Market announcement

Title

2019 IV quarter and 12 months consolidated interim report (unaudited)

Message

This  announcement includes Nordecon AS's  consolidated financial statements for
the fourth quarter and twelve months of 2019 (unaudited) and overview of the key
events influencing the period's financial result.
Interim  report is attached to the announcement  and is also published on NASDAQ
Tallinn and Nordecon's web page (http://www.nordecon.com/for-investor/financial-
reports/interim-reports).
Period's  investor presentation  are attached  to the  announcement and are also
published on Nordecon's web page (http://www.nordecon.com/for-investor/investor-
presentations).

Condensed consolidated interim statement of financial position

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

 Current assets

 Cash and cash equivalents                               7,032            7,678

 Trade and other receivables                            37,003           31,627

 Prepayments                                             1,813            1,383

 Inventories                                            22,655           20,444

 Total current assets                                   68,503           61,132


 Non-current assets

 Investments in equity-accounted investees               2,369            2,266

 Other investments                                          26               26

 Trade and other receivables                             8,435            8,225

 Investment property                                     5,530            5,526

 Property, plant and equipment                          19,002           12,288

 Intangible assets                                      14,736           14,674

 Total non-current assets                               50,098           43,005

 TOTAL ASSETS                                          118,601          104,137



 LIABILITIES

 Current liabilities

 Borrowings                                             11,058            9,374

 Trade payables                                         40,726           34,954

 Other payables                                          7,966            5,187

 Deferred income                                         7,355            3,932

 Provisions                                                716            1,013

 Total current liabilities                              67,821           54,460


 Non-current liabilities

 Borrowings                                             16,326           14,830

 Trade payables                                             98               98

 Other payables                                            177               71

 Provisions                                              1,425              969

 Total non-current liabilities                          18,026           15,968

 TOTAL LIABILITIES                                      85,847           70,428



 EQUITY

 Share capital                                          14,379           16,321

 Own (treasury) shares                                    -660             -693

 Share premium                                             635              618

 Statutory capital reserve                               2,554            2,554

 Translation reserve                                     1,169            1,992

 Retained earnings                                      12,372           10,896

 Total equity attributable to owners of the
 parent                                                 30,449           31,688

 Non-controlling interests                               2,305            2,021

 TOTAL EQUITY                                           32,754           33,709

 TOTAL LIABILITIES AND EQUITY                          118,601          104,137

Condensed consolidated interim statement of comprehensive income

 EUR '000                                     Q4 2019     2019 Q4 2018     2018
-------------------------------------------------------------------------------

 Revenue                                       61,271  233,508  55,908  223,496

 Cost of sales                                -57,229 -221,745 -52,563 -213,463

 Gross profit                                   4,042   11,763   3,345   10,033



 Marketing and distribution expenses             -149     -784    -156     -626

 Administrative expenses                       -2,169   -6,837  -1,748   -6,725

 Other operating income                           187      315     247    1,471

 Other operating expenses                        -145     -193     -49     -122

 Operating profit                               1,766    4,264   1,639    4,031



 Finance income                                    62    1,277     190      431

 Finance costs                                   -213   -1,219    -168     -909

 Net finance costs/income                        -151       58      22     -478



 Share of loss/profit of equity-accounted
 investees                                        -37      585      -9      835



 Profit before income tax                       1,578    4,907   1,652    4,388

 Income tax expense                              -324     -777      15     -567

 Profit for the period                          1,254    4,130   1,667    3,821



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

 Exchange differences on translating
 foreign operations                               -42     -823    -105       -3

 Total other comprehensive expense                -42     -823    -105       -4

 TOTAL COMPREHENSIVE INCOME                     1,212    3,307   1,562    3,818



 Profit attributable to:

 - Owners of the parent                           835    3,367   1,409    3,381

 - Non-controlling interests                      419      763     258      440

 Profit for the period                          1,254    4,130   1,667    3,821



 Total comprehensive income attributable
 to:

 - Owners of the parent                           793    2,544   1,304    3,378

 - Non-controlling interests                      419      763     258      440

 Total comprehensive income for the period      1,212    3,307   1,562    3,818



 Earnings per share attributable to owners
 of the parent:

 Basic earnings per share (EUR)                  0.03     0.11    0.04     0.11

 Diluted earnings per share (EUR)                0.03     0.11    0.04     0.11

Condensed consolidated interim statement of cash flows

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

  Cash receipts from customers                            277,941    269,292

  Cash paid to suppliers                                 -239,901   -232,669

  VAT paid                                                 -6,816     -8,269

  Cash paid to and for employees                          -22,989    -22,593

  Income tax paid                                            -232       -596

  Net cash from operating activities                        8,003      4,692



  Cash flows from investing activities

  Paid on acquisition of property, plant and equipment       -594       -534

  Paid on acquisition of intangible assets                      0          0

  Proceeds from sale of property, plant and equipment         377      1,784

  Paid on acquisition of investment property                    0        -88

  Proceeds from sale of investment property                     0      1,300

  Loans provided                                              -74        -12

  Repayment of loans provided                                  13         14

  Dividends received                                          489        460

  Interest received                                             9         10

  Net cash from investing activities                          220      2,934



  Cash flows from financing activities

  Proceeds from loans received                              3,705      2,898

  Repayment of loans received                              -4,032     -4,671

  Lease payments made                                      -3,276     -1,879

  Interest paid                                            -1,004       -737

  Dividends paid                                           -2,360     -2,627

  Reduction of share capital                               -1,892     -1,847

  Other payments                                               -4          0

  Net cash used in financing activities                    -8,863     -8,863



  Net cash flow                                              -638     -1,237



  Cash and cash equivalents at beginning of period          7,678      8,915

  Effect of movements in foreign exchange rates                -8          0

  Increase in cash and cash equivalents                      -638     -1,237

  Cash and cash equivalents at end of period                7,032      7,678

Proposals for a dividend distribution and the reduction of share capital

Having  agreed it  with the  council, the  board proposes  that the shareholders
distribute  in 2020 a dividend of 0.06 euros  per share (1,892 thousand euros in
total)  for 2019. Own (treasury) shares do  not give the company any shareholder
rights.
In  addition, the Group's  ultimate controlling party  has notified the board of
its intention to propose at the annual general meeting a motion for reducing the
share  capital of Nordecon AS by 1,943 thousand euros (0.06 euros per share). If
the  motion is approved, share capital  will decrease from 14,379 thousand euros
to 12,436 thousand euros. According to the motion, share capital will be reduced
by  reducing the book value of the shares  so that the number of the shares will
remain  the same,  i.e. 32,375,483 shares,  including the 846,898 own (treasury)
shares held at 31 December 2019.

Financial review

Financial performance

In an environment of continuously stiff competition, Nordecon's gross profit and
gross  margin  improved. The Group ended the year with a gross profit of 11,763
thousand  euros (2018: 10,033 thousand euros) and  a gross margin of 5.0% (2018:
4.5%). The  gross margin of the Buildings segment increased considerably, rising
to  6.3% for 2019 (2018: 4.7%) and 8.8% for the fourth quarter (Q4 2018: 8.3%).
The  gross margin  of the  Infrastructure segment,  on the  other hand, weakened
noticeably,  dropping  to  3.5% for  2019 (2018:  5.6%) and  1.9% for the fourth
quarter   (Q4  2018: 1.9%), which  is  certainly  less  than  satisfactory.  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 costs related 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 decreased compared  to 2018, which,  in turn,  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. Input costs continue to  rise, which has a particularly
strong  effect  on  the  profitability  of  general  contractors.  According  to
Statistics  Estonia,  in  2019 the  construction  price index increased by 1.9%
compared  to the average figure for  2018. Labour costs increased by 4.3%, plant
and  equipment costs by  2.0% and materials costs  by 0.7% (also compared to the
average figures for 2018).
The  Group's  administrative  expenses  for  2019 totalled 6,837 thousand euros.
Compared to 2018, administrative expenses increased by around 2.0% (2018: 6,725
thousand  euros) and the ratio of  administrative expenses to revenue (12 months
rolling) was 2.9% (2018: 3.0%).
The  Group ended  2019 with an  operating profit  of 4,264 thousand euros (2018:
4,031 thousand  euros). EBITDA  amounted to  7,300 thousand euros  (2018: 6,021
thousand euros) and EBITDA margin was 3.1% (2018: 2.7%).
Finance  income and costs of  the period continued to  be influenced by exchange
rate  fluctuations  in  the  Group's  foreign  markets.  During  the period, the
Ukrainian  hryvnia strengthened  against the  euro by  around 20% and  the Group
recognised  an exchange gain of  1,044 thousand euros (2018: 147 thousand euros)
on  the translation of loans provided to  the Ukrainian subsidiary in euros. The
Swedish krona, on the other hand, weakened against the euro by around 2% and the
Group  recognised  an  exchange  loss  of 196 thousand euros (2018: 121 thousand
euros) on the translation of a loan provided to the Swedish subsidiary in euros.
In  addition, interest expense increased by  221 thousand euros year on year due
to changes in lease accounting policies.
The  Group earned  a net  profit of  4,130  thousand euros (2018: 3,821 thousand
euros)  of which the net  profit attributable to owners  of the parent, Nordecon
AS, was 3,367 thousand euros (2018: 3,381 thousand euros).

Cash flows

Operating  activities of 2019 produced a net cash inflow of 8,003 thousand euros
(2018: 4,692 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 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 resulted in a net cash inflow of 220 thousand euros (2018:
2,934 thousand  euros). The largest items were  amounts paid for property, plant
and equipment of 594 thousand euros (2018: 534 thousand euros) and proceeds from
sales  of  property,  plant  and  equipment  of 377 thousand euros (2018: 1,784
thousand  euros). Dividends received amounted  to 489 thousand euros (2018: 460
thousand  euros).  In  2018, cash  flows  from  investing  activities  were also
influenced by the sale of investment property for 1,300 thousand euros.
Financing activities generated a net cash outflow of 8,863 thousand euros (2018:
an  outflow of 8,863 thousand euros). The  largest items in financing cash flows
were  loan and  finance lease  payments. Proceeds  from loans  received totalled
3,705 thousand  euros, comprising  development loans  and overdrafts used (2018:
2,898 thousand euros).
Loan  repayments  totalled  4,032 thousand  euros  (2018: 4,671 thousand euros),
consisting  of  scheduled  repayments  of  long-term  investment and development
loans.  Lease  payments  totalled  3,276 thousand  euros  (2018:  1,879 thousand
euros).  Lease payments increased in connection with changes in lease accounting
policies.  Dividends paid amounted to 2,360 thousand euros (2018: 2,627 thousand
euros).  Payments  made  on  the  reduction  of share capital amounted to 1,892
thousand euros (2018: 1,847 thousand euros).
At  31 December  2019, the  Group's  cash  and  cash equivalents totalled 7,032
thousand euros (31 December 2018: 7,678 thousand euros).

Key financial figures and ratios

 Figure/ratio for the period                         2019       2018       2017
-------------------------------------------------------------------------------
 Revenue (EUR '000)                               233,508    223,496    231,387

 Revenue change                                      4.5%      -3.4%      26.2%

 Net profit (EUR '000)                              4,130      3,821      1,725

 Net profit attributable to owners of the
 parent (EUR '000)                                  3,367      3,381      1,388

 Average number of shares                      31,528,585 31,528,585 30,913,031

 Earnings per share (EUR)                            0.11       0.11       0.04

 Administrative expenses to revenue                  2.9%       3.0%       3.0%

 EBITDA (EUR '000)                                  7,300      6,021      3,123

 EBITDA margin                                       3.1%       2.7%       1.3%

 Gross margin                                        5.0%       4.5%       3.8%

 Operating margin                                    1.8%       1.8%       0.5%

 Operating margin excluding gain on asset
 sales                                               1.7%       1.3%       0.5%

 Net margin                                          1.8%       1.7%       0.7%

 Return on invested capital                         10.0%       8.4%       5.9%

 Return on equity                                   12.4%      11.2%       4.8%

 Equity ratio                                       27.6%      32.4%      30.8%

 Return on assets                                    3.7%       3.5%       1.6%

 Gearing                                            33.8%      28.5%      32.7%

 Current ratio                                       1.01       1.12       1.11

 As at 31 December                                   2019       2018       2017
-------------------------------------------------------------------------------
 Order book (EUR '000)                            227,568    100,352    144,122
-------------------------------------------------------------------------------


Performance by geographical market

In  2019, revenue  generated  outside  Estonia  accounted  for around 11% of the
Group's total revenue, rising to recent years' highest level.

            2019   2018   2017
-------------------------------
  Estonia    89%    93%    94%

  Ukraine     2%     4%     2%

  Sweden      5%     2%     3%

  Finland     4%     1%     1%

In  2019, the Group  brought in  its largest-ever  Finnish revenue.  Our biggest
project   in   the  Finnish  market  is  a  subcontract  for  building  concrete
constructions  for the  Raitinkartano commercial  and residential  building. The
Group's Swedish revenue also grew year on year, underpinned by two new apartment
building contracts secured as a general contractor and a concrete works contract
secured  as a subcontractor  for building foundations  for 73 wind turbines in a
wind farm being built in northern Sweden (all signed in 2019).  The contribution
of  the Ukrainian market, on the other hand, decreased by almost a half compared
to 2018.

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

We  strive  to  keep  the  revenues  of  our  operating  segments (Buildings and
Infrastructure)  as balanced as  possible because this  helps to diversify risks
and provides better opportunities for continuing construction operations in more
challenging  market conditions,  for example  when the  volumes of  a subsegment
decline sharply.

The  Group's revenue for 2019 amounted to 233,508 thousand euros, 4.5% up on the
223,496 thousand  euros generated in  2018. Revenue grew by  4% in the Buildings
segment  and  7% in  the  Infrastructure  segment.  Buildings and Infrastructure
generated   revenue   of   169,124 thousand  euros  and  64,023 thousand  euros,
respectively. The corresponding figures for 2018 were 162,909 thousand euros and
60,086 thousand  euros. The period's revenue structure  is also reflected in the
Group's order book, where the Buildings segment continues to dominate.

  Operating segments   2019   2018   2017
------------------------------------------
  Buildings             70%    72%    74%

  Infrastructure        30%    28%    26%

Subsegment revenues

The  largest revenue  source in  the Buildings  segment is  still the commercial
buildings  subsegment whose  revenue for  2019 remained comparable  to 2018. The
largest  projects of  the period  were the  reconstruction and  extension of the
building  of Terminal D in the Old City  Harbour, the construction of phase I of
the  Porto Franco commercial and office  development next to the Admiralty Basin
and  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  car park and commercial building  at Tammsaare tee 92 in Tallinn as
well  as  the  design  and  construction  of  a  multi-storey car park for Tartu
University Hospital in Tartu.
The strongest-growing subsegments were public buildings and apartment buildings,
which  increased their revenue by 14% and  16% year on year, respectively. Major
public  buildings completed and  delivered in 2019 were  an academic building of
the  Estonian Academy of Security  Sciences in Tallinn, the  building of a state
upper  secondary school at Kohtla-Järve, the Peetri sports and leisure centre in
Rae parish, an assembly area for the defence forces' base at Tapa and a barracks
for 300 people at the defence forces' base at Jõhvi.
A significant share of our Estonian apartment building projects is located in or
near  Tallinn. Large projects  completed in Tallinn  in 2019 included phases III
and IV of the Sõjakooli project and apartment buildings at Lesta 10, Sammu 6 and
Valge  16. The subsegment's revenue is also  strengthened by contracts signed in
Sweden,  where  the  Group  continues  to  provide  services under three housing
development contracts.
We  continue to build our own housing  development projects in Tallinn and Tartu
(reported  in  the  apartment  buildings  subsegment).  During  the  period,  we
completed  the construction and sale of a four-floor apartment building with 21
apartments  at Nõmme  tee 97 in  Tallinn and  three apartment buildings with 10
apartments  each  at  Aruküla  tee  in  Tartu.  Work  continues  on a five-floor
apartment   building   with   24 apartments   at   Võidujooksu   8c in   Tallinn
(www.voidujooksu.ee  (http://www.voidujooksu.ee)).  Our  own housing development
revenue  amounted to 6,528 thousand euros  in 2019 (2018: 9,369 thousand euros).
In carrying out real estate development activities, we monitor closely potential
risks in the housing development market.
The  largest projects in the industrial and warehouse facilities subsegment were
the  construction of a warehouse  and office building at  Kaldase tee in Maardu,
the  reconstruction (phase  V) of  the fattening  unit of  a pig farm of Rakvere
Farmid  AS (EKSEKO), the  construction of micro-warehouses  in Betooni street in
Tallinn  and the  construction of  a commercial  and warehouse  building in Savi
street  in Pärnu.  Compared to  previous periods,  the contribution of contracts
signed with the agricultural sector has decreased significantly, which is one of
the  reasons  for  the  subsegment's  revenue decline. In 2019, the subsegment's
revenue decreased by around 48% year on year.

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

  Public buildings                              29%    25%    19%

  Apartment buildings                           27%    25%    30%

  Industrial and warehouse facilities            8%    15%    26%

In  the  Infrastructure  segment,  the  share  of  revenue generated by the road
construction  and maintenance subsegment decreased for the first time in several
years.  However, this was mostly due to  a few large other engineering projects.
There  is no general trend indicating a rise in investments in subsegments other
than  road construction and maintenance. During the period, a major share of the
revenue  of  the  road  construction  and  maintenance  subsegment 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 revenue contributors among contracts secured in 2019 were
two  large projects: one for the construction of the Missoküla-Hindsa section (8
km)  and the Misso small town section (2 km) of main road no. 7 (Riga-Pskov) and
the other for the construction of the Kernu bypass and the Kernu filling station
and  Haiba junctions.  A significant  share of  the subsegment'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.
In  2019, the Group completed the construction  of the Kiili-Paldiski section of
the  onshore  part  of  Balticconnector  (a  gas  pipeline  between  Estonia and
Finland),  which made  a strong  contribution to  other engineering revenue. The
subsegment's  revenue was also influenced by the construction of foundations for
73 wind  turbines in the Nysäter wind farm  being built in northern Sweden, near
Sundsvall, which will continue in 2020.

 Revenue breakdown in the Infrastructure segment          2019 2018 2017
------------------------------------------------------------------------
 Road construction and maintenance                         80%  89%  86%

 Other engineering                                         16%   7%   8%

 Environmental engineering                                  3%   4%   6%

 Specialist engineering (including hydraulic engineering)   1%   0%   0%

Order book

At 31 December 2019, the Group's order book (backlog of contracts signed but not
yet performed) stood at 227,568 thousand euros. Compared to the end of 2018, the
order  book has  increased more  than two  times. In  2019, the Group signed new
contracts  of 305,695 thousand  euros (2018:  134,419 thousand euros). The Group
has been equally successful in winning both public and private contracts.

  As at 31 December          2019      2018      2017
------------------------------------------------------
  Order book (EUR '000)   227,568   100,352   144,122

At  the  reporting  date,  contracts  secured  by  the Buildings segment and the
Infrastructure  segment  accounted  for  85% and  15% of the Group's total order
book,  respectively (31  December 2018: 72% and  28%, respectively). Compared to
31 December 2018, the order books of both segments have grown. The order book of
the  Buildings  segment  has  increased  more  than  2.5 times  and  that of the
Infrastructure segment by 21%.
In the Buildings segment, the order books of all subsegments have increased year
on  year. Growth  has been  the strongest  in the apartment buildings subsegment
whose  order book is the largest in the Buildings segment, accounting for 39% of
the total. A major share of the order book of the apartment buildings subsegment
is  made  up  of  the  contract  of  around  40 million euros for the design and
construction  of the first two  phases of the Kalaranna  quarter in Tallinn. The
subsegment's  order book also includes the work secured but not yet performed in
Sweden  where the  Group continues  to build  two apartment  buildings: one near
Uppsala city centre and the other in the Bromma district in Stockholm. The order
books  of the public buildings and  the commercial buildings subsegments account
for  23% and 20% of the of the segment's order book, respectively. A large share
of the order book of the public buildings subsegment is made up of contracts 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, a
storage  complex at  the defence  forces' base  at Tapa  and a new basic school,
Kindluse   Kool,  in  Järveküla,  near  Tallinn.  In  the  commercial  buildings
subsegment, the largest projects in progress are in Tallinn: the construction of
a new seven-floor commercial building in Rotermann City and phase I of the Porto
Franco  development as  well as  the design  and construction  of phase  II of a
multi-storey  car park in  Ülemiste City. The  order book of  the industrial and
warehouse   facilities   subsegment   has  grown  through  a  contract  for  the
construction of a dairy complex for E?Piim in Paide.
For a long time, the order book of the Infrastructure segment has been dominated
by  contracts  secured  by  the  road  construction  and maintenance subsegment.
However,  in  the  reporting  period  the  structure of the segment's order book
changed  significantly.  At  the  reporting  date,  other  engineering contracts
accounted  for roughly a half of the order book of the Infrastructure segment. A
major  share of the order book of the other engineering subsegment is made up of
a  contract secured in the third quarter for the construction of foundations for
73 wind  turbines in the  Nysäter wind farm  in northern Sweden, near Sundsvall.
The  other half of the Infrastructure order book is made up of contracts awarded
to  the  road  construction  and  maintenance  subsegment whose largest projects
include  a contract secured in the second quarter of 2019 for building the Kernu
bypass  and the Kernu filling station  and Haiba junctions on the Tallinn-Pärnu-
Ikla  road and  a contract  secured at  the end  of the  financial year  for the
reconstruction  of the Vinso-Kirmsi section of  the  Võru-Räpina road. The Group
continues  to provide road maintenance services in three road maintenance areas:
Järva, Hiiu and Kose.
Although the Group's order book includes a considerable amount of work that will
continue  into  2021, we  expect  that  in  2020 the  Group's  revenue will grow
compared  to 2019. In an environment of exceptionally stiff competition, we have
avoided  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.

People

Employees and personnel expenses

In  2019, the Group (the parent and the subsidiaries) employed, on average, 687
people,  including 414 engineers and technical  personnel (ETP). Total headcount
remained stable compared to 2018.

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

                  2019   2018   2017
-------------------------------------
  ETP              414    419    426

  Workers          273    268    309

  Total average    687    687    735

The  Group's  personnel  expenses  increased  by  around 10%. In 2019, personnel
expenses,  including  all  taxes,  totalled  25,323 thousand euros. In 2018, the
figure  was  22,964 thousand  euros.  The  main  factors that underpin growth in
personnel expenses are the general pressure for a wage increase, the shortage of
qualified  labour  and  improvements  in  the  Group's  performance,  which have
increased the share of performance-related pay.
The  service fees of the members of the council of Nordecon AS for 2019 amounted
to  187 thousand  euros  and  associated  social  security  charges totalled 62
thousand euros (2018: 187 thousand euros and 62 thousand euros, respectively).
The  service fees of  the members of  the board of  Nordecon AS amounted to 480
thousand  euros  and  associated  social  security charges totalled 158 thousand
euros  (2018:  656 thousand  euros  and  217 thousand  euros, respectively). The
figures  for 2018 include termination  benefits of 180 thousand  euros paid to a
member of the board and associated social security charges of 60 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:

                                                       2019    2018    2017
----------------------------------------------------------------------------
  Nominal labour productivity (rolling), (EUR '000)   339.8   325.4   314.9

  Change against the comparative period, %             4.4%    3.3%   17.6%



  Nominal labour cost efficiency (rolling), (EUR)       9.2     9.7    10.1

  Change against the comparative period, %            -5.3%   -3.8%   12.6%

The  Group's nominal labour productivity increased  year on year through revenue
growth. Nominal labour cost efficiency, on the other hand, decreased because the
rise in personnel expenses exceeded revenue growth.


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  unaudited  revenue  of  the  Group  in 2019 was 234 million euros.
Currently  Nordecon  Group  employs  close  to 690 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)