Market announcement

Title

2018 3 months consolidated unaudited interim report

Message

COMMENTARY FROM MANAGEMENT

Sales  revenue of Merko Ehitus in Q1 of 2018 grew to EUR 80.3 million, bolstered
by  the pre-existing portfolio of construction contracts. The group's net profit
was   EUR  1.1 million.  In  the  first  quarter,  Merko  companies  signed  new
construction  contracts worth EUR 22 million and the secured order book stood at
EUR 292 million.

Considering the volume of Merko Ehitus secured order book and the major projects
currently  under way, the  growth of the  group's sales revenue  compared to the
same period last year was as expected. The greatest growth came in sales revenue
in Latvia, and the volume of construction works performed outside Estonia in the
first quarter was greater than the volume for Estonia

In  the first quarter, the trends of pressure  on the growth of input prices and
the  limited availability of construction resources continued from last year. In
the construction value chain, risks are being redistributed among parties, which
also  exerts  an  effect  on  general  contracting  companies  and,  ultimately,
customers.  Although compared  to the  first quarter  of last year, construction
volumes  grew  and  profitability  of  construction  service  improved,  group's
management  was  not  satisfied  with  the  overall  result for our construction
activity  under  contracts.  Merko  group  is  continuing  to  look  for greater
effectiveness  both  in  project  management  and  on  the expenses side and for
optimum  risk to income ratio,  but not at the  expense of construction quality.
One  quarter will not yield big major changes in this area, but solely growth in
construction volumes is not a goal unto itself.

In  Q1, Merko Ehitus sold  51 apartments, compared to 141 last  year in the same
period.  Although the share of the apartment  development activity was less of a
factor  in the  results for  Q1, this  was more  due to technical reasons: sales
depend  on  the  moment  that  the  authorisation  for  use  for the building is
received,  at which  point Merko  Ehitus can  start delivering the apartments to
buyers. The number of apartments sold under preliminary contracts grew and these
sales  will be realised in quarters to come. Group's management didn't see major
changes  in the first  three months of  the year on  the apartment market in the
Estonian, Latvian and Lithuanian capitals. The economic environment is currently
solid  in the Baltic states, financing  conditions are favourable and purchasing
power  remains  stable.  Driven  by  customer  demand,  more attention has to be
devoted  in apartment development to well-designed and sustainable solutions and
an integral living environment. Greater efficiency and rationality in processing
building   permits   and  planning  documents  would  help  to  raise  apartment
development  volumes. In the first quarter, Merko Ehitus Group launched four new
development projects with more than 140 apartments, and this year plans to bring
several new development projects to market in Vilnius, Tallinn and Riga.

In Q1 of 2018, Merko Ehitus posted revenue of EUR 80.3 million (EUR 58.1 million
for  the  same  period  last  year;  growth of +38%), EBITDA of EUR 1.8 million,
profit before taxes of EUR 1.3 million and net profit of EUR 1.1 million. In the
first 3 months of 2018, the group entered into new contracts with a total volume
of  EUR 22.3 million,  including for  establishing public  space for the central
square  in Kuressaare,  Estonia and  for performing  additional works  on the Z-
Towers  complex in  Latvia. As  of 31 March  2018, Merko Ehitus  Group's secured
order book amounted to EUR 291.9 million.

Among major projects in progress in Q1 in Estonia there were the construction of
T1  Mall of  Tallinn shopping  centre, Maakri  Kvartal, Öpiku Maja's building B,
Noblessner  residential  quarter,  Pärnu  mnt  22 office  building, expansion of
Wendre  production  facility,  the  residence  of  the  Embassy  of the People's
Republic  of China, the Tallink office  building, Viimsi state gymnasium and the
Toom-Kuninga  21 apartment building. In  Latvia, the major  projects in progress
were  the  Akropole  and  Alfa  shopping  centres,  the Z-Towers complex and the
Ventspils  music school  and concert  hall; in  Lithuania, the  expansion of the
Radisson  Blu  Hotel  Lietuva,  Neringa  Hotel,  a  Philip Morris plant, and the
Rinktines  Urban and Basteja  Life development projects.  In Norway, the largest
project under way in Q1 was the renovation and conversion of the office building
at Akersgata 8 in Oslo.

OVERVIEW OF THE 3 MONTHS RESULTS

PROFITABILITY
Net  profit in  3M 2018 was EUR  1.1 million (3M  2017: EUR 1.0 million), having
increased  by  7.3% compared  to  the  same  period last year. Net profit margin
decreased  to 1.4% (3M  2017: 1.8%). Profit before  tax in  3M 2018 was EUR 1.3
million  (3M 2017: EUR 1.1 million), which brought  the profit before tax margin
to 1.6% (3M 2017: 1.9%).

REVENUE
3M 2018 revenue was EUR 80.3 million (3M 2017: EUR 58.1 million). 3M revenue has
increased  by 38.1% compared to  last year. The  share of revenue earned outside
Estonia in 3M 2018 was 57.5% (3M 2017: 29.2%).

SECURED ORDER BOOK
As  at 31 March 2018, the  group's secured order  book was EUR 291.9 million (31
March 2017: EUR 287.7 million). In 3M 2018, group companies signed new contracts
in the amount of EUR 22.3 million (3M 2017: EUR 58.6 million).

REAL ESTATE DEVELOPMENT
The  group sold a total of 51 apartments (incl. 25 apartment in a joint venture)
in  3 months of 2018 at a total value  of EUR 4.3 million (excl. VAT). During 3
months of 2017, 141 apartments (incl. 1 apartment in a joint ventures) were sold
at total value of EUR 16.3 million.

CASH POSITION
At  the end of the reporting period, the  group had EUR 27.6 million in cash and
cash  equivalents,  and  equity  EUR  131.3 million  (47.6%  of  total  assets).
Comparable  figures as  at 31 March  2017 were EUR  33.8 million and  EUR 123.8
million (53.6% of total assets), respectively. As at 31 March 2018 the group had
net debt of EUR 23.1 million (31 March 2017: EUR 6.9 million).

DISTRIBUTION OF PROFITS
The general meeting of shareholders held on 9 May 2018 resolved to approve the
profit allocation proposal for 2017 and to distribute EUR 17.7 million (1 euro
per share) in dividends from retained earnings. This is equivalent to a 120%
dividend rate for 2017.

                                                    3M                      12M
                                   3M 2018        2017    Variance         2017
-------------------------------------------------------------------------------
 Revenue          million EUR         80.3        58.1 +38.1 %            317.6
-------------------------------------------------------------------------------
 EBITDA           million EUR          1.8         1.9  -7.5 %             22.2
-------------------------------------------------------------------------------
 EBITDA margin    %                    2.2         3.3                      7.0
-------------------------------------------------------------------------------
 EBIT             million EUR          1.3         1.3  +1.9 %             19.5
-------------------------------------------------------------------------------
 EBIT margin      %                    1.6         2.2                      6.2
-------------------------------------------------------------------------------
 Profit    before
 tax              million EUR          1.3         1.1 +14.2 %             18.8
-------------------------------------------------------------------------------
 PBT margin       %                    1.6         1.9                      5.9
-------------------------------------------------------------------------------
 Net       profit
 (parent)         million EUR          1.1         1.0  +7.3 %             14.7
-------------------------------------------------------------------------------
 Net       profit
 margin           %                    1.4         1.8                      4.6
-------------------------------------------------------------------------------
 EPS              EUR                 0.06        0.06  +7.3 %             0.83
-------------------------------------------------------------------------------



                             31.03.2018    31.03.2017    Variance    31.12.2017
-------------------------------------------------------------------------------
 ROE      (on
 yearly
 basis)       %                    11.8           5.8                      11.9
-------------------------------------------------------------------------------
 Equity ratio      %               47.6          53.6                      47.0
-------------------------------------------------------------------------------
 Secured      million
 order book   EUR                 291.9         287.7  +1.4 %             344.4
-------------------------------------------------------------------------------
              million
 Total assets EUR                   276           231 +19.3 %             277.1
-------------------------------------------------------------------------------
 Number    of
 employees    people                764           759  -4.4 %               757
-------------------------------------------------------------------------------

Business activities

The  group business reporting is divided  into three business segments: Estonian
construction  service, other home  markets construction service  and real estate
development.

Estonian construction service

The  Estonian construction service segment consists  of services in the field of
general construction, civil engineering, electricity, external networks and road
construction,  as well  as concrete  works and  construction services on project
basis in Finland.

In  the  3 months  of  2018, the  revenue  of  the Estonian construction service
segment  was  EUR  27.8 million  (3  months  of  2017: EUR 26.7 million), having
increased  by 4.0% from  the same  period last  year. The  Estonian construction
service  segment revenue for 3 months 2018 was  34.6% of the group's revenue (3M
2017: 46.0%).

In  this segment, the group earned an operating profit of EUR 0.3 million for 3
months (3 months of 2017: EUR operating loss 0.5 million). In 3 months of 2018,
the  operating profit  margin of  the Estonian  construction service segment was
1.1% (3 months of 2017: -5.3%).

The  competition  in  main  contracting  in  the area of general construction is
getting  increasingly tighter in the  Estonian construction services market. The
number   of  construction  objects  in  the  market  is  limited  and  therefore
contractors  tend to  leave an  increasingly small  buffer for profitability and
adverse  developments when competing  in price. This  is particularly evident in
public  procurements  where  Merko  is  finding  it  increasingly  difficult  to
successfully  participate.  Thus,  the  share  of  the  public sector in Merko's
Estonian   construction  services  portfolio  has  considerably  decreased.  The
depression  in sales prices  is accompanied by  an increasing cost pressure from
growing  construction prices. The  prices of labour,  construction equipment and
building   materials   have  all  increased.  In  order  to  ensure  sustainable
profitability,  the group has  to continue improving  the efficiency of internal
project  management processes and optimizing the  placement of resources and the
cost base.

Larger  projects in the  first quarter in  Estonian construction service segment
included  the construction works of Maakri Kvartal business complex, T1 shopping
centre,  Öpiku office building B, Pärnu  mnt 22 office building, extension works
to  the  complex  of  the  air  traffic control centre, Tallink office building,
Embassy  of the People's Republic of  China residence, extension works of Wendre
production  building,  Viimsi  State  Gymnasium  and  Toom-Kuninga 21 residenial
building  construction works and clean up works of the residual pollution of the
Maadevahe and Priimetsa asphalt concrete plant.

Other home markets construction service

The  sales  revenue  of  the  other  home  markets  construction service segment
amounted  to EUR  43.5 million in  the 3 months  of 2018 (3  months of 2017: EUR
11.2 million),  which is 289.2% more than in  the 3 months of 2017. If the other
home  markets construction service  segment revenues of  3 months of 2017 formed
19.2% of the group's revenue, then during 3 months of 2018, that ratio increased
to  54.2%. The revenue  growth has  been supported  mainly by major construction
contracts in Latvia.

In  Latvia, Merko has gained a  stronger position among general contractors than
previously, which provides opportunities to grow business volumes. In Lithuania,
we  are continuing our strategic plan to focus on foreign customers, who make up
the predominant part of the group's Lithuanian secured order book. In Lithuania,
we  have also entered more widely the  public procurement sphere in the field of
general  construction. In Norway,  the group is  performing a number of smaller-
scale agreements.

The  group is  facing tough  competition and  growing costs  also in  other home
markets   (primarily   Latvia   and   Lithuania).  We  are  therefore  carefully
deliberating  in  participating  in  procurements  in  those  markets and submit
tenders  for  contracts  in  which  we  consider  the risk to reward ratio to be
sufficiently  good.  In  2018, the  primary  focus  in  this  segment  is on the
successful completion of large projects in progress.

The  3 months operating  profit of  the other  home market  construction service
segment  amounted to EUR 0.1 million (3  months of 2017: operating loss EUR 0.6
million) and the operating profit margin was 0.3% (3 months of 2017: -5.3%).

In  the first  quarter of  2018, the larger  ongoing projects  in the other home
markets  construction service segment included,  in Riga, the construction works
of  Multifunctional Centre Akropole and of Alfa Shopping Centre, finishing works
of  Z Towers complex and,  in Ventspils, the construction  works of music school
and concert hall. In Vilnius, the larger projects were the construction works of
the design and construction works of Radisson Blu Hotel Lietuva extension, Hotel
Neringa  and construction  works of  the residential  complex in  Shaltiniu Namai
quarter,  in Klaipeda,  the reconstruction  and extension  construction works of
Philip  Morris  plant.  In  Norway,  the  larger project included renovation and
building works of Akersgata 8 office building in Oslo.

Real estate development

The real estate development segment includes residential real estate development
and  construction of joint  venture projects, long-term  real estate investments
and  commercial real  estate projects  in Estonia,  Latvia and Lithuania. In the
interests  of  the  finest  quality  and  maximum  convenience and assurance for
buyers, Merko handles all phases of development: acquisition of the real estate,
planning,  design of the development project, construction, sales and marketing,
and warranty-period customer service.

The group sold a total of 51 apartments (incl. 25 apartment in a joint ventures)
in 3 months of 2018 at a total value of EUR 4.3 million (excl. VAT) comparing to
2017 3 months  when 141 apartments (incl. 1 apartment  in a joint ventures) were
sold  at a  total value  of EUR  16.3 million. In  3 months of 2018, real estate
development segment revenues decreased by 55.4% compared to the same period last
year.  In  the  3 months  of  2018, the  share  of  revenue from the real estate
development  segment  formed  11.2% of  the  group's  total revenue (3 months of
2017: 34.8%).

The 3 months of 2018 operating profit of the segment amounted to EUR 1.3 million
(3 months of 2017: EUR 2.7 million) and the operating profit margin was 14.3% (3
months  of 2017: 13.3%), which increased  by 1.0 pp compared  to the same period
previous year. The profitability of the apartment development projects varies by
project and depends greatly on the cost structure of the specific project, incl.
the  land  acquisition  price.  The  2018 3 months  segment's  profitability was
positively   influenced   by   the  sale  of  immovable  property  that  is  not
strategically needed by the group. At the same time, the operating profit margin
has  been  reduced,  in  comparison  with  2017, by  the growth in the volume of
construction   service   projects  developed  by  joint  ventures.  Profit  from
construction  has been recognised  in the course  of construction and the profit
from  development is realised at  a later stage, upon  sale of apartments to the
final customer, based on the equity method.

At  the end  of the  period, group's  inventory comprised 322 apartments where a
preliminary agreement had been signed: 39 completed apartments (5 in Estonia and
34 in  Latvia) and 283 apartments  under construction (207  in Estonia and 76 in
Lithuania).  The  sale  of  these  apartments  had  not  yet  been finalised and
delivered to customers, because the development site is still under construction
or  the site  was completed  at the  end of  the reporting  period and the sales
transactions have not all been finalised yet.

As at 31 March 2018, the group had a total of 403 apartments for active sale (as
at  31 March 2017: 598 apartments; as  at 31 December 2017: 317 apartments), for
which  there are no pre-sale agreements and of which 138 have been completed (33
in  Estonia, 100 in  Latvia and  5 in Lithuania)  and 265 are under construction
(141 in Estonia and 124 in Lithuania).
In  3 months of 2018, the group launched the  construction of a total of 145 new
apartments  in the Baltic  states (3 months  of 2017: 408 apartments). In the 3
months  of 2018, the group has invested a  total of EUR 7.1 million (3 months of
2017: EUR  7.5 million) in new development projects  launched in 2018 as well as
projects already in progress.

Merko  group continues  to invest  in residential  real estate  projects also in
2018. Depending  on the  apartment market  developments in  the Baltic states in
2018, the  group  will  launch  the  construction  of  approximately 650-700 new
apartments.  The planned investment  level in 2018 in  both development projects
initiated  in the  previous years  and new  projects to  be launched  in 2018 is
nearly  EUR 60 million (2017:  EUR 48.4 million invested).  However, when making
the  investments, the group continues to be  dependent on the pace of processing
of building permits.

One  of group's objectives  is to keep  a sufficient portfolio  of land plots to
ensure  stable inventory of  property development projects,  which considers the
market  conditions. As at  31 March 2018, the group's  inventories included land
plots with development potential, where the construction works have not started,
in amount of EUR 62.1 million (31.03.2017: EUR 67.0 million).

No  new land plots for real estate  development purposes were acquired in the 3
months  of 2018 (3 months of  2017: EUR 4.1 million; 12 months of 2017: acquired
different  new land plots in Tallinn, Estonia at an acquisition cost of EUR 5.1
million and in Riga, Latvia at an acquisition cost of EUR 4.1 million)

Secured order book

As  at  31 March  2018, the  group's  secured  order book amounted to EUR 291.9
million,  compared to EUR 287.7 million as at 31 March 2017, having increased by
1,4% in  the annual comparison. The secured  order book excludes the group's own
residential  development projects  and construction  works related to developing
real estate investments.

In  3 months  of  2018, EUR  22.3 million  worth  of  new contracts were signed,
compared to EUR 58.6 million in same period 2017.

Of the contracts signed in the 3 months of 2018, private sector orders accounted
for  the majority, which is also represented  in the group's secured order book,
where  private sector orders from  projects in progress constitute approximately
84% (31.03.2017: approximately 70%; 31.12.2017: approximately 86%).

To  diversify  group's  operating  portfolio,  a  strategic  goal is to increase
construction  service  revenues  outside  Estonia.  Thus, the group continues to
identify  and strengthen its  competitive advantages and  are closely monitoring
the  development  and  opportunities  in  both  the Baltic states and the Nordic
countries, especially in Norway. At the same time, it has to be ensured that the
growth  is profitable.  The group  is therefore  focused on  ensuring that sales
revenue is grown only on the basis of projects with an acceptable risk to reward
ratio.

Cash flows

As  at 31 March 2018, the group  had cash and cash  equivalents in the amount of
EUR  27.6 million (31.03.2017: EUR  33.8 million; 31.12.2017: EUR 39.2 million).
The group's cash position continues to be strong: the group has not utilised all
its  credit lines  of existing  overdrafts and  loan agreements within reporting
period.  As at the end of the reporting period, the group entities had concluded
overdraft  contracts with banks in a total  amount of EUR 17.5 million, of which
EUR  9.7 was unused (31.03.2017: EUR 11.2 million  of which EUR 9.7 was unused).
In  addition to the overdraft facilities, the company has a working capital loan
facility with the limit of EUR 3.5 million (31.03.2017: EUR 3.5 million) from AS
Riverito,  which was not withdrawn at the end of current period (31.03.2017: not
withdrawn).

The 3 month cash flow from operating activity was negative at EUR 3.0 million (3
months of 2017: positive EUR 5.6 million), cash flow from investing activity was
positive at EUR 0.1 million (3 months of 2017: negative EUR 0.1 million) and the
cash  flow from financing activity was negative  at EUR 8.7 million (3 months of
2017: negative  EUR 5.2 million). Compared to the  year 2017, the cash flow from
operating  activities had positive impacts from EBITDA EUR 1.8 million (3 months
of  2017: EUR  1.9 million)  and  from  the  positive  change in trade and other
payables  related to  operating activities  EUR 4.5 million  (3 months of 2017:
negative change of EUR 5.0 million), while the negative impacts came from change
in  trade and other receivables related  to operating activities EUR 3.6 million
(3  months of 2017: positive change of  EUR 10.8 million), change in inventories
EUR  3.3 million  (3  months  of  2017: positive  change of EUR 2.6 million) and
change  in the provisions EUR 1.6 million  (3 months of 2017: negative change of
EUR 2.0 million.

To  support  cash  flows  from  operating  activities, the group has judiciously
raised  additional  external  capital.  At  the  same  time,  the debt ratio has
remained   at   a   moderate   level   (18.4%   as  at  31.03.2018; 17.7% as  at
31.03.2017; 21.4% as at 31.12.2017).

Cash  flows  from  investing  activities  include  negative  cash  flow from the
acquisition  of non-current assets in the amount of EUR 0.2 million (3 months of
2017: EUR  0.4 million)  and  positive  cash  flow  from the sale of non-current
assets in the amount of EUR 0.3 million (3 months of 2017: EUR 0.3 million).

Project  specific  loans  obtained  using  investment  property  as  collateral,
included  under cash flows from financing  activities, were repaid in the amount
of  EUR 0.1 million (3 months  of 2017: negative cash flow  in the net amount of
EUR  0.1 million). Net  of loans  received and  loans repaid  in connection with
development projects amounted to negative cash flow of EUR 8.1 million (3 months
of  2017: net positive cash flow of EUR 9.1 million) and finance lease principal
repayments of EUR 0.2 million (3 months of 2017: EUR 0.2 million).

Dividends and dividend policy

The  distribution of dividends to the shareholders of the company is recorded as
a  liability in the  financial statements as  of the moment  when the payment of
dividends is approved by the company's shareholders.

According   to  the  current  dividends  policy  the  objective  is  paying  the
shareholders 50-70% of the annual profit.

The  annual general  meeting of  shareholders of  AS Merko  Ehitus held at 9 May
2018 approved the Supervisory Board's proposal to pay the shareholders the total
amount  of EUR  17.7 million (EUR  1.00 per share)  as dividends from net profit
brought  forward,  which  is  equivalent  to  a  120% dividend rate and a 11.4%
dividend  yield  for  the  year  2017 (using  the  share price as at 31 December
2017). Comparable  figures in 2016 were accordingly:  EUR 7.3 million (EUR 0.41
per share) as dividends, which is equivalent to a 119% dividend rate and a 4.5%
dividend yield (using the share price as at 31 December 2016).

According  to the  Estonian Income  Tax Law  section 50 subsection  11, AS Merko
Ehitus  can  pay  dividends,  without  any  additional  income  tax  expense and
liabilities  occurring,  up  to  the  amount  it  has  received  dividends  from
subsidiaries,  which are  resident companies  of a  Contracting State of the EEA
Agreement  subject to that  state's income tax  legislation. Taking into account
the  dividends already paid  to the parent  company by foreign subsidiaries, the
group  will  not  incur  income  tax  expenses  arising  in  2018 in  Estonia in
connection with disbursement of dividends in Estonia (Q2 2017: EUR 0.9 million).
The dividend payment to the shareholders will take place on 15 June 2018.

Ratios

(attributable to equity holders of the parent)

 Income statement summary                      3M 2018 3M 2017 3M 2016 12M 2017
-------------------------------------------------------------------------------
 Revenue                          million EUR     80.3 58.1    46.8       317.6
-------------------------------------------------------------------------------
 Gross profit                     million EUR      4.1  4.1     3.1        30.9
-------------------------------------------------------------------------------
 Gross profit margin                   %           5.1  7.1     6.5         9.7
-------------------------------------------------------------------------------
 Operating profit                 million EUR      1.3  1.3     0.5        19.5
-------------------------------------------------------------------------------
 Operating profit margin               %           1.6  2.2     1.0         6.2
-------------------------------------------------------------------------------
 Profit before tax (PBT)          million EUR      1.3  1.1     0.3        18.8
-------------------------------------------------------------------------------
 PBT margin                            %           1.6  1.9     0.6         5.9
-------------------------------------------------------------------------------
 Net profit                       million EUR      1.2  1.0     0.0        15.8
-------------------------------------------------------------------------------
 attributable to equity holders
 of the parent                    million EUR      1.1  1.0     0.1        14.7
-------------------------------------------------------------------------------
 attributable to non-controlling
 interest                         million EUR      0.1 (0.0 )  (0.1 )       1.1
-------------------------------------------------------------------------------
 Net profit margin                     %           1.4  1.8     0.2         4.6
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 Other      income      statement
 indicators                                    3M 2018 3M 2017 3M 2016 12M 2017
-------------------------------------------------------------------------------
 EBITDA                           million EUR      1.8  1.9     1.2        22.2
-------------------------------------------------------------------------------
 EBITDA margin                         %           2.2  3.3     2.5         7.0
-------------------------------------------------------------------------------
 General expense ratio                 %           4.5  5.8     6.8         4.6
-------------------------------------------------------------------------------
 Labour cost ratio                     %           9.0 13.2    14.2        10.1
-------------------------------------------------------------------------------
 Revenue per employee             thousand EUR     109   77      62         434
-------------------------------------------------------------------------------


 Other      significant
 indicators                         31.03.2018 31.03.2017 31.03.2016 31.12.2017
-------------------------------------------------------------------------------
 Return on equity            %            11.8        5.8        7.5       11.9
-------------------------------------------------------------------------------
 Return on assets            %             5.6        3.1        4.3        5.8
-------------------------------------------------------------------------------
 Return   on   invested
 capital                     %            11.2        5.5        7.8       11.4
-------------------------------------------------------------------------------
 Equity ratio                %            47.6       53.6       62.3       47.0
-------------------------------------------------------------------------------
 Debt ratio                  %            18.4       17.7       12.9       21.4
-------------------------------------------------------------------------------
 Current ratio             times           2.3        2.7        3.4        2.2
-------------------------------------------------------------------------------
 Quick ratio               times           1.1        1.1        1.3        1.1
-------------------------------------------------------------------------------
 Accounts    receivable
 turnover                  days             43         39         35         40
-------------------------------------------------------------------------------
 Accounts       payable
 turnover                  days             42         38         35         40
-------------------------------------------------------------------------------
 Average    number   of
 employees                people           737        759        755        732
-------------------------------------------------------------------------------
 Secured order book     million EUR      291.9      287.7      243.5      344.4
-------------------------------------------------------------------------------

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited

in thousand euros

                                                      2018      2017       2017
                                                  3 months  3 months  12 months
-------------------------------------------------------------------------------
 Revenue                                          80,310    58,147    317,598
-------------------------------------------------------------------------------
 Cost of goods sold                              (76,227 ) (54,026 ) (286,747 )
-------------------------------------------------------------------------------
 Gross profit                                      4,083     4,121     30,851
-------------------------------------------------------------------------------
 Marketing expenses                                 (806 )    (860 )   (3,215 )
-------------------------------------------------------------------------------
 General and administrative expenses              (2,819 )  (2,518 )  (11,289 )
-------------------------------------------------------------------------------
 Other operating income                              852       567      3,793
-------------------------------------------------------------------------------
 Other operating expenses                            (32 )     (57 )     (601 )
-------------------------------------------------------------------------------
 Operating profit                                  1,278     1,253     19,539
-------------------------------------------------------------------------------
 Finance income/costs                                (26 )    (156 )     (767 )
-------------------------------------------------------------------------------
 incl. finance income from sale of subsidiary          -         -         14
-------------------------------------------------------------------------------
 finance income/costs from joint ventures            136        28         64
-------------------------------------------------------------------------------
 finance income/costs from other long-term
 investments                                           -         -          2
-------------------------------------------------------------------------------
 interest expense                                   (153 )    (173 )     (745 )
-------------------------------------------------------------------------------
 foreign exchange gain (loss)                         (1 )       2         (1 )
-------------------------------------------------------------------------------
 other financial income (expenses)                    (8 )     (13 )     (101 )
-------------------------------------------------------------------------------
 Profit before tax                                 1,252     1,097     18,772
-------------------------------------------------------------------------------
 Corporate income tax expense                        (90 )    (118 )   (3,020 )
-------------------------------------------------------------------------------
 Net profit for financial year                     1,162       979     15,752
-------------------------------------------------------------------------------
 incl. net profit attributable to equity holders
 of the parent                                     1,104     1,029     14,694
-------------------------------------------------------------------------------
 net profit attributable to non-controlling
 interest                                             58       (50 )    1,058
-------------------------------------------------------------------------------
 Other comprehensive income, which can
 subsequently be classified in the income
 statement
-------------------------------------------------------------------------------
 Currency translation differences of foreign
 entities                                             13        (3 )      (74 )
-------------------------------------------------------------------------------
 Comprehensive income for the period               1,175       976     15,678
-------------------------------------------------------------------------------
 incl. net profit attributable to equity holders
 of the parent                                     1,117     1,025     14,637
-------------------------------------------------------------------------------
 net profit attributable to non-controlling
 interest                                             58       (49 )    1,041
-------------------------------------------------------------------------------
 Earnings per share for profit attributable to
 equity holders of the parent (basic and
 diluted, in EUR)                                   0.06      0.06       0.83
-------------------------------------------------------------------------------

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited

in thousand euros

                                         31.03.2018   31.03.2017   31.12.2017
-------------------------------------------------------------------------------
 ASSETS
-------------------------------------------------------------------------------
 Current assets
-------------------------------------------------------------------------------
 Cash and cash equivalents                   27,600       33,839       39,210
-------------------------------------------------------------------------------
 Trade and other receivables                 85,027       45,414       75,844
-------------------------------------------------------------------------------
 Prepaid corporate income tax                   549          528          492
-------------------------------------------------------------------------------
 Inventories                                121,754      120,838      118,421
-------------------------------------------------------------------------------
                                            234,930      200,619      233,967
-------------------------------------------------------------------------------
 Non-current assets
-------------------------------------------------------------------------------
 Long-term financial assets                  15,266       11,922       17,242
-------------------------------------------------------------------------------
 Deferred income tax assets                       5        1,326            5
-------------------------------------------------------------------------------
 Investment property                         15,655        4,043       15,719
-------------------------------------------------------------------------------
 Property, plant and equipment                9,358       12,456        9,665
-------------------------------------------------------------------------------
 Intangible assets                              511          668          497
-------------------------------------------------------------------------------
                                             40,795       30,415       43,128
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 TOTAL ASSETS                               275,725      231,034      277,095
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 LIABILITIES
-------------------------------------------------------------------------------
 Current liabilities
-------------------------------------------------------------------------------
 Borrowings                                  13,673       14,586       24,218
-------------------------------------------------------------------------------
 Payables and prepayments                    81,761       54,909       74,972
-------------------------------------------------------------------------------
 Income tax liability                           484          103          413
-------------------------------------------------------------------------------
 Short-term provisions                        4,119        4,633        4,569
-------------------------------------------------------------------------------
                                            100,037       74,231      104,172
-------------------------------------------------------------------------------
 Non-current liabilities
-------------------------------------------------------------------------------
 Long-term borrowings                        37,003       26,196       35,138
-------------------------------------------------------------------------------
 Deferred income tax liability                1,299        1,149        1,259
-------------------------------------------------------------------------------
 Other long-term payables                     1,474        2,000        1,789
-------------------------------------------------------------------------------
                                             39,776       29,345       38,186
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 TOTAL LIABILITIES                          139,813      103,576      142,358
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 EQUITY
-------------------------------------------------------------------------------
 Non-controlling interests                    4,625        3,643        4,567
-------------------------------------------------------------------------------
 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              (689 )       (649 )       (702 )
-------------------------------------------------------------------------------
 Retained earnings                          123,254      115,742      122,150
-------------------------------------------------------------------------------
                                            131,287      123,815      130,170
-------------------------------------------------------------------------------
 TOTAL EQUITY                               135,912      127,458      134,737
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
 TOTAL LIABILITIES AND EQUITY               275,725      231,034      277,095
-------------------------------------------------------------------------------

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


Priit Roosimägi
Head of Group Finance Unit
AS Merko Ehitus
+372 650 1250
[email protected] (mailto:[email protected])

AS  Merko Ehitus (group.merko.ee  (http://group.merko.ee/en/)) group consists of
Estonia's  leading  construction  company  AS  Merko  Ehitus Eesti, the Latvian-
market-oriented SIA Merks, UAB Merko Statyba that is operating on the Lithuanian
market,  Peritus  Entreprenør  AS  construction  company  in Norway and the real
estate development business unit along with real estate holding companies. As at
the  end of 2017, the  group employed 757 people  and the company's 2017 revenue
was EUR 317.6 million.

Attachments

  * Merko_Ehitus_2018_3M_interim_report (https://prlibrary-
    eu.nasdaq.com/Resource/Download/78533cb4-ebf6-48e7-ad73-89051be7a2bb)
  * Merko_Ehitus_2018_3M_presentation (https://prlibrary-
    eu.nasdaq.com/Resource/Download/1649c505-0c87-4f7e-b88a-249c31725196)