN S QUARTERL OUSE RICE IN E
Prices of apartments in 2018-2020 generally
continued on the same growth trajectory, with fluctuations within the brackets of statistical error. The sudden rise in cost of construction in Q2 of 2021 will undoubtedly lead to a rise in prices of yet unsold apartments in new developments, although the price elasticity of demand is unknown – the adaptation of housing loan providers to new price levels. The question for all market participants is whether and to what extent the current rise in construction cost stemming from materials will push sales prices of newly developed properties upwards ahead of the curve and whether the new price levels will be sustainable even in case the inflationary pressure from materials, energy sources and labour slackens off.
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, electricity, 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
| 6M 2021 | 6M 2020 | VARIANCE | Q2 2021 | Q2 2020 | VARIANCE | 12M 2020 | |
|---|---|---|---|---|---|---|---|
| Revenue | 105.5 | 77.7 | +35.7% | 66.5 | 42.8 | +55.4% | 186.8 |
| % of total revenue | 72.3% | 59.9% | 77.5% | 57.9% | 59.1% | ||
| Operating profit | 2.8 | 1.0 | +179.9% | 2.8 | 1.3 | +104,5% | 4.6 |
| Operating profit margin | 2.6% | 1.3% | 4.1% | 3.1% | 2.4% |
In the 6 months of 2021, the revenue of the construction service segment was EUR 105.5 million (6M 2020: EUR 77.7 million). The sales revenue of construction service has increased by 35.7% compared to the same period last year. The construction service segment revenue for 6 months 2021 made up 72.3% of the group's total revenue (6M 2020: 59.9%). In this segment, the group earned an operating profit of EUR 2.8 million for 6 months (6M 2020: EUR 1.0 million). The operating profit margin was 2.6% (6M 2020: 1.3%).
The COVID-1 pandemic has not had a significant direct impact on the group's construction volumes. The functionality of supply chains has been a key factor, as alongside deadlines it has also started affecting prices of materials. After restrictions were lifted, demand for commodities and intermediate products has risen rapidly, part of which should be considered temporary, as many producers are trying to make up for sales forgone during the restrictions and/or replenish their warehouse stocks. This has resulted in rising prices of construction materials and, at times, worsening of availability, which certainly has an impact on the profitability of construction activity, but only to an insignificant degree on volumes.
Larger projects in progress in the second quarter in construction service segment in Estonia included the third development stage of the Mustamäe medical campus of the North Estonia Medical Centre, Tallinn School of Music and Ballet, zero cycle construction works of Liivalaia business and residential complex, construction works of water supply and sewerage piping in Kohila Parish, construction works of the Republic of Estonia's southeast land border as well as the renovation of Nordic Hotel Forum and Tallink City Hotel. In Latvia, larger ongoing projects in the second 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 Telšiai and Anykščiai 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 | ||||
|---|---|---|---|---|
| 6M 2021 | 6M 2020 | VARIANCE | Q2 2021 | Q2 2020 | VARIANCE | 12M 2020 | |
|---|---|---|---|---|---|---|---|
| Revenue | 40.4 | 52.0 | -22.4% | 19.3 | 31.1 | -38.0% | 129.1 |
| incl. revenue from sale of apartments |
25.8 | 46.0 | 11.0 | 27.4 | 116.6 | ||
| incl. construction service from public-private partnerships |
6.5 | 2.5 | 3.9 | 2.4 | 6.4 | ||
| incl. construction service to joint venture projects |
1.4 | 0.6 | 1.2 | 0.3 | 1.6 | ||
| incl. revenue from immovable properties |
4.2 | 0.7 | 1.6 | 0.3 | 1.0 | ||
| % of total revenue | 27.7% | 40.1% | 22.5% | 42.1% | 40.9% | ||
| Operating profit | 9.1 | 8.9 | +2.8% | 4.8 | 6.0 | -20.1% | 23.7 |
| Operating profit margin | 22.6% | 17.1% | 24.9% | 19.3% | 18.4% |
In 6 months 2021, the group sold a total of 145 apartments and 6 commercial premises; in 6 months 2020, 369 apartments and 4 commercial premises. The group earned a revenue of EUR 25.8 million (VAT not included) from sale of developed apartments in 6 months 2021 and EUR 46.0 million (VAT not included) in 6 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 6 months of 2021, real estate development segment revenues decreased by 22.4% compared to the same period last year and formed 27.7% of the group's total revenue 6 months of 2020: 40.1%).
The segment's operating profit for the 6 months of 2021 amounted to EUR 9.1 million (6 months of 2020: EUR 8.9 million) and the operating profit margin was 22.6% (6 months of 2020: 17.1%). 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 6 months of 2021, the group launched the construction of a total of 813 new apartments in the Baltic states (6 months of 2020: the group did not launch apartment construction). In the 6 months, the group invested a total of EUR 27.0 million (6 months of 2020: EUR 32.8 million) in the ongoing development projects.
After the reporting date, the group has started the construction of 60 apartments in the third phase of the Erminurme residential development project in Tartu.
In the first half of the year, there was a growth in pre-sale contracts of apartments, but this is not fully reflected in revenue, which is based on final deeds of sale. Revenue from apartment sales proved lower year-on-year mainly because last year during the same period, 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 June 2021, the group's inventories included land plots with development potential, where the construction works have not started, in the amount of EUR 63.4 million (30.06.2020: EUR 69.4 million).
ROU 'S INVENTORIES IT EVELO MENT OTENTIAL B COUNTR
| million EUR | |||
|---|---|---|---|
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
| Estonia | 21.6 | 28.6 | 24.9 |
| Latvia | 25.0 | 26.9 | 25.4 |
| Lithuania | 15.2 | 13.9 | 10.4 |
| Norway | 1.6 | - | - |
| Total | 63.4 | 69.4 | 60.7 |
In the 6 months of 2021, the group purchased new land plots at the acquisition cost of EUR 7.7 million (6 months of 2020: the group did not purchase new land plots for real estate development purposes).
SECURED ORDER BOOK
As of 30 June 2021, the group's secured order book amounted to EUR 249.8 million, compared to EUR 236.7 million as of 30 June 2020, having increased by 5.5% 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 6 months of 2021, EUR 135.1 million worth of new contracts were signed, which is decreased by 22.8% compared to the same period of the previous year (6 months of 2020: EUR 175.1 million). The value of new contracts signed in the second quarter of 2021 amounted to EUR 37.8 million; in the second quarter of 2020 the value of new contracts signed amounted to EUR 87.8 million.
LARGEST CONSTRUCTION CONTRACTS SIGNED IN THE SECOND QUARTER OF 2021
| BRIEF DESCRIPTION OF CONTRACT | COUNTRY | COMPLETION TIME | VALUE MILLION EUR |
|---|---|---|---|
| Construction contract to design and construct the infrastructure of the Republic of Estonia's southeast land border sections 4–6 |
Estonia | April of 2025 | 15.8 |
| Construction contract for the construction of St John's School in Tallinn |
Estonia | Summer of 2022 | 5.6 |
After the balance sheet date, the group has concluded the following larger construction contracts:
- On 2 July 2021 UAB Merko Statyba, part of AS Merko Ehitus group, and Nordex Lithuania GmbH, part of the Nordex Group, entered into a contract to perform wind farm foundation construction works in Mažeikiai district in Lithuania. The contract value is more than EUR 7 million and project is scheduled to be completed in the first quarter of 2022.
- On 13 July 2021 UAB Merko Statyba, part of AS Merko Ehitus group, and UAB Šilalės vėjas, part of Eesti Energia group, entered into a contract to perform the wind farm balance of plant construction works in Šilalė district in Lithuania. The contract value is more than EUR 15 million and the project is scheduled to be completed in the first quarter of 2023.
- On 3 August 2021, SIA Merks, part of AS Merko Ehitus group, has entered into a contract with SIA Gustava parks projekti, part of UAB GALIO Group, for the construction of GUSTAVS business center in Riga. The value of the contract is approximately EUR 22 million and works are scheduled to be completed in December 2022.
- On 3 August 2021 UAB Merko Statyba, part of AS Merko Ehitus group, and UAB Potentia industriae entered into a contract to perform the construction of wind farm foundations in Jonava district in Lithuania. The contract value is more than EUR 4 million and the project is scheduled to be completed in December 2021.
As of 30 June 2021, the public sector orders accounted for approximately 54% of the total balance in the group's secured order book (30.06.2020: approximately 59%). The change does not provide any reason to see broad growth in private sector demand or to forecast a shift in public sector position as a contracting counterparty for construction in the coming periods. 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 21.7 million (30.06.2020: EUR 23.7 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 44.1 million, which was almost entirely unused at the end of current period (30.06.2020: EUR 37.6 million of which EUR 29.2 was unused).
The 6-month cash flow from operating activity was negative at EUR 15.5 million (6 months of 2020: positive EUR 7.2 million), cash flow from investing activity was negative at EUR 0.8 million (6 months of 2020: negative EUR 1.7 million) and the cash flow from financing activity was negative at EUR 9.4 million (6 months of 2020: negative EUR 6.4 million).
The cash flow from operating activities had positive effect from EBITDA of EUR 12.2 million (6 months of 2020: positive effect of EUR 10.5 million) and change in trade and other payables related to operating activities of EUR 24.3 million (6 months of 2020: negative effect of EUR 6.8 million). The negative effects to cash flow from operating activities came from the changes in receivables and liabilities related to construction contracts of EUR 10.7 million (6 months 2020: positive effect of EUR 6.8 million), from the changes in trade and other receivables related to operating activities of EUR 24.4 million (6 months of 2020: negative effect of EUR 1.7 million), from change in the provisions of EUR 3.1 million (6 months of 2020: negative effect of EUR 5.1 million) and from the change in inventories of EUR 10.3 million (6 months of 2020: positive effect of EUR 5.0 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 0.3 million (6 months of 2020: EUR 0.6 million) and corporate income tax was paid at EUR 2.8 million (6 months of 2020: EUR 0.6 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 30.06.2021; 21.1% as of 30.06.2020; 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 0.9 million, which is mainly related to the renewal of equipment in the field of road construction, (6 months of 2020 EUR 1.8 million) and positive effect from the sale of non-current assets in the amount of EUR 0.1 million (6 months of 2020: EUR 0.1 million).
In cash flows from financing, the larger negative factors were dividend payment of EUR 17.7 million (6 months of 2020: EUR 0.1 million), repayments of lease liabilities in the amount of EUR 0.4 million (6 months of 2020: net negative cash flow of EUR 0.5 million) and the net change in loans received and repaid in connection with development projects in the amount of EUR 0.5 million (6 months of 2020: net negative cash flow of EUR 6.4 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 9.2 million (6 months of 2020: negative cash flow in the net amount of EUR 0.3 million).
The Q2 2021 cash flow from operating activity was negative at EUR 20.0 million (Q2 2020: negative EUR 2.5 million), cash flow from investing activity was negative at EUR 0.4 million (Q2 2020: negative EUR 1.6 million) and the cash flow from financing activity was negative at EUR 12.6 million (Q2 2020: positive EUR 9.3 million).
RATIOS
(attributable to equity holders of the parent)
| INCOME STATEMENT SUMMARY | 6M 2021 |
6M 2020 |
6M 2019 |
Q2 2021 |
Q2 2020 |
Q2 2019 |
12M 2020 |
|
|---|---|---|---|---|---|---|---|---|
| Revenue | million EUR | 145.9 | 129.7 | 154.2 | 85.8 | 73.9 | 77.4 | 315.9 |
| Gross profit | million EUR | 17.2 | 16.5 | 14.7 | 10.3 | 11.0 | 8.5 | 43.7 |
| Gross profit margin | % | 11.8 | 12.7 | 9.5 | 12.0 | 14.9 | 10.9 | 13.8 |
| Operating profit | million EUR | 10.9 | 9.1 | 7.6 | 7.0 | 6.9 | 4.7 | 25.5 |
| Operating profit margin | % | 7.5 | 7.0 | 4.9 | 8.2 | 9.4 | 6.1 | 8.1 |
| Pre-tax profit | million EUR | 10.5 | 8.8 | 7.5 | 6.7 | 6.7 | 4.5 | 24.5 |
| Pre-tax profit margin | % | 7.2 | 6.8 | 4.9 | 7.9 | 9.1 | 5.9 | 7.7 |
| Net profit | million EUR | 9.6 | 8.0 | 4.6 | 6.3 | 6.1 | 1.7 | 22.5 |
| attributable to equity holders of the parent |
million EUR | 9.8 | 8.2 | 4.5 | 6.4 | 6.2 | 1.7 | 23.0 |
| attributable to non-controlling interest |
million EUR | (0.1) | (0.2) | 0.2 | (0.1) | (0.1) | 0.0 | (0.5) |
| Net profit margin | % | 6.7 | 6.3 | 2.9 | 7.5 | 8.3 | 2.2 | 7.3 |
| Other income statement indicators | 6M 2021 |
6M 2020 |
6M 2019 |
Q2 2021 |
Q2 2020 |
Q2 2019 |
12M 2020 |
|
| EBITDA | million EUR | 12.2 | 10.5 | 8.8 | 7.6 | 7.7 | 5.3 | 28.2 |
| EBITDA margin | % | 8.4 | 8.1 | 5.7 | 8.9 | 10.4 | 6.9 | 8.9 |
| General expense ratio | % | 5.2 | 5.6 | 5.2 | 4.5 | 4.8 | 5.2 | 5.6 |
| Labour cost ratio | % | 12.1 | 12.0 | 12.0 | 10.6 | 10.3 | 12.4 | 11.5 |
| Revenue per employee | thousand EUR |
219 | 195 | 213 | 129 | 111 | 107 | 478 |
| OTHER SIGNIFICANT INDICATORS | 30.06.2021 | 30.06.2020 | 30.06.2019 | 31.12.2020 | |
|---|---|---|---|---|---|
| Return on equity | % | 16.4 | 15.3 | 13.4 | 16.2 |
| Return on assets | % | 9.2 | 6.9 | 6.1 | 8.4 |
| Return on invested capital | % | 14.5 | 11.3 | 11.7 | 13.1 |
| Assets | million EUR | 276.7 | 274.9 | 287.9 | 256.9 |
| Equity | million EUR | 149.4 | 142.4 | 123.3 | 157.4 |
| Equity attributable to equity holders of the parent |
million EUR | 145.3 | 138.4 | 118.5 | 153.2 |
| Equity ratio | % | 52.5 | 50.3 | 41.2 | 59.6 |
| Debt ratio | % | 13.6 | 21.1 | 21.8 | 11.3 |
| Current ratio | times | 2.4 | 2.3 | 1.9 | 2.7 |
| Quick ratio | times | 0.9 | 0.7 | 0.7 | 1.0 |
| Accounts receivable turnover | days | 29 | 43 | 42 | 35 |
| Accounts payable turnover | days | 34 | 47 | 47 | 37 |
| Average number of employees | people | 667 | 667 | 724 | 661 |
| Secured order book | million EUR | 249.8 | 236.7 | 172.1 | 225.1 |
Ratio definitions are provided on page 39 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 June 2021, no provision has been formed (30.06.2020: 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 June 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 AS Merko Ehitus Eesti, part of AS Merko Ehitus group . On 2 February 2 16, AS Merko Ehitus group companies, Suur- aekalda OÜ and Väike- aekalda OÜ, filed a complaint in Tallinn Administrative Court for compensation of damage. The plaintiffs are seeking a ruling ordering that the state pay damages of approximately EUR 3.2 million to Suur-Paekalda OÜ exact amount to be determined and approximately EUR 1.6 million to Väike-Paekalda (exact amount to be determined) as well as late interest at the rate specified in subsection 113 (1) of the Law of Obligations Act starting from 2 February 2016 until due compliance with the demand for compensation. 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 5 May 2 15, SIA Merks filed suit in Riga istrict Court against former SIA 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 SIA 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, a new hearing will take place on 25 August 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
In August, 2019, the Latvian Competition Council (Konkurences padome) initiated administrative proceeding, the purpose of which, to the group's knowledge, is to ascertain whether there have been infringements of competition law in Latvia by construction companies. SIA Merks is among the construction companies involved in the proceeding. To the knowledge of the group's Management Board, the Competition Council has extended the deadline for the proceeding until 1 August 2021. No provisions are recognised in relation to the effect of this proceeding. At the time of publication of this report, the result of the proceeding has not been announced.
SIA Ostas Celtnieks
On 6 November 2 1 , SIA Merks filed an action against SIA "Ostas Celtnieks" in an amount of EUR 2 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 5% is to be covered by SIA "Ostas Celtnieks" according to its share in the consortium. So far, SIA "Ostas Celtnieks" 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 Celtnieks" filed a counterclaim against SIA Merks for lost profits, which prolongs the process. The next hearing will take place on 7 September 2021. The impact of this claim has not been taken into account in the group's reporting.
EMPLOYEES AND LABOUR COSTS
As of 30 June 2021, Merko Ehitus group employed 718 people (including temporary and part-time staff). Compared to the same period last year, the number of group's employees increased by 45 (+6.7%). The number of employees increased in all countries where the group operates.
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 6 months 2021, the labour cost was EUR 17.7 million (6 months 2020: EUR 15.5 million), which increased by 13.8% compared to the same period previous year. The labour cost ratio increased by 0.1 pp from 12.0% to 12.1% in comparable periods.
During 6 months of 2021, AS Merko Ehitus Eesti, one of the largest Estonian construction companies, part of AS Merko Ehitus group, paid EUR 4.0 million in labour taxes in Estonia, being one ofthe largest labour tax payer in the construction sector (6 months 2020: EUR 4.3 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 June 2021, the company has 17,700,000 shares. The number of shares has not changed during 2021.
A total of 26,825 transactions were conducted with the shares of Merko Ehitus in 6 months of 2021, with 1.41 million shares (8.0% of total shares) traded, generating a turnover of EUR 19.8 million (comparable figures in 6 months 2020 were accordingly: 13,115 transactions with 1.09 million shares traded (6.1% of total shares), generating a turnover of EUR 9.2 million). The lowest valueper-share transaction was recorded at the price of EUR 9.48 and the highest at EUR 17.14 per share (6 months of 2020: EUR 6.56 and EUR 10.60, accordingly). On 30 June 2021, the closing price of the share was EUR 15.10 (30.06.2020: EUR 8.48). As of 30 June 2021, by the Nasdaq Baltic stock exchange, the market capitalisation of AS Merko Ehitus was EUR 267.3 million, up 78.1% compared to the end of the equivalent period of the prior year (30.06.2020: EUR 150.1 million).
| 30.06.2021 | 30.06.2020 | 30.06.2019 | 31.12.2020 | |
|---|---|---|---|---|
| Number of shares | 17,700,000 | 17,700,000 | 17,700,000 | 17,700,000 |
| Earnings per share (EPS), euros | 0.55 | 0.46 | 0.25 | 1.30 |
| Equity per share, euros | 8.45 | 7.37 | 7.20 | 8.01 |
| P/B ratio | 1.79 | 1.15 | 1.27 | 1.18 |
| P/E ratio | 10.87 | 7.51 | 9.47 | 7.28 |
| Market value, million EUR | 267.3 | 150.1 | 162.1 | 167.4 |
Ratio definitions are provided on page 39 of the report.
CHANGE IN THE PRICE AND TRANSACTION VOLUME OF MERKO EHITUS SHARE AT NASDAQ TALLINN STOCK EXCHANGE IN 2021
volume of transactions
STRUCTURE OF SHAREHOLDERS ACCORDING TO NUMBER OF SHARES AS OF 30.06.2021
| 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 | 0.09% | 1,357,605 | 7.67% |
| 10,001 – 100,000 | 49 | 0.63% | 1,096,725 | 6.20% |
| 1,001-10,000 | 532 | 6.79% | 1,509,721 | 8.53% |
| 101-1,000 | 2,334 | 29.80% | 840,240 | 4.75% |
| 1-100 | 4,909 | 62.68% | 153,023 | 0.86% |
| Total | 7,832 | 100% | 17,700,000 | 100% |
SHAREHOLDERS OF AS MERKO EHITUS AS OF 30.06.2021 AND CHANGE COMPARED TO THE PREVIOUS QUARTER
| NUMBER OF SHARES |
% OF TOTAL 30.06.2021 |
% OF TOTAL 31.03.2021 |
CHANGE | |
|---|---|---|---|---|
| AS Riverito | 12,742,686 | 71.99% | 71.99% | - |
| OÜ Midas Invest | 366,000 | 2.07% | 1.99% | 14,500 |
| Firebird Republics Fund Ltd | 317,000 | 1.79% | 1.83% | (6,300) |
| Firebird Avrora Fund Ltd | 178,067 | 1.01% | 1.01% | - |
| SEB Life and Pension Baltic SE Estonian Branch | 148,787 | 0.84% | 0.84% | - |
| Siseinfo OÜ | 130,000 | 0.73% | 0.73% | - |
| Clearstream Banking AG | 114,030 | 0.64% | 0.63% | 1,800 |
| Firebird Fund L.P. | 103,721 | 0.59% | 0.59% | - |
| Seitse Samuraid OÜ | 100,000 | 0.56% | 0.56% | - |
| Sven Einar Stefan Andersson | 80,000 | 0.45% | 0.54% | (16,410) |
| Total largest shareholders | 14,280,291 | 80.67% | 80.71% | (6,410) |
| Total other shareholders | 3,419,709 | 19.33% | 19.29% | 6,410 |
| 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 Supervisory 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 Supervisory 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 will apply 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 will withhold additional 7% income tax from dividends paid to shareholders that are natural persons and on which the 14/86 income tax rate has 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 AS Merko Ehitus Eesti (100%), Tallinna Teede AS (100%), SIA Merks (100%), UAB Merko Statyba (100%), UAB Merko Bustas (100%), Peritus Entreprenør AS 56% and the company belonging to the AS Merko Ehitus Eesti group: AS Merko Infra (100%).
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 page 18 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 June 2021, the management structure is as follows:
GROUP'S LEGAL STRUCTURE
As of 30 June 2021, in addition to AS Merko Ehitus, the group comprises 32 companies (30.06.2020: 31). 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 1 % 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 AS 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 2 21, 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, will merge with Connecto Eesti AS. In the future the services will be provided under Connecto brand. Estonian Competition Authority granted the needed approval on 25 June 2021. The transfer of shares and completion of the transactions took place in July 2021.
GENERAL MEETING OF SHAREHOLDERS
The company's highest governing body is the eneral Meeting of Shareholders, 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 June 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 Chairman 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 Supervisory Board.
Below are the supervisory boards and management boards of the significant subsidiaries that are wholly-owned by AS Merko Ehitus as of 30 June 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, riit Roosimägi |
| SIA Merks | Andres Trink (Chairman), Tõnu Toomik, riit Roosimägi |
Andris Bišmeistars (Manager) |
| UAB Merko Statyba | Andres Trink (Chairman), Tõnu Toomik, riit Roosimägi |
Saulius Putrimas (Chairman) Jaanus Rästas |
| UAB Merko Bustas | Andres Trink (Chairman), Tõnu Toomik, riit Roosimägi |
Saulius Putrimas (Manager) |
Changes in the management of group subsidiaries
The powers of the management board member of Tallinna Teede AS, a subsidiary of AS 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 Chairman 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 Statyba, UAB Merko Būstas and SIA 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 6 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 05.08.2021
Tõnu Toomik Member of the Management Board 05.08.2021
INTERIM FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros
| Note | 2021 6 months |
2020 6 months |
2021 II quarter |
2020 II quarter |
2020 12 months |
|---|---|---|---|---|---|
| Revenue 2 |
145,860 | 129,733 | 85,753 | 73,861 | 315,918 |
| Cost of goods sold 3 |
(128,622) | (113,250) | (75 489) | (62,852) | (272,169) |
| Gross profit | 17,238 | 16,483 | 10 264 | 11,009 | 43,749 |
| Marketing expenses | (1,830) | (1,873) | (883) | (925) | (4,212) |
| General and administrative expenses | (5,706) | (5,393) | (2,991) | (2,588) | (13,412) |
| Other operating income | 1,314 | 1,122 | 639 | 614 | 2,320 |
| Other operating expenses | (93) | (1,252) | (39) | (1,189) | (2,979) |
| Operating profit | 10,923 | 9,087 | 6,990 | 6,921 | 25,466 |
| Finance income/costs | (441) | (310) | (257) | (211) | (1,009) |
| incl. finance income/costs from joint venture | 3 | 92 | (4) | 2 | (144) |
| interest expense | (316) | (330) | (170) | (158) | (719) |
| foreign exchange gain (loss) | (39) | (4) | (39) | (4) | (7) |
| other financial income (expenses) | (89) | (68) | (44) | (51) | (139) |
| Profit before tax | 10,482 | 8,777 | 6,733 | 6,710 | 24,457 |
| Corporate income tax expense | (856) | (786) | (427) | (648) | (1,954) |
| Net profit for financial year | 9,626 | 7,991 | 6,306 | 6,062 | 22,503 |
| incl. net profit attributable to equity holders of the parent | 9,763 | 8,175 | 6,395 | 6,156 | 22,994 |
| net profit attributable to non-controlling interest | (137) | (184) | (89) | (94) | (491) |
| Other comprehensive income, which can subsequently be classified in the income statement |
|||||
| Currency translation differences of foreign entities | 16 | (128) | (7) | 60 | (115) |
| Comprehensive income for the period | 9,642 | 7,863 | 6,299 | 6,122 | 22,388 |
| incl. net profit attributable to equity holders of the parent | 9,779 | 8,044 | 6,387 | 6,221 | 22,890 |
| net profit attributable to non-controlling interest | (137) | (181) | (88) | (99) | (502) |
| Earnings per share for profit attributable to equity holders 4 of the parent (basic and diluted, in EUR) |
0.55 | 0.46 | 0.36 | 0.35 | 1.30 |
The notes set out on pages 25-38 are an integral part of these interim financial statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
| in thousand euros | Note | 30.06.2021 | 30.06.2020 | 31.12.2020 |
|---|---|---|---|---|
| ASSETS | ||||
| Current assets | ||||
| Cash and cash equivalents | 5 | 21,713 | 23,728 | 47,480 |
| Trade and other receivables | 6 | 62,902 | 44,790 | 32,657 |
| Prepaid corporate income tax | 315 | 91 | 306 | |
| Inventories | 7 | 136,605 | 161,534 | 126,332 |
| 221,535 | 230,143 | 206,775 | ||
| Non-current assets | ||||
| Investments in joint venture | 2,357 | 2,590 | 2,354 | |
| Other long-term loans and receivables | 8 | 22,797 | 14,504 | 17,979 |
| Deferred income tax assets | 842 | - | 653 | |
| Investment property | 9 | 13,872 | 13,988 | 13,922 |
| Property, plant and equipment | 10 | 14,611 | 12,996 | 14,521 |
| Intangible assets | 11 | 733 | 686 | 711 |
| 55,212 | 44,764 | 50,140 | ||
| TOTAL ASSETS | 276,747 | 274,907 | 256,915 | |
| LIABILITIES | ||||
| Current liabilities | ||||
| Borrowings | 12 | 9,279 | 28,011 | 13,649 |
| Payables and prepayments | 13 | 77,814 | 63,243 | 55,846 |
| Income tax liability | 731 | 912 | 1,202 | |
| Short-term provisions | 14 | 5,720 | 5,915 | 6,347 |
| 93,544 | 98,081 | 77,044 | ||
| Non-current liabilities | ||||
| Long-term borrowings | 12 | 28,493 | 29,900 | 15,409 |
| Deferred income tax liability | 1,739 | 1,650 | 3,001 | |
| Other long-term payables | 15 | 3,586 | 2,858 | 4,026 |
| 33,818 | 34,408 | 22,436 | ||
| TOTAL LIABILITIES | 127,362 | 132,489 | 99,480 | |
| EQUITY | ||||
| Non-controlling interests | 4,078 | 4,036 | 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 | (798) | (841) | (814) | |
| Retained earnings | 137,383 | 130,501 | 145,320 | |
| 145,307 | 138,382 | 153,228 | ||
| TOTAL EQUITY | 149,385 | 142,418 | 157,435 | |
| TOTAL LIABILITIES AND EQUITY | 276,747 | 274,907 | 256,915 |
The notes set out on pages 25-38 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 | - | - | - | 8,175 | 8,175 | (184) | 7,991 |
| Other comprehensive income | - | - | (131) | - | (131) | 3 | (128) |
| Total comprehensive income (loss) for the reporting period |
- | - | (131) | 8,175 | 8,044 | (181) | 7,863 |
| Transactions with owners | |||||||
| Option over shares relating to non controlling interests |
- | - | - | - | - | 66 | 66 |
| Dividends (Note 4) | - | - | - | - | - | (66) | (66) |
| Total transactions with owners | - | - | - | - | - | - | - |
| Balance as of 30.06.2020 | 7,929 | 793 | (841) | 130,501 | 138,382 | 4,036 | 142,418 |
| Balance as of 31.12.2020 | 7,929 | 793 | (814) | 145,320 | 153,228 | 4,207 | 157,435 |
| Profit (loss) for the reporting period | - | - | - | 9,763 | 9,763 | (137) | 9,626 |
| Other comprehensive income | - | - | 16 | - | 16 | 0 | 16 |
| Total comprehensive income (loss) for the reporting period |
- | - | 16 | 9,763 | 9,779 | (137) | 9,642 |
| Transactions with owners | |||||||
| Non-controlling interests of purchased subsidiary |
- | - | - | - | - | 1 | 1 |
| Contribution to subsidiary's share capital |
- | - | - | - | - | 7 | 7 |
| Dividends (Note 4) | - | - | - | (17,700) | (17,700) | - | (17,700) |
| Total transactions with owners | - | - | - | (17,700) | (17,700) | 8 | (17,700) |
| Balance as of 30.06.2021 | 7,929 | 793 | (798) | 137,383 | 145 307 | 4,078 | 149,385 |
The share capital of AS Merko Ehitus consists of 17,700,000 shares without nominal value.
The notes set out on pages 25-38 are an integral part of these interim financial statements.
CONSOLIDATED CASH FLOW STATEMENT
unaudited
in thousand euros
| Note | 2021 6 months |
2020 6 months |
2020 12 months |
|---|---|---|---|
| Cash flows from operating activities | |||
| Operating profit | 10,923 | 9,087 | 25,466 |
| Adjustments: | |||
| Depreciation and impairment | 1,262 | 1,413 | 2,751 |
| (Profit)/loss from sale of non-current assets | (60) | (113) | (250) |
| Change in receivables and liabilities related to construction contracts |
(10,672) | 6,835 | 2,794 |
| Interest income from operating activities | (1,004) | (709) | (1,499) |
| Change in provisions | (3,055) | (5,130) | (1,072) |
| Change in trade and other receivables related to operating activities |
(24,405) | (1,686) | 7,017 |
| Change in inventories | (10,250) | 4,976 | 40,231 |
| Change in trade and other payables related to operating activities | 24,275 | (6,814) | (11,937) |
| Interest received | 660 | 666 | 1 349 |
| Interest paid | (327) | (603) | (1,068) |
| Other finance income (costs) | (106) | (69) | (139) |
| Corporate income tax paid | (2,782) | (648) | (1,132) |
| Total cash flows from operating activities | (15 541) | 7,205 | 62,511 |
| Cash flows from investing activities | |||
| Acquisition of subsidiaries | (1) | - | - |
| Purchase of investment property | (1) | (7) | (7) |
| Purchase of property, plant and equipment (excl. leased assets) | (755) | (1,802) | (4,321) |
| Proceeds from sale of property, plant and equipment | 65 | 147 | 289 |
| Purchase of intangible assets | (125) | (20) | (143) |
| Interest received | 10 | - | 1 |
| Total cash flows from investing activities | (807) | (1,682) | (4,181) |
| Cash flows from financing activities | |||
| Proceeds from borrowings | 10,501 | 27,465 | 20,433 |
| Repayments of borrowings | (1,809) | (33,345) | (54,911) |
| Repayments of lease liabilities | (426) | (486) | (922) |
| Contributions to the subsidiary's share capital from non controlling shareholder |
9 | - | - |
| Dividends paid | (17,686) | (66) | (133) |
| Total cash flows from financing activities | (9,411) | (6,432) | (35,533) |
| Net increase/decrease in cash and cash equivalents | (25,759) | (909) | 22,797 |
| Cash and cash equivalents at the beginning of the period 5 |
47,480 | 24,749 | 24,749 |
| Effect of exchange rate changes | (8) | (112) | (66) |
| Cash and cash equivalents at the end of the period 5 |
21,713 | 23,728 | 47,480 |
The notes set out on pages 25-38 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 6 months 2021 were prepared in accordance with the requirements of IAS 4 "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 6 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 6 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 6 months | Construction service | Real estate development |
Total segments |
|---|---|---|---|
| Revenue | 107,156 | 60,283 | 167,439 |
| Inter-segment revenue | (1,686) | (19,893) | (21,579) |
| Revenue from clients | 105,470 | 40,390 | 145,860 |
| incl. timing of revenue recognition at a point in time | 919 | 32,044 | 32,963 |
| timing of revenue recognition over time | 104,551 | 8,346 | 112,897 |
| Operating profit (loss) | 2,778 | 9,141 | 11,919 |
| Profit (loss) before tax | 2,710 | 8,879 | 11,589 |
| incl. interest income from operating activities | 53 | 952 | 1,005 |
| depreciation | (1,046) | (216) | (1,262) |
| recognition of provisions | (1,771) | (8) | (1,779) |
| reversal of provisions | 101 | 101 | 202 |
| profit (loss) from joint venture | - | 3 | 3 |
| other finance income (costs) | (15) | (237) | (252) |
| incl. interest expenses | (9) | (151) | (160) |
| Assets 30.06.2021 | 69,389 | 178,011 | 247,400 |
| incl. joint venture | - | 2,357 | 2,357 |
| 2020 6 months | Construction service | Real estate development |
Total segments |
|---|---|---|---|
| Revenue | 77,713 | 68,013 | 140,726 |
| Inter-segment revenue | (11) | (10,982) | (10,993) |
| Revenue from clients | 77,702 | 52,031 | 129,733 |
| incl. timing of revenue recognition at a point in time | 666 | 48,268 | 48,934 |
| timing of revenue recognition over time | 77,036 | 3,763 | 80,799 |
| Operating profit (loss) | 993 | 8,889 | 9,882 |
| Profit (loss) before tax | 862 | 8,830 | 9,692 |
| incl. interest income from operating activities | 13 | 696 | 709 |
| depreciation | (1,164) | (249) | (1,413) |
| recognition of provisions | (608) | (271) | (879) |
| reversal of provisions | 3 | - | 3 |
| profit from joint venture | - | 92 | 92 |
| other finance income (costs) | (10) | (106) | (116) |
| incl. interest expenses | (10) | (89) | (99) |
| Assets 30.06.2020 | 58,869 | 193,445 | 252,314 |
| incl. joint venture | - | 2,590 | 2,590 |
AS MERKO EHITUS CONSOLIDATED INTERIM REPORT
| 2021 II quarter | Construction service | Real estate development |
Total segments |
|---|---|---|---|
| Revenue | 67,912 | 36,493 | 104,405 |
| Inter-segment revenue | (1,415) | (17,237) | (18,652) |
| Revenue from clients | 66,497 | 19,256 | 85,753 |
| incl. timing of revenue recognition at a point in time | 657 | 13,894 | 14,551 |
| timing of revenue recognition over time | 65,840 | 5,362 | 71,202 |
| Operating profit (loss) | 2,750 | 4,797 | 7,547 |
| Profit (loss) before tax | 2,718 | 4,633 | 7,351 |
| incl. interest income from operating activities | 38 | 494 | 532 |
| depreciation | (545) | (98) | (643) |
| recognition of provisions | (1,317) | (5) | (1,322) |
| reversal of provisions | 101 | 101 | 202 |
| profit from joint venture | - | (4) | (4) |
| other finance income (costs) | (9) | (146) | (155) |
| incl. interest expenses | (3) | (86) | (89) |
| ' II |
15,836 | 10,867 | 26,703 |
| incl. joint venture | - | (4) | (4) |
| 2020 II quarter | Construction service | Real estate development |
Total segments |
|---|---|---|---|
| Revenue | 42,801 | 35,283 | 78,084 |
| Inter-segment revenue | (6) | (4,217) | (4,223) |
| Revenue from clients | 42,795 | 31,066 | 73,861 |
| incl. timing of revenue recognition at a point in time | 230 | 28,093 | 28,323 |
| timing of revenue recognition over time | 42,565 | 2,973 | 45,538 |
| Operating profit (loss) | 1,346 | 6,007 | 7,353 |
| Profit (loss) before tax | 1,283 | 5,935 | 7,218 |
| incl. interest income from operating activities | 6 | 333 | 339 |
| depreciation | (617) | (124) | (741) |
| recognition of provisions | 366 | (109) | 257 |
| reversal of provisions | 3 | - | 3 |
| profit from joint venture | - | 2 | 2 |
| other finance income (costs) | (4) | (53) | (57) |
| incl. interest expenses | (4) | (44) | (48) |
| ' II |
5,829 | (5,030) | 799 |
| incl. joint venture | - | 2 | 2 |
| 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 30.06.2021 the group holds assets in the amount of EUR 29,347 thousand (30.06.2020: EUR 22,593 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 | |
| 6 months | 6 months | II quarter | II quarter | 12 months | |
| Pre-tax profit from reporting segments | 11,589 | 9,692 | 7,351 | 7,218 | 27,507 |
| Other operating profit (loss) | (996) | (794) | (558) | (431) | (2,805) |
| incl. recognition of provisions | - | - | - | - | (9) |
| finance income (costs) | (111) | (121) | (60) | (77) | (245) |
| incl. interest expenses | (65) | (91) | (33) | (47) | (176) |
| Total profit before tax | 10,482 | 8,777 | 6,733 | 6,710 | 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 6 months | 2020 6 months | 2020 II quarter | 2020 II quarter | 2020 12 months | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Estonia | 90,503 | 62% | 64,430 | 50% | 52,563 | 61% | 38,433 | 52% | 177,344 | 56% |
| Latvia | 22,087 | 15% | 25,248 | 19% | 13,447 | 16% | 8,451 | 11% | 49,735 | 16% |
| Lithuania | 28,772 | 20% | 35,407 | 27% | 17,934 | 21% | 24,107 | 33% | 77,173 | 24% |
| Norway | 4,498 | 3% | 4,648 | 4% | 1,809 | 2% | 2,870 | 4% | 11,666 | 4% |
| Total | 145,860 | 100% | 129,733 | 100% | 85,753 | 100% | 73,861 | 100% | 315,918 | 100% |
CONTRACT ASSETS AND LIABILITIES
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
|---|---|---|---|
| Accrued income from construction services (Note 6) | 18,019 | 8,005 | 7,741 |
| Prepayments for construction services (Note 13) | (6,502) | (11,265) | (6,926) |
| Advance payments received for construction contract works (Notes 13, 15) | (9,948) | (3,280) | (8,576) |
| Recognised provision for onerous construction contracts (Note 14) | (324) | (1,011) | (312) |
NON-CURRENT ASSETS (EXCEPT FOR FINANCIAL ASSETS) BY LOCATION OF ASSETS
in thousand euros
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
|---|---|---|---|
| Estonia | 17,866 | 16,488 | 17,896 |
| Latvia | 13,187 | 13,177 | 13,096 |
| Lithuania | 383 | 472 | 383 |
| Norway | 137 | 123 | 133 |
| Total | 31,573 | 30,260 | 31,508 |
NOTE 3 COST OF GOODS SOLD
in thousand euros
| 2021 | 2020 | 2021 | 2020 | 2020 | |
|---|---|---|---|---|---|
| 6 months | 6 months | II quarter | II quarter | 12 months | |
| Construction services and properties purchased for resale |
77,709 | 69,365 | 45,756 | 39,332 | 174,208 |
| Materials | 24,481 | 19,183 | 15,007 | 11,230 | 42,526 |
| Labour costs | 12,341 | 10,701 | 6,227 | 5,243 | 24,509 |
| Construction mechanisms and transport |
4,446 | 5,217 | 2,962 | 3,507 | 11,687 |
| Design | 2,128 | 2,460 | 1,244 | 1,317 | 5,103 |
| Real estate management costs | 168 | 151 | 78 | 66 | 323 |
| Depreciation | 847 | 945 | 432 | 505 | 1,815 |
| Impairment of inventories | - | - | - | - | 604 |
| Provisions | 1,779 | 876 | 1,323 | (260) | 3,100 |
| Other expenses | 4,723 | 4,352 | 2,460 | 1,912 | 8,294 |
| Total cost of goods sold | 128,622 | 113,250 | 75,489 | 62,852 | 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 6 months |
2020 6 months |
2021 II quarter |
2020 II quarter |
2020 12 months |
|
|---|---|---|---|---|---|
| Net profit (loss) attributable to shareholders (in thousand EUR) | 9,763 | 8,175 | 6,395 | 6,156 | 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) | 0.55 | 0.46 | 0.36 | 0.35 | 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 2 2 , will be 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 30.06.2021 the balance of deferred income tax liability includes deferred income tax on dividends in the amount of 79 thousand euros (30.06.2020: EUR 0 euros; 31.12.2020: EUR 1,368 thousand euros).
As of 30.06.2021, the parent company AS Merko Ehitus has no previously taxed dividends and income received from abroad on which income tax has been withheld (30.06.2020: EUR 3,328 thousand; 31.12.2020: EUR 3,507 thousand), on which income tax has been withheld.
As of 30.06.2021, it is possible to pay out dividends to shareholders from retained earnings in the amount of EUR 109,268 thousand (30.06.2020: EUR 104,634; 31.12.2020: EUR 116,547 thousand). Considering the dividends received and income tax withheld on foreign income totalling EUR 0 (30.06.2020: EUR 832 thousand; 31.12.2020: EUR 877 thousand), the corresponding income tax on dividends would amount to EUR 27,317 thousand (30.06.2020: EUR 25,026 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
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
|---|---|---|---|
| Cash on hand | - | 1 | - |
| Bank accounts | 21,713 | 23,727 | 47,480 |
| Total cash and cash equivalents | 21,713 | 23,728 | 47,480 |
NOTE 6 TRADE AND OTHER RECEIVABLES
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
|---|---|---|---|
| Trade receivables | |||
| Accounts receivable | 34,111 | 35,905 | 25,391 |
| Allowance for doubtful receivables | (3,474) | (1,977) | (3,525) |
| 30,637 | 33,928 | 21,866 | |
| Tax prepayments excluding corporate income tax | |||
| Value added tax | 1,445 | 747 | 585 |
| Other taxes | 29 | 2 | 35 |
| 1,474 | 749 | 620 | |
| Accrued income form construction services | 18,019 | 8,005 | 7,741 |
| Other short-term receivables | |||
| Short-term loans | 7,122 | 50 | 371 |
| Interest receivables | 34 | 10 | 1 |
| Other short-term receivables | 397 | 145 | 118 |
| 7,553 | 205 | 490 | |
| Prepayments for services | |||
| Prepayments for construction services | 4,879 | 1,512 | 1,570 |
| Prepaid insurance | 142 | 116 | 137 |
| Other prepaid expenses | 198 | 275 | 233 |
| 5,219 | 1,903 | 1,940 | |
| Total trade and other receivables | 62,902 | 44,790 | 32,657 |
| incl. other short-term receivables and prepayments to related parties (Note 16) |
1,353 | 551 | 369 |
NOTE 7 INVENTORIES
| in thousand euros | ||||
|---|---|---|---|---|
| -- | -- | ------------------- | -- | -- |
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
|---|---|---|---|
| Materials | 373 | 544 | 351 |
| Work-in-progress | 63,752 | 70,953 | 38,626 |
| Finished goods | 8,115 | 17,753 | 25,210 |
| Goods for resale | |||
| Registered immovables purchased for resale/development | 63,423 | 69,377 | 60,667 |
| Other goods purchased for resale | 164 | 133 | 87 |
| 63,587 | 69,510 | 60,754 | |
| Prepayments for inventories | |||
| Prepayments for other inventories | 778 | 2,774 | 1,391 |
| Total inventories | 136,605 | 161,534 | 126,332 |
NOTE 8 OTHER LONG-TERM LOANS AND RECEIVABLES
in thousand euros
| 30.06.2021 | 30.06.2020 | 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 | 21,680 | 13,387 | 16,862 |
| Total other long-term loans and receivables | 22,797 | 14,504 | 17,979 |
| incl. long-term loan receivables from related parties (Note 16) | 1,115 | 1,115 | 1,115 |
NOTE 9 INVESTMENT PROPERTY
| 30.06.2021 | 30.06.2020 | 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 | (1,182) | (1,066) | (1,132) |
| 1,449 | 1,565 | 1,499 | |
| Total investment property | 13,872 | 13,988 | 13,922 |
NOTE 10 PROPERTY, PLANT AND EQUIPMENT
| in thousand euros | |||
|---|---|---|---|
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
| Land | 712 | 712 | 712 |
| Buildings at carrying amount* | |||
| Cost | 7,378 | 6,386 | 6,040 |
| Accumulated depreciation | (2,860) | (2,737) | (2,689) |
| 4,518 | 3,649 | 3,351 | |
| Machinery and equipment at carrying amount* | |||
| Cost | 14,808 | 14,321 | 14,377 |
| Accumulated depreciation | (9,316) | (8,394) | (8,760) |
| 5,492 | 5,927 | 5,617 | |
| Other fixtures at carrying amount | |||
| Cost | 4,351 | 3,972 | 4,027 |
| Accumulated depreciation | (3,258) | (3,060) | (3,145) |
| 1,093 | 912 | 882 | |
| Prepayments for property, plant and equipment | 2,796 | 1,796 | 3,959 |
| Total property, plant and equipment | 14,611 | 12,996 | 14,521 |
* As of 30 June 2021 the balance of buildings at carrying amount includes leased assets in a sum of EUR 107 thousand (30.06.2020: 398 thousand; 31.12.2020: EUR 186 thousand). The balance of machinery and equipment at carrying amount includes leased assets in a sum of EUR 2,624 thousand (30.06.2020: EUR 2,580 thousand; 31.12.2020: EUR 2,487 thousand).
NOTE 11 INTANGIBLE ASSETS
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
|---|---|---|---|
| Goodwill | |||
| Cost | 72 | 66 | 69 |
| 72 | 66 | 69 | |
| Software at carrying amount | |||
| Cost | 2,104 | 2,000 | 2,122 |
| Accumulated depreciation | (1,552) | (1,395) | (1,495) |
| 552 | 605 | 627 | |
| Prepayments for intangible assets | 109 | 15 | 15 |
| Total intangible assets | 733 | 686 | 711 |
NOTE 12 BORROWINGS
| in thousand euros | |||
|---|---|---|---|
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
| Lease liabilities* | |||
| Lease liabilities balance | 2,725 | 2,958 | 2,703 |
| incl. current portion | 789 | 838 | 790 |
| non-current portion 25 years | 1,936 | 2,120 | 1,913 |
| Bank loans | |||
| Loan balance | 28,942 | 48,953 | 20,299 |
| incl. current portion | 8,441 | 21,173 | 6,859 |
| non-current portion 25 years | 20,501 | 27,780 | 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) | 105 | - | 56 |
| incl. non-current portion 25 years | 49 | - | - |
| non-current portion 2…5 years | 56 | - | 56 |
| Total loans | |||
| Loans balance | 35,047 | 54,953 | 26,355 |
| incl. current portion | 8,490 | 27,173 | 12,859 |
| non-current portion 2…5 years | 26,557 | 27,780 | 13,496 |
| Total borrowings | 32,772 | 57,911 | 29,058 |
| incl. current portion | 9,279 | 28,011 | 13,649 |
| non-current portion 25 years | 28,493 | 29,900 | 15,409 |
* As of 30 June 2021 the lease liabilities include a balance of EUR 56 thousand to related parties (30.06.2020: EUR 106 thousand; 31.12.2020: EUR 82 thousand) (Note 16).
NOTE 13 PAYABLES AND PREPAYMENTS
| in thousand euros | |||
|---|---|---|---|
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
| Trade payables | 35,506 | 29,537 | 20,948 |
| Payables to employees | 9,319 | 7,610 | 11,788 |
| Tax liabilities, except for corporate income tax | |||
| Value added tax | 1,009 | 2,244 | 3,199 |
| Personal income tax | 849 | 397 | 470 |
| Social security tax | 1,177 | 1,053 | 1,180 |
| Unemployment insurance tax | 45 | 37 | 50 |
| Contributions to mandatory funded pension | 31 | 26 | 36 |
| Other taxes | 171 | 296 | 98 |
| 3,282 | 4,053 | 5,033 | |
| Prepayments for construction services | 6,502 | 11,265 | 6,926 |
| Other liabilities | |||
| Interest liabilities | 11 | 16 | 1 |
| Dividends payables | - | 196 | - |
| Other liabilities | 983 | 316 | 592 |
| 994 | 528 | 593 | |
| Prepayments received * | 22,211 | 10,250 | 10,558 |
| Total payables and prepayments | 77,814 | 63,243 | 55,846 |
| incl. payables to related parties (Note 16) | 79 | 220 | 3 |
* As of 30 June 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 8,564 thousand (30.06.2020: EUR 3,280 thousand; 31.12.2020: EUR 6,997 thousand) and of prepayments received in connection with residential properties (apartment buyers) in a sum of EUR 13,647 thousand (30.06.2020: EUR 6,970 thousand; 31.12.2020: EUR 3,561 thousand) (Note 2).
NOTE 14 SHORT-TERM PROVISIONS
in thousand euros
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
|---|---|---|---|
| Provision for warranty obligation for construction | 3,432 | 3,420 | 3,448 |
| Provision for costs of projects sold and work-in-progress projects | 1,951 | 1,282 | 2,319 |
| Provision for onerous construction contracts | 324 | 1,011 | 312 |
| Provision for legal costs and claims filed | - | 202 | 202 |
| Other provisions | 13 | - | 66 |
| Total short-term provisions | 5,720 | 5,915 | 6,347 |
NOTE 15 OTHER LONG-TERM PAYABLES
in thousand euros
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
|---|---|---|---|
| Trade payables | 1,864 | 2,202 | 2,120 |
| Prepayments received * | 1,384 | - | 1,579 |
| Interest liabilities | 1 | - | - |
| Other long-term liabilities | 337 | 656 | 327 |
| Other long-term payables total | 3,586 | 2,858 | 4,026 |
| incl. other long-term payables to related parties (Note 16) | 338 | 656 | 327 |
* As of 30 June 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 1,384 thousand (30.06.2020: 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 30.06.2021; 30.06.2020 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
| Ownership and voting rights % | Location | Area of operation | ||||
|---|---|---|---|---|---|---|
| 30.06.2021 | 30.06.2020 | 31.12.2020 | ||||
| Subsidiaries | ||||||
| AS Merko Ehitus Eesti | 100 | 100 | 100 | Estonia, Tallinn | Construction | |
| Tallinna Teede AS | - | 100 | 100 | Estonia, Tallinn | Road construction | |
| AS Merko Infra | 100 | 100 | 100 | Estonia, Tallinn | Construction | |
| OÜ Tähelinna Kinnisvara | 100 | 100 | 100 | Estonia, Tallinn | Real estate | |
| OÜ Vahi Lastehoid | 100 | 100 | 100 | Estonia, Tallinn | Real estate | |
| OÜ Merko Kaevandused | 100 | 100 | 100 | Estonia, Tallinn | Mining | |
| Tallinna Teede AS | 100 | - | - | Estonia, Tallinn | Road construction | |
| UAB Merko Statyba | 100 | 100 | 100 | Lithuania, Vilnius | Construction | |
| UAB Statinių riežiūra ir Administravimas |
- | 100 | - | 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, Tallinn | Real estate | |
| UAB Balsiu Mokyklos SPV | 100 | 100 | 100 | Lithuania, Vilnius | Real estate | |
| UAB Merko Bustas | 100 | 100 | 100 | 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 liquidation in the commercial register) |
|
| UAB MB Projektas | 100 | 100 | 100 | Lithuania, Vilnius | Real estate | |
| UAB Statinių riežiūra ir Administravimas |
100 | - | 100 | Lithuania, Vilnius | Real estate | |
| OÜ Merko Investments | 100 | 100 | 100 | Estonia, Tallinn | Holding | |
| SIA Merks | 100 | 100 | 100 | Latvia, Riga | Construction | |
| SIA SK Viesturdarzs | 100 | 100 | 100 | Latvia, Riga | Real estate | |
| SIA Merks Investicijas | 100 | 100 | 100 | Latvia, Riga | Real estate | |
| SIA Industrialais Parks |
100 | 100 | 100 | Latvia, Riga | Real estate | |
| SIA Ropažu riedes | 100 | 100 | 100 | Latvia, Riga | Real estate | |
| PS Merko-Merks | 100 | 100 | 100 | Latvia, Riga | Construction | |
| SIA Zakusala Estates | 75 | 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, Helsinki | Construction | |
| Merko Investments AS | 100 | 100 | 100 | Norway, Sofiemyr Holding | ||
| eritus Entreprenør AS | 56 | 56 | 56 | Norway, Sofiemyr Construction | ||
| Løkenskogen Bolig AS | 56 | - | - | Norway, Sofiemyr Real estate | ||
| 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.
GOODS AND SERVICES
| in thousand euros | |||
|---|---|---|---|
| 2021 6 months | 2020 6 months | 2020 12 months | |
| Provided services and goods sold | |||
| Parent company | 6 | 7 | 13 |
| Joint venture | 1,009 | 1,090 | 1,494 |
| Entities under common control | 7,386 | 280 | 844 |
| Members of the management | 127 | 179 | 838 |
| Total services provided and goods sold | 8,528 | 1,556 | 3,189 |
| Interest income | |||
| Joint venture | 34 | 40 | 74 |
| Purchased services and goods | |||
| Parent company | 45 | 45 | 90 |
| Entities under common control | 30 | 29 | 68 |
| Members of the management | 1 | 1 | 3 |
| Total purchased services and goods | 76 | 75 | 161 |
| Interest expense | |||
| Entities under common control | 64 | 71 | 142 |
| Other related parties | 7 | - | - |
| Total interest expense | 71 | 71 | 142 |
BALANCES WITH RELATED PARTIES
| in thousand euros | |||
|---|---|---|---|
| 30.06.2021 | 30.06.2020 | 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 |
| Joint venture | 270 | 383 | 25 |
| Entities under common control | 1,079 | 36 | 340 |
| Members of the management | - | 128 | - |
| Total receivables and prepayments | 1,353 | 551 | 369 |
| Total receivables from related parties | 2,468 | 1,666 | 1,484 |
| Payables to related parties | |||
| Lease liabilities (Note 12) | |||
| Entities under common control | 56 | 106 | 82 |
| Short-term loans received (Note 12) | |||
| Entities under common control | - | 6,000 | 6,000 |
| Other related parties | 49 | - | - |
| Payables and prepayments (Note 13) | |||
| Parent company | 9 | 9 | - |
| Entities under common control | 14 | 15 | 3 |
| Members of the management | 56 | - | - |
| Other related parties | - | 196 | - |
| Total payables and prepayments | 79 | 220 | 3 |
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
|---|---|---|---|
| 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 | 338 | 656 | 327 |
| Total payables to related parties | 6,578 | 6,982 | 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 6 months of 2021 was EUR 972 thousand (6 months of 2020: EUR 922 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 6 months of 2021, the Management Board members of major subsidiaries received EUR 68 thousand in compensation (6 months of 2020: EUR 65 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 30.06.2021:
| 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 holds directly and through holding companies the majority of the votes determined by shares in AS Riverito. With that the votes held by AS Riverito in AS Merko Ehitus (12,742,686 shares) are deemed to belong to Toomas Annus.
The Management Board of the holding company AS Merko Ehitus has two members: Andres Trink and Tõnu Toomik.
Shares held by members of the Management Board of AS Merko Ehitus as of 30.06.2021:
| 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.
| 30.06.2021 | 30.06.2020 | 31.12.2020 | |
|---|---|---|---|
| erformance period's warranty to the customer | 26,910 | 30,163 | 24,901 |
| Tender warranty | 640 | 752 | 669 |
| Guarantee for warranty period | 22,148 | 21,193 | 22,253 |
| Prepayment guarantee | 13,187 | 7,332 | 11,589 |
| Payment guarantee | 817 | - | 516 |
| Contracts of surety | 1,689 | 1,993 | 1,834 |
| Total contingent liabilities | 65,391 | 61,433 | 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 | ||
|---|---|---|
| Gross profit margin (%) | = | Revenue |
| Operating profit margin (%) | = | Operating profit |
| Revenue Pre-tax profit |
||
| EBT margin (%) | = | Revenue |
| Net profit (attributable to equity holders of the parent) | ||
| Net profit margin (%) | = | 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) |
| (Profit before tax + interest expense - foreign exchange gain (loss) + other financial income) of the current 4 quarters | ||
| Return on invested capital, ROIC (%) | = | (Shareholders equity (average) + interest-bearing liabilities (average)) of the current 4 quarters |
| Equity ratio (%) | = | Shareholders' equity |
| Total assets | ||
| Debt ratio (%) | = | Interest-bearing liabilities Total assets |
| Current assets | ||
| Current ratio | = | 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 |
| EBITDA margin (%) | = | Operating profit + depreciation |
| Revenue Marketing expenses + General and administrative expenses |
||
| General expense ratio (%) | = | Revenue |
| Labour costs | ||
| Labour cost ratio (%) | = | 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 |
| Shareholders equity (average of the current 4 quarters) | ||
| Equity/share (EUR) | = | 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) |
| Dividends payable per share | ||
| Dividend yield (%) | = | Share price 31.12 |
| P/E | = | Share price 30.06 |
| Earnings per share of the current 4 quarters | ||
| P/B | = | Share price 30.06 Equity per share (average of the current 4 quarters) |
Market value = Share price 30.06 x Number of shares