2024 12 months and IV quarter consolidated unaudited interim report

COMMENTARY FROM MANAGEMENT

Merko Ehitus posted revenue of EUR 160.4 million and net profit of EUR 19.9 million in Q4 of 2024. The respective figures for the entire year 2024 were EUR 539 million and EUR 64.7 million. Approximately 90% of revenue came from sales of construction services and 53% was earned in Lithuania. In coordination with the supervisory board, the management board of Merko Ehitus proposes to the general shareholder meeting to pay out EUR 1.90 per share as dividends.

According to the management of Merko Ehitus, the solid results of 2024 stemmed from the right decisions in terms of focusing on selected sectors and specific projects, and the teams’ superb work both in terms of efficient implementation of projects and management of risks and expenses. In 2024, contracts signed in the turbulent 2021-2022 period, the bulk of the construction on Arter Quarter, the tram line to Old City Harbour, TKM Group logistics centre, the third stage of Vilneles Skverai apartment development in Vilnius and construction of the large-scale Lithuanian wind energy infrastructure were completed. A joint venture in which the group has a 50% holding, Connecto Infra, delivered a strong performance in whole year of 2024. The Merko Group’s financial position is strong and net debt negative; and the lower need for loans translated into savings on financial expenses during a period of higher interest rates.

During the last two years, the group's Lithuanian team started work on a large number of complicated wind farm infrastructure projects. They were able to tap into the economy of scale effect and build a record 87 turbine foundations using what was effectively an industrial production process, at a consistent pace and record speed. In addition, risks were avoided, and all of it together yielded significant savings on expenses. Expenses were also reduced by the fact that work on a national defence site in Lithuania are executed ahead of schedule.

During 2024, the group's companies entered into close to one-third fewer new contracts than in 2023 and the secured order book was significantly lower than the previous year. Construction contracts generally have a term of 18-24 months, and considering the economic climate, low investments and procurements being won with very low prices seen since 2023 a complicated 2025 and 2026 for the Estonian and Latvian construction sector can be expected. As for developments in Lithuania, there are grounds for much greater optimism there. In 2024, companies of Merko Group signed new construction contracts worth EUR 338 million, which is nearly one-third less than in 2023 (EUR 501 million). As at the end of the year, the group’s balance of secured order-book was EUR 341 million.

Due to the changed market situation, the results of real estate development division are significantly more modest than in previous years. The 2024 revenue was only 40% of that of 2023, yet Merko has managed to retain profitability in this business area. Despite the softer real estate market, the default rate on obligational contracts did not increase and it has been succeeded in reducing balance of apartments still waiting to be sold. The weakest economic sentiment is seen in Estonia and the strongest sentiment is in Lithuania, where the market for new apartments is active and we are increasing our supply. In Latvia, it is hoped to stay at the current market levels and in Estonia, buoyed by the more active real estate aftermarket, there are looking ahead to growth in sales of new real estate.

In 2024, Merko delivered 323 apartments and 11 commercial units to buyers. In the course of the year, Merko launched construction and sales of 259 new apartments, and as of the end of the year, our balance stood at 633 apartments, of which 17% were covered by preliminary sale contracts. The largest development projects in progress were, in Tallinn, Uus-Veerenni, Noblessner and Lahekalda; in Tartu, Erminurme; while in Riga the leaders were Lucavsala, Arena Garden Towers, Viesturdārzs, Mežpilsēta and Magnolijas; and in Vilnius, Vilnelės Skverai.

In 2024, the largest projects in progress in Estonia were the TKM Group logistics centre, the Hampton by Hilton and Hyatt hotel buildings, Arter Quarter, the City Plaza 2 office building in Tallinn, the Estonian Defence Forces buildings at Ämari base, a tram line between Old City Harbour and Rail Baltica Ülemiste passenger terminal, the first stage of the Ülemiste multimodal transport junction and the Rail Baltica’s Tõdva highway overpasses. In Lithuania, the largest sites under way were the wind farm infrastructure projects in Kelmė, Pagėgiai and Telšiai regions, a substation in Kelmė and various national defence buildings and infrastructure. In Latvia, a solar energy farm in Vārme municipality and a student hotel in Riga were under construction.

OVERVIEW OF THE IV QUARTER AND 12 MONTHS RESULTS

PROFITABILITY
2024 12 months’ pre-tax profit was EUR 76.4 million and Q4 2024 was EUR 26.8 million (12M 2023: EUR 52.0 million and Q4 2023 was EUR 18.1 million), which brought the pre-tax profit margin to 14.2% (12M 2023: 11.1%).
Net profit attributable to shareholders for 12 months 2024 was EUR 64.7 million (12M 2023: EUR 46.0 million) and for Q4 2024 net profit attributable to shareholders was EUR 19.9 million (Q4 2023: EUR 13.9 million). 12 months net profit margin was 12.0% (12M 2023: 9.9%).

REVENUE
Q4 2024 revenue was EUR 160.4 million (Q4 2023: EUR 126.5 million) and 12 months’ revenue was EUR 539.0 million (12M 2023: EUR 466.3 million). 12 months’ revenue increased by 15.6% compared to same period last year. The share of revenue earned outside Estonia in 12 months 2024 was 58.3% (12M 2023: 39.3%).

SECURED ORDER BOOK
As of 31 December 2024, the group’s secured order book was EUR 340.6 million (31 December 2023: EUR 477.5 million). In 12 months 2024, group companies signed contracts in the amount of EUR 338.0 million (12M 2023: EUR 500.8 million). In Q4 2024, new contracts were signed in the amount of EUR 45.9 million (Q4 2023: EUR 121.4 million).

REAL ESTATE DEVELOPMENT
In 12 months 2024, the group sold a total of 323 apartments; in 12 months 2023, the group sold 948 apartments. The group earned a revenue of EUR 58.9 million from sale of own developed apartments in 12 months 2024 and EUR 137.5 million in 12 months 2023. In Q4 of 2024 a total of 129 apartments were sold, compared to 283 apartments in Q4 2023, and earned a revenue of EUR 22.9 million from sale of own developed apartments (Q4 2023: EUR 31.4 million).

CASH POSITION
At the end of the reporting period, the group had EUR 91.9 million in cash and cash equivalents, and equity of EUR 254.3 million (56.9% of total assets). Comparable figures as of 31 December 2023 were EUR 77.3 million and EUR 212.1 million (49.9% of total assets), respectively. As of 31 December 2024, the group’s net debt was negative EUR 58.5 million (31 December 2023: negative EUR 22.5 million).

PROPOSAL FOR DISTRIBUTION OF PROFITS
The Management Board proposes to the Supervisory Board to distribute to shareholders EUR 33.6 million in dividends (1.90 euros per share) from retained earnings in 2025. This is equivalent to a 52% dividend rate for 2024.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros

	2024 12 months	2023 12 months	2024 IV quarter	2023 IV quarter
Revenue	539,049	466,304	160,373	126,466
Cost of goods sold	(443,162)	(401,267)	(127,565)	(104,625)
Gross profit	95,887	65,037	32,808	21,841

Marketing expenses	(5,030)	(4,312)	(1,664)	(1,299)
General and administrative expenses	(21,908)	(19,423)	(6,793)	(6,527)
Other operating income	5,724	4,171	759	772
Other operating expenses	(2,190)	(991)	322	(377)
Operating profit	72,483	44,482	25,432	14,410

Finance income/costs	3,931	7,500	1,407	3,735
incl. finance income/costs from investments in subsidiaries	(5,087)	-	(1,968)	-
finance income/costs from joint ventures	9,951	10,220	3,317	4,159
interest expense	(1,823)	(2,697)	(354)	(686)
foreign exchange gain (loss)	(948)	(153)	(17)	39
other financial income (expenses)	1,838	130	429	223
Profit before tax	76,414	51,982	26,839	18,145

Corporate income tax expense	(11,820)	(6,081)	(6,953)	(4,254)

Net profit for financial year	64,594	45,901	19,886	13,891
incl. net profit attributable to equity holders of the parent	64,668	46,048	19,887	13,900
net profit attributable to non-controlling interest	(74)	(147)	(1)	(9)

Other comprehensive income, which can subsequently be classified in the income statement
Currency translation differences of foreign entities	105	(41)	(24)	(25)
Comprehensive income for the period	64,699	45,860	19,862	13,866
incl. net profit attributable to equity holders of the parent	64,764	45,993	19,862	13,877
net profit attributable to non-controlling interest	(65)	(133)	-	(11)
Earnings per share for profit attributable to equity holders of the parent (basic and diluted, in EUR)	3.65	2.60	1.12	0.79

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros

	31.12.2024	31.12.2023
ASSETS
Current assets
Cash and cash equivalents	91,879	77,330
Short-term deposits	10,000	-
Trade and other receivables	51,419	68,754
Prepaid corporate income tax	270	2
Inventories	196,521	195,435
	350,089	341,521
Non-current assets
Investments in joint ventures	21,571	21,915
Other shares and securities	80	80
Other long-term loans and receivables	40,196	24,490
Deferred income tax assets	5,056	3,298
Investment property	12,606	16,823
Property, plant and equipment	17,147	16,613
Intangible assets	350	520
	97,006	83,739

TOTAL ASSETS	447,095	425,260

LIABILITIES
Current liabilities
Borrowings	21,303	19,673
Payables and prepayments	129,786	133,898
Income tax liability	7,101	4,260
Short-term provisions	7,678	10,451
	165,868	168,282
Non-current liabilities
Long-term borrowings	12,102	35,142
Deferred income tax liability	6,148	4,441
Other long-term payables	8,719	5,495
	26,969	45,078

TOTAL LIABILITIES	192,837	213,360

EQUITY
Non-controlling interests	-	(155)
Equity attributable to equity holders of the parent
Share capital	7,929	7,929
Statutory reserve capital	793	793
Currency translation differences	(41)	(838)
Retained earnings	245,577	204,171
	254,258	212,055
TOTAL EQUITY	254,258	211,900

TOTAL LIABILITIES AND EQUITY	447,095	425,260

Interim report is attached to the announcement and is also published on NASDAQ Tallinn and Merko’s web page (group.merko.ee).

Urmas Somelar
Head of Finance
AS Merko Ehitus
+372 650 1250
urmas.somelar@merko.ee

AS Merko Ehitus (group.merko.ee) group companies construct buildings and infrastructure and develop real estate. We create a better living environment and build the future. We operate in Estonia, Latvia and Lithuania. As at the end of 2024, the group employed 605 people, and the group’s revenue for 2024 was EUR 539 million.

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