Merko Ehitus Q2 net profit grows to EUR 6.2 million
In Q2 of 2020, Merko Ehitus posted revenue of EUR 74 million and a net profit of EUR 6.2 million. The respective six month figures were EUR 130 million and EUR 8.2 million. In 6 months of 2020, Merko sold 369 apartments, and the 6-month revenue generated by the real estate development segment grew more than four times compared to the same period last year, making up 40% of the group’s revenue. During the first six months of the year, the group companies concluded new construction contracts worth EUR 175 million, which is twice as much as a year ago.
“The sale of apartments were above our spring expectations, which due to the pandemic restrictions took a sudden turn for the negative. Yet the restrictions did not significantly impact the second-quarter delivery of apartments sold under preliminary contracts signed before the pandemic. We sold the most apartments in Vilnius and at the moment, the market for apartments in all three Baltic capitals is moderate. Activity levels are not as high as they were before the crisis but the price level has remained stable,” said AS Merko Ehitus management board chairman Andres Trink. “The increase in revenue from real estate development had a positive impact on the growth of net profit in Q2 as well. The sale of apartments may vary significantly by quarter, depending on the time during which development projects were completed and authorisations for use were obtained.”
“The group’s volume of construction contracts has grown 38% compared to a year ago, and over the first six months of the year, we signed 175 million euros worth of new construction contracts, which is approximately twice as much as a year ago. Based on the diminished economic outlook, a large share of orders from private sector customers has been postponed and public contracts are prevalent among new orders,” said Trink about the results in the construction services segment.
“Despite the positive results in the second quarter, we see that the impacts caused by the pandemic are gradually becoming more apparent in the construction and real estate sector, and because of this, the outlook for the market developments in the second half of the year and 2021 are likely to be moving in a negative direction. The group companies have implemented cost-cutting measures to ensure efficient and flexible operations during and after the crisis. The market as a whole has been supported by the response from banking in terms of payment moratoria and more broadly in ensuring availability of credit,” he added.
Over six months, Merko Ehitus Group sold 369 apartments and 4 commercial units (6 months 2019: 100 apartments and 6 commercial units). The revenue figure for the real estate development segment in the first half of 2020 saw fourfold growth year-over-year, making up 40.1% of the group’s total revenue. (6 months 2019: 7.9%). Merko’s biggest projects in Tallinn are the Uus-Veerenni, Lahekalda and Pikaliiva residential projects; in Riga, the Gaiļezers and Viesturdārzs developments; and, in Vilnius, the Vilneles slenis and Rinktinės Urban developments. In spring, the group halted the launch of new development projects for three months due to risks related to the pandemic. At the end of the period, the third stage of construction and sales of the Uus-Veerenni project in Tallinn was started.
Merko Ehitus posted revenue of EUR 73.9 million in Q2 of 2020 (Q2 2019: EUR 77.4 million), an EBITDA of EUR 7.7 million (Q2 2019: EUR 5.3 million), and net profit of EUR 6.2 million (Q2 2019: EUR 1.7 million). In 6 months 2020, the group companies entered into new contracts totalling EUR 175.1 million and, for Q2 alone, EUR 87.8 million (Q2 2019: EUR 53.8 million).
As of 30 June 2020, the group had a secured order book balance of EUR 236.7 million (30 June 2019: EUR 172.1 million). The largest projects in progress in Q2 in Estonia were the construction of the Tallinn Music and Ballet School, the Arte Gymnasium, the parking house at D-terminal of the Tallinn passenger port, the high-voltage power cables in Tallinn, Türi Basic School, the reconstruction of Aaspere-Haljala road section, the public water supply and sewerage pipeline in Kohila Parish and a data centre in Harju County. In Latvia, the biggest projects in progress were construction of the school building and dormitory in Pinki, Lidl logistics centre and the renovation of the Riga Technical University Civil Engineering Faculty building. In Lithuania, the construction of Hotel Neringa and the Kaunas district police headquarter building were in progress.