Market announcement

Title

2021 6 months and II quarter consolidated unaudited interim report

Message

COMMENTARY FROM MANAGEMENT

Second-quarter  revenue for Merko  Ehitus was EUR  86 million and net profit was
EUR  6.4 million. The revenue for first half increased by 12% to EUR 146 million
and  net profit by 19% to EUR 9.8 million. This year, Merko has sold nearly 150
apartments this year and launched the construction of more than 800 apartments.

According to the management of Merko Ehitus, the construction sector is more and
more  influenced by the  rapid price rise  of materials and  problems related to
supply,  as  a  result  of  which  the  risks  related  to on-time completion of
construction  objects  and  staying  within  budget have soared. Considering the
current  market situation, the  management is satisfied  with the results of the
first  half of the year. The group's revenue  and net profit grew in both Q2 and
in  the first half of the year.  The number of new construction contracts signed
this  year decreased  somewhat, while  the launch  of new  apartment development
projects continued, which are not reflected in the portfolio of contracts.

The  share of  the apartment  development sector  segment in the group's revenue
decreased  in the first  half-year due to  the time timing  of completion of the
development  projects. In the first half of the year, almost 150 apartments have
been  handed over to buyers  and launched the construction  of more than 800 new
apartments,  of  which  the  majority  will  be completed in 2022. The number of
apartments  under construction is up significantly and apartment sales are going
according  to plan - most of the finished  apartments have been sold and a large
part  of  the  apartments  under  construction  are  reserved  under preliminary
contracts  of sale.  As a  whole, the  apartment market  in the Baltics has been
active   this   year.   Merko's  largest  apartment  development  projects  were
Noblessner,  Uus-Veerenni, Odra, Metsatuka and Lahekalda, in Tallinn; Erminurme,
in  Tartu;  Viesturd?rzs  and  Mezhpils?ta,  in  Riga;  and  Vilneles Skverai, in
Vilnius.

In Q2, AS Merko Ehitus Eesti entered into a contract for acquiring a 35% holding
in  the network  construction and  maintenance company  Connecto Eesti AS, under
which  Merko Ehitus Eesti's electrical engineering unit will merge with Connecto
Eesti  AS. The management  of Merko Ehitus  considers that that investments into
energy  and communication  infrastructure are  continuing and  Connecto has good
prospects to be a part of these developments.

In  Q2 of 2021, Merko entered  into new contracts worth  EUR 38 million of which
the   largest   were   a  contract  for  the  design  and  construction  of  the
infrastructure  of the Republic of Estonia's southeast land border sections 4-6
and  a contract for the  construction of St John's  School in Tallinn. The Merko
group's  secured order book balance grew to EUR 250 million as of the end of the
second quarter.

In the second quarter, the largest objects in Estonia were the third development
phase  of the Mustamäe  medical campus of  the North-Estonia Medical Centre, the
Tallinn  School of Music and Ballet,  construction on the Liivalaia business and
residential  complex  and  the  construction  of  infrastructure segments of the
Republic  of Estonia's southeast  land border. In  Latvia, the works in progress
were  the Orkla wafer and biscuit production plant and NATO facilities in ?dazhi,
and  the Kauguri city park  and youth house. In  Lithuania, infrastructure for a
number  of wind farms and the Kaunas district police headquarters building, NATO
barracks and a production building for Continental Automotive.

OVERVIEW OF THE II QUARTER AND 6 MONTHS RESULTS

PROFITABILITY
2021 6 months'  pre-tax profit  was EUR  10.5 million and  Q2 2021 was  EUR 6.7
million  (6M  2020: EUR  8.8 million  and  Q2  2020 was  EUR 6.7 million), which
brought the pre-tax profit margin to 7.2% (6M 2020: 6.8%).
Net  profit attributable to  shareholders for 6 months  2021 was EUR 9.8 million
(6M   2020: EUR   8.2 million)  and  for  Q2  2021 net  profit  attributable  to
shareholders was EUR 6.4 million (Q2 2020: EUR 6.2 million). 6 months net profit
margin was 6.7% (6M 2020: 6.3%).

REVENUE
Q2  2021 revenue was EUR 85.8 million  (Q2 2020: EUR 73.9 million) and 6 months'
revenue  was EUR  145.9 million (6M  2020: EUR 129.7 million). 6 months' revenue
increased  by  12.4% compared  to  same  period  last year. The share of revenue
earned outside Estonia in 6 months 2021 was 38.0% (6M 2020: 50.3%).

SECURED ORDER BOOK
As  of 30 June  2021, the group's  secured order  book was EUR 249.8 million (30
June  2020: EUR  236.7 million).  In  6 months  2021, group companies signed new
contracts in the amount of EUR 135.1 million (6M 2020: EUR 175.1 million). In Q2
2021, new  contracts were signed in the amount of EUR 37.8 million (Q2 2020: EUR
87.8 million).

REAL ESTATE DEVELOPMENT
In  6 months 2021, the group sold a  total of 145 apartments; in 6 months 2020,
the  group sold 369 apartments.  The group earned  a revenue of EUR 25.8 million
from  sale of own developed apartments  in 6 months 2021 and EUR 46.0 million in
6 months  2020. In Q2  of 2021 a  total of  55 apartments were sold, compared to
236 apartments in Q2 2020, and earned a revenue of EUR 11.0 million from sale of
own developed apartments (Q2 2020: EUR 27.4 million).

CASH POSITION
At  the end of the reporting period, the  group had EUR 21.7 million in cash and
cash  equivalents,  and  equity  of  EUR  145.3 million (52.5% of total assets).
Comparable  figures  as  of  30 June  2020 were  EUR 23.7 million and EUR 138.4
million  (50.3% of total assets), respectively.  As of 30 June 2021, the group's
net debt was EUR 16.1 million (30 June 2020: EUR 34.2 million).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros

                               2021      2020        2021        2020      2020
                           6 months  6 months  II quarter  II quarter 12 months

 Revenue                    145,860   129,733      85,753      73,861   315,918

 Cost of goods sold       (128,622) (113,250)    (75 489)    (62,852) (272,169)

 Gross profit                17,238    16,483      10 264      11,009    43,749



 Marketing expenses         (1,830)   (1,873)       (883)       (925)   (4,212)

 General and
 administrative expenses    (5,706)   (5,393)     (2,991)     (2,588)  (13,412)

 Other operating income       1,314     1,122         639         614     2,320

 Other operating expenses      (93)   (1,252)        (39)     (1,189)   (2,979)

 Operating profit            10,923     9,087       6,990       6,921    25,466



 Finance income/costs         (441)     (310)       (257)       (211)   (1,009)

 incl. finance
 income/costs from joint
 venture                          3        92         (4)           2     (144)

 interest expense             (316)     (330)       (170)       (158)     (719)

 foreign exchange gain
 (loss)                        (39)       (4)        (39)         (4)       (7)

 other financial income
 (expenses)                    (89)      (68)        (44)        (51)     (139)

 Profit before tax           10,482     8,777       6,733       6,710    24,457



 Corporate income tax
 expense                      (856)     (786)       (427)       (648)   (1,954)



 Net profit for financial
 year                         9,626     7,991       6,306       6,062    22,503

 incl. net profit
 attributable to equity
 holders of the parent        9,763     8,175       6,395       6,156    22,994

 net profit attributable
 to non-controlling
 interest                     (137)     (184)        (89)        (94)     (491)



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

 Currency translation
 differences of foreign
 entities                        16     (128)         (7)          60     (115)

 Comprehensive income for
 the period                   9,642     7,863       6,299       6,122    22,388

 incl. net profit
 attributable to equity
 holders of the parent        9,779     8,044       6,387       6,221    22,890

 net profit attributable
 to non-controlling
 interest                     (137)     (181)        (88)        (99)     (502)

 Earnings per share for
 profit attributable to
 equity holders of the
 parent (basic and
 diluted, in EUR)              0.55      0.46        0.36        0.35      1.30

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros

                                               30.06.2021 30.06.2020 31.12.2020

 ASSETS

 Current assets

 Cash and cash equivalents                         21,713     23,728     47,480

 Trade and other receivables                       62,902     44,790     32,657

 Prepaid corporate income tax                         315         91        306

 Inventories                                      136,605    161,534    126,332

                                                  221,535    230,143    206,775

 Non-current assets

 Investments in joint venture                       2,357      2,590      2,354

 Other long-term loans and receivables             22,797     14,504     17,979

 Deferred income tax assets                           842          -        653

 Investment property                               13,872     13,988     13,922

 Property, plant and equipment                     14,611     12,996     14,521

 Intangible assets                                    733        686        711

                                                   55,212     44,764     50,140



 TOTAL ASSETS                                     276,747    274,907    256,915



 LIABILITIES

 Current liabilities

 Borrowings                                         9,279     28,011     13,649

 Payables and prepayments                          77,814     63,243     55,846

 Income tax liability                                 731        912      1,202

 Short-term provisions                              5,720      5,915      6,347

                                                   93,544     98,081     77,044

 Non-current liabilities

 Long-term borrowings                              28,493     29,900     15,409

 Deferred income tax liability                      1,739      1,650      3,001

 Other long-term payables                           3,586      2,858      4,026

                                                   33,818     34,408     22,436



 TOTAL LIABILITIES                                127,362    132,489     99,480



 EQUITY

 Non-controlling interests                          4,078      4,036      4,207

 Equity attributable to equity holders of the
 parent

 Share capital                                      7,929      7,929      7,929

 Statutory reserve capital                            793        793        793

 Currency translation differences                   (798)      (841)      (814)

 Retained earnings                                137,383    130,501    145,320

                                                  145,307    138,382    153,228

 TOTAL EQUITY                                     149,385    142,418    157,435



 TOTAL LIABILITIES AND EQUITY                     276,747    274,907    256,915

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

Urmas Somelar
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 general  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.