Market announcement

Title

2020 III quarter and 9 months consolidated interim report (unaudited)

Message

Compared to the same period last year, the 9 month results of the Group in 2020
are  characterised by an  increase in sales  revenue and operating profit, which
was achieved in the context of a slight decline in gross profitability through a
reduction  in operating costs and an increase in overall efficiency. Despite the
global  COVID-19 pandemic and the resulting economic downturn, the impact on the
results  of  the  Group  in  the  9 months of 2020 is limited. Continuously, the
weakening  of Ukranian hryvnia and the  resulting exchange rate loss affects the
net  result. The order book  has increased year on  year as compared to the same
period  of 2019 from  196 million euros  to 215 million  euros mainly due to the
contracts  form the public  sector. Estimated two  thirds of the  order book are
works to be performed in 2021 and 2022.
The  COVID-19 pandemic has an  increasing impact on  the construction market and
companies operating in the construction sector. The volume of new private orders
has  fallen considerably in the second and  third quarters of 2020 and the start
of  construction of  many objects  in the  tender phase  has been delayed in the
future.  The  pressure  on  the  main  contracting  companies by demand side has
increased  as the market volume declines, but the expected decrease in the input
prices  offered by subcontractors has  not occurred significantly. The situation
has put the profit margin under pressure and brought into focus the reduction of
the Group's costs and the need to contribute more resources to automated digital
solutions.

Condensed consolidated interim statement of financial position

 EUR '000                                    30 September 2020 31 December 2019
-------------------------------------------------------------------------------
 ASSETS

 Current assets

 Cash and cash equivalents                               7,640            7,032

 Trade and other receivables                            61,532           37,563

 Prepayments                                             4,208            1,813

 Inventories                                            24,080           21,142

 Total current assets                                   97,460           67,550

 Non-current assets

 Investments in equity-accounted investees               1,802            2,369

 Other investments                                          26               26

 Trade and other receivables                             8,615            8,435

 Investment property                                     6,301            5,530

 Property, plant and equipment                          18,451           19,002

 Intangible assets                                      14,924           14,736

 Total non-current assets                               50,119           50,098

 TOTAL ASSETS                                          147,579          117,648



 LIABILITIES

 Current liabilities

 Borrowings                                             19,196           11,058

 Trade payables                                         60,286           40,730

 Other payables                                          9,440            7,954

 Deferred income                                         7,550            6,391

 Provisions                                              1,156              716

 Total current liabilities                              97,628           66,849

 Non-current liabilities

 Borrowings                                              8,187           16,326

 Trade payables                                             98               98

 Other payables                                          2,283              177

 Provisions                                              1,339            1,425

 Total non-current liabilities                          11,907           18,026

 TOTAL LIABILITIES                                     109,535           84,875



 EQUITY

 Share capital                                          14,379           14,379

 Own (treasury) shares                                    -660             -660

 Share premium                                             635              635

 Statutory capital reserve                               2,554            2,554

 Translation reserve                                     2,544            1,169

 Retained earnings                                      14,919           12,383

 Total equity attributable to owners of the
 parent                                                 34,371           30,460

 Non-controlling interests                               3,673            2,313

 TOTAL EQUITY                                           38,044           32,773

 TOTAL LIABILITIES AND EQUITY                          147,579          117,648

Condensed consolidated interim statement of comprehensive income

 EUR '000                             9M 2020 Q3 2020  9M 2019 Q3 2019     2019
-------------------------------------------------------------------------------
 Revenue                              217,664  80,866  172,237  71,796  234,071

 Cost of sales                       -208,149 -77,358 -164,516 -67,369 -222,302

 Gross profit                           9,515   3,508    7,721   4,427   11,769



 Marketing and distribution
 expenses                                -386    -184     -635    -137     -784

 Administrative expenses               -5,312  -1,452   -4,668  -1,620   -6,837

 Other operating income                   273      95      128      61      315

 Other operating expenses                -138     -28      -48     -28     -193

 Operating profit                       3,952   1,939    2,498   2,703    4,270



 Finance income                           270      21    1,215     720    1,277

 Finance costs                         -2,102    -861   -1,006    -343   -1,219

 Net finance costs/income              -1,832    -840      209     377      -58



 Share of profit of equity-
 accounted investees                      966     487      622     370      585



 Profit before income tax               3,086   1,586    3,329   3,450    4,913

 Income tax expense                       -82       0     -453       0     -764

 Profit for the period                  3,004   1,586    2,876   3,450    4,149



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

 Exchange differences on
 translating foreign operations         1,375     557     -777    -514     -823

 Total other comprehensive
 income/expense                         1,375     557     -777    -514     -823

 TOTAL COMPREHENSIVE INCOME             4,379   2,143    2,099   2,936    3,326



 Profit attributable to:

 - Owners of the parent                 1,040   1,197    2,532   3,325    3,378

 - Non-controlling interests            1,964     389      344     125      771

 Profit for the period                  3,004   1,586    2,876   3,450    4,149



 Total comprehensive income
 attributable to:

 - Owners of the parent                 2,415   1,754    1,755   2,811    2,555

 - Non-controlling interests            1,964     389      344     125      771

 Total comprehensive income for
 the period                             4,379   2,143    2,099   2,936    3,326



 Earnings per share attributable
 to owners of the parent:

 Basic earnings per share (EUR)          0.03    0.04     0.08    0.10 0.11

 Diluted earnings per share (EUR)        0.03    0.04     0.08    0.10 0.11

Condensed consolidated interim statement of cash flows

  EUR '000                                                9M 2020    9M 2019
-----------------------------------------------------------------------------
  Cash flows from operating activities

  Cash receipts from customers                            267,488    193,567

  Cash paid to suppliers                                 -238,592   -165,291

  VAT paid                                                 -8,245     -4,606

  Cash paid to and for employees                          -20,849    -17,332

  Income tax paid                                             -81       -149

  Net cash used in/from operating activities                 -279      6,189



  Cash flows from investing activities

  Paid on acquisition of property, plant and equipment       -184       -216

  Proceeds from sale of property, plant and equipment         246        215

  Acquisition of intangible assets                             -2          0

  Acquisition of a subsidiary                                  -2          0

  Cash received on acquisition of a subsidiary              3,605          0

  Loans provided                                              -17        -14

  Repayment of loans provided                                  43          9

  Dividends received                                          251        489

  Interest received                                             8          6

  Net cash from investing activities                        3,948        489



  Cash flows from financing activities

  Proceeds from loans received                              2,333      3,036

  Repayment of loans received                              -1,949     -3,245

  Lease payments made                                      -2,167     -2,400

  Interest paid                                              -790       -744

  Dividends paid                                             -472     -2,360

  Net cash used in financing activities                    -3,045     -5,713



  Net cash flow                                               624        965



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

  Effect of movements in foreign exchange rates               -16        -13

  Increase in cash and cash equivalents                       624        965

  Cash and cash equivalents at end of period                7,640      8,630

Financial review

Financial performance

Nordecon  ended the  first nine  months of  2020 with a  gross profit  of 9,515
thousand  euros (9M 2019: 7,721 thousand euros).  Gross margin was 4.4% for nine
months  (9M 2019: 4.5%) and 4.3% for  the third quarter  (Q3 2019: 6.2%). In the
Buildings  segment, gross  margin decreased  year on  year, dropping to 4.7% for
nine  months and 4.0% for the third  quarter (9M 2019: 5.4% and Q3 2019: 5.1%).
The  decline is mainly attributable to a loss-making housing development project
completed  in Sweden. In the Infrastructure  segment, gross margin improved year
on  year, rising  to 4.6% for  nine months  and 5.9% for  the third  quarter (9M
2019: 4.0% and Q3 2019: 9.2%). The segment's nine-month result was influenced by
an  earlier  start  of  the  road  construction  season and a strong order book.
Despite  the  fact  that  market  players'  capacity to produce asphalt concrete
considerably  exceeds market  demand, the  Group's asphalt  concrete output grew
year  on year, providing  cover for fixed  costs, the largest  share of which is
made  up  of  costs  related  to  the  plant  and equipment required for asphalt
concrete production and laying.
The  Group's administrative expenses for the  first nine months of 2020 totalled
5,312 thousand  euros.  Compared  to  the  same  period  in 2019, administrative
expenses  increased by around  14% (9M 2019: 4,668 thousand euros).  The rise is
attributable  to growth  in personnel  expenses and  depreciation as well as the
fact  that Embach  Ehitus OÜ  became a  subsidiary. The  ratio of administrative
expenses to revenue (12 months rolling) was 2.7, remaining virtually the same as
a year earlier (9M 2019: 2.8%).
The  Group's  operating  profit  for  the  first  nine months of 2020 was 3,952
thousand  euros (9M 2019: 2,498 thousand euros).  Operating margin improved year
on  year, rising  to 1.8% for  the nine  months of  2020 (9M 2019: 1.5%). EBITDA
amounted to 6,512 thousand euros (9M 2019: 4,732 thousand euros).
Finance  income and costs of  the period continued to  be influenced by exchange
rate  fluctuations in the Group's foreign markets, particularly the movements in
the  exchange rate of the Ukrainian hryvnia,  which weakened against the euro by
approximately  20%. In contrast to the first  nine months of 2019 when the Group
earned a foreign exchange gain, in the reporting period the translation of loans
provided  to the Ukrainian subsidiaries in  euros resulted in a foreign exchange
loss  of  1,255 thousand  euros  (9M  2019: an  exchange  gain of 1,040 thousand
euros).  The Swedish krona  weakened against the  euro by around 1%. The foreign
exchange gain recognised in finance income in connection with the translation of
a loan provided to the Swedish subsidiary in euros amounted to 84 thousand euros
(9M 2019: a foreign exchange loss of 258 thousand euros).
The Group's net profit amounted to 3,004 thousand euros (9M 2019: 2,876 thousand
euros). The profit attributable to owners of the parent, Nordecon AS, was 1,040
thousand euros (9M 2019: 2,532 thousand euros).

Cash flows

In  the  first  nine  months  of  2020, operating activities produced a net cash
outflow  of 279 thousand euros (9M 2019: an inflow of 6,189 thousand euros). The
key  factor  that  affects  operating  cash  flow  is  the  mismatch between the
settlement  terms agreed  with customers  and suppliers.  Operating cash flow is
also  strongly influenced by the fact that the contracts signed with most public
and  private sector customers do not require them to make advance payments while
the  Group has to make prepayments to subcontractors and materials suppliers. In
2020, the  share of prepayments has increased due to the COVID-19 pandemic. 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 3,948 thousand euros (9M
2019: an  inflow  of  489 thousand  euros).  The  transaction with the strongest
impact  was the  transformation of  Embach Ehitus  OÜ from  an associate  into a
subsidiary,  which generated cash inflow of  3,605 thousand euros. Cash flow was
also  influenced by  payments made  for the  acquisition of  property, plant and
equipment  of 184 thousand euros (9M 2019: 216 thousand euros) and proceeds from
the  sale of property, plant and  equipment of 246 thousand euros (9M 2019: 215
thousand   euros).   Dividends  received  amounted  to  251 thousand  euros  (9M
2019: 489 thousand euros).
Financing  activities generated a  net cash outflow  of 3,045 thousand euros (9M
2019: an outflow of 5,713 thousand euros). The largest items were loan and lease
payments  and  dividends  paid.  Proceeds  from  loans  received totalled 2,333
thousand  euros, comprising  the use  of the  overdraft facility and development
loans  (9M 2019: 3,036 thousand euros).  Loan repayments totalled 1,949 thousand
euros (9M 2019: 3,245 thousand euros), consisting of regular repayments of long-
term  investment and  development loans.  Lease payments totalled 2,167 thousand
euros  (9M 2019: 2,400 thousand euros). Dividends paid  in the first nine months
of 2020 amounted to 472 thousand euros (9M 2019: 2,360 thousand euros).
The  Group's  cash  and  cash  equivalents  totalled 7,640 thousand euros at 30
September 2020 (30 September 2019: 8,630 thousand euros).

Key financial figures and ratios

 Figure/ratio                     9M 2020      9M 2019      9M 2018        2019
-------------------------------------------------------------------------------
 Revenue (EUR '000)               217,664      172,237      167,588     234,071

 Revenue change                     26.4%         2.8%        -4.2%        4.7%

 Net profit (EUR '000)              3,004        2,876        2,154       4,149

 Net profit attributable to
 owners of the parent
 (EUR '000)                         1,040        2,532        1,972       3,378

 Weighted average number of
 shares                        31,528,585   31,528,585   30,986,585  31,528,585

 Earnings per share (EUR)            0.03         0.08         0.06        0.11

 Administrative expenses to
 revenue                             2.4%         2.7%         3.0%        2.9%

 Administrative expenses to
 revenue (rolling)                   2.7%         2.8%         2.9%        2.9%

 EBITDA (EUR '000)                  6,512        4,732        3,879       7,311

 EBITDA margin                       3.0%         2.7%         2.3%        3.1%

 Gross margin                        4.4%         4.5%         4.0%        5.0%

 Operating margin                    1.8%         1.5%         1.4%        1.8%

 Operating margin excluding
 gain on asset sales                 1.8%         1.4%         0.8%        1.7%

 Net margin                          1.4%         1.7%         1.3%        1.8%

 Return on invested capital          6.2%         5.8%         5.4%       10.0%

 Return on equity                    8.5%         8.8%         6.4%       12.5%

 Equity ratio                       25.8%        25.9%        28.6%       27.9%

 Return on assets                    2.3%         2.5%         1.9%        3.7%

 Gearing                            30.2%        30.0%        29.1%       33.8%

 Current ratio                       1.00         0.93         0.96        1.01

                                  30 Sept
 As at                               2020 30 Sept 2019 30 Sept 2018 31 Dec 2019
-------------------------------------------------------------------------------
 Order book (EUR '000)            215,494      196,493      131,953     227,545
-------------------------------------------------------------------------------


Performance by geographical market

The  revenue contribution of the Groups  foreign markets increased year on year,
rising  to approximately  12% of the  Group's total  revenue for  the first nine
months of 2020.

            9M 2020   9M 2019   9M 2018   2019
-----------------------------------------------
  Estonia       88%       91%       94%    89%

  Sweden         6%        3%        2%     5%

  Finland        5%        4%        1%     4%

  Ukraine        1%        2%        3%     2%

The  revenue contribution of the Swedish market grew significantly year on year.
During  the  period,  we  provided  services  under  three building construction
contracts  secured as a  general contractor and  one concrete works subcontract.
Finnish  revenues  grew  somewhat,  underpinned  by  concrete works subcontracts
signed  in  the  building  construction  segment  and  two  general contractor's
contracts  signed in the agriculture sector.  Revenue generated in the Ukrainian
market and its proportionate share in the Group's total revenue decreased.
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  have  a  strong  effect  on  our  current results. Increasing the
contribution of foreign markets is one of Nordecon's strategic targets.

Performance by business line

Segment revenues

The  Group ended the first nine  months of 2020 with revenue of 217,664 thousand
euros,  a roughly 26% improvement on the 172,237 thousand euros generated in the
first  nine months of 2019. Revenue growth  was driven by the strong performance
of  the Buildings segment, which increased its revenue by 38%. Based on the size
of  its order book,  revenue growth in  the Buildings segment  was expected. The
Infrastructure segment's revenue, on the other hand, decreased by 2% compared to
the same period last year.
The  limited volume of infrastructure  construction projects, which continues to
affect the entire Estonian construction market, is also reflected in our revenue
structure. In in the first nine months of 2020, our Buildings and Infrastructure
segments  generated revenue of 169,439 thousand euros and 48,025 thousand euros,
respectively.  The corresponding figures  for in the  first nine months of 2019
were 122,825 thousand euros and 49,138 thousand euros.

  Operating segments   9M 2020   9M 2019   9M 2018   2019
----------------------------------------------------------
  Buildings                75%       70%       71%    70%

  Infrastructure           25%       30%       29%    30%

Subsegment revenues

In  the Buildings segment, all subsegments  delivered lesser or greater year-on-
year  revenue growth. The fastest-growing subsegment was public buildings, which
increased  its  revenue  by  78%. It  was  also the largest revenue contributor,
generating approximately a third of total segment revenue. During the period, we
completed  and delivered on  time the Estonian  Academy of Security Sciences and
the  University of Tartu Learning Centre in  Narva, phase I of Kindluse Kool - a
basic  school in Järveküla near Tallinn, and the Annelinn upper secondary school
in  Tartu. The largest  projects in progress  in the public buildings subsegment
are  the construction of a storage complex for the defence forces' base at Tapa,
a sports and health centre at Kohtla-Järve, a family health centre in Tartu, and
an  extension to  the building  of the  Estonian Foreign Intelligence Service in
Rahumäe tee in Tallinn, and the reconstruction of two schools in East Ukraine.
The  largest  projects  of  the  commercial  buildings subsegment that generated
revenue  in the reporting  period are in  Tallinn. The construction  of a seven-
floor  commercial  building  in  Rotermann  City  continues.  We  completed  and
delivered on time the building of Terminal D in the Old City Harbour, phase I of
the  Porto Franco commercial and office development next to the Admiralty Basin,
and a multi-storey car park at Sepapaja 1 in Tallinn.
A  significant share of  our Estonian apartment  building projects is located in
Tallinn. During the period under review, the largest of them were the design and
construction  of the first two  phases of the Kalaranna  quarter, and the design
and  construction of  the Tiskreoja  residential area  on the  western border of
Tallinn.  Similarly  to  previous  periods,  a  major  share of the subsegment's
revenue came from the construction of apartment buildings in Sweden.
We  continue to build our own housing  development projects in Tallinn and Tartu
(reported  in  the  apartment  buildings  subsegment).  During  the  period,  we
completed  a five-floor apartment building with 24 apartments at Võidujooksu 8c
in  Tallinn (www.voidujooksu.ee). Revenue  from our own  real estate development
operations  amounted to 2,455 thousand euros (9M 2019: 6,388 thousand euros). In
carrying  out our  own real  estate development  activities, we  monitor closely
potential risks in the housing development market.
Although  the  amount  and  share  of  revenue  generated  by the industrial and
warehouse  facilities subsegment remained modest  compared to other subsegments,
its revenue grew more than two times compared to the same period in 2019. Still,
the  values of projects in  progress are small, amounting  to 2 million euros on
average.  Based on the order book, we  thus expect that the subsegment's revenue
contribution will remain modest in 2020.

 Revenue breakdown in the Buildings segment 9M 2020 9M 2019 9M 2018 2019
------------------------------------------------------------------------
 Public buildings                               36%     28%     27%  29%

 Apartment buildings                            28%     30%     22%  27%

 Commercial buildings                           25%     35%     36%  36%

 Industrial and warehouse facilities            11%      7%     15%   8%

Although  the largest revenue contributor in the Infrastructure segment is still
road construction and maintenance, both the proportion and amount of its revenue
have  decreased year-on-year.  A significant  share of  its revenue results from
road rehabilitation contracts of 2 to 3 million euros each. The largest projects
in progress include a contract secured in 2019 for the construction of the Kernu
bypass  as well as the Kernu filling station and Haiba junctions on the Tallinn-
Pärnu-Ikla road, and a contract signed this year for the construction of the Väo
junction  on the eastern border of Tallinn. In addition to road construction and
maintenance, the subsegment builds infrastructure assets for the defence forces,
and  improves forest  roads under  a number  of small  contracts signed with the
State  Forest Management  Centre. We  also continue  to provide road maintenance
services  in Järva  and Hiiu  counties and  the Kose  maintenance area  in Harju
county.
The  revenue of the  other engineering subsegment  is strongly influenced by the
construction of foundations for 73 wind turbines in the Nysäter wind farm, which
is being built in northern Sweden, near Sundsvall.
During  the period, work continued on the construction of a 640-metre waterfront
promenade  at Sillamäe, which accounts for a significant share of the revenue of
the specialist engineering subsegment.

 Revenue breakdown in the Infrastructure segment 9M 2020 9M 2019 9M 2018 2019
-----------------------------------------------------------------------------
 Road construction and maintenance                   77%     81%     91%  78%

 Other engineering                                   18%     16%      6%  18%

 Specialist engineering                               4%      0%      0%   1%

 Environmental engineering                            1%      3%      3%   3%

Order book

The Group's order book (backlog of contracts signed but not yet performed) stood
at  215,494 thousand euros at 30 September 2020, a 10% increase year on year. In
the  third  quarter,  we  signed  new  contracts  of  87,751 thousand  euros (Q3
2019: 69,894 thousand euros).

 As at                 30 Sept 2020 30 Sept 2019 30 Sept 2018 31 Dec 2019
-------------------------------------------------------------------------
 Order book (EUR '000)      215,494      196,493      131,953     227,545

The  breakdown  of  the  order  book  between  the  two segments has not changed
significantly: the volume of contracts secured by the Buildings segment is still
substantially  larger, accounting for 79% of the  Group's total order book while
contracts  secured by the  Infrastructure segment account  for 21% (30 September
2019: 80% and 20%, respectively). Compared to 30 September 2019, the order books
of  both segments have  increased. The order  book of the  Buildings segment has
grown  by around  7% and that  of the  Infrastructure segment by 20%. Around two
thirds  of the Group's order  book is made up  of projects that will continue in
2021 and 2022.
The order book of the public buildings subsegment accounts for roughly a half of
the  order book of the Buildings segment. Its growth is mainly attributable to a
contract  signed at the beginning  of the third quarter  for the construction of
phase III of the Maarjamõisa Medical Campus of the Tartu University Hospital. In
phase  III, the building complex  at L. Puusepa 8 will  be added two new blocks:
the M Block, which will house a children's hospital, and the C Block, which will
house  an ear clinic, a women's clinic, a  family centre, and a day surgery. The
cost of the contract is 47.3 million euros. In addition, in the third quarter we
signed  contracts  for  the  construction  of  an academic building for an upper
secondary  school in Kuressaare on the island of Saaremaa and for the design and
construction  of  a  barracks  for  300 people  in  the  defence  forces base at
Paldiski.  The order  books of  the apartment  buildings and  the industrial and
warehouse  facilities  subsegments  have  remained  at  the same level as at 30
September  2019. A  major  share  of  the  order book of the apartment buildings
subsegment  is made up of  a contract of around  40 million euros for the design
and  construction of the first two phases of the Kalaranna quarter in Tallinn. A
significant  share of the order book  of the industrial and warehouse facilities
subsegment  is made up of contracts for  the construction of a dairy complex for
E?Piim  in  Paide  and  two  shed  complexes  in  Finland. The order book of the
commercial  buildings subsegment has  decreased substantially year  on year. Its
largest  projects  in  progress  are  the  construction  of  a  new  seven-floor
commercial  building in Rotermann City in Tallinn  and a store building for Lidl
Eesti OÜ in Tartu.
Contracts  secured by the  road construction and  maintenance subsegment account
for  74% of the order book of the  Infrastructure segment. The size of the order
book  is strongly influenced by a contract secured in the second quarter for the
construction  of the  Väo junction  on the  eastern border  of Tallinn. Nordecon
Group  continues to provide road maintenance  services in three road maintenance
areas:  Järva,  Hiiu  and  Kose.  We  have  signed  a new five-year contract for
maintaining  national roads in the Järva maintenance area. The contract involves
year-round maintenance of around 950 km of national roads in Järva county. Based
on  the rates for  2020, the total cost  of the contract  is approximately 10.7
million  euros. Other engineering contracts account for 15% 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 2019 for the
construction  of foundations  for 73 wind  turbines in  the Nysäter wind farm in
northern Sweden, near Sundsvall.
A  large part of the contracts signed in  the third quarter came from the public
sector. The volume of work secured from the private sector has decreased sharply
and  the  commencement  of  many  projects  that  have  been  announced has been
postponed.  Customers are increasingly expecting that general contractors should
lower  their  prices  but  the  input  prices charged by subcontractors have not
decreased  as anticipated. This has put profit margins under strong pressure. In
an  environment of 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. Our main focus  is on cost control and pre-construction
and   design  activities  in  order  to  harness  our  professional  competitive
advantages.
Between  the reporting date (30 September 2020) and  the date of release of this
report,  Group companies have  secured additional construction  contracts in the
region of 16,640 thousand euros.

People

Employees and personnel expenses

In  the first nine months  of 2020, the Group (the  parent and the subsidiaries)
employed,   on   average,  703 people,  including  422 engineers  and  technical
personnel  (ETP). Headcount increased by around 2% compared with the same period
in 2019. The number of engineers and technical personnel grew due to a change in
the Group's structure: Embach Ehitus OÜ became a subsidiary, which increased the
group's workforce by 40 employees.

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

                  9M 2020   9M 2019   9M 2018   2019
-----------------------------------------------------
  ETP                 422       413       425    414

  Workers             261       276       272    273

  Total average       703       689       697    687

The  Group's personnel expenses for the  first nine months of 2020 including all
taxes,  totalled 19,476 thousand euros. The figure  for the same period in 2019
was  17,772 thousand euros. Personnel expenses grew  by around 10% year on year,
mainly in connection with Embach Ehitus OÜ becoming a subsidiary and the payment
of project-based performance bonuses.
The service fees of the members of the council of Nordecon AS for the first nine
months  of 2020 amounted  to 135 thousand  euros and  associated social security
charges  totalled 45 thousand euros (9M 2019: 140 thousand euros and 46 thousand
euros, respectively).
The  service fees of  the members of  the board of  Nordecon AS amounted to 357
thousand  euros  and  associated  social  security charges totalled 118 thousand
euros (9M 2019: 356 thousand euros and 117 thousand euros, respectively).

Labour productivity and labour cost efficiency

We  measure  the  efficiency  of  our  operating  activities using the following
productivity  and  efficiency  indicators,  which  are  based  on  the number of
employees and personnel expenses incurred:

                                                  9M 2020 9M 2019 9M 2018  2019
-------------------------------------------------------------------------------
 Nominal labour productivity (rolling), (EUR
 '000)                                              400.4   335.0   318.6 340.6

 Change against the comparative period, %           19.5%    5.1%    3.4%  4.7%



 Nominal labour cost efficiency (rolling), (EUR)     10.3     9.5     9.6   9.2

 Change against the comparative period, %            8.4%   -0.6%   -6.7% -5.0%

The  Group's nominal labour productivity and nominal labour cost efficiency have
improved year on year, primarily through 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, Sweden, Finland and Ukraine. The parent of the Group
is  Nordecon  AS,  a  company  registered  and  located in Tallinn, Estonia. The
consolidated  revenue  of  the  Group  in  2019 was 234 million euros. Currently
Nordecon  Group  employs  close  to  700 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)