Market announcement

Title

2023 9 months and III quarter consolidated unaudited interim report

Message

COMMENTARY FROM MANAGEMENT

Q3 2023 revenue for Merko Ehitus was EUR 122 million and for the nine months was
EUR  340 million. Net profit in  Q3 was EUR 12.7 million  and net profit for the
nine  months increased to  EUR 32.1 million. Merko  delivered 665 apartments and
22 commercial units to customers in the first nine months of 2023.

According  to the management of Merko Ehitus, the Q3 and nine-month results were
supported  by delivery  of presold  apartments to  customers in  newly completed
apartment  developments. The  Merko group  has inventory  of apartments that are
under  construction and  presold is  significantly smaller  than in the past few
years due to the recession and the slump in the real estate market and this will
exert  a  negative  impact  on  the  group's  results  in coming years. The poor
macroeconomic  picture  and  general  uncertainty  did  not  improve  in  Q3 and
investments into new development projects are still being curtailed. The outlook
in  this regard is also very weak, the economic outlook has deteriorated and the
recovery  has  been  deferred  to  the  more  distant future due to central bank
interest  rate policy,  continuing inflation,  unstable energy  and tax policies
and,  above all, the geopolitical situation.  Over nine months of 2023 the group
has  invested a  total of  EUR 73 million  into ongoing development projects and
acquisitions of new properties.

In  the first nine  months of 2023, the  group companies signed new construction
contracts  worth  EUR  379 million,  which  was  31% more than in the comparison
period,  and the balance of secured  order-book grew by approximately 30% to EUR
449 million.  The  group's  secured  order-book  continued  growth  in Q3 and is
currently  strong,  which  does  partially  counterbalance  the  impacts  of the
slumping apartment market on the group's construction volumes. Yet profitability
of  construction service is under constant strain  and the risks are high, since
in  the medium to long  term, cautious positions are  predominant in markets and
supply  chains, and there is an extreme  amount of uncertainty about the impacts
of  governments' economic  and foreign  policy measures.  Therefore, the group's
companies will have to devote great attention to managing the risks.

In  the first nine  months of the  year, Merko delivered  665 apartments and 22
business premises. As of the end of Q3, the group's companies had 825 apartments
on its balance sheet. About 40% of the apartments in the construction phase were
covered  by preliminary sale contracts.  The largest apartment developments were
Uus-Veerenni,   Noblessner   and  Lahekalda  in  Tallinn,  Erminurme  in  Tartu,
Viesturdarzs,  Mezhpilseta  and  Magnolijas  in  Riga,  and  Vilneles  Skverai in
Vilnius.

In  Q3 of 2023, the largest sites under construction in Estonia were the Rae and
Pelgulinna  state gymnasiums, Hampton by Hilton and Hyatt hotel buildings, Arter
Quarter,  the logistics centre  for Tallinn Kaubamaja  Group, the infrastructure
along  the south-eastern  border of  the Republic  of Estonia, the renovation of
Vana-Kalamaja  Street, a  tram line  between Old  City Harbour  and Rail Baltica
Ülemiste  passenger  terminal,  and  the  first  phase  of Ülemiste terminal. In
Latvia,  the  Elemental  Business  Centre  office  buildings  were  in progress.
Projects  in Lithuania were wind farm infrastructure works in Kelme and Pag?giai
regions, and various buildings and infrastructure for NATO training centres.

OVERVIEW OF THE III QUARTER AND 9 MONTHS RESULTS

PROFITABILITY
2023 9 months'  pre-tax profit  was EUR  33.8 million and  Q3 2023 was EUR 13.6
million  (9M  2022: EUR  18.7 million  and  Q3 2022 was EUR 10.3 million), which
brought the pre-tax profit margin to 10.0% (9M 2022: 7.0%).
Net  profit attributable to shareholders  for 9 months 2023 was EUR 32.1 million
(9M   2022: EUR  17.0 million)  and  for  Q3  2023 net  profit  attributable  to
shareholders  was  EUR  12.7 million  (Q3  2022: EUR  9.8 million). 9 months net
profit margin was 9.5% (9M 2022: 6.4%).

REVENUE
Q3 2023 revenue was EUR 122.5 million (Q3 2022: EUR 110.0 million) and 9 months'
revenue  was EUR  339.8 million (9M  2022: EUR 266.2 million). 9 months' revenue
increased  by  27.7% compared  to  same  period  last year. The share of revenue
earned outside Estonia in 9 months 2023 was 34.5% (9M 2022: 53.4%).

SECURED ORDER BOOK
As  of 30 September 2023, the  group's secured order  book was EUR 448.6 million
(30 September 2022: EUR 341.0 million). In 9 months 2023, group companies signed
contracts in the amount of EUR 379.4 million (9M 2022: EUR 290.4 million). In Q3
2023, new contracts were signed in the amount of EUR 124.7 million (Q3 2022: EUR
97.1 million).

REAL ESTATE DEVELOPMENT
In  9 months 2023, the group sold a  total of 665 apartments; in 9 months 2022,
the  group sold 456 apartments. The group  earned a revenue of EUR 106.1 million
from  sale of own developed apartments  in 9 months 2023 and EUR 56.9 million in
9 months  2022. In Q3 of  2023 a total of  153 apartments were sold, compared to
242 apartments in Q3 2022, and earned a revenue of EUR 25.5 million from sale of
own developed apartments (Q3 2022: EUR 29.8 million).

CASH POSITION
At  the end of the reporting period, the  group had EUR 31.3 million in cash and
cash  equivalents,  and  equity  of  EUR  198.4 million (49.7% of total assets).
Comparable  figures as of 30 September 2022 were EUR 22.2 million and EUR 166.6
million  (40.9%  of  total  assets),  respectively. As of 30 September 2023, the
group's net debt was EUR 28.4 million (30 September 2022: EUR 88.3 million).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros

                             2023      2022         2023         2022      2022
                         9 months  9 months  III quarter  III quarter 12 months

 Revenue                  339,838   266,206      122,491      110,008   409,633

 Cost of goods sold     (296,642) (235,123)    (105,114)     (96,206) (355,975)

 Gross profit              43,196    31,083       17,377       13,802    53,658



 Marketing expenses       (3,013)   (2,945)        (918)        (776)   (4,077)

 General and
 administrative
 expenses                (12,896)  (11,411)      (4,635)      (3,889)  (15,860)

 Other operating income     3,399     2,426          621        1,004     3,144

 Other operating
 expenses                   (614)     (647)        (467)        (192)   (1,834)

 Operating profit          30,072    18,506       11,978        9,949    35,031



 Finance income/costs       3,765       168        1,639          361     2,067

 incl. finance
 income/costs from
 joint ventures             6,061     1,093        2,242          765     3,516

 interest expense         (2,011)     (670)        (674)        (296)   (1,180)

 foreign exchange gain
 (loss)                     (192)     (152)           98         (85)     (138)

 other financial income
 (expenses)                  (93)     (103)         (27)         (23)     (131)

 Profit before tax         33,837    18,674       13,617       10,310    37,098



 Corporate income tax
 expense                  (1,827)   (1,911)        (898)        (735)   (2,995)



 Net profit for
 financial year            32,010    16,763       12,719        9,575    34,103

 incl. net profit
 attributable to equity
 holders of the parent     32,148    17,023       12,698        9,821    34,640

 net profit
 attributable to non-
 controlling interest       (138)     (260)           21        (246)     (537)

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

 Currency translation
 differences of foreign
 entities                    (16)        11         (88)           23        30

 Comprehensive income
 for the period            31,994    16,774       12,631        9,598    34,133

 incl. net profit
 attributable to equity
 holders of the parent     32,116    17,020       12,626        9,831    34,648

 net profit
 attributable to non-
 controlling interest       (122)     (246)            5        (233)     (515)

 Earnings per share for
 profit attributable to
 equity holders of the
 parent (basic and
 diluted, in EUR)            1.82      0.96         0.72         0.55      1.96

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros

                                               30.09.2023 30.09.2022 31.12.2022

 ASSETS

 Current assets

 Cash and cash equivalents                         31,282     22,200     17,665

 Trade and other receivables                       86,895     72,295     77,959

 Prepaid corporate income tax                           2          5         38

 Inventories                                      206,603    243,222    225,661

                                                  324,782    337,722    321,323

 Non-current assets

 Investments in joint ventures                     17,756     10,472     12,895

 Other shares and securities                           80          -          -

 Other long-term loans and receivables             21,104     28,323     22,982

 Deferred income tax assets                         1,852      1,155        693

 Investment property                               15,534     11,511     11,485

 Property, plant and equipment                     17,238     17,527     17,452

 Intangible assets                                    508        592        582

                                                   74,072     69,580     66,089



 TOTAL ASSETS                                     398,854    407,302    387,412



 LIABILITIES

 Current liabilities

 Borrowings                                        23,325     60,034     49,687

 Payables and prepayments                         124,285    119,251     96,248

 Income tax liability                               1,846      1,830      1,241

 Short-term provisions                             10,268      5,584      9,820

                                                  159,724    186,699    156,996

 Non-current liabilities

 Long-term borrowings                              36,377     50,469     42,236

 Deferred income tax liability                      1,878      1,671      2,355

 Other long-term payables                           2,841      2,377      2,133

                                                   41,096     54,517     46,724



 TOTAL LIABILITIES                                200,820    241,216    203,720



 EQUITY

 Non-controlling interests                          (380)      (473)      (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                   (815)      (794)      (783)

 Retained earnings                                190,507    158,631    176,248

                                                  198,414    166,559    184,187

 TOTAL EQUITY                                     198,034    166,086    183,692



 TOTAL LIABILITIES AND EQUITY                     398,854    407,302    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
urmas.somelar@merko.ee (mailto:urmas.somelar@merko.ee)

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.