Market announcement

Title

2019 II quarter and 6 months consolidated interim report (unaudited)

Message

Nordecon  Group's  business  volume  and  profitability  increased in the second
quarter  of 2019 as compared to the same  period of the last year. Revenues grew
6.3% to  65,917 thousand  euros  (Q2  2018: 61,996 thousand euros) and operating
profit 43.6% to 1,545 thousand euros (Q2 2018: 1,076 thousand euros).

Profit was earned mainly in the buildings segment, where the gross margin in the
second  quarter was 6.1% (Q2 2018: 3.3%), whereas the gross profitability of the
infrastructure segment decreased to 3.5% (Q2 2018: 8.6%).

The  market is  continuously characterised  by high  competition and increase in
input  prices. When in  building construction market  there are new sizeable and
complex  engineer-technical projects, then in road construction the average size
and  complexity of the project has fallen, increasing thereby the competition in
the  segment.  Decrease  in  latter  volumes  has  in  turn created on market an
approximate  25% asphalt production  capacity surplus,  affecting negatively the
margins.

The Group's order book as of 30 June 2019 stood at 180 million euros, consisting
mainly of projects of the building segment.

Condensed consolidated interim statement of financial position

 EUR '000                                         30 June 2019 31 December 2018
-------------------------------------------------------------------------------
 ASSETS

 Current assets

 Cash and cash equivalents                               6,220            7,678

 Trade and other receivables                            44,176           31,627

 Prepayments                                             2,443            1,383

 Inventories                                            19,757           20,444

 Total current assets                                   72,596           61,132


 Non-current assets

 Investments in equity-accounted investees               2,035            2,266

 Other investments                                          26               26

 Trade and other receivables                             8,340            8,225

 Investment property                                     5,526            5,526

 Property, plant and equipment                          16,531           12,288

 Intangible assets                                      14,670           14,674

 Total non-current assets                               47,128           43,005

 TOTAL ASSETS                                          119,724          104,137



 LIABILITIES

 Current liabilities

 Borrowings                                             18,093            9,374

 Trade payables                                         47,368           34,954

 Other payables                                          8,482            5,187

 Deferred income                                         4,044            3,932

 Provisions                                                310            1,013

 Total current liabilities                              78,297           54,460


 Non-current liabilities

 Borrowings                                              9,427           14,830

 Trade payables                                             98               98

 Other payables                                            177               71

 Provisions                                              1,222              969

 Total non-current liabilities                          10,924           15,968

 TOTAL LIABILITIES                                      89,221           70,428



 EQUITY

 Share capital                                          16,321           16,321

 Own (treasury) shares                                    -693             -693

 Share premium                                             618              618

 Statutory capital reserve                               2,554            2,554

 Translation reserve                                     1,730            1,992

 Retained earnings                                       8,212           10,896

 Total equity attributable to owners of the
 parent                                                 28,742           31,688

 Non-controlling interests                               1,761            2,021

 TOTAL EQUITY                                           30,503           33,709

 TOTAL LIABILITIES AND EQUITY                          119,724          104,137

Condensed consolidated interim statement of comprehensive income

 EUR '000                             H1 2019 Q2 2019  H1 2018 Q2 2018     2018
-------------------------------------------------------------------------------

 Revenue                              100,441  65,917  105,658  61,996  223,496

 Cost of sales                        -97,147 -62,669 -102,459 -59,250 -213,463

 Gross profit                           3,294   3,248    3,199   2,746   10,033



 Marketing and distribution
 expenses                                -498    -152     -331    -158     -626

 Administrative expenses               -3,048  -1,555   -3,386  -1,715   -6,725

 Other operating income                    67      11      219     202    1,471

 Other operating expenses                 -20      -7      -76       1     -122

 Operating loss/profit                   -205   1,545     -375   1,076    4,031



 Finance income                           495     224      385     250      431

 Finance costs                           -663    -299     -586    -282     -909

 Net finance costs                       -168     -75     -201     -32     -478



 Share of profit of equity-
 accounted investees                      252     302      452     515      835



 Loss/profit before income tax           -121   1,772     -124   1,559    4,388

 Income tax expense                      -453    -453     -400    -200     -567

 Loss/profit for the period              -574   1,319     -524   1,359    3,821



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

 Exchange differences on
 translating foreign operations          -262    -218      -60    -128       -3

 Total other comprehensive expense       -262    -218      -60    -128       -3

 TOTAL COMPREHENSIVE EXPENSE/INCOME      -836   1,101     -584   1,231    3,818



 Loss/profit attributable to:

 - Owners of the parent                  -793   1,169     -532   1,274    3,381

 - Non-controlling interests              219     150        8      85      440

 Loss/profit for the period              -574   1,319     -524   1,359    3,821



 Total comprehensive expense/income
 attributable to:

 - Owners of the parent                -1,055     951     -592   1,146    3,378

 - Non-controlling interests              219     150        8      85      440

 Total comprehensive expense/income
 for the period                          -836   1,101     -584   1,231    3,818



 Earnings per share attributable to
 owners of the parent:

 Basic earnings per share (EUR)         -0.03    0.04    -0.02    0.04     0.11

 Diluted earnings per share (EUR)       -0.03    0.04    -0.02    0.04     0.11

Condensed consolidated interim statement of cash flows

  EUR '000                                               H1 2019    H1 2018
----------------------------------------------------------------------------
  Cash flows from operating activities

  Cash receipts from customers                           108,300    116,509

  Cash paid to suppliers                                 -93,163   -100,166

  VAT paid                                                -2,104     -2,874

  Cash paid to and for employees                         -11,385    -10,480

  Income tax paid                                           -146       -305

  Net cash from operating activities                       1,502      2,684



  Cash flows from investing activities

  Paid on acquisition of property, plant and equipment      -165       -252

  Paid on acquisition of intangible assets                     0          0

  Proceeds from sale of property, plant and equipment         99         22

  Loans provided                                             -14        -17

  Repayment of loans provided                                  6          7

  Dividends received                                         244        249

  Interest received                                            5          5

  Net cash from investing activities                         175         14



  Cash flows from financing activities

  Proceeds from loans received                             3,328      1,411

  Repayment of loans received                             -2,265     -1,547

  Finance lease payments made                             -1,025       -888

  Settlements of lease liability                            -549          0

  Interest paid                                             -481       -366

  Dividends paid                                          -2,129     -2,243

  Net cash used in financing activities                   -3,121     -3,633



  Net cash flow                                           -1,444       -935



  Cash and cash equivalents at beginning of period         7,678      8,916

  Effect of movements in foreign exchange rates              -14          4

  Decrease in cash and cash equivalents                   -1,444       -935

  Cash and cash equivalents at end of period               6,220      7,985

Financial review

Financial performance

Nordecon  ended  the  first  six  months  of  2019 with a gross profit of 3,294
thousand euros (H1 2018: 3,199 thousand euros). The Group's gross margin for the
first  half-year  was  3.3% (H1  2018: 3%) and  for  the second quarter 4.9% (Q2
2018: 4.4%). Gross  profit was  earned in  the Buildings  segment that  posted a
gross  margin of  5.5% for the  first half-year  (H1 2018: 3.3) and 6.1% for the
second  quarter (Q2  2018: 3.3%). We are  satisfied with  the improvement in the
segment's  gross margin  although it  is not  yet on  target. The  result of the
Infrastructure  segment that  ended the  first half-year  with a  negative gross
margin,  on the  other hand,  is far  from satisfactory. The segment's six-month
gross  margin was -1.4%  (H1 2018: 3.7%) and second-quarter  gross margin, which
was   3.5%, was   considerably   lower   than  last  year  (Q2  2018: 8.6%). The
Infrastructure   segment   is   mainly  involved  in  the  performance  of  road
construction  and  maintenance  contracts.  Road  construction, which is capital
intensive,  requires a certain critical amount of work to cover its fixed costs,
the largest share of which is made up of expenses relating to asphalt production
and  laying equipment. The  road maintenance result  is mainly influenced by the
weather. Exceptionally challenging weather conditions in the first two months of
2019 had  an adverse  impact on  the profitability  of national road maintenance
contracts.  The average cost of new road construction projects put out to tender
in  2019 has decreased compared to 2018, which  in turn has increased the number
of  bidders.  Also,  the  gap  between  contractors' asphalt concrete production
capacity  and  market  demand  has  widened:  according to estimates, production
capacity  exceeds demand by at least 25%. All  this has had a negative impact on
bid  prices and the Group has not been sufficiently successful in winning public
road construction contracts.

The  Group's administrative expenses for the  first half of 2019 totalled 3,048
thousand  euros. Compared to the same  period last year, administrative expenses
decreased  by  around  10% (H1  2018: 3,386 thousand  euros)  and  the  ratio of
administrative  expenses  to  revenue  (12  months  rolling) dropped to 2.9% (H1
2018: 3.1%).

The  Group ended the first  half of 2019 with an  operating loss of 205 thousand
euros  (H1 2018: an  operating loss  of 375 thousand  euros). EBITDA amounted to
1,281 thousand euros (H1 2018: 606 thousand euros).

Finance  income and costs of  the period continued to  be influenced by exchange
rate  fluctuations  in  the  Group's  foreign  markets.  The  Ukrainian  hryvnia
strengthened  against the euro by 6.7% and the Group recognised an exchange gain
of 377 thousand euros (H1 2018: a gain of 243 thousand euros) on the translation
of the loans provided to the Ukrainian subsidiaries in euros. The Swedish krona,
on  the  other  hand,  weakened  against  the  euro by around 2.9% and the Group
recognised  an  exchange  loss  of  206 thousand  euros (H1 2018: a loss of 154
thousand  euros)  on  the  translation  of  the  loan  provided  to  the Swedish
subsidiary in euros.

The Group's net loss amounted to 574 thousand euros (H1 2018: a net loss of 524
thousand  euros) of  which the  net loss  attributable to  owners of the parent,
Nordecon AS, was 793 thousand euros (H1 2018: 532 thousand euros).

Cash flows

In  the first half of  2019, operating activities produced a  net cash inflow of
1,502 thousand  euros  (H1  2018: 2,684 thousand  euros).  The  key  factor that
affects  operating cash flow  is the mismatch  between customers' and suppliers'
settlement  terms. Cash flow  is also strongly  influenced by the  fact that the
contracts  signed with both  public and private  sector customers do not require
the customer to make advance payments while the Group has to make prepayments to
subcontractors,  materials  suppliers,  etc.  Cash  inflow  is  also  lowered 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 resulted  in a  net cash  inflow of 175 thousand euros (H1
2018: 14 thousand euros). The largest items were payments for the acquisition of
property,  plant  and  equipment  of  165 thousand  euros (H1 2018: 252 thousand
euros)  and  dividends  received  of  244 thousand  euros (H1 2018: 249 thousand
euros).

Financing  activities generated a  net cash outflow  of 3,121 thousand euros (H1
2018: an  outflow of 3,633 thousand euros). The largest items were loan, finance
lease  and  dividend  payments.  Proceeds  from  loans  received totalled 3,328
thousand   euros,   comprising   development   loans  and  overdrafts  used  (H1
2018: 1,411 thousand  euros). Loan repayments  totalled 2,265 thousand euros (H1
2018: 1,547 thousand  euros),  consisting  of  scheduled repayments of long-term
investment and development loans. Finance lease payments totalled 1,025 thousand
euros  (H1 2018: 888 thousand euros). Dividends  paid amounted to 2,129 thousand
euros (H1 2018: 2,243 thousand euros).

At  30 June 2019, the Group's cash  and cash equivalents totalled 6,220 thousand
euros (30 June 2018: 7,985 thousand euros).

Key financial figures and ratios

 Figure/ratio for the period      H1 2019      H1 2018      H1 2017        2018
-------------------------------------------------------------------------------
 Revenue (EUR '000)               100,441      105,658      103,501     223,496

 Revenue change                       -5%           2%          40%       -3.4%

 Net loss/profit (EUR '000)          -574         -524         -897       3,821

 Net loss/profit
 attributable to owners of
 the parent (EUR '000)               -793         -532         -890       3,381

 Average number of shares      31,528,585   30,986,585   30,756,728  31,528,585

 Earnings per share (EUR)           -0.03        -0.02        -0.03        0.11

 Administrative expenses to
 revenue                             3.0%         3.2%         3.0%        3.0%

 Administrative expenses to
 revenue (rolling)                   2.9%         3.1%         3.0%        3.0%

 EBITDA (EUR '000)                  1,281          606          664       6,021

 EBITDA margin                       1.3%         0.6%         0.6%        2.7%

 Gross margin                        3.3%         3.0%         3.0%        4.5%

 Operating margin                   -0.2%        -0.4%        -0.3%        1.8%

 Operating margin excluding
 gain on asset sales                -0.3%        -0.4%        -0.3%        1.3%

 Net margin                         -0.6%        -0.5%        -0.9%        1.7%

 Return on invested capital          0.6%         0.5%        -0.1%        8.4%

 Return on equity                   -1.8%        -1.6%        -2.4%       11.2%

 Equity ratio                       25.5%        25.4%        29.0%       32.4%

 Return on assets                   -0.5%        -0.4%        -0.8%        3.5%

 Gearing                            36.7%        35.2%        32.5%       28.5%

 Current ratio                       0.93         0.98         1.02        1.12

 As at                       30 June 2019 30 June 2018 30 June 2017 31 Dec 2018
-------------------------------------------------------------------------------
 Order book (EUR '000)            179,691      131,552      130,601     100,352
-------------------------------------------------------------------------------

Performance by geographical market

In  the  first  half  of  2019, the  contribution of the Group's foreign markets
increased  somewhat compared to the same period last year, accounting for around
9% of total revenue.

            H1 2019   H1 2018   H1 2017   2018
-----------------------------------------------
  Estonia       91%       93%       93%    93%

  Finland        4%        1%        2%     1%

  Ukraine        3%        4%        1%     4%

  Sweden         2%        2%        3%     2%

It  is worth noting that  the share of revenue  earned in Finland has increased.
Based  on the Finnish order book, where the largest project is a subcontract for
supplying   concrete   constructions   for   the  Raitinkartano  commercial  and
residential  building, we expect that in 2019 our Finnish revenues will increase
compared  to previous years.  The contribution of  the Ukrainian market where we
are  currently  providing  general  contractor's  services  under  two  building
construction  contracts has  decreased compared  to the  same period  last year.
Swedish  revenues have also decreased year on year: two new general construction
contracts  secured in Sweden  in 2019 had only  a modest impact  on the period's
revenue  because  the  Group  was  mainly  involved  in  preparatory  and design
activities.

Geographical  diversification  of  the  revenue  base  is a consciously deployed
strategy by which we mitigate the risks resulting from excessive reliance on one
market.  However,  conditions  in  some  of  our chosen foreign markets are also
volatile  and affect our current results. Increasing the contribution of foreign
markets is one of Nordecon's strategic targets.

Performance by business line

Segment revenues

In the first half of 2019, Nordecon generated revenue of 100,441 thousand euros,
roughly  5% less than  in the  same period  last year  when revenue  amounted to
105,658 thousand  euros.  Revenue  decreased  in  both  the  Buildings  and  the
Infrastructure  segment, by 6% and 2% respectively.  The decline is attributable
to  longer than usual  decision-making processes between  the submission of bids
and  the signature of contracts in public procurements carried out in the second
half  of 2018 and longer  than expected preparation  processes of some contracts
signed  with private  sector customers.  The matter  was also highlighted in our
annual  report  for  2018. However,  based  on  the Group's order book and known
developments  in our chosen markets, we expect that in 2019 the Group's business
volumes will grow somewhat compared to 2018.

The  limited volume of infrastructure  construction projects, which is affecting
the  entire  Estonian  construction  market,  is  also  reflected in our revenue
structure.  In the first half of 2019, our Buildings and Infrastructure segments
generated   revenue   of   76,065 thousand   euros   and  24,213 thousand  euros
respectively.  In  the  same  period  last  year, the corresponding figures were
80,827 thousand euros and 24,587 thousand euros.

  Operating segments*   H1 2019   H1 2018   H1 2017   2018
-----------------------------------------------------------
  Buildings                 74%       76%       81%    72%

  Infrastructure            26%       24%       19%    28%

Sub-segment revenues

The  largest  revenue  source  in  the  Buildings  segment  continues  to be the
commercial  buildings sub-segment.  The period's  largest projects  included the
reconstruction  and extension  of the  building of  Terminal D  in the  Old City
harbour,  the  construction  of  a  multi-storey  car park at Sepapaja 1 and the
design and construction of an eight-floor accommodation building at Liimi 1B and
a  concrete  frame  for  an  eight-floor  multi-storey  car  park and commercial
building at Tammsaare tee 92 in Tallinn.

Based  on the  Group's order  book, we  expect that  in 2019 the  revenue of the
public  buildings sub-segment will increase  compared to 2018. The sub-segment's
revenue for the period was influenced the most by the construction of the Peetri
sports  and leisure centre in Rae parish and a state secondary school at Kohtla-
Järve.  The state's  investments in  national defence  also continue  to play an
important role. During the period, we continued to build an assembly area at the
defence  forces'  base  at  Tapa  and  a  barracks for 300 people at the defence
forces'  base at  Jõhvi. The  Estonian Academy  of Security Sciences building in
Tallinn was delivered to the customer on schedule.

A  significant  share  of  the  Group's  Estonian apartment building projects is
located in Tallinn. During the period, the largest of them were located at Lesta
10, Sammu  6 and Valge 16. Sweden,  where we are  providing services under three
housing  development contracts, also continues to  make a strong contribution to
the  sub-segment's  revenue.  Apartment  buildings  in  phases III and IV of the
Sõjakooli project were delivered to the customer on schedule.

We  continue to carry  out our own  housing development projects  in Tallinn and
Tartu  (reported in the apartment buildings  sub-segment). During the period, we
completed  a four-floor apartment building with 21 apartments at Nõmme tee 97 in
Tallinn (www.nommetee.ee (http://www.nommetee.ee)) and three apartment buildings
with   10 apartments   each   at   Aruküla   tee   in   Tartu  (www.kaldakodu.ee
(http://www.kaldakodu.ee)).  Work continues  on a  five-floor apartment building
with    24 apartments   at   Võidujooksu   8c in   Tallinn   (www.voidujooksu.ee
(http://www.voidujooksu.ee)).  During the  period, our  own housing developments
generated  revenue of  3,792 thousand euros  (H1 2018: 3,228 thousand euros). In
conducting  real  estate  development  activities,  we monitor closely potential
risks in the housing development market.

The  largest projects in the industrial and warehouse facilities sub-segment are
the construction of a warehouse and office building at Kaldase tee in Maardu and
the  reconstruction (phase  V) of  the fattening  unit of  a pig farm of Rakvere
Farmid  AS (EKSEKO). Compared to previous periods, the share of contracts signed
with  the agricultural sector  has decreased significantly,  which is one of the
reasons for the sub-segment's revenue decline.

 Revenue breakdown in the Buildings segment H1 2019 H1 2018 H1 2017 2018
------------------------------------------------------------------------
 Commercial buildings                           35%     36%     25%  35%

 Apartment buildings                            33%     23%     31%  25%

 Public buildings                               24%     26%     26%  25%

 Industrial and warehouse facilities             8%     15%     18%  15%

We  do  not  expect  revenue  breakdown  in the Infrastructure segment to change
significantly  in  2019. The  segment  will  continue  to  be  dominated by road
construction  and maintenance  despite the  fact that  the contribution of other
engineering  work has grown. During the period,  a major share of the revenue of
the  road  construction  and  maintenance  sub-segment  resulted  from contracts
secured  in 2018: the  construction of  passing lanes  on the Pikknurme-Puurmani
section  of the Tallinn-Tartu-Võru-Luhamaa  road (a 2+1 road  section) and roads
and bridges for the defence forces' central training area in Kuusalu parish. The
strongest  contributors  among  contracts  secured  in  2019 were  those for the
construction  of the  Missokülä-Hindsa section  (8 km)  and the Misso small town
section  (2 km) of main road no. 7 (Riga-Pskov). A significant share of the sub-
segment's  revenue results from forest road improvement services provided to the
State  Forest  Management  Centre.  The  Group  also  continues  to provide road
maintenance services in Järva and Hiiu counties and the Kose maintenance area in
Harju county.

During  the period, we continued earthworks on the Kiili-Paldiski section of the
onshore  part of  Balticconnector (a  gas pipeline  between Estonia and Finland)
that generated a major share of other engineering revenue.

 Revenue breakdown in the Infrastructure segment H1 2019 H1 2018 H1 2017 2018
-----------------------------------------------------------------------------
 Road construction and maintenance                   77%     90%     84%  89%

 Other engineering                                   20%      7%     12%   7%

 Environmental engineering                            3%      3%      4%   4%

Order book

At 30 June 2019, the Group's order book (backlog of contracts signed but not yet
performed)  stood at 179,691 thousand euros, an increase of 37% year on year. In
the second quarter of 2019, we signed new contracts of 65,901 thousand euros (Q2
2018: 43,416 thousand euros).

 As at                 30 June 2019 30 June 2018 30 June 2017 31 Dec 2018
-------------------------------------------------------------------------
 Order book (EUR '000)      179,691      131,552      130,601     100,352

At  the  reporting  date,  contracts  secured  by  the Buildings segment and the
Infrastructure segment accounted for 81% and 19% of the Group's total order book
respectively  (30  June  2018: 73% and  27% respectively).  Compared  to 30 June
2018, the  order book of  the Buildings segment  has increased by around 52% and
the order book of the Infrastructure segment has decreased by 6%.

In  the Buildings segment, the  largest order books are  those of the commercial
and  the public buildings sub-segments, which  account for 36% and 33% of the of
the segment's order book respectively. The order book of the apartment buildings
sub-segment has also grown compared to the same period last year. The order book
of  the industrial and warehouse facilities  sub-segment, on the other hand, has
decreased  substantially. In  the commercial  buildings sub-segment, the largest
projects  in progress are mostly in Tallinn: the reconstruction and extension of
the building of Terminal D in the Old City Harbour and the construction of a new
seven-floor  commercial building in Rotermann City.  At the end of the reporting
period, we were awarded a contract for the construction of the first building in
the  Porto Franco development in Tallinn: a  building near Laeva street that has
three underground and five above-ground floors. In Tartu, we continue to build a
multi-storey  car park for Tartu University Hospital.  A large part of the order
book  of the public buildings sub-segment is  made up of contracts signed at the
beginning  of  2019 for  the  construction  of  the Estonian Academy of Security
Sciences  and the  University of  Tartu Training  Centre in  Narva, a sports and
health  centre at Kohtla-Järve and an assembly  area at the Defence Forces' base
at   Tapa.   In  the  second  quarter,  we  also  secured  a  contract  for  the
reconstruction  and extension  of a  research and  academic building  of Tallinn
University  of  Technology  at  Mäepealse  3. The  order  book  of the apartment
buildings  sub-segment  includes  contracts  for  the  construction of apartment
buildings  in  Tallinn.  In  addition,  in  the  first  quarter  we were awarded
contracts  for the construction  of two apartment  buildings in Sweden: one near
Uppsala city centre and the other in the Bromma district in Stockholm.

As  in  previous  years,  the  order  book  of  the  Infrastructure  segment  is
underpinned  by contracts of the  road construction and maintenance sub-segment,
which  at  the  end  of  the  reporting  period  accounted for around 89% of the
segment's  order book.  In the  second quarter  of 2019, we signed contracts for
building  the Kernu bypass and the Kernu  filling station and Haiba junctions on
the  Tallinn-Pärnu-Ikla road and  reconstructing two road  sections of main road
no. 7 (Riga-Pskov): the Missokülä-Hindsa section (8 km) and the Misso small town
section  (2 km).  Under contracts  signed in  2018, we continue to build passing
lanes  for a 2+1 road on the  Pikknurme-Puurmani section (km 142.2-146.9) of the
Tallinn-Tartu-Võru-Luhamaa  road and roads  and bridges for  the Defence Forces'
central  training area  in Kuusalu  parish. The  Group continues to provide road
maintenance services in three road maintenance areas: Järva, Hiiu and Kose.

Based on the size of the Group's order book and known developments in our chosen
markets,  we expect that in 2019 the Group's revenue will grow slightly compared
to  2018. In an environment of exceptionally  stiff competition, we avoid taking
unjustified risks whose realisation in the contract performance phase would have
an  adverse  impact  on  the  Group's  results.  Despite  this,  where  suitable
opportunities  arise,  we  strive  to  increase  the portfolio to counteract the
pressure on margins that is caused by the market situation. Our preferred policy
is to keep fixed costs under control and monitor market developments closely.

Between  the  reporting  date  (30  June  2019) and  the date of release of this
report,  Group companies have  secured additional construction  contracts in the
region of 34,080 thousand euros.

People

Employees and personnel expenses

In the first half of 2019, the Group (the parent and the subsidiaries) employed,
on  average, 678 people  including 405 engineers  and technical personnel (ETP).
Headcount decreased by around 2% compared to the same period in 2018.

Average  number of  employees at  Group entities  (including the  parent and the
subsidiaries)

                      H1 2019   H1 2018   H1 2017   2018
---------------------------------------------------------
  ETP                     405       426       423    419

  Workers                 273       268       314    268

  Total average           678       694       737    687

The  Group's personnel expenses for the first half of 2019, including all taxes,
totalled  11,036 thousand euros. In  the first half  of 2018, personnel expenses
amounted  to 10,566 thousand  euros. Despite  a decline  in the number of staff,
personnel  expenses  grew  by  around  4% year  on  year.  Due to the persisting
shortage  of  qualified  and  experienced  labour,  employers  are  under strong
pressure to increase wages and salaries.

The service fees of the members of the council of Nordecon AS for the first half
of  2019 amounted to  94 thousand euros  and associated  social security charges
totalled  31 thousand euros  (H1 2018: 94 thousand  euros and  31 thousand euros
respectively).

The  service fees of  the members of  the board of  Nordecon AS amounted to 278
thousand euros and associated social security charges totalled 93 thousand euros
(H1  2018: 390 thousand euros and 128 thousand  euros respectively). The figures
for  the first  half of  2018 include termination  benefits of 93 thousand euros
paid  to a  member of  the board  and associated  social security charges of 31
thousand euros.

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 personnel expenses incurred:

                                                  H1 2019 H1 2018 H1 2017  2018
-------------------------------------------------------------------------------
 Nominal labour productivity (rolling), (EUR
 '000)                                              321.5   327.4   296.5 325.4

 Change against the comparative period, %           -1.8%   10.4%   33.0%  3.3%



 Nominal labour cost efficiency (rolling), (EUR)      9.3     9.9    10.2   9.7

 Change against the comparative period, %           -6.3%   -2.1%   30.3% -3.8%

The  Group's  nominal  labour  productivity  and labour cost efficiency declined
compared  to the first quarter of 2018 due to lower revenue and higher personnel
expenses.


Nordecon (www.nordecon.com (http://www.nordecon.com)) is a group of construction
companies  whose core  business is  construction project  management and general
contracting  in the  buildings and  infrastructures segment.  Geographically the
Group  operates in Estonia, Ukraine, Finland and Sweden. The parent of the Group
is  Nordecon  AS,  a  company  registered  and  located in Tallinn, Estonia. The
consolidated  revenue  of  the  Group  in  2018 was 223 million euros. Currently
Nordecon  Group  employs  close  to  680 people. Since 18 May 2006 the company's
shares have been quoted in the main list of the NASDAQ Tallinn Stock Exchange.

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)