Market announcement

Title

2021 9 months and III quarter consolidated unaudited interim report

Message

COMMENTARY FROM MANAGEMENT

Third-quarter revenue for Merko Ehitus was EUR 81 million and net profit for the
same  period was EUR 5.5 million. The revenue for the first nine months of 2021
grew by 8% to EUR 227 million and net profit by 17% to over EUR 15 million. This
year  in the three Baltics, Merko has  launched construction of more than 1,300
apartments due to be completed in the next two years.

According  to  the  management  of  Merko  Ehitus,  the situation on the general
construction contracting market continues to be complicated due to global supply
chain  problems. There has also been a jump in the prices of materials and there
is  a major shortage of qualified workforce.  The risks to on-time completion of
projects and staying within budget are quite sizeable today and unfortunately we
are also seeing them be realized on some sites. There are fewer new projects and
actual  orders on the market,  since customers have not  managed to adapt to the
changes  and higher prices  on the construction  market. These problems are more
manageable in the apartment development sector, where we have greater control of
the development and construction process.

The  share of  apartment developments  in the  group's nine-month revenue is, as
expected, lower because of the timing of the completion of projects and delivery
to  buyers.  The  delivery  of  pre-sold  apartments  to buyers continues in the
following quarters, which is also reflected in the group's financial result. New
sales  of  apartments  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.

In  the  first  nine  months  of  2021, Merko  delivered  197 apartments  and 7
commercial  units  to  buyers  and  launched  construction  of  1,300 apartments
expected  to be completed in 2022 and 2023. The largest residential developments
are  Noblessner,  Uus-Veerenni,  Odra,  Metsatuka  and  Lahekalda,  in  Tallinn;
Erminurme, in Tartu; Viesturd?rzs and Mezhpils?ta, in Riga; and Vilneles Skverai,
in Vilnius.

Considering  the changes  that have  taken place  in the  last few  years on the
construction  and real estate market, it can  be said that the group's companies
have adjusted rapidly. Merko group companies have been able to maintain and even
increase  profitability  despite  the  supply  chain  problems and rise in input
prices.  A greater  strategic focus  on residential  real estate development has
also  paid off so far.  Many thanks to the  company's employees and all partners
who  have to  contend with  the extremely  fraught situation. Unfortunately, the
latest  developments regarding the coronavirus in  the Baltic countries are very
negative,  and the group  must be prepared  that high morbidity and restrictions
will  pose new obstacles to  the normal course of  processes in construction and
real estate development in the coming months.

The  Merko group's secured order-book balance grew  to EUR 314 million as of the
end of Q3. In Q3 of 2021, Merko entered into new contracts worth EUR 138 million
of  which the  biggest were  a contract  for the  construction of  the Elemental
Skanste office buildings and GUSTAVS business centre in Riga and construction of
wind farm infrastructure in the Akmen? and Shilal? region in Lithuania.

In  the  third  quarter,  Merko  had  under  construction  in  Estonia the third
development  phase of the  Mustamäe medical campus  of the North-Estonia Medical
Centre,  the  Tallinn  School  of  Music  and Ballet, 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 III QUARTER AND 9 MONTHS RESULTS

PROFITABILITY
2021 9 months'  pre-tax profit  was EUR  16.6 million and  Q3 2021 was  EUR 6.1
million  (9M  2020: EUR  13.9 million  and  Q3  2020 was EUR 5.1 million), which
brought the pre-tax profit margin to 7.3% (9M 2020: 6.6%).
Net  profit attributable to shareholders  for 9 months 2021 was EUR 15.3 million
(9M   2020: EUR  13.1 million)  and  for  Q3  2021 net  profit  attributable  to
shareholders was EUR 5.5 million (Q3 2020: EUR 4.9 million). 9 months net profit
margin was 6.7% (9M 2020: 6.2%).

REVENUE
Q3  2021 revenue was EUR 80.7 million  (Q3 2020: EUR 79.7 million) and 9 months'
revenue  was EUR  226.5 million (9M  2020: EUR 209.5 million). 9 months' revenue
increased by 8.1% compared to same period last year. The share of revenue earned
outside Estonia in 9 months 2021 was 38.8% (9M 2020: 47.6%).

SECURED ORDER BOOK
As  of 30 September 2021, the  group's secured order  book was EUR 314.4 million
(30 September 2020: EUR 251.2 million). In 9 months 2021, group companies signed
new  contracts in the amount of  EUR 272.9 million (9M 2020: EUR 248.0 million).
In  Q3 2021, new contracts  were signed in  the amount of  EUR 137.7 million (Q3
2020: EUR 72.9 million).

REAL ESTATE DEVELOPMENT
In  9 months 2021, the group sold a  total of 197 apartments; in 9 months 2020,
the  group sold 534 apartments.  The group earned  a revenue of EUR 33.3 million
from  sale of own developed apartments  in 9 months 2021 and EUR 67.0 million in
9 months  2020. In Q3  of 2021 a  total of  52 apartments were sold, compared to
165 apartments  in Q3 2020, and earned a revenue of EUR 7.5 million from sale of
own developed apartments (Q3 2020: EUR 21.0 million).

CASH POSITION
At  the end of the reporting period, the  group had EUR 19.6 million in cash and
cash  equivalents,  and  equity  of  EUR  150.8 million (50.9% of total assets).
Comparable  figures as of 30 September 2020 were EUR 25.4 million and EUR 143.3
million  (53.0%  of  total  assets),  respectively. As of 30 September 2021, the
group's net debt was EUR 20.6 million (30 September 2020: EUR 25.2 million).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros

                             2021      2020         2021         2020      2020
                         9 months  9 months  III quarter  III quarter 12 months

 Revenue                  226,533   209,480       80,673       79,747   315,918

 Cost of goods sold     (200,064) (184,268)     (71,442)     (71,018) (272,169)

 Gross profit              26,469    25,212        9,231        8,729    43,749



 Marketing expenses       (2,632)   (3,157)        (802)      (1,284)   (4,212)

 General and
 administrative
 expenses                 (9,098)   (8,148)      (3,392)      (2,755)  (13,412)

 Other operating income     2,511     1,714        1,197          592     2,320

 Other operating
 expenses                   (328)   (1,316)        (235)         (64)   (2,979)

 Operating profit          16,922    14,305        5,999        5,218    25,466



 Finance income/costs       (351)     (432)           90        (122)   (1,009)

 incl. finance
 income/costs from
 associate and joint
 venture                      384       204          381          112     (144)

 interest expense           (548)     (530)        (232)        (200)     (719)

 foreign exchange gain
 (loss)                      (39)      (12)            -          (8)       (7)

 other financial income
 (expenses)                 (148)      (94)         (59)         (26)     (139)

 Profit before tax         16,571    13,873        6,089        5,096    24,457



 Corporate income tax
 expense                  (1,426)   (1,227)        (570)        (441)   (1,954)



 Net profit for
 financial year            15,145    12,646        5,519        4,655    22,503

 incl. net profit
 attributable to equity
 holders of the parent     15,277    13,071        5,514        4,896    22,994

 net profit
 attributable to non-
 controlling interest       (132)     (425)            5        (241)     (491)



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

 Currency translation
 differences of foreign
 entities                      14     (117)          (2)           11     (115)

 Comprehensive income
 for the period            15,159    12,529        5,517        4,666    22,388

 incl. net profit
 attributable to equity
 holders of the parent     15,292    12,939        5,513        4,895    22,890

 net profit
 attributable to non-
 controlling interest       (133)     (410)            4        (229)     (502)

 Earnings per share for
 profit attributable to
 equity holders of the
 parent (basic and
 diluted, in EUR)            0.86      0.74         0.31         0.28      1.30

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros

                                               30.09.2021 30.09.2020 31.12.2020

 ASSETS

 Current assets

 Cash and cash equivalents                         19,581     25,353     47,480

 Trade and other receivables                       59,665     44,518     32,657

 Prepaid corporate income tax                           3         91        306

 Inventories                                      154,688    153,433    126,332

                                                  233,937    223,395    206,775

 Non-current assets

 Investments in associates and joint ventures       7,288      2,702      2,354

 Other long-term loans and receivables             23,832     16,238     17,979

 Deferred income tax assets                         1,120          -        653

 Investment property                               13,847     13,955     13,922

 Property, plant and equipment                     15,624     13,152     14,521

 Intangible assets                                    684        664        711

                                                   62,395     46,711     50,140



 TOTAL ASSETS                                     296,332    270,106    256,915



 LIABILITIES

 Current liabilities

 Borrowings                                         9,355     24,221     13,649

 Payables and prepayments                          88,394     60,916     55,846

 Income tax liability                                 997      1,325      1,202

 Short-term provisions                              6,318      5,775      6,347

                                                  105,064     92,237     77,044

 Non-current liabilities

 Long-term borrowings                              30,826     26,365     15,409

 Deferred income tax liability                      1,986      1,635      3,001

 Other long-term payables                           3,553      2,785      4,026

                                                   36,365     30,785     22,436



 TOTAL LIABILITIES                                141,429    123,022     99,480



 EQUITY

 Non-controlling interests                          4,083      3,807      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                   (799)      (842)      (814)

 Retained earnings                                142,897    135,397    145,320

                                                  150,820    143,277    153,228

 TOTAL EQUITY                                     154,903    147,084    157,435



 TOTAL LIABILITIES AND EQUITY                     296,332    270,106    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.