Market announcement

Title

2024 first quarter consolidated interim report (unaudited)

Message

The  first quarter of 2024 of the Nordecon Group is characterized by an increase
in  sales revenue, an improvement in profitability  and an increase in the order
book.
The  sales revenue of the first quarter of 2024 was 46,245 thousand euros, which
increased  by  approximately  38% compared  to  the  sales revenue of continuing
operations  in the  same period  last year.  The sales  revenue in the Buildings
segment  increased by 42%, and  the sales revenue  of the Infrastructure segment
remained essentially at the same level as in the comparable period. The increase
in sales revenue was expected based on the volume of the group's order book.
Gross  profitability was 4.6% in the  first quarter of 2024 (Q1 2023: 2.9%). The
increase  in profitability is  based on the  improvement in the profitability of
the Buildings segment. Due to the seasonality of construction, the result of the
first  quarter is affected, especially in the Infrastructure segment, by a large
part  of  uncovered  fixed  costs.  It  mainly  concerns  the  asphalt  concrete
production  and installation  part of  road construction,  where the cost of the
necessary equipment makes up a large part of the fixed costs.
As  of  31 March  2024, the  amount  of  unexecuted  works  of  the construction
contracts  concluded by the  companies of the  group was 198,737 thousand euros,
which is approximately 34% more compared to the period a year ago.

Condensed consolidated interim statement of financial position

 EUR'000                                           31 March 2024 31 December 2023
-------------------------------------------------------------------------------
 ASSETS

 Current assets

 Cash and cash equivalents                              16,083           11,892

 Trade and other receivables                            30,117           37,010

 Prepayments                                             2,812            1,789

 Inventories                                            24,766           25,879

 Total current assets                                   73,778           76,570

 Non-current assets

 Other investments                                          76               76

 Trade and other receivables                             9,198            9,113

 Investment property                                     5,517            5,517

 Property, plant and equipment                          13,979           14,292

 Intangible assets                                      14,979           14,964

 Total non-current assets                               43,749           43,962

 TOTAL ASSETS                                          117,527          120,532



 LIABILITIES

 Current liabilities

 Borrowings                                             13,751           10,188

 Trade payables                                         52,355           39,855

 Other payables                                          6,367            9,241

 Deferred income                                        12,996           20,602

 Provisions                                              1,006            1,129

 Total current liabilities                              86,475           81,015

 Non-current liabilities

 Borrowings                                              4,090           8,563,

 Trade payables                                          2,115            6,011

 Provisions                                              2,440            2,405

 Total non-current liabilities                           8,645           16,979

 TOTAL LIABILITIES                                      95,120           97,994



 EQUITY

 Share capital                                          14,379           14,379

 Own (treasury) shares                                   (660)            (660)

 Share premium                                             635              635

 Statutory capital reserve                               2,554            2,554

 Translation reserve                                     3,837            3,786

 Retained earnings                                         326              919

 Total equity attributable to owners of the
 parent                                                 21,071           21,613

 Non-controlling interests                               1,336              925

 TOTAL EQUITY                                           22,407           22,538

 TOTAL LIABILITIES AND EQUITY                          117,527          120,532

Condensed consolidated interim statement of comprehensive income

 EUR'000                                               Q1 2024  Q1 2023      2023
-------------------------------------------------------------------------------
 Continuing operations
-------------------------------------------------------------------------------
 Revenue                                              46,245   33,549   186,464

 Cost of sales                                      (44,107) (32,564) (182,655)

 Gross profit                                          2,138      985     3,809



 Marketing and distribution expenses                    (68)    (104)     (497)

 Administrative expenses                             (1,564)  (1,587)   (6,564)

 Other operating income                                   26      109       286

 Other operating expenses                              (146)     (28)     (465)



 Operating profit (loss)                                 386    (625)   (3,431)

 Finance income                                          137       69       613

 Finance costs                                         (705)    (885)   (3,356)

 Net finance costs                                     (568)    (816)   (2,743)



 Loss before tax                                       (182)  (1,441)   (6,174)

 Income tax expense                                        0    (243)     (244)

 Loss for the period from continuing operations        (182)  (1,684)   (6,418)

 Profit for the period from a discontinued
 operation                                                 -       10     8,474

 Profit (loss) for the period                          (182)  (1,674)     2,056

 Other comprehensive income
 Items that may be reclassified subsequently to
 profit or loss

 Exchange differences on translating foreign
 operations                                               51      169       470

 Total other comprehensive income                         51      169       470

 TOTAL COMPREHENSIVE INCOME (EXPENSE)                  (131)  (1,505)     2,526



 Profit (loss) attributable to:

 - Owners of the parent                                (593)  (1,874)     (942)

 - Non-controlling interests                             411      200     2,998

 Profit (loss) for the period                          (182)  (1,674)     2,056



 Comprehensive income (expense) attributable to:

 - Owners of the parent                                (542)  (1,705)     (472)

 - Non-controlling interests                             411      200     2,998

 Comprehensive income (expense) for the period         (131)  (1,505)     2,526



 Earnings per share from continuing operations
 attributable to owners of the parent:

 Basic earnings per share (EUR)                         (0.02)   (0.06)    (0.31)

 Diluted earnings per share (EUR)                       (0.02)   (0.06)    (0.31)



 Earnings per share from a discontinued operation
 attributable to owners of the parent:

 Basic earnings per share (EUR)                              -     0.00      0.28

 Diluted earnings per share (EUR)                            -     0.00      0.28

Condensed consolidated interim statement of cash flows

  EUR'000                                                     Q1 2024    Q1 2023
-------------------------------------------------------------------------------
  Cash flows from operating activities

  Cash receipts from customers                               53,333     77,360

  Cash paid to suppliers                                   (39,940)   (67,923)

  VAT paid                                                  (3,112)    (2,692)

  Cash paid to and for employees                            (4,859)    (5,716)

  Income tax paid                                                 0      (324)

  Net cash from operating activities                          5,422        705



  Cash flows from investing activities

  Apaid for acquisition of property, plant and equipment       (21)       (37)

  Proceeds from sale of property, plant and equipment            25        201

  Loans provided                                               (18)      (508)

  Repayments of loans provided                                    0          4

  Dividends received                                              6         12

  Interest received                                              39          2

  Net cash from (used in) investing activities                   31      (326)



  Cash flows from financing activities

  Proceeds from loans received                                  108      1,234

  Repayments of loans received                                (633)    (1,330)

  Dividends paid                                                  0      (588)

  Lease payments                                              (555)      (735)

  Interest paid                                               (278)      (294)

  Other payments                                                 99          0

  Net cash used in financing activities                     (1,259)    (1,713)



  Net cash flow                                               4,194    (1,334)



  Cash and cash equivalents at beginning of period           11,892      7,238

  Effect of movements in foreign exchange rates                 (3)        (3)

  Change in cash and cash equivalents                         4,194    (1,334)

  Cash and cash equivalents at end of period                 16,083      5,901

Financial review

Financial performance

Nordecon delivered a gross profit of EUR2,138 thousand and a gross margin of 4.6%
in  the first quarter of 2024 (Q1 2023: EUR985 thousand and 2.9%). The improvement
in  profitability was driven by the Buildings segment, which increased its gross
margin  to 7.8% (Q1 2023: 6.3%). Due to the  seasonal nature of the construction
business, first-quarter results are affected by a large share of uncovered fixed
costs,  particularly in the  Infrastructure segment. Above  all, this applies to
asphalt  concrete production  and laying  in road  construction, where plant and
equipment  expenses account for a  major share of fixed  costs. As a result, the
gross  margin of  the Infrastructure  segment was  negative at  30.9% (Q1 2023:
negative at 26.3%).
The  group's administrative expenses  for the first  quarter of 2024 amounted to
EUR1,564  thousand. Administrative expenses from continuing operations remained at
the  same level  as in  the first  quarter of  2023, when the  figure was EUR1,587
thousand.  The ratio of  administrative expenses to  revenue (12 months rolling)
increased year on year, rising to 3.3% (Q1 2023: 2.9%).
The  group ended  the first  quarter of  2024 with an  operating profit  of EUR386
thousand  (Q1 2023: an operating  loss of EUR625  thousand). EBITDA for the period
was EUR1,094 thousand (Q1 2023: EUR155 thousand).
The  group's finance income and costs are affected by exchange rate fluctuations
in  the group's  foreign markets.  During the  period, the  exchange rate of the
Ukrainian  hryvnia remained stable against the  euro, while the exchange rate of
the  Swedish krona  weakened against  the euro  by around  4%. As a  result, the
translation  of  the  loans  provided  to  the  group's  Ukrainian  and  Swedish
subsidiaries in euros into the local currencies gave rise to an exchange loss of
EUR30  thousand (Q1 2023: EUR133 thousand). Due  to the group's relatively high loan
burden,  finance  costs  were  strongly  influenced  by  interest expense, which
amounted to EUR230 thousand (Q1 2023: EUR212 thousand).
The  group ended the  period with a  net loss of  EUR182 thousand (Q1 2023: EUR1,674
thousand).  The net loss attributable to owners  of the parent, Nordecon AS, was
EUR593 thousand (Q1 2023: EUR1,874 thousand).

Cash flows

Operating  activities produced a net cash inflow of EUR5,422 thousand in the first
quarter  of 2024 (Q1 2023: an  inflow of EUR705  thousand). Operating cash flow is
strongly  influenced by the fact that the  contracts signed with most public and
private sector customers do not require them to make advance payments, while the
group  has to make  prepayments to subcontractors  and materials suppliers. Cash
inflow  is also reduced by contractual retentions, which extend from 5 to 10% of
the contract price and are released at the end of the construction period only.
Investing activities of the period resulted in a net cash inflow of EUR31 thousand
(Q1  2023: an outflow of EUR326 thousand).  Payments for the purchase of property,
plant  and equipment totalled EUR21 thousand  (Q1 2023: EUR37 thousand) and proceeds
from  the  sale  of  property,  plant  and  equipment  totalled EUR25 thousand (Q1
2023: 201 thousand).  Loans  provided  amounted  to  EUR18 thousand (Q1 2023: EUR508
thousand) and interest received amounted to EUR39 thousand (Q1 2023: 2 thousand).
Financing  activities generated a net cash outflow of EUR1,259 thousand (Q1 2023:
an outflow of EUR1,713 thousand). The largest items were loan repayments and lease
payments  of  EUR633  thousand  and  EUR555  thousand, respectively (Q1 2023: EUR1,330
thousand and EUR735 thousand, respectively). Proceeds from loans received amounted
to  EUR108  thousand  (Q1  2023: EUR1,234  thousand)  and  interest payments to EUR278
thousand  (Q1 2023: EUR294 thousand). In the first quarter of 2023, the group also
paid dividends of EUR588 thousand.
The  group's  cash  and  cash  equivalents  at 31 March 2024 amounted to EUR16,083
thousand (31 March 2023: EUR5,901 thousand).

Key financial figures and ratios

 Figure/ratio                                   Q1 2024 Q1 2023 Q1 2022    2023
-------------------------------------------------------------------------------
 Revenue (EUR'000)*                                46,245  33,549  44,539 186,464

 Revenue change*                                  37.8% (24.7)%   22.1% (15.4)%

 Net loss (EUR'000)*                                (182) (1,674) (1,166) (6,418)

 Net  loss attributable to owners of the parent
 (EUR'000)                                          (593) (1,874)   (919)   (942)

 Earnings per share (EUR)                          (0.02)  (0.06)  (0.03)  (0.03)

 Administrative expenses to revenue*               3.4%    4.7%    2.8%    3.5%

 Administrative expenses to revenue (rolling)*     3.3%    2.9%    2.1%    3.5%

 EBITDA (EUR'000)*                                  1,094     155     912   (412)

 EBITDA margin*                                    2.4%    0.5%    2.0%  (0.2)%

 Gross margin*                                     4.6%    2.9%  (0.2)%    2.0%

 Operating margin*                                 0.8%  (1.9)%    0.2%  (1.8)%

 Net margin*                                     (0.4)%  (5.0)%  (2.6)%  (3.4)%

 Return on invested capital                        0.1%  (2.4)%  (0.2)%    8.0%

 Return on equity                                (0.8)%  (6.4)%  (1.1)%    8.3%

 Equity ratio                                     19.1%   19.5%   20.4%   18.7%

 Return on assets                                (0.2)%  (1.3)%  (0.2)%  (1.6)%

 Gearing                                           4.4%   35.6%   36.1%   16.6%

 Current ratio                                     0.85    0.85    0.91    0.95

 Order book (EUR'000)*                            198,737 148,302 204,495 216,732

* Continuing operations

Performance by geographical market

Revenue  generated  outside  Estonia  in  the  first  quarter  of 2024 decreased
compared  to the same period  in 2023 and accounted for  1% of the group's total
revenue for the period. Despite the ongoing war, Nordecon's construction volumes
in Ukraine increased. During the period, work continued on the reconstruction of
substations  and the installation  of associated physical  protection systems in
the  Poltava, Zhytomyr, Volyn and Ivano-Frankivsk  regions of Ukraine. The group
did  not generate any revenue  and had no ongoing  construction contracts in the
Swedish market. With the sale of Nordecon Betoon OÜ at the beginning of December
2023, the  group also  withdrew from  the Finnish  market, where it had operated
through  Nordecon Betoon OÜ's subsidiary NOBE Rakennus OY. The group operated on
a project basis in Latvia and Lithuania.

            Q1 2024   Q1 2023   Q1 2022   2023
-----------------------------------------------
  Estonia       99%       98%       95%    97%

  Ukraine        1%        0%        0%     2%

  Finland         -        2%        2%     1%

  Latvia          -        0%        3%     0%

Performance by business line

Segment revenues

We strive to maintain the revenues of our two main operating segments (Buildings
and  Infrastructure)  in  balance,  if  this  is permitted by market conditions,
because this helps diversify risks and provides better opportunities to continue
construction  operations in more challenging market conditions where the volumes
of  one subsegment decline  sharply while the  volumes of another  may grow more
rapidly.
The  group's revenue for the first  quarter of 2024 was EUR46,245 thousand, around
38% larger than a year earlier, when revenue from continuing operations amounted
to EUR33,549 thousand. The Buildings segment generated revenue of EUR43,408 thousand
and  the Infrastructure  segment revenue  of EUR2,808  thousand. The corresponding
figures for the first quarter of 2023 were EUR30,673 thousand and EUR2,849 thousand.
Revenue  generated  by  the  Buildings  segment  increased by 42%, while revenue
generated by the Infrastructure segment remained more or less stable compared to
the  same period last year. The revenue growth and changes in performance of the
reportable segments were expected and in line with the group's order book.

  Revenue by operating segment   Q1 2024   Q1 2023   Q1 2022   2023
--------------------------------------------------------------------
  Buildings                          94%       92%       87%    74%

  Infrastructure                      6%        8%       13%    26%

Subsegment revenues

In  the Buildings segment, the main revenue contributor was the public buildings
subsegment, which delivered approximately 83% growth compared to the same period
last   year.  Revenue  generated  by  the  commercial  and  apartment  buildings
subsegments also increased, while the revenue contribution of the industrial and
warehouse  facilities subsegment  decreased sharply  with only  one construction
contract in progress.
The  period's  largest  projects  in  the  public  buildings subsegment were the
construction  of the main building of the Estonian Internal Security Service and
Loodusmaja  (Nature Hub)  in Tallinn,  the design  and construction of warehouse
complexes  for  the  Centre  for  Defence  Investment  in  Luunja  and Nõo rural
municipalities   in  Tartu  county  and  in  Ida-Viru  county,  the  design  and
construction  of a new  study and sports  building for the  Saku upper secondary
school near Tallinn and the reconstruction of the building of the Karlova school
in Tartu.
The revenue of the apartment buildings subsegment resulted from the construction
of the commercial and residential complex Vektor and the group's own development
projects.  Revenue from the group's own development operations increased year on
year,  rising  to  EUR3,952  thousand  (Q1  2023: EUR2,173  thousand).  Nordecon  is
continuing    the   development   of   the   Mõisavahe   Kodu   housing   estate
(https://moisavahe.ee)  and  the  construction  of  the Emajõe Residents housing
estate,  located close  to the  city centre  on the  banks of  the Emajõgi river
(https://emajoeresidents.ee),  in Tartu.  In the  first quarter,  the group also
started  the construction  of phase  1 of the  Seileri Kvartal housing estate in
Pärnu  (https://seileri.ee). In carrying out  our own development activities, we
carefully monitor potential risks in the housing development market.
The  largest projects under construction  in the commercial buildings subsegment
were  the commercial and residential complex  Vektor and the LEED Gold compliant
Golden   Gate  office  building  at  Ahtri  6 in  Tallinn  and  the  design  and
construction of a commercial building at Nõlvakaare 4 at Raadi in Tartu county.

  Buildings segment                     Q1 2024   Q1 2023   Q1 2022   2023
---------------------------------------------------------------------------
  Public buildings                          67%       43%       28%    37%

  Commercial buildings                      19%       25%       23%    23%

  Apartment buildings                       14%       22%       31%    27%

  Industrial and warehouse facilities        0%       10%       18%    13%

The   largest   revenue  contributor  in  the  Infrastructure  segment  is  road
construction  and maintenance although in the  first quarter of 2024 its revenue
decreased  by  around  6% compared  with  a  year  earlier. A major share of the
subsegment's  revenue  for  the  period  resulted  from  the  construction of an
armoured  manoeuvre shooting range  and roads in  Harju county, the provision of
road  maintenance services  in Järva  county and  the construction of the Tagadi
ecoduct (wildlife crossing) on the Rail Baltica route.

  Infrastructure segment              Q1 2024   Q1 2023   Q1 2022   2023
-------------------------------------------------------------------------
  Road construction and maintenance       83%       61%       66%    63%

  Other engineering                       17%       33%       27%    30%

  Environmental engineering                0%        6%        0%     7%

  Specialist engineering                   0%        0%        7%     0%

Order book

The group's order book (backlog of contracts signed but not yet performed) stood
at  EUR198,737 thousand at 31 March 2024, reflecting  an increase of approximately
34% year  on year.  In the  first quarter  of 2024, we  signed new contracts for
EUR17,617  thousand (Q1 2023: EUR41,860 thousand). After the reporting date, we have
signed  additional  new  contracts  for  EUR14,900  thousand. The rise in material
prices  and interest rates in recent years, due to the uptrend in EURIBOR rates,
has   caused  a  sharp  increase  in  the  cost  of  development  projects  and,
consequently,  the postponement of new projects.  The volume of investments made
by  the Transport  Administration has  decreased significantly,  which has had a
direct  impact on the size of the  order book of our Infrastructure segment. The
volume  of  procurements  for  the  Rail  Baltica project has increased and will
partially offset the decline in investments by the Transport Administration, but
the  excessive length of the procurement processes makes it difficult to predict
the  potential start dates of  the work and the  impact on revenue. While public
investment  in building construction has also  decreased, we see some investment
activity at local authority level.

                     31 March 2024 31 March 2023 31 March 2022 31 Dec 2023
--------------------------------------------------------------------------
 Order book (EUR'000)*       198,737       148,302       204,495     216,732

* Continuing operations

The  share of the Buildings segment in  the group's order book has increased: at
31 March  2024, the Buildings  segment accounted  for 93% and the Infrastructure
segment  for 7% of  the group's  total order  book (31 March 2023: 81% and 19%,
respectively).  Compared  with  31 March  2023, the  order book of the Buildings
segment has increased by 53%, while the order book of the Infrastructure segment
has  decreased by 49% and now  consists solely of contracts  secured by the road
construction and maintenance subsegment.
Major contracts secured during the period include:

  * the construction of an armoured manoeuvre shooting range and roads for the
    Centre for Defence Investment in Harju county with an approximate cost of
    EUR5,450 thousand;
  * the construction of a modern war and disaster medicine centre for the Centre
    for Defence Investment in Tartu with an approximate cost of EUR15,000 thousand
    (the group is one of the joint bidders).

Management  expects the group's revenue to increase slightly in 2024 compared to
the  revenue generated by continuing operations in 2023. In a highly competitive
environment,  we  will  avoid  taking  unjustified  risks that could materialise
during  the contract execution phase  and have an adverse  impact on the group's
results.  We  will  focus  on  cost  management  and pre-construction and design
activities where we can leverage our professional competitive advantages.

People

Employees and staff costs

The  group's average number of employees in  the first quarter of 2024 was 423,
including  281 engineers and technical  professionals (ETP). Headcount decreased
by   around   28% year  on  year,  due  to  the  restructuring  of  the  group's
Infrastructure  segment and the sale of Nordecon  Betoon OÜ and NOBE Rakennus OY
at the beginning of December 2023.

Average   number   of   employees   at  group  companies  (the  parent  and  the
subsidiaries):

                  Q1 2024   Q1 2023   Q1 2022   2023
-----------------------------------------------------
  ETP                 281       392       434    374

  Workers             142       192       225    184

  Total average       423       584       659    558

The  group's staff costs, including all taxes, were EUR3,939 thousand in the first
quarter of 2024, compared with EUR4,531 thousand from continuing operations in the
same period last year. The decrease is mainly due to a lower headcount following
the reorganisation of the Infrastructure segment.
The  service fees  of the  members of  the council  of Nordecon  AS for Q1 2024
totalled EUR50 thousand and the associated social security charges amounted to EUR17
thousand (Q1 2023: EUR37 thousand and EUR12 thousand, respectively).
The  service  fees  of  the  members  of  the board of Nordecon AS totalled EUR130
thousand and the associated social security charges amounted to EUR43 thousand (Q1
2023: EUR115 thousand and EUR38 thousand, respectively).

Labour productivity and labour cost efficiency
We  measure  the  efficiency  of  our  operating  activities using the following
productivity  and  efficiency  indicators,  which  are  based  on  the number of
employees and staff costs incurred:

                                                Q1 2024 Q1 2023 Q1 2022    2023
-------------------------------------------------------------------------------
 Nominal labour productivity (rolling), (EUR'000)   535.4   472.3   451.9   499.3

 Change against the comparative period, %         13.4%    4.5%    8.3%    1.8%



 Nominal labour cost efficiency (rolling), (EUR)     11.1    11.0    12.2    10.3

 Change against the comparative period, %          0.5%  (9.8)%   11.4% (13.4)%

The  group's nominal labour  productivity for the  period increased year on year
due to a decrease in the average number of employees.

Andri Hõbemägi
Nordecon AS
Head of Investor Relations
Tel: +372 6272 022
Email: [email protected] (mailto:[email protected])
www.nordecon.com (http://www.nordecon.com)