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MRK: 2012 12 months and IV quarter consolidated unaudited interim report

Spekuliantai.lt | 2013-02-14 | NASDAQ OMX biržų naujienos | perskaitė: 1069
Raktiniai žodžiai: Merko Ehitus AS, MRK
MRK: 2012 12 months and IV quarter consolidated unaudited interim report

Merko Ehitus Quarterly report 14.02.2013

2012 12 months and IV quarter consolidated unaudited interim report

Estonia, Tallinn, 2013-02-14 15:35 CET (GLOBE NEWSWIRE) --

MANAGEMENT REPORT


Overview of the 12 months results

Profitability has improved: net profit in Q4 was EUR 4.42 million (Q3 2012: EUR
2.62 million), which shows a positive trend toward increased profitability. The
profit from sale of Latvian apartments also contributed in the last quarter.
The 12-month net profit was EUR 7.63 million (12 months of 2011: net loss of
EUR 14.08 million).
Revenue is up: the revenue for Q4 of 2012 was EUR 71.40 million (Q3 2012: EUR
70.87 million), which was EUR 5.47 million higher compared to the results for
Q4 in the previous year. The 12-month revenue totalled EUR 249.13 million,
which is 13.6% more than the revenue in the same period in the previous year
(12 months of 2011: EUR 219.32 million).
Strong cash position: by the end of the reporting period, the group had EUR
35.32 million in cash and cash equivalents, EUR 116.93 million in equity (52.0%
of the balance sheet volume). Comparable data as of 2011 were, respectively EUR
18.65 million and EUR 109.24 million (49.6% of the balance sheet volume). The
group’s net debt was EUR 0.19 million as of 31 December 2012 (31 December 2011:
EUR 21.69 million; 30 September 2012: EUR 25.94 million).
Secured order book is stable: in Q4 of 2012, the group’s companies entered into
new contracts worth a volume of EUR 49 million (Q4 2011: EUR 32 million) and
the secured order book balance as of 31 December 2012 was EUR 190 million (31
December 2011: EUR 166 million).

Background information and major changes introduced in the corporate structure

AS Merko Ehitus is a holding company incorporating construction and real estate
development companies offering integrated construction solutions in Estonia,
Latvia and Lithuania. Major construction companies incorporated under the
holding company include AS Merko Ehitus Eesti (100%), SIA Merks (100%), UAB
Merko Statyba (100%), as well as the AS Merko Ehitus Eesti group companies
Tallinna Teede AS (100%) and AS Merko Infra (100%).

The Management Board of the holding company AS Merko Ehitus has two members:
Andres Trink and Viktor Mõisja.

The profiles of the members of the Management Board and Supervisory Board have
been presented in Note 15 to the financial statements, and published, together
with the track record and photographs, on the company’s website at
www.merko.ee.

On 6 July 2012, AS Merko Ehitus transferred, in connection with review of its
investment strategy, its 25% stake in the reinforced concrete element
manufacturer AS TMB to the company management.

The changes introduced in the management of SIA Merks, the Latvian-based
subsidiary of AS Merko Ehitus, took effect in September 2012, with the former
Chairman of the Management Board Ivars Geidāns being appointed a member of the
Supervisory Board of SIA Merks, and the former CFO Oskars Ozoliņš the Chairman
of the Management Board of SIA Merks. The Management Board of SIA Merks will
continue with two members: Oskars Ozoliņš as the chairman and construction
director Jānis Šperbergs as member of the Management Board. The company’s
Supervisory Board will continue with Andres Trink serving as the chairman, and
Tõnu Toomik, Jaan Mäe and Ivars Geidāns as members.

In connection with the review of the Lithuanian business strategy, the
Supervisory Board of UAB Merko Statyba decided to end the implementation of
water management projects on the Lithuanian market and focus on the field of
general construction and apartment development.

In connection with the revising of the Ukrainian market prospects, the
Supervisory Board of AS Merko Ehitus approved, on 4 September 2012, the
management’s proposal for the initiation of the liquidation of the 100%
subsidiary Merko Ukraine LLC. The company has no work-in-progress, contracts
that needed to be served, or employees in Ukraine.

In December 2012, a 100% subsidiary in Russia was founded and registered, OOO
Lenko Stroi (registry code 1129847028288). The subsidiary was founded through
the 100% Finnish subsidiary Merko Finland OY. The share capital of the new
subsidiary is EUR 4,986. This was a technicality aimed at establishing a legal
platform for operations in Russia. No actual business activity is currently
taking place in Russia.

In October 2012, the shareholders of OÜ Unigate signed a notarized plan for a
division under which registered immovable property with natural conservation
restrictions were separated from OÜ Unigate and distributed among the owners
equally. AS Merko Ehitus founded two 100% subsidiaries in order to receive the
five immovables arising from the transaction: Väike-Paekalda OÜ and
Suur-Paekalda OÜ.

In 2012, the business strategy of AS Merko Ehitus subsidiary companies focused
on improving profitability, enhancing the efficiency of the cost base and
strengthening the long-term liquidity position, concentrating on general
contracting and real estate development at the domestic markets of Estonia,
Latvia and Lithuania.

In 2012, the activities of AS Merko Ehitus were recognized in the form of the
following prizes:

International Olympic Committee (ROK) prize - Sport and the environment

At a gala evening taking place on 27 December 2012, the foundation behind
Estonian recreational trails won an International Olympic Committee (ROK) prize
- Sport and the environment. The foundation, SA Eesti Terviserajad (Estonian
Recreational Trails), is the initiative of three companies – Merko Ehitus,
Eesti Energia and Swedbank – for creating and improving Estonian trails and
sports opportunities in natural settings. The goal of the joint venture is to
support development of Estonian recreational trails to ensure that the public
has free of charge access to places where they can exercise and play sports
throughout the year. From 2004 to 2012, over EUR 23 million had been invested
into the development of recreational trails, and among others contributors
include SA Eesti Terviserajad, local governments, the Ministry of Culture and
the European Union. Across Estonia, pro and amateur sportsmen and -women have
close to 90 trails – 750 km worth of maintained and mostly illuminated trails.

The Entrepreneurship Award 2012

AS Merko Ehitus was granted the most competitive enterprise award in the field
of construction at the Entrepreneurship Award competition organised by
Enterprise Estonia, the Estonian Chamber of Commerce and the Estonian
Employers’ Confederation.

Euromoney – Real Estate Survey 2012

In its real estate market survey for 2012, Euromoney – the international
financial journal with a history of more than 40 years – declared AS Merko
Ehitus Estonia’s best developer. The Real Estate Survey 2012 is the eighth
survey conducted by Euromoney with the aim of ranking the best in real estate
on the basis of the market data, as well as the assessments of developers,
counsellors, business customers, investors and banks.


Business activities

Key financial indicators (in millions of euros):

12m 12m 2011 Q4 2012 Q4 2011
2012
Revenue
Estonia 202,1 162,2 49,3 55,1
Latvia 38,3 41,8 19,4 9,9
Lithuania 8,7 15,3 2,7 0,9
Revenue total 249,1 219,3 71,4 65,9
------------------------------------
------------------------------------

Operating profit (EBIT) 7,4 (13,3) 4,4 (6,6)

------------------------------------
attributable to equity holders of the 7,6 (14,1) 4,4 (6,8)
parent
attributable to non-controlling interest (0,0) (0,1) 0,1 (0,0)
Net profit 7,6 (14,2) 4,5 (6,8)
------------------------------------
------------------------------------

Earnings per share (EPS), in euros 0,43 (0,80) 0,25 (0,38)
------------------------------------
------------------------------------

Cash and cash equivalents at the end of period 35,3 18,5 35,3 18,5
---------------------------------

Merko Ehitus generated a total of EUR 249.1 million in revenue in 12 months of
2012, including the EUR 71.4 million generated in the fourth quarter. 81.1% of
the revenue was generated in Estonia, 15.4% in Latvia and 3.5% in Lithuania.
The consolidated revenue grew by 13.6%, compared to 12 months of 2011. This can
mainly be attributed to the increase in the revenue generated from engineering
projects in Estonia and apartment projects in all three Baltic counties. A bulk
of the revenue generated from the construction sector can be attributed to
projects co-financed by the European Structural Funds.

A total of 235 apartments were sold in 12 months of 2012 at the total value of
EUR 25.0 million (w/o VAT) (159 apartments and EUR 18.2 million in 12 months of
2011). In the last quarter, 116 apartments were sold for a total price of EUR
12.3 million (not including VAT) compared to 46 sold apartments in Q4 2011. In
the fourth quarter, a 115-unit apartment building in Riga on Skanstese street
and a 68-flat apartment in Vilnius on Mokslininkų street were completed. At the
end of the period, the Merko Ehitus group’s inventory consisted of a total of
155 completed but not yet sold apartments (55 in Estonia, 47 in Latvia and 53
in Lithuania).

The following table lists the apartment projects in progress:

Town Completion time No of apartments
Räägu 9 Tallinn 2013 spring 20
Eha 4 / Paldiski 17 Tallinn 2013 summer 27
Vaarika 5 Tartu 2013 summer 15
Pallasti 46, 48, 50 Tallinn 2013 autumn 69
Grostonas 17 Riga 2013 autumn 62
Tedre 55 Tallinn 2014 spring 47
Total 240
-----------------

In addition, the construction activity on 311 apartments from 2007 and 2011 has
been frozen.

The real estate market has become more selective – key aspects considered in
the evaluation of risks prior to the launch of each project is the location,
scale of development, design solutions and the target group. Considering the
low mortgage interest rates and the limited supply on the new apartments market
in the last three years, demand and transaction activity on the apartment
market has grown moderately.

In 12 months of 2012, the group earned a gross profit from development and
construction activity of EUR 17.9 million (12 months of 2011: EUR 3.6 million).
The impact of seasonal factors in construction on the 12-month results for 2012
were insignificant compared to that of previous years. Considering the fact
that Q3 is generally the most active construction period in the annual cycle,
it nevertheless proved possible in the Q4 to increase the revenue compared to
that of the previous quarter – by EUR 0.5 million. Sales of apartments in the
amount of EUR 12.3 million gave a boost in this direction. The said sales made
up 49.0% of the annual apartment sales. Primarily due to the above-mentioned
result, the quarterly sales were 8.3% higher than last year in the same period.
New and profitable projects and sales of apartment developments in Q4 have led
to a positive gross profit trend compared to the same period the previous year.
In addition, positive influence stems from the fact that the losses from
problematic projects were already recognized in previous periods. For the same
reasons, the gross profit margin has improved by 8.8% (12 months of 2012: 7.2%)
compared to the 12 months of 2011 (-1.6%). In light of the ever more
competitive construction sector, it is a major challenge for subsidiaries in
the field of construction to maintain their gross margin at the same level.

The consolidated earnings before taxes (EBT) for the 12 months of 2012 amounted
to EUR 7.9 million and net profit to EUR 7.6 million, compared to the negative
EBT of EUR 14.0 million and net loss of EUR 14.1 million for the 12 months of
2011.

The group posted a net profit of EUR 4.4 million in the fourth quarter of 2012,
compared to the EUR 6.8 million net loss for the fourth quarter of 2011. The
result in the final quarter of 2011 was most impacted by impairment of
inventories by EUR 6.0 million.

As at 31 December 2012, secured order book amounted to EUR 190 million,
compared to the EUR 166 million as at 31 December 2011. The group does not
include residential building projects developed by the group and development of
investment property in the order book.

A total of EUR 247 million worth of new contracts (without sold apartments)
were concluded in 12 months of 2012, compared to the EUR 168 million in the
same period last year. The largest construction agreements concluded in fourth
quarter of 2012 have been brought out below:

Contracts Cost
in
million
of euros
Construction of Vääna-Jõesuu water- and sewer pipelines, part 2 and 14.6
part 3
The design and construction work for the Narva-Jõesuu public water 8.8
supply and sewerage pipelines, their renovation and expansion, part
1 and part 2
Riga Technical University, Faculty of Electronics and 6.6
Telecommunication
The design and construction work for the Tõrva public water supply 5.6
and sewerage pipelines

Although the share of public procurements was still predominant among
construction contracts in 2012, the private customer segment became more active
in the construction markets of all three Baltics. With the current EU financial
framework period ending, a certain drop in the volume of public procurements
can be forecasted starting in the latter half of 2013. As a result, it will be
a challenge in its own right to keep the volume of new construction agreements
at the 2012 level.

The group has improved on its financial resources. As at the end of the
reporting period the Merko Ehitus group’s financial resources amounted to EUR
35.3 million, compared to the EUR 18.7 million in the same period last year.

During the year, the strategic cash position and investment capability of the
AS Merko Ehitus holding company have improved.

The 12-month cash flow from operating activity was positive at EUR 3.5 million
(12 months of 2011: negative EUR 12.3 million), cash flow from investing
activity was positive at EUR 12.7 million (12 months of 2011: EUR 8.7 million)
and the cash flow from financing activity was positive at EUR 0.7 million (12
months of 2011: EUR 12.1 million). The cash flow from operating activity was
most influenced by the negative change in trade and other receivables related
to operating activity – EUR 8.2 million, by the operating profit of EUR 7.4
million and positive change in trade payables and inventories related to
operating activity – EUR 5.4 million. The group’s cash flows from operating
activity were positive in the last quarter – EUR 19.3 million – compared to the
EUR 9.9 million in Q4 2011. The significantly greater cash inflow in the last
quarter of the year was due to the seasonality of construction activity. It
should still be emphasized in this connection that the share of public sector
orders with a long payment term has increased as a proportion of the group’s
cash flow from operating activity (by contract, an average of 56 days after
evaluation of the work) and there is an additional burden on working capital,
including optimal management of cash flows. To support cash flows arising from
operating activity, the group, in deliberated fashion, brought in additional
external capital, including factoring. At the same time, the debt ratio has
remained at a moderate level (15.8% as of 12 months of 2012).

The EUR 12.7 million cash flow from investing activities is made up of the
positive EUR 9.9 million of repayment of loans related to the financing of
development activities as well as the EUR 2.8 million generated from the
disposal of the share in AS TMB. Negative cash flows consist of the EUR 1.5
million spent on the acquisition of investment property (mainly the
construction of the court and police department building in Jõgeva).

The balance of loans received and loans repaid contributed EUR 1.6 million and
the repayment of the finance lease principal EUR 0.9 million to the cash flow
from financing activities.

The financial ratios of Merko Ehitus for the 12 months of 2012, and the methods
for calculating the financial ratios (per share attributable to equity holders
of the parent company):

12 months 12 months 12 months
2012 2011 2010
Net profit margin % 3,1 -6,4 0,7
EBT margin % 3,2 -6,4 1,0
Operating margin % 3,0 -6,1 1,4
Gross profit margin % 7,2 -1,6 7,5
EBITDA margin % 4,0 -5,0 2,8
ROE % 6,8 -12,2 1,0
ROA % 3,4 -6,6 0,6
Equity ratio % 52,0 49,6 63,8
Debt ratio % 15,8 18,3 13,2
Current ratio multiplier 2,1 2,0 2,7
Quick ratio multiplier 1,1 1,0 1,1
General expense ratio % 4,5 4,6 6,4
Gross remuneration ratio % 8,3 7,6 9,3
Accounts receivable turnover days 58 56 46
Accounts payable turnover days 47 45 40
Revenue per employee thousand 278 235 208
euros
Average number of employees people 895 920 809
(in group)

Net profit margin = net profit / revenue
EBT margin = EBT / revenue
Operating profit margin = operating profit / revenue
Gross margin = gross profit / revenue
EBITDA margin = (operating profit + depreciation, amortisation and impairment)
/ revenue
ROE = rolling 4 last quarter net profit / average equity
ROA = rolling 4 last quarter net profit / average total assets
Equity ratio = equity / total assets
Debt ratio: interest-bearing liabilities / total assets
Current ratio = current assets / current liabilities
Quick ratio = (current assets - inventories) / current liabilities
General expense ratio = general expenses / revenue
Gross remuneration ratio = gross remuneration / revenue
Accounts receivable turnover = average accounts receivable / rolling 4 last
quarter revenue x 365
Accounts payable turnover = average accounts payable / rolling 4 last quarter
cost of goods sold x 365
Revenue per employee = revenue / average number of employees


Employees and remuneration

The number of the group’s employees has dropped by 2 in the last 12 months
(-0.2%). As at 31 December 2012, the group had a total of 915 employees
(including fixed-term and part-time employees). The 12-month gross remuneration
for employees in the 12 months of 2012 was EUR 20.7 million, of which the share
of basic wages made up 74.8% and bonuses accounted for 25.2% (12 months of
2011: EUR 16.7 million, basic wages 84.6% and bonuses 15.4%). Gross
remuneration grew 24.0% compared to last year, including basic wage 9.7% and
bonuses 102.4%.


Share and shareholders

Information on security

ISIN EE3100098328
Short name MRK1T
List Baltic Main List
Nominal value no par value
Securities issued 17 700 000
Securities listed 17 700 000
Date of listing 11 August 2008

The shares of Merko Ehitus have been listed in the main list of NASDAQ OMX
Tallinn. A total of 1,662 transactions were conducted with the shares of Merko
Ehitus in 12 months of 2012, with 0.94 million shares traded, generating a
turnover of EUR 5.5 million. The lowest share price amounted to EUR 5.37 and
the highest to EUR 7.30 per share. The closing price of the share was EUR 5.90
on 31 December 2012. As at 31 December 2012, the market value of AS Merko
Ehitus amounted to EUR 104 million.

31.12.2012 31.12.2011 31.12.2010
No. of shares, pcs 17 700 000 17 700 000 17 700 000
Earnings per share (EPS), in euros 0,43 -0,80 0,07
Equity per share, in euros 6,61 6,17 7,05
P/B (price to book ratio) 0,89 0,87 1,28

Structure of shareholders as at 31.12.2012

No. of shares No. of % of No. of % of shares
shareholders shareholders shares
1 000 001 - … 1 0,07% 12 742 686 71,99%
100 001 – 1 000 10 0,71% 3 079 937 17,40%
000
10 001 – 100 000 28 1,99% 845 449 4,77%
1001-10 000 236 16,79% 709 342 4,01%
101-1000 731 51,99% 300 686 1,70%
1-100 400 28,45% 21 900 0,13%
Total 1406 100% 17 700 000 100%
--------------------------------------------------------------

Main shareholders of AS Merko Ehitus as at 31.12.2012 and change compared to
previous quarter:

No. of % of Change
shares total
AS Riverito 12 742 686 71,99% -
ING Luxembourg S.A., clients 974 126 5,50% -
Skandinaviska Enskilda Banken Ab, clients 896 864 5,07% +160
000
Firebird Republics Fund Ltd 302 395 1,71% -
Gamma Holding OÜ 163 256 0,92% +690
State Street Bank and Trust Omnibus Account a 153 018 0,86% -
Fund No OM01
SEB Elu- ja Pensionikindlustus AS 125 520 0,71% -
Skandinaviska Enskilda Banken Finnish clients 125 191 0,71% -
Andersson Investeeringud OÜ 120 015 0,68% +8 174
AS Midas Invest 117 055 0,66% +4 500
Clearstream Banking Luxembourg S.A. clients 102 497 0,58% -440


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited, in thousand euros

2012 2011
12 months 12 months

Revenue 249 131 219 322
Cost of goods sold (231 220) (222 928)
Gross profit (loss) 17 911 (3 606)

Marketing expenses (2 107) (2 104)
Administrative and general expenses (9 173) (7 910)
Other operating income 1 604 1 611
Other operating expenses (834) (1 308)
Operating profit (loss) 7 401 (13 317)

Finance income/costs 501 (718)
incl. finance income/costs from investments in associates 163 (1 120)
and joint ventures
finance income/costs from other long-term investments 1 359 973
interest expense (1 156) (1 149)
foreign exchange gain (44) 501
other financial income (expenses) 179 77
Profit (loss) before tax 7 902 (14 035)
Corporate income tax expense (289) (121)
Net profit (loss) for current period 7 613 (14 156)
---------------------
incl. net profit (loss) attributable to equity holders of 7 627 (14 084)
the parent
net profit (loss) attributable to non-controlling interest (14) (72)

Other comprehensive income (loss)
Currency translation differences of foreign entities 58 354
Comprehensive income (loss) for the period 7 671 (13 802)
---------------------
---------------------
incl. net profit (loss) attributable to equity holders of 7 685 (13 730)
the parent
net profit (loss) attributable to non-controlling interest (14) (72)

Earnings per share for profit (loss) attributable to 0,43 (0,80)
equity holders of the parent (basic and diluted, in euros)


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited, in thousand euros

2012 2011
IV IV
quarter quarter

Revenue 71 402 65 931
Cost of goods sold (64 143) (69 892)
Gross profit (loss) 7 259 (3 961)

Marketing expenses (722) (530)
Administrative and general expenses (2 485) (1 936)
Other operating income 1 000 1 024
Other operating expenses (654) (1 207)
Operating profit (loss) 4 398 (6 610)

Finance income/costs 40 (293)
incl. finance income/costs from investments in - (14)
subsidiaries
finance income/costs from investments in associates (26) (1 277)
and joint ventures
finance income/costs from other long-term investments 343 973
interest expense (235) (393)
foreign exchange gain (81) 397
other financial income (expenses) 39 21
Profit (loss) before tax 4 438 (6 903)
Corporate income tax expense (51) (117)
Net profit (loss) for current period 4 489 (6 786)
---------------------
---------------------
incl. net profit (loss) attributable to equity holders of 4 425 (6 755)
the parent
net profit (loss) attributable to non-controlling interest 64 (31)

Other comprehensive income (loss)
Currency translation differences of foreign entities (49) 331

Comprehensive income (loss) for the period 4 440 (6 455)
---------------------
---------------------
incl. net profit (loss) attributable to equity holders of 4 376 (6 424)
the parent
net profit (loss) attributable to non-controlling interest 64 (31)

Earnings per share for profit (loss) attributable to 0,25 (0,38)
equity
holders of the parent (basic and diluted, in euros)


CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited, in thousand euros

31.12.2012 31.12.2011
ASSETS
Current assets
Cash and cash equivalents 35 316 18 510
Short-term deposits - 140
Trade and other receivables 60 343 64 449
Prepaid corporate income tax 478 686
Inventories 82 830 87 834
Total current assets 178 967 171 619

Non-current assets
Long-term financial assets 24 378 27 051
Deferred income tax assets 1 919 1 870
Investment property 3 566 2 313
Property, plant and equipment 14 853 16 057
Intangible assets 1 365 1 427
Total non-current assets 46 081 48 718

TOTAL ASSETS 225 048 220 337
-----------------------

LIABILITIES AND EQUITY
Current liabilities
Borrowings 16 299 16 574
Payables and prepayments 63 209 61 635
Short-term provisions 6 165 6 781
Total current liabilities 85 673 84 990

Non-current liabilities
Long-term borrowings 19 205 23 764
Long-term interest liabilities 3 -
Long-term trade payables 1 553 790
Deferred corporate income tax liability 327 131
Long-term provisions 20 66
Total non-current liabilities 21 108 24 751
Total liabilities 106 781 109 741
-----------------------
-----------------------

Equity
Non-controlling interest 1 342 1 356
Equity attributable to equity holders of the parent
Share capital 12 000 12 000
Statutory reserve capital 1 200 1 131
Currency translation differences (512) (570)
Retained earnings 104 237 96 679
Total equity attributable to equity holders of parent 116 925 109 240
Total equity 118 267 110 596
-----------------------

TOTAL LIABILITIES AND EQUITY 225 048 220 337
-----------------------


Signe Kukin
Group CFO
+372 650 1250
[email protected]


1. 12M_2012_MERKO EHITUS_ENG.pdf
(https://newsclient.omxgroup.com/cds/DisclosureAttachmentServlet?messageAttachmentId=418926)

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