Börsiteade

Pealkiri

2023 12 months and IV quarter consolidated unaudited interim report

Teade

COMMENTARY FROM MANAGEMENT

Merko  Ehitus revenue was  EUR 126 million in  Q4 2023, and the  revenue for 12
months  amounted to EUR 466 million, while the respective figures for net profit
were  EUR 13.9 million and 12 months was  EUR 46.0 million. Merko delivered 948
apartments and 27 commercial units to buyers in 12 months this year.

According  to the  management of  Merko Ehitus,  the solid results for 2023 were
mainly  delivered by Merko teams,  who have made good  decisions in the last few
tumultuous  years and adapted to market demand in the field of both construction
service  and real estate  development. Construction and  real estate development
projects  generally span  more than  one reporting  period and the final results
become evident at the end of the projects.  The 12-month and Q4 results in 2023
show  that several important factors  coincided in the same  time period. In the
past  few years, Merko group had the capability for launching large construction
projects,  of which  the Kapitel's  contracts are  the most extensive, totalling
more  than EUR 200 million. The Kapitel contracts refer to two high-rise offices
in Riga and the majority of the construction on three high-rise buildings in the
Arter  Quarter in central Tallinn, which Merko  completed for Kapitel at the end
of  the year. The results were clearly  supported by the real estate development
business  area, where in 2023, Merko companies  handed over to the buyers nearly
1,000 apartments that had been presold during the last two years.

An  era in real estate development is  over - i.e. pre-sold apartments have been
completed  and delivered to customers,  and now we are  operating in a much more
difficult  market situation. The  apartment market in  the Baltics is uncertain,
interest  rates have risen  and the pace  of sales of  new apartments has slowed
significantly  due to the new market situation. We have launched construction of
a  smaller number of apartment  developments and in the  near future there is no
grounds  for expecting  results comparable  to 2023 in  real estate development.
Over  12 months of 2023 the  group has invested  a total of  EUR 86 million into
ongoing development projects and acquisitions of new properties.

The  group's secured order-book continued growth in Q4 and is exceeding previous
expectations,  which does partially  counterbalance the negative  impacts of the
slumping   apartment  market  on  our  construction  volumes  and  revenue.  Yet
profitability   of  construction  service  is  under  constant  strain  and  the
risks persist  - supply chains  are seeing another  price rise and macroeconomic
problems  have made  private sector  customers cautious  about investments. Many
defence  and  energy  projects  are  in  progress currently but these, too, will
decline  in volume  in the  medium to  long term.  Thus, risk management for the
group  companies - above all hedging price  risks - is under continued scrutiny.
In  2023, the  group's  companies  signed  new construction contracts worth 501
million  euros, or 58% more than a year ago, and the secured orderbook increased
by more than 60% compared to a year ago to 477 million euros.

In the 12 months of 2023, Merko delivered 948 apartments and 27 commercial units
to  buyers.  As  of  year-end,  the  group's companies had 697 apartments on its
balance sheet. At the end of the year, approximately 5% of the 393 apartments in
the  construction phase were covered by  preliminary sale contracts. The largest
apartment  developments were Uus-Veerenni, Noblessner  and Lahekalda in Tallinn,
Erminurme  in  Tartu,  Viesturdarzs,  Mezhpilseta  and  Magnolijas  in  Riga, and
Vilneles Skverai in Vilnius.

In  Q4 of  2023, the largest  sites under  construction in  Estonia were the Rae
state gymnasium, Hampton by Hilton and Hyatt hotel buildings, Arter Quarter, the
logistics  centre for Tallinn  Kaubamaja Group, barracks  at the Defence Forces'
Ämari base, the infrastructure along the south-eastern border of the Republic of
Estonia,  the Rail Baltica  road viaducts in  Harjumaa, a tram  line between Old
City  Harbour and  Rail Baltica  Ülemiste passenger  terminal, as well the first
phase  of Ülemiste  terminal. In  Latvia, the  Elemental Business  Centre office
buildings  were in progress. Projects in Lithuania were wind farm infrastructure
works  in Kelme and  Pag?giai regions, and  various buildings and infrastructure
for NATO training centres.

OVERVIEW OF THE IV QUARTER AND 12 MONTHS RESULTS

PROFITABILITY
2023 12 months'  pre-tax profit was  EUR 52.0 million and  Q4 2023 was EUR 18.1
million  (12M 2022: EUR  37.1 million and  Q4 2022 was  EUR 18.4 million), which
brought the pre-tax profit margin to 11.1% (12M 2022: 9.1%).
Net  profit attributable to shareholders for 12 months 2023 was EUR 46.0 million
(12M  2022: EUR  34.6 million)  and  for  Q4  2023 net  profit  attributable  to
shareholders  was EUR  13.9 million (Q4  2022: EUR 17.6 million).  12 months net
profit margin was 9.9% (12M 2022: 8.5%).

REVENUE
Q4  2023 revenue  was  EUR  126.5 million  (Q4  2022: EUR 143.4 million) and 12
months'  revenue was EUR 466.3 million (12M 2022: EUR 409.6 million). 12 months'
revenue  increased  by  13.8% compared  to  same  period last year. The share of
revenue earned outside Estonia in 12 months 2023 was 39.3% (12M 2022: 50.1%).

SECURED ORDER BOOK
As of 31 December 2023, the group's secured order book was EUR 477.5 million (31
December  2022: EUR  297.2 million).  In  12 months 2023, group companies signed
contracts  in the amount of EUR  500.8 million (12M 2022: EUR 317.9 million). In
Q4 2023, new contracts were signed in the amount of EUR 121.4 million (Q4 2022:
EUR 27.5 million).

REAL ESTATE DEVELOPMENT
In 12 months 2023, the group sold a total of 948 apartments; in 12 months 2022,
the  group sold 923 apartments. The group  earned a revenue of EUR 137.5 million
from sale of own developed apartments in 12 months 2023 and EUR 127.0 million in
12 months  2022. In Q4 of 2023 a total  of 283 apartments were sold, compared to
467 apartments in Q4 2022, and earned a revenue of EUR 31.4 million from sale of
own developed apartments (Q4 2022: EUR 70.2 million).

CASH POSITION
At  the end of the reporting period, the  group had EUR 77.3 million in cash and
cash  equivalents,  and  equity  of  EUR  212.1 million (49.9% of total assets).
Comparable  figures as of 31 December 2022 were  EUR 17.7 million and EUR 184.2
million  (47.5%  of  total  assets),  respectively.  As of 31 December 2023, the
group's  net debt  was negative  EUR 22.5 million  (31 December  2022: EUR 74.3
million).

PROPOSAL FOR DISTRIBUTION OF PROFITS
The  Management  Board  proposes  to  the  Supervisory  Board  to  distribute to
shareholders  EUR 17.7 million  in dividends  (1 euro  per share)  from retained
earnings in 2024. This is equivalent to a 38% dividend rate for 2023.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros

                                           2023      2022       2023       2022
                                      12 months 12 months IV quarter IV quarter

 Revenue                                466,304   409,633    126,466    143,427

 Cost of goods sold                   (401,267) (355,975)  (104,625)  (120,852)

 Gross profit                            65,037    53,658     21,841     22,575



 Marketing expenses                     (4,312)   (4,077)    (1,299)    (1,132)

 General and administrative expenses   (19,423)  (15,860)    (6,527)    (4,449)

 Other operating income                   4,171     3,144        772        718

 Other operating expenses                 (991)   (1,834)      (377)    (1,187)

 Operating profit                        44,482    35,031     14,410     16,525



 Finance income/costs                     7,500     2,067      3,735      1,899

 incl. finance income/costs from
 joint ventures                          10,220     3,516      4,159      2,423

 interest expense                       (2,697)   (1,180)      (686)      (510)

 foreign exchange gain (loss)             (153)     (138)         39         14

 other financial income (expenses)          130     (131)        223       (28)

 Profit before tax                       51,982    37,098     18,145     18,424



 Corporate income tax expense           (6,081)   (2,995)    (4,254)    (1,084)



 Net profit for financial year           45,901    34,103     13,891     17,340

 incl. net profit attributable to
 equity holders of the parent            46,048    34,640     13,900     17,617

 net profit attributable to non-
 controlling interest                     (147)     (537)        (9)      (277)

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

 Currency translation differences of
 foreign entities                          (41)        30       (25)         19

 Comprehensive income for the period     45,860    34,133     13,866     17,359

 incl. net profit attributable to
 equity holders of the parent            45,993    34,648     13,877     17,628

 net profit attributable to non-
 controlling interest                     (133)     (515)       (11)      (269)

 Earnings per share for profit
 attributable to equity holders of
 the parent (basic and diluted, in
 EUR)                                      2.60      1.96       0.79       1.00

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros

                                                     31.12.2023 31.12.2022

 ASSETS

 Current assets

 Cash and cash equivalents                               77,330     17,665

 Trade and other receivables                             68,754     77,959

 Prepaid corporate income tax                                 2         38

 Inventories                                            195,435    225,661

                                                        341,521    321,323

 Non-current assets

 Investments in joint ventures                           21,915     12,895

 Other shares and securities                                 80          -

 Other long-term loans and receivables                   24,490     22,982

 Deferred income tax assets                               3,298        693

 Investment property                                     16,823     11,485

 Property, plant and equipment                           16,613     17,452

 Intangible assets                                          520        582

                                                         83,739     66,089



 TOTAL ASSETS                                           425,260    387,412



 LIABILITIES

 Current liabilities

 Borrowings                                              19,673     49,687

 Payables and prepayments                               133,898     96,248

 Income tax liability                                     4,260      1,241

 Short-term provisions                                   10,451      9,820

                                                        168,282    156,996

 Non-current liabilities

 Long-term borrowings                                    35,142     42,236

 Deferred income tax liability                            4,441      2,355

 Other long-term payables                                 5,495      2,133

                                                         45,078     46,724



 TOTAL LIABILITIES                                      213,360    203,720



 EQUITY

 Non-controlling interests                                (155)      (495)

 Equity attributable to equity holders of the parent

 Share capital                                            7,929      7,929

 Statutory reserve capital                                  793        793

 Currency translation differences                         (838)      (783)

 Retained earnings                                      204,171    176,248

                                                        212,055    184,187

 TOTAL EQUITY                                           211,900    183,692



 TOTAL LIABILITIES AND EQUITY                           425,260    387,412

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 Finance
AS Merko Ehitus
+372 650 1250
urmas.somelar@merko.ee (mailto:urmas.somelar@merko.ee)

AS Merko Ehitus (group.merko.ee (https://group.merko.ee/en/)) group companies
develop real estate and construct buildings and infrastructure. We create a
better living environment and build the future. We operate in Estonia, Latvia,
Lithuania and Norway. As at the end of 2023, the group employed 638 people, and
the group's revenue for 2023 was EUR 466 million.