Market announcement

Title

2020 12 months and IV quarter consolidated unaudited interim report

Message

COMMENTARY FROM MANAGEMENT

Merko  Ehitus posted  revenue of  approximately EUR  106 million for  the fourth
quarter of 2020, while total revenue for the whole year was EUR 316 million. The
group's  fourth quarter  2020 net profit  was EUR  10 million and its annual net
profit  grew over  40%, amounting to  EUR 23 million.  In coordination  with the
supervisory board, the group's management board proposes to pay shareholders one
euro per share in dividends.

The  management is satisfied with the results of 2020 and thanks all the group's
employees  for their good  work, especially considering  the restrictions due to
the  pandemic. The group earned more than half of the profit outside Estonia and
primarily  from apartment development.  The sale of  many apartment developments
that  had previously been launched was realized in 2020, and as a result a total
of  900 new  homes  were  sold.  A  large  share  of the apartments currently in
development  will  be  ready  for  sales  in  2022. Due to the influences of the
pandemic,  the management  is not  expecting growth  on the  Baltic construction
market in the year ahead.

A  major  part  of  the  group's  profit  came  from  the  area  of  real estate
development,  where 2020 revenue  grew by  84% year-over-year and  the number of
apartments  almost doubled (895 apartments in 2020 and 482 in 2019). The largest
apartment  development projects  were Uus-Veerenni,  Lahekalda and  Pikaliiva in
Tallinn,  Gai?ezers and Viesturd?rzs  in Riga and  Vilneles Slenis and Rinktin?s
Urban in Vilnius.

During  2020, the group's  companies entered  into new  contracts worth EUR 277
million  - EUR 29.1 million of  which was in Q4.  The largest contracts were the
construction  of a commercial building in Tiskre, Estonia, and the establishment
of  a NATO base in  ?dazhi, Latvia. The group's  secured order book balance as of
the end of the year was EUR 225 million.

The  largest projects in progress in Q4  were the third development stage of the
Mustamäe  medical campus of the North Estonia Medical Centre, the Tallinn School
of  Music and Ballet, Tallinn Arte Gymnasium, a data centre in Harju County, the
renovations of the Nordic Hotel Forum and the Tallink City Hotel, and the design
and  construction of infrastructure of the  Republic of Estonia's southeast land
border.  In  Latvia,  construction  of  the  Orkla waffle and biscuit factory in
?dazhi,  the construction of a kindergarten  in Salaspils, and the reconstruction
of  the Riga Technical  University's Civil Engineering  Faculty building were in
progress.  In Lithuania, the largest works in progress were the Neringa Hotel in
Vilnius, wind park infrastructure facilities in the Telshiai district and, in the
Kaunas district, a police headquarters building and NATO barracks.

OVERVIEW OF THE IV QUARTER AND 12 MONTHS RESULTS

PROFITABILITY
2020 12 months' profit before tax was EUR 24.5 million and Q4 2020 was EUR 10.6
million  (12M 2019: EUR  20.3 million and  Q4 2019 was  EUR 10.0 million), which
brought the profit before tax margin to 7.7% (12M 2019: 6.2%).
Net  profit attributable to  equity holders of  the parent in 12 months 2020 was
EUR   23.0 million   (12M   2019: EUR   16.3 million)  and  Q4  2020 net  profit
attributable  to equity holders of the  parent was EUR 9.9 million (Q4 2019: EUR
9.3 million). 12 months net profit margin was 7.3% (12M 2019: 5.0%).

REVENUE
Q4 2020 revenue was EUR 106.4 million (Q4 2019: EUR 99.2 million) and 12 months'
revenue  was EUR 315.9 million (12M 2019: EUR 326.8 million). 12 months' revenue
decreased by 3.3% compared to same period last year. The share of revenue earned
outside Estonia in 12 months 2020 was 43.9% (12M 2019: 48.3%).

SECURED ORDER BOOK
As at 31 December 2020, the group's secured order book was EUR 225.1 million (31
December 2019: EUR 141.4 million). In 12 months 2020, group companies signed new
contracts  in the amount of EUR  277.2 million (12M 2019: EUR 169.6 million). In
Q4  2020, new contracts were signed in the amount of EUR 29.1 million (Q4 2019:
EUR 42.0 million).

REAL ESTATE DEVELOPMENT
In  12 months 2020, the group sold a total of 895 apartments (incl. 3 apartments
in a joint venture); in 12 months 2019, the group sold 482 apartments (incl. 47
apartments  in a joint venture). The group earned a revenue of EUR 116.6 million
from  sale of own developed apartments in 12 months 2020 and EUR 63.8 million in
12 months  2019. In  Q4  of  2020 a  total  of 361 apartments (all own developed
apartments)  were  sold,  compared  to  276 apartments (incl. 11 apartments in a
joint venture) in Q4 2019, and earned a revenue of EUR 49.6 million from sale of
own developed apartments (Q4 2019: EUR 43.6 million).

CASH POSITION
At  the end of the reporting period, the  group had EUR 47.5 million in cash and
cash  equivalents,  and  equity  of  EUR  153.2 million (59.6% of total assets).
Comparable  figures as at 31 December 2019 were  EUR 24.7 million and EUR 130.3
million  (46.2%  of  total  assets),  respectively.  As at 31 December 2020, the
group's  net debt was EUR -18.4  million (negative) (31 December 2019: EUR 39.0
million).

PROPOSAL FOR DISTRIBUTION OF PROFITS
In  coordination with  the Supervisory  Board, the  Management Board proposes to
distribute to shareholders EUR 17.7 million in dividends (1 euro per share) from
retained earnings in 2021. This is equivalent to a 77% dividend rate for 2020.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros

                                         2020      2019        2020        2019
                                    12 months 12 months  IV quarter  IV quarter

 Revenue                              315,918   326,779     106,438      99,159

 Cost of goods sold                 (272,169) (291,958)    (87,901)    (85,235)

 Gross profit                          43,749    34,821      18,537      13,924



 Marketing expenses                   (4,212)   (4,260)     (1,055)     (1,634)

 General and administrative
 expenses                            (13,412)  (12,988)     (5,264)     (4,147)

 Other operating income                 2,320     2,983         606       1,243

 Other operating expenses             (2,979)   (1,318)     (1,663)        (96)

 Operating profit                      25,466    19,238      11,161       9,290



 Finance income/costs                 (1,009)     1,085       (577)         722

 incl. finance income/costs from
 joint venture                          (144)     1,766       (348)         921

 interest expense                       (719)     (656)       (189)       (185)

 foreign exchange gain (loss)             (7)         -           5           -

 other financial income (expenses)      (139)      (25)        (45)        (14)

 Profit before tax                     24,457    20,323      10,584      10,012



 Corporate income tax expense         (1,954)   (3,833)       (727)       (850)



 Net profit for financial year         22,503    16,490       9,857       9,162

 incl. net profit attributable to
 equity holders of the parent          22,994    16,270       9,923       9,267

 net profit attributable to non-
 controlling interest                   (491)       220        (66)       (105)

 Other comprehensive income, which
 can subsequently be classified in
 the income statement

 Currency translation differences
 of foreign entities                    (115)        13           2          23

 Comprehensive income for the
 period                                22,388    16,503       9,859       9,185

 incl. net profit attributable to
 equity holders of the parent          22,890    16,281       9,951       9,279

 net profit attributable to non-
 controlling interest                   (502)       222        (92)        (94)

 Earnings per share for profit
 attributable to equity holders of
 the parent (basic and diluted, in
 EUR)                                    1.30      0.92        0.56        0.52

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros

                                                     31.12.2020 31.12.2019

 ASSETS

 Current assets

 Cash and cash equivalents                               47,480     24,749

 Trade and other receivables                             32,657     50,413

 Prepaid corporate income tax                               306        104

 Inventories                                            126,332    166,226

                                                        206,775    241,492

 Non-current assets

 Investments in joint venture                             2,354      2,498

 Other long-term loans and receivables                   17,979     11,094

 Deferred income tax assets                                 653          -

 Investment property                                     13,922     14,047

 Property, plant and equipment                           14,521     11,919

 Intangible assets                                          711        777

                                                         50,140     40,335



 TOTAL ASSETS                                           256,915    281,827



 LIABILITIES

 Current liabilities

 Borrowings                                              13,649     20,725

 Payables and prepayments                                55,846     69,585

 Income tax liability                                     1,202        812

 Short-term provisions                                    6,347      7,976

                                                         77,044     99,098

 Non-current liabilities

 Long-term borrowings                                    15,409     43,001

 Deferred income tax liability                            3,001      1,682

 Other long-term payables                                 4,026      3,491

                                                         22,436     48,174



 TOTAL LIABILITIES                                       99,480    147,272



 EQUITY

 Non-controlling interests                                4,207      4,217

 Equity attributable to equity holders of the parent

 Share capital                                            7,929      7,929

 Statutory reserve capital                                  793        793

 Currency translation differences                         (814)      (710)

 Retained earnings                                      145,320    122,326

                                                        153,228    130,338

 TOTAL EQUITY                                           157,435    134,555



 TOTAL LIABILITIES AND EQUITY                           256,915    281,827

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

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

AS  Merko Ehitus (group.merko.ee (https://group.merko.ee/en/)) group consists of
AS  Merko Ehitus  Eesti in  Estonia, SIA  Merks in  Latvia, UAB Merko Statyba in
Lithuania  and Peritus Entreprenør AS  in Norway. Besides providing construction
service  as  a  main  contractor,  the  group's  other major area of activity is
apartment development. As at the end of 2020, the group employed 666 people, and
the group's revenue for 2020 was EUR 316 million.