Stell kept growing despite the crisis

Stell Eesti, which increased its sales revenue last year, estimated the negative economic impact of the state of emergency on the company’s turnover at 600,000 euros in its annual report. Nevertheless, the company’s CFO says that, the general economic situation taken into account, the company can be said to have been swimming against the current during the crisis, creating new jobs and expanding beyond Tallinn.

Stell Eesti AS (former ISS Eesti AS) is a real estate management company. Stell provides real estate maintenance services all over Estonia and has branches in Tallinn, Tartu, Pärnu, Jõhvi, Viljandi, Haapsalu, and Kuressaare.

“2019 was year of major changes for the company. The international group ISS left the Estonian market and sold ISS Eesti AS. In August 2019, the sales and purchase transaction was finalized, which meant that the owner of ISS Eesti AS had changed, and the company was not a part of the international group ISS any longer. After the sales and purchase transaction, preparations were made for bringing a new brand to the market and for the merging of the subsidiaries and the parent company,” the heads of the company Kaur Õllek, Margus Välling and Mikk Sillamaa explain in the annual report.

The company has been operating under the new brand and name since January 2020. At the same time, parent companies Ancora Investment and ISS Haldus as well as sister company HA&HO Kinnisvarateenused were merged with Stell.

With its turnover of 21.23 million euros, Stell Eesti’s operating profit was 0.74 million euros in 2019. Compared to the year before, the company’s sales revenue increased by 8.67% while the operating profit margin was 3.5%, having decreased by 0.47 per cent in a year.

Stell’s target group to which all services related to real estate maintenance are provided comprises real estate owners. Last year, cleaning services accounted for 75.1% of the sales revenue while management and maintenance services and other services accounted for 22.9% and 2% respectively.

In 2018, the company’s sales revenue amounted to 19.54 million euros while the operating profit was 0.78 million euros.

“It was the sphere of cleaning services which primarily contributed to the growth through expanding the scope of services used by existing clients and attracting new clients. Gross margin ratio and operating profit margin both decreased which was due to employees’ salary expectations becoming higher and higher as well as a very low unemployment rate. Consequently, the biggest challenge the company faced was finding workforce accompanied by a decrease in labour turnover,” the annual report states.

 

Contractual service amounts restored

The state of emergency implemented from March to May had a significant impact on Stell’s operation. In the annual report completed in April, the management estimate the impact on turnover to be as high as 600,000 euros, the most important factors being  the collapse of the tourism sector as well as the restrictions imposed by the government on the operation of various companies and cultural institutions.

“Like the majority of companies in our line of business, Stell certainly felt a considerable impact of the state of emergency on its operation. A number of our clients could not continue working as usual, and, consequently, our services to them had to be suspended or cancelled. Our goal as a service provider was to retain existing agreements during the state of emergency, to be flexible and find solutions suitable for both parties, so we suspended services or temporarily reduced their quantity, changed the concept and focus of some services, and gave clients opportunities to review their contracts and modify them if necessary,” said Kaur Õllek, the company’s CFO.

Not a single major sales contract with Stell was terminated as the result of the state of emergency, and almost all the contracts which were suspended or saw a reduction in the amount of services during the state of emergency have been restored to the contracted amounts by now.

“As we forecast the impact of the state of emergency on our turnover in 2020 to amount to approximately 600,000 euros in our annual report prepared in April, the turnover of the first seven months of this year, with the adjustment in question taken into account, can essentially be considered equal to that of the same period of last year,” Õllek said.

“We did not have to lay people off as the result of the state of emergency, and we see no need for it now. Judging by the general economic situation, it can be said we were swimming against the current, because we created new jobs and strengthened the company’s capacity, competence and market position outside Tallinn. Today, we keep creating new and new jobs. Our goal lies in providing clients with the services we used to outsource so that the share of subcontracting in our business can be reduced. The shorter our subcontracting chain, the more flexibility we can ensure as a service provider in order to promptly modify the components of the service and reschedule our resources where necessary.”

At the end of the previous reporting year, the company had 989 employees, and the number of employees had decreased by 2 in one year. The company payed more than 12.7 million euros in labour costs and spent 2.34 million euros on purchasing tangible fixed assets.

 

Acquisition of Balti Haldusgrupp

The company’s main goal in 2020 is to strengthen the brand of Stell in the Estonian real estate maintenance sector. “Similarly to 2019, the focus of 2020 will certainly be on labour shortage in Estonia and the resulting expectations of salary growth. Stell aims to find a sustainable solution to reduce employee turnover and increase employee satisfaction,” the management writes.

“Stell has established the goal of providing clients with integrated property management solutions in order to cater for as many needs related to real estate as possible: maintenance, business administration, technical services, residential property management and a variety of support services,” Õllek said.

In July, Stell acquired the company Balti Haldusgrupp OÜ, which was founded in 2015 and provides real estate management and maintenance services in the Baltic States. It employs 65 people as cleaning staff and real estate managers.

Mikk Sillamaa, the CEO of Stell Eesti, says the acquisition is a part Stell’s business strategy which involves expanding the company’s operation in Estonia and other Baltic States alike in the upcoming years. “The market of administrative services is consolidating everywhere around the world, with major service providers playing the key role. Such trends are still in their infancy here in Estonia, but we want to be leading these processes and to contribute to the changes occurring in the market,” Sillamaa noted.

All the former employees of Balti Haldusgrupp will be joining Stell’s service units. All existing contracts with Balti Haldusgrupp will also remain in force for its clients, but the business name of the service provider will change.

 

This article was published on the portal “Kinnisvarauudised” (Real Estate News) on 12 August 2020 https://www.kinnisvarauudised.ee/majandustulemused/2020/08/12/kasvav-stell-ujus-kriisi-ajal-vastuvoolu