Market announcement

Title

2023 3 months consolidated unaudited interim report

Message

COMMENTARY FROM MANAGEMENT

Q1  2023 revenue for  Merko Ehitus  was EUR  76 million, representing 11% growth
compared to the same period a year ago. Net profit for the first quarter was EUR
5.9 million  - nearly double that of  Q1 2022. Merko delivered 145 apartments to
new homeowners in Q1.

According  to the management of Merko Ehitus,  despite the good profit growth in
Q1, it had entered a completely different apartment market situation than was in
2020 and  2021 when transaction volume  and prices peaked.  Today are drawing up
the final contracts under property law for apartments pre-sold earlier, and this
is  also  showing  up  in  current  financial  results. The pace of new sales of
apartments  has dropped  steeply compared  to spring  2022 and is  several times
lower  than before. Because of that,  Merko group has launched fewer development
projects in the last 12 months, which in turn means fewer apartments in the next
few  years.  On  the  positive  side  of  things,  the  demand for new homes has
increased somewhat in Q1.

In  Q1 2023, the group  companies entered into  new construction contracts worth
EUR 170 million and the balance of secured order-book grew by approximately 10%
to  EUR 412 million. The secured order-book  of the group companies is currently
strong,  which  in  the  sense  of  construction volumes does counterbalance the
impacts  of the apartment  market declining in  the next few  years. The project
management  business directly relies  on the volume  of construction orders, and
these  in turn  depend on  investment confidence  and the  general health of the
economy.  The outlook in this  area is not good  and rapid inflation will mean a
number of risks on the construction contact expense side.

In  Q1, Merko delivered 145 apartments to buyers and launched the fifth phase of
Lahekalda  apartment development in Tallinn, with the construction of the above-
ground  structures. The decision  to build the  project to completion depends on
the  market situation. As of the end of Q1, the group had 1,004 apartments under
construction, of which more than 40% were covered by preliminary sale contracts.
The  largest apartment developments were  Uus-Veerenni, Noblessner and Lahekalda
in  Tallinn, Erminurme in Tartu, Viesturd?rzs, Mezhpils?ta and Magnolijas in Riga
and Vilneles Skverai in Vilnius.

In  Q1 of 2023, the largest  sites under construction in  Estonia were the third
phase  of the Mustamäe medical  campus of the North  Estonia Medical Centre, Rae
and  Pelgulinna state gymnasiums, Arter Quarter and the infrastructure along the
south-eastern  border of  the Republic  of Estonia,  Defence Forces buildings on
Tapa  base, a  tram line  between Old  City Harbour  and Rail  Baltic's Ülemiste
passenger  terminal  and  the  renovation  of  Vana-Kalamaja Street. Projects in
progress  in Latvia were the GUSTAVS  business centre, Elemental Business Centre
office  buildings and NATO infrastructure in ?dazhi. In Lithuania, infrastructure
for  several  wind  farms  and  buildings  and  infrastructure for NATO training
centres.

OVERVIEW OF THE 3 MONTHS RESULTS

PROFITABILITY
2023 3 months'  pre-tax profit  was EUR  6.1 million (3M 2022: EUR 3.5 million),
which brought the pre-tax profit margin to 8.0% (3M 2022: 5.1%).
Net  profit attributable to  shareholders for 3 months  2023 was EUR 5.9 million
(3M   2022: EUR  3.0 million)  and  3 months  net  profit  margin  was  7.8% (3M
2022: 4.4%).

REVENUE
2023 3 months'  revenue  was  EUR  75.8 million  (3M 2022: EUR 68.4 million). 3
months'  revenue increased by 10.7% compared to same period last year. The share
of revenue earned outside Estonia in 3 months 2023 was 46.7% (3M 2022: 56.2%).

SECURED ORDER BOOK
As  of 31 March 2023, the  group's secured order  book was EUR 412.2 million (31
March   2022: EUR  376.1 million).  In  3 months  2023, group  companies  signed
contracts in the amount of EUR 170.3 million (3M 2022: EUR 171.2 million).

REAL ESTATE DEVELOPMENT
In  3 months 2023, the group sold a  total of 145 apartments; in 3 months 2022,
the  group sold 126 apartments.  The group earned  a revenue of EUR 19.4 million
from  sale of own developed apartments  in 3 months 2023 and EUR 15.5 million in
3 months 2022.

CASH POSITION
At  the end of the reporting period, the  group had EUR 14.3 million in cash and
cash  equivalents,  and  equity  of  EUR  190.1 million (50.0% of total assets).
Comparable  figures as  of 31 March  2022 were EUR  29.9 million and  EUR 170.3
million  (50.0% of total assets), respectively. As of 31 March 2023, the group's
net debt was EUR 72.8 million (31 March 2022: EUR 23.6 million).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros

                                                        2023     2022      2022
                                                    3 months 3 months 12 months

 Revenue                                              75,751   68,426   409,633

 Cost of goods sold                                 (65,776) (60,554) (355,975)

 Gross profit                                          9,975    7,872    53,658



 Marketing expenses                                  (1,077)  (1,115)   (4,077)

 General and administrative expenses                 (3,965)  (3,723)  (15,860)

 Other operating income                                  817      686     3,144

 Other operating expenses                               (62)     (61)   (1,834)

 Operating profit                                      5,688    3,659    35,031



 Finance income/costs                                    391    (160)     2,067

 incl. finance income/costs from joint ventures        1,280      (2)     3,516

 interest expense                                      (655)    (162)   (1,180)

 foreign exchange gain (loss)                          (210)       52     (138)

 other financial income (expenses)                      (24)     (48)     (131)

 Profit before tax                                     6,079    3,499    37,098



 Corporate income tax expense                          (292)    (421)   (2,995)



 Net profit for financial year                         5,787    3,078    34,103

 incl. net profit attributable to equity holders of
 the parent                                            5,880    3,006    34,640

 net profit attributable to non-controlling
 interest                                               (93)       72     (537)



 Other comprehensive income, which can subsequently
 be classified in the income statement

 Currency translation differences of foreign
 entities                                                 53       16        30

 Comprehensive income for the period                   5,840    3,094    34,133

 incl. net profit attributable to equity holders of
 the parent                                            5,910    3,020    34,648

 net profit attributable to non-controlling
 interest                                               (70)       74     (515)

 Earnings per share for profit attributable to
 equity holders of the parent (basic and diluted,
 in EUR)                                                0.33     0.17      1.96

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros

                                               31.03.2023 31.03.2022 31.12.2022

 ASSETS

 Current assets

 Cash and cash equivalents                         14,295     29,881     17,665

 Trade and other receivables                       54,206     57,331     77,959

 Prepaid corporate income tax                          89         53         38

 Inventories                                      244,549    187,848    225,661

                                                  313,139    275,113    321,323

 Non-current assets

 Investments in joint ventures                     14,175      9,377     12,895

 Other long-term loans and receivables             22,685     23,878     22,982

 Deferred income tax assets                           873        793        693

 Investment property                               11,460     13,803     11,485

 Property, plant and equipment                     17,287     16,966     17,452

 Intangible assets                                    564        653        582

                                                   67,044     65,470     66,089



 TOTAL ASSETS                                     380,183    340,583    387,412



 LIABILITIES

 Current liabilities

 Borrowings                                        59,753     11,554     49,687

 Payables and prepayments                          88,907    103,801     96,248

 Income tax liability                               1,290        956      1,241

 Short-term provisions                              8,973      6,825      9,820

                                                  158,923    123,136    156,996

 Non-current liabilities

 Long-term borrowings                              27,347     41,938     42,236

 Deferred income tax liability                      2,327      3,159      2,355

 Other long-term payables                           2,054      2,244      2,133

                                                   31,728     47,341     46,724



 TOTAL LIABILITIES                                190,651    170,477    203,720



 EQUITY

 Non-controlling interests                          (565)      (153)      (495)

 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                   (753)      (777)      (783)

 Retained earnings                                182,128    162,314    176,248

                                                  190,097    170,259    184,187

 TOTAL EQUITY                                     189,532    170,106    183,692



 TOTAL LIABILITIES AND EQUITY                     380,183    340,583    387,412

Interim  report is attached to the announcement  and is also published on NASDAQ
Tallinn and Merko's web page (group.merko.ee (https://group.merko.ee/en/)).

Urmas Somelar
Head of Finance
AS Merko Ehitus
+372 650 1250
[email protected] (mailto:[email protected])

AS Merko Ehitus (group.merko.ee (https://group.merko.ee/en/)) group companies
develop real estate and construct buildings and infrastructure. We create a
better living environment and build the future. We operate in Estonia, Latvia,
Lithuania and Norway. As at the end of 2022, the group employed 661 people, and
the group's revenue for 2022 was EUR 410 million.