Börsiteade

Pealkiri

2010 II quarter and six months consolidated interim report (unaudited)

Teade

The Group's strategy and objectives                                             

Need for adjusting the Group's strategy                                         
The Group's development strategy for 2009-2013 was underpinned by the assumption
that in the forthcoming years the construction market would see shrinkage in    
volumes, downward pressure on the end-price of the service, increasing          
competition and subsequent market consolidation. The factors were interpreted   
not only as threats but also as opportunities to be exploited for reinforcing   
the Group's position and facilitating its international expansion. However, in  
2009 the global financial crisis and the ensuing economic downturn had a more   
severe impact on the Group's markets and financial performance than anticipated.

To date, the Group has suspended the operations of its Lithuanian subsidiary    
Nordecon Statyba UAB and at the beginning of 2010 we divested our Latvian       
subsidiary Nordecon Infra SIA owing to its poor operating results. In the past  
year and a half, the Ukrainian buildings construction market has hit more or    
less a standstill. As a result,  we have had to make deep expense and job cuts  
at our Ukrainian subsidiary Eurocon Ukraine TOV. At the reporting date,         
approximately 95% of our business is conducted in Estonia.                      

In July 2010, the board of Nordecon International AS proposed that the council  
revise the Group's development strategy because achieving one of the main       
strategic goals (continuing internationalization) and the ultimate strategic    
goal by 2013 had become unrealistic.
                                            
The board considered revision necessary in light of the following:              
- In 2010 the construction markets of the Baltic countries and Ukraine will
remain in a slump. 
- In the next few years, economic growth in the Baltic countries will be modest 
and the construction market cannot be expected to recover before 2012.          
- The construction market is dominated by public procurement tenders that
induce underbidding and do not allow construction companies to operate at their
average historical profit margins. 
- The decline in input prices has been replaced by a rise and the forthcoming 
years will reveal the extent of the risks taken/losses incurred with the intent 
of lowering prices.                                                            

The Group's revised strategy for 2010-2012                                      
The board is of the opinion that in the next couple of years, the Group should  
focus on its core business in its main market Estonia where Nordecon is         
represented in almost all sub-segments and can rely on extensive local          
experience. In order to adapt to adverse changes in the external environment,   
the Group will have to continue restructuring its operations, improving         
profitability by effective cost management, and creating opportunities for      
successfully entering the growth phase of the market (also in the foreign       
markets).                                                                       

According to the board's proposal, in 2010-2012 the Group should focus on       
achieving the above. Thus, the new strategic outlook will be for a shorter term 
than the previous one (for an overview of the strategy for 2009-2013, see the   
annual report for 2009). The strategy for the next three years will have to     
support the Group's recovery from the slump and prepare ground for seizing the  
opportunities provided by the economic growth that is currently anticipated to  
emerge in 2012.
                                                                 
The ultimate goal of the Group's strategy for 2009-2013 was to become the       
fastest growing construction group on the Nordic and Baltic stock exchanges by  
2013 in terms of revenue growth. In the next few years, revenue growth will not 
be a priority because this would assume taking unjustified risks at margins that
are unnaturally low for the construction market.                               

The board submitted its proposals for revising the Group's strategy for         
2010-2012 for review and approval by the council in July 2010. The council will 
make its decisions in the first half of the third quarter.                      

The board's proposals for revising the strategy for 2010-2012                   
- To complete adjustments to the Group's structure and governance that were 
launched in 2009 in order to secure profitable and rapid growth in the rise     
phase of the market                                                             
- To operate in Latvia, Lithuania and Belarus on a project basis, assuming that 
this is profitable                                                              
- To continue buildings construction operations in Ukraine in 2010 in line with 
the former strategy and to decide the need for revising the strategy in light of
the economic situation in the country in the first quarter of 2011 at the latest
- To maintain preparedness for re-launching more active operations in foreign 
markets (as a general contractor) as soon as the situation in the construction 
market has become sufficiently supportive                                       
- To penetrate the Finnish concrete works market (as a contractor) through a 
subsidiary in order to support development of the division                      
- To become the leading construction group in Estonia that earns half of its 
revenue from infrastructure and the other half from buildings construction by   
the end of 2012                                                                 

The leitmotif of the strategy for 2010-2012 is “To respond to market changes    
swiftly and flexibly and to enter the next economic growth cycle successfully”  


Changes in the Group's operations in the first half of 2010                     

Changes in the Group's Estonian operations                                      
In the first half of 2010, the Group's Estonian operations did not change       
significantly. By the end of 2009 all major planned restructuring activities    
were completed and since the beginning of 2010 the Group has been conducting its
core business through two subgroups - Nordecon Ehitus and Nordecon Infra that   
specialise in buildings and infrastructure construction respectively. Nordecon  
International acts mostly as a holding company, providing the Group with        
strategic management and intra-Group support services.                          
Changes in the Group's foreign operations                                       

Latvia                                                                          
The Group entered the Latvian market at the beginning of 2007 when the          
acquisition of OÜ Kaurits provided it with a stake in a Latvian company - SIA   
Abagars (later Nordecon Infra SIA). In order to avoid subsequent conflicts of   
interest, the Group acquired the majority shareholding in the Latvian entity in 
May 2008. The core business of the Latvian company was construction of water and
wastewater networks. Business volumes in Latvia grew swiftly and the company was
awarded and delivered several large public procurement projects. However, the   
over-rapid growth rate resulted in an accumulation of operational risks which in
combination with drastic changes in the economic environment caused the company 
to incur losses in the second half of 2009. The overall downturn in the Latvian 
economy caused difficulties in collecting payments from customers including     
counter-parties related to state and local governments.
                         
As a result, in February 2010 the board of Nordecon International AS resolved to
divest the Group's entire 56% interest in Nordecon Infra SIA because it was     
evident that in the next few years the entity would be operating with a loss.   
The stake was sold to an individual (a non-controlling shareholder). After the  
transaction, the Group does not have any ownership interests in companies       
domiciled in Latvia. The financial aspects of the transaction are described in  
greater detail in note 4 to the interim financial statements.                   
In the next years, the Group will continue operating in Latvia on a project     
basis through its Estonian subsidiaries, involving partners where necessary.    
However, the continuation of project-based operations assumes the availability  
of profitable projects.                                                         

Belarus                                                                         
The Group has signed a contract with a Finnish food industry company for the    
construction of a factory in Belarus. The project is being performed through the
Group's wholly-held Belarusian subsidiary Eurocon Stroi IOOO whose establishment
was completed in January 2010. At the moment, this is the Group's only project  
in Belarus. The Group used a similar strategy, i.e. contracts tendered by       
well-known Nordic or Baltic companies, for penetrating the Ukrainian market more
than twelve years ago. The Group is not holding any negotiations regarding other
projects and according to the Group's development strategy penetrating the      
Belarusian market more extensively in 2010 is not a priority. The current year  
and the above project will serve as a basis for getting to know the market and  
conducting further analyses.                                                    

Ukraine                                                                         
There have not been any significant changes in the Group's Ukrainian operations 
compared with the end of 2009.                                                  

Finland                                                                         
The Group's subsidiary Nordecon Betoon OÜ has been seeking opportunities for    
winning concrete works contracts in Finland since the end of 2009. For this, in 
the first half of 2010 a Finnish subsidiary Estcon OY was acquired from the     
parent. The Group undertook the transaction to support the development of its   
concrete works operations.                                                      


The Group's structure and major structural changes                              

Major changes in the Group's structure in the first half of 2010                
Nordecon International AS                                                       
In January, the establishment proceedings of Eurocon Stroi IOOO, a Belarusian   
company founded by Nordecon International AS and Nordecon Ehitus AS, were       
completed. The shareholders' interests are 70% and 30% respectively. The company
was established for performing project-based construction work. Since Belarus is
one of the Group's potential target markets, then in line with the corporate    
strategy the majority shareholding in the entity belongs to the Group's parent  
company.                                                                        

In February, Nordecon International AS sold its 56% stake in the Latvian        
subsidiary Nordecon Infra SIA along with interests in its subsidiaries. The     
subsidiary was sold to an external party (a non-controlling shareholder). After 
the transaction, the Group has no ownership interests in companies registered in
Latvia.                                                                         

In April, Nordecon International AS sold 100% of its shares in the Finnish      
subsidiary Estcon OY to Group company Nordecon Betoon OÜ that is going to use   
the subsidiary for performing concrete works in Finland. Finland is not one of  
the Group's target markets. Therefore, the transfer of the investment was not in
contradiction with the Group's general investment holding strategy.             

Nordecon Infra AS                                                               
In April, Nordecon Infra AS participated in the establishment of Pigipada OÜ,   
paying for a 24% stake with a monetary contribution of 9.6 thousand kroons (0.6 
thousand euros). Pigipada OÜ will engage in the production of bitumen emulsion. 
After the reporting date, Nordecon Infra AS has increased its interest in the   
company to 49% (see Significant structural changes after the reporting date).   
The operations of Pigipada OÜ have not yet been launched.                       

Eston Ehitus AS                                                                 
In March, Eston Ehitus AS established a subsidiary Kaasa Vara OÜ. The share     
capital of the subsidiary is 40 thousand kroons (3 thousand euros). At the      
moment, the company is not active. The company was established for executing the
corporate rehabilitation plans of major debtors of Eston Ehitus AS.             

In May, Eston Ehitus AS participated in the establishment of Magasini 29 OÜ,    
acquiring a 34% stake for a monetary contribution of 13.6 thousand kroons (0.9  
thousand euros). The entity was established so that it could be transferred some
of the assets and liabilities of Crislivinca OÜ (in which the stake of Eston    
Ehitus AS was also 34%) that were related to an undeveloped property in Magasini
street, Tallinn. After the reporting date, Eston Ehitus AS has raised its stake 
in the entity to 100% (see Significant structural changes after the reporting   
date).                                                                          

Eurocon Ukraine TOV                                                             
In March, Eurocon Ukraine TOV sold its 99% stake in the subsidiary Bukovina     
Development TOV. The entity did not conduct any active business operations.     
After the transaction, the Group has no ownership interest in Bukovina          
Development TOV.                                                                

Significant structural changes after the reporting date                         
Nordecon Infra AS                                                               
Nordecon Infra AS has raised its 24% stake in Pigipada OÜ to 49%, paying for the
additional interest 10 thousand kroons (0.64 thousand euros).                   

Eston Ehitus AS                                                                 
In August, Eston Ehitus AS and AS EKE Invest completed a transaction by which   
they exchanged interests in Crislivinca OÜ and Magasini 29 OÜ. Before the       
transaction, the respective stakes of Eston Ehitus AS and AS EKE Invest were 34%
and 66% in both companies. After the transaction, Eston Ehitus AS holds 100% of 
the shares in Magasini 29 OÜ and has no stake in Crislivinca OÜ while AS EKE    
Invest holds all the shares in Crislivinca OÜ and has no stake in Magasini 29   
OÜ. See also note 16 to the interim financial statements.                       


Financial review                                                                

Margins                                                                         
Nordecon International Group ended the first half of 2010 with a gross loss of  
45.2 million kroons (2.9 million euros). In the comparative period (first half  
of 2009), the Group earned a gross profit of 84.4 million kroons (5.4 million   
euros). The loss of the first half-year is mainly attributable to the combined  
effect of the seasonal nature of the construction business, unfavourable weather
conditions and estimates of potential losses on projects secured before the     
input prices started rising.                                                    
The following table provides an overview of seasonal fluctuations in gross      
profit development:                                                             
--------------------------------------------------------------------------------
| Percentage of annual  |      Q1 |        Q2 |       Q3 |       Q4 |    Total |
| gross profit          |         |           |          |          |          |
--------------------------------------------------------------------------------
| 2006                  |     10% |       20% |      33% |      37% |     100% |
--------------------------------------------------------------------------------
| 2007                  |     13% |       30% |      26% |      31% |     100% |
--------------------------------------------------------------------------------
| 2008                  |     28% |       38% |      20% |      13% |     100% |
--------------------------------------------------------------------------------
| 2009                  |     27% |       35% |      59% |     -21% |     100% |
--------------------------------------------------------------------------------
The past winter was considerably harsher for construction companies than the    
previous ones. Abundance of snow and temperature fluctuations did not allow     
continuing work on the majority of active projects or making preparations for   
new ones. On the other hand, regardless of the number of projects in progress   
and suspension of work, companies were incurring their fixed costs. Moreover,   
the long and snowy winter had a strong impact on road care and maintenance      
activities that are performed mostly in that period. Performance of fixed-price 
maintenance contracts in the first quarter of 2010 proved highly unprofitable   
because snow clearing and de-icing operations were much more time and labour    
consuming than usual.
                                                           
Excluding the effect of seasonal factors, the decline in gross profit has       
continued owing to the slump prevailing in the external environment. Steep      
shrinkage in the volume of contracts on offer has heightened competition,       
triggering a rapid (and, to some extent, ongoing) decline in construction prices
that has not always been in correlation with the decrease in input prices. In   
such a situation, long-term construction contracts carry the risk of loss. The  
Group's second quarter gross loss is mainly attributable to the recognition of  
potential losses that may result from increases in the prices of raw materials  
(such as bitumen, metal and others) as well as the exhaustion of opportunities  
for benefiting from stiff competition among the suppliers of subcontracting     
services and goods. In line with generally accepted accounting principles,      
potential contract losses have to be recognised immediately and in full, which  
concentrates their impact on a specific quarter although project work will      
continue. In view of the above, management believes that in the second half-year
the Group's margins will start improving although this need not ensure that the 
year will end in a profit.
                                                      
The Group's administrative expenses for the first half-year totalled 35.6       
million kroons (2.3 million euros). Compared with the first half of 2009, the   
Group has cut its administrative expenses by 46%. As at the reporting date, the 
ratio of administrative expenses to revenue was 6.1% (HY1 2009: 5.3%).          
Management believes that the implementation of specific cost-cutting measures   
will reduce the Group's annual administrative expenses by at least a third      
compared with 2009. This should ensure that the annual ratio of administrative  
expenses to revenue will be at the 5% level targeted by management.             
Because of the above factors, the Group ended the first half of 2010 with an    
operating loss of 85.6 million kroons (5.5 million euros) (HY1 2009: operating  
profit of 5.2 million kroons/0.3 million euros).
                                
The Group's net loss for the period amounted to 65.3 million kroons (4.2 million
euros). Consolidated operating loss was reduced by one-off finance income from  
the sale of the loss-generating Latvian operations (for further information, see
note 4 to the interim financial statements). The loss attributable to owners of 
the parent Nordecon International AS amounted to 59.3 million kroons (3.8       
million euros).                                                                 

Cash flows                                                                      
The Group's operating activities for the first half of 2010 generated a net     
inflow of 10.8 million kroons (0.7 million euros), a significant improvement on 
the net outflow of 57.1 million kroons (3.7 million euros) posted for the first 
half of 2009. The positive operating cash flow is mainly attributable to the    
work done with contract partners and suppliers in extending the Group's         
settlement terms in line with market conditions, a decrease in employee bonuses 
(the gross loss did not allow making bonus payments) and the deferral of the    
settlement terms of some projects started in 2009 to 2010 (e.g. those of        
institutions funded from the state budget). On the other hand, the customers'   
contractual settlement terms have also become longer (particularly in the case  
of public sector entities) and owing to the ongoing economic downturn there     
occur significant settlement delays that give rise to overdue accounts. The     
Group's ability to maintain a positive operating cash flow depends on how well  
we can adapt to our operating environment and whether we are able to sustain the
work done to reduce our operating expenses.                                     

The Group's investing activities generated a net inflow of 7.2 million kroons   
(0.5 million euros) compared with a net outflow of 41.1 million kroons (2.6     
million euros) for the first half of 2009. A significant proportion of cash     
outflows from investing activities (9.9 million kroons/0.6 million euros) are   
attributable to outflows related to the disposal of the subsidiary Nordecon     
Infra SIA and the discontinuance of its consolidation (see note 4 to the interim
financial statements). A significant proportion of cash inflows resulted from   
the disposal of property, plant and equipment and investment properties that    
generated 16.0 million kroons (1.0 million euros).                              

Financing activities for the first half of 2010 resulted in a net cash outflow  
of 79.6 million kroons (5.1 million euros) compared with an outflow of 39.9     
million kroons (2.6 million euros) in the first half of 2009. The structure of  
financing cash flows has changed because the Group has reduced borrowing and is 
settling its existing loan liabilities on a timely basis.                       
Key financial figures and ratios                                                
--------------------------------------------------------------------------------
| Figure / ratio             |   6M 2010 |   6M 2009 |    6M 2008 |       2009 |
--------------------------------------------------------------------------------
| Weighted average number of |30,756,728 |30,756,728 | 30,756,728 | 30,756,728 |
| shares (1)                 |           |           |            |            |
--------------------------------------------------------------------------------
| Earnings per share (in     |     -1.93 |      0.69 |       3.39 |      -1.49 |
| kroons)                    |           |           |            |            |
--------------------------------------------------------------------------------
| Earnings per share (in     |     -0.12 |      0.04 |       0.22 |      -0.09 |
| euros)                     |           |           |            |            |
--------------------------------------------------------------------------------
| Revenue growth             |    -52.2% |    -34.5% |      23.1% |     -37.5% |
--------------------------------------------------------------------------------
| Average number of          |       797 |     1,187 |      1,209 |      1,128 |
| employees                  |           |           |            |            |
--------------------------------------------------------------------------------
| Revenue per employee (in   |       734 |     1,032 |      1,547 |      2,144 |
| thousands of kroons)       |           |           |            |            |
--------------------------------------------------------------------------------
| Revenue per employee (in   |        47 |        66 |         99 |        137 |
| thousands of euros)        |           |           |            |            |
--------------------------------------------------------------------------------
| Personnel expenses to      |     18.6% |     15.4% |      12.4% |      15.0% |
| revenue                    |           |           |            |            |
--------------------------------------------------------------------------------
| Administrative expenses to |      6.1% |      5.3% |       5.0% |       5.2% |
| revenue                    |           |           |            |            |
--------------------------------------------------------------------------------
| EBITDA  (in thousands of   |   -58,170 |    41,125 |    179,579 |      4,308 |
| kroons) (2)                |           |           |            |            |
--------------------------------------------------------------------------------
| EBITDA  (in thousands of   |    -3,718 |     2,628 |     11,477 |        275 |
| euros) (2)                 |           |           |            |            |
--------------------------------------------------------------------------------
| EBITDA margin              |     -9.9% |      3.4% |       9.6% |       0.2% |
--------------------------------------------------------------------------------
| Gross margin               |     -7.7% |      6.9% |      12.8% |       5.6% |
--------------------------------------------------------------------------------
| Operating margin           |    -14.6% |      0.4% |       7.8% |      -5.2% |
--------------------------------------------------------------------------------
| Operating margin excluding |    -14.6% |      0.3% |       7.6% |      -5.4% |
| gains on asset sales       |           |           |            |            |
--------------------------------------------------------------------------------
| Net margin                 |    -11.2% |      0.4% |       5.9% |      -3.7% |
--------------------------------------------------------------------------------
| Return on invested capital |     -5.0% |      1.9% |      11.7% |      -4.1% |
--------------------------------------------------------------------------------
| Return on assets           |     -4.7% |      0.2% |       6.3% |      -6.0% |
--------------------------------------------------------------------------------
| Return on equity           |     -9.6% |      0.6% |      13.7% |     -11.4% |
--------------------------------------------------------------------------------
| Equity ratio               |     38.2% |     35.8% |      33.0% |      37.1% |
--------------------------------------------------------------------------------
| Gearing                    |     25.2% |     31.7% |      27.4% |      26.4% |
--------------------------------------------------------------------------------
| Current ratio              |      1.53 |      1.36 |       1.45 |       1.47 |
--------------------------------------------------------------------------------
|                            |   30 June |   30 June |    30 June |     31 Dec |
|                            |      2010 |      2009 |       2008 |       2009 |
--------------------------------------------------------------------------------
| Order book (in thousands   | 1,399,433 | 1,568,004 |  3,196,937 |  1,530,661 |
| of kroons)                 |           |           |            |            |
--------------------------------------------------------------------------------
| Order book (in thousands   |    89,440 |   100,214 |    204,322 |     97,827 |
| of euros)                  |           |           |            |            |
--------------------------------------------------------------------------------
(1) For comparability, the weighted average number of shares is the number of 
shares after the bonus issues.                                                  
(2) On calculating EBITDA, non-cash expenses included depreciation and 
amortisation as well as impairment losses on goodwill.                          
--------------------------------------------------------------------------------
| Earnings per share (EPS) = net       | Operating margin excluding gains on   |
| profit attributable to equity        | asset sales = (operating profit -     |
| holders of the parent / weighted     | gains on sale of property, plant and  |
| average number of shares outstanding | equipment - gains on sale of real     |
| Revenue per employee = revenue /     | estate) / revenue                     |
| average number of employees          | Net margin = net profit for the       |
| Personnel expenses to revenue =      | period / revenue                      |
| personnel expenses / revenue         | Return on invested capital = (profit  |
| Administrative expenses to revenue = | before tax + interest expense) / the  |
| administrative expenses / revenue    | period's average (interest-bearing    |
| EBITDA = earnings before interest,   | liabilities + equity)                 |
| taxes, depreciation and              | Return on assets = operating profit / |
| amortisation                         | the period's average total assets     |
| EBITDA margin = EBITDA / revenue     | Return on equity = net profit for the |
| Gross margin = gross profit /        | period /the period's average total    |
| revenue                              | equity                                |
| Operating margin = operating profit  | Equity ratio = total equity / total   |
| / revenue                            | equity and liabilities                |
|                                      | Gearing = (interest-bearing           |
|                                      | liabilities - cash and cash           |
|                                      | equivalents) / (interest bearing      |
|                                      | liabilities + equity)                 |
|                                      | Current ratio = total current assets  |
|                                      | / total current liabilities           |
--------------------------------------------------------------------------------


Performance by geographical market                                              
In the first half of 2010, revenue earned outside Estonia accounted for around  
6% of the Group's total revenue. A year ago, the contribution of foreign markets
was around 16%. The decrease results from the Group's decision to sell its      
Latvian operations in 2010 (see also the chapter Changes in the Group's         
operations in the first half of 2010). In addition, in contrast to the first    
half of 2009 the Group did not earn any revenue in Lithuania. The proportion of 
the Group's Ukrainian revenues has increased somewhat but mainly on account of a
decrease in its Estonian revenues. The Group's vision of its operations in the  
Latvian, Lithuanian and Ukrainian markets is presented in the chapter Outlooks  
of the Group's geographical markets.                                            
--------------------------------------------------------------------------------
|                       |    6M 2010 |     6M 2009 |     6M 2008 |        2009 |
--------------------------------------------------------------------------------
| Estonia               |        94% |         84% |         80% |         86% |
--------------------------------------------------------------------------------
| Ukraine               |         6% |          2% |         15% |          3% |
--------------------------------------------------------------------------------
| Lithuania             |         0% |          1% |          2% |          0% |
--------------------------------------------------------------------------------
| Latvia                |         0% |         13% |          3% |         11% |
--------------------------------------------------------------------------------
In the reporting period, we started performing a project-based construction     
contract in Belarus but the period's revenue was not significant. The work will 
continue in the second half-year. Concrete works in Finland did not yet account 
for a percentage of consolidated revenue either.
                                
Revenue distribution between different geographical segments is a consciously   
deployed strategy by which the Group avoids excessive reliance on a single      
market. Although in the long-term perspective the Group's strategy foresees     
increasing foreign operations, in the short-term perspective the Group will     
focus on the Estonian market and seizing opportunities in an environment that it
knows best and that entails comparatively fewer identified market risks.        


Performance by business line                                                    
The core business of Nordecon International Group is general contracting and    
project management in buildings and infrastructure construction. The Group is   
involved, among other things, in the construction of commercial and industrial  
buildings and facilities, road construction and maintenance, environmental      
engineering, concrete works and real estate development.
                        
Consolidated revenue for the first half of 2010 amounted to 585.2 million kroons
(37.4 million euros), a 52% decrease from the 1,225.1 million kroons (78.3      
million euros) generated in the first half of 2009. Above all, the downturn is  
attributable to a significant decline in the demand for construction services in
all of the Group's markets and, in the first quarter, an exceptionally snowy and
cold winter that had the strongest impact on the Infrastructure segment where   
most of the work is done outdoors. In addition, the absolute revenue figure has 
been influenced by stiff competition that has lowered the construction prices.  
The Group aims to maintain the revenues generated by its business segments      
(Buildings and Infrastructure) in balance as this helps disperse risks and      
provides a more solid foundation under stressed circumstances when one segment  
experiences shrinkage. In view of estimated demand for apartments, in subsequent
years the proportion of housing construction revenue will remain within the     
strategic 20% limit.                                                            

Segment revenue                                                                 
By the end of the first half-year, the Group's infrastructure construction      
revenues exceeded those of buildings construction. Considering that for some    
time most of the construction market tenders have been related to infrastructure
(primarily projects financed by the state and with the support of the EU        
structural funds) and that the Infrastructure segment accounts for roughly two  
thirds of the Group's order book, this was an expected development. According to
management's estimates, in the second half-year the relative importance of the  
Infrastructure segment will increase even further.
                              
In the first half of 2010, the Buildings and Infrastructure segments generated  
revenue of 273.0 million kroons (17.4 million euros) and 305.0 million kroons   
(19.5 million euros) respectively. The corresponding figures for the first half 
of 2009 were 600.8 million kroons (38.4 million euros) and 616.4 million kroons 
(39.4 million euros).                                                           

Revenue distribution between segments *                                         
--------------------------------------------------------------------------------
| Business segments             |  6M 2010 |   6M 2009 |   6M 2008 |      2009 |
--------------------------------------------------------------------------------
| Buildings                     |      46% |       49% |       72% |       45% |
--------------------------------------------------------------------------------
| Infrastructure                |      54% |       51% |       28% |       55% |
--------------------------------------------------------------------------------
* In connection with the entry into force of IFRS 8 Operating Segments, the     
Group has changed segment reporting in its financial statements. In Directors'  
report the Ukrainian and EU Buildings segments which are disclosed separately in
the financial statements are presented as a single segment. In addition, the    
segment information presented in Directors' report does not include the         
disclosures on “other segments” that are presented in the financial statements. 

Revenue distribution within segments                                            
Distribution of projects within the Buildings segment has changed significantly 
compared with a year ago as well as with historical annual averages. There are  
two main reasons for this. The scarcity of projects forces companies to compete 
in all market segments and the number of contracts awarded is small compared    
with bids made. Such a situation does not allow concentrating on a specific     
business area. Another important factor is the general economic environment.    
During the past year, private companies' investments in commercial and          
industrial buildings and facilities have been almost nonexistent while local    
governments' investments in schools, nurseries and public buildings have        
increased, partly thanks to the support received from the EU structural funds.  
The proportion of industrial buildings in the Group's portfolio is large mainly 
because of the ongoing construction of the Ahtme peak load boiler plant. The    
Group builds apartment buildings for external customers as a general contractor,
not a developer. Revenue distribution within the segment should remain similar  
throughout the rest of the year.		                                              
--------------------------------------------------------------------------------
| Revenue distribution in the   |  6M 2010 |   6M 2009 |   6M 2008 |      2009 |
| Buildings segment             |          |           |           |           |
--------------------------------------------------------------------------------
| Commercial buildings          |      26% |       71% |       59% |       66% |
--------------------------------------------------------------------------------
| Industrial and warehouse      |      21% |       11% |       20% |       10% |
| facilities                    |          |           |           |           |
--------------------------------------------------------------------------------
| Public buildings              |      38% |       16% |       13% |       18% |
--------------------------------------------------------------------------------
| Apartment buildings           |      15% |        1% |        8% |        6% |
--------------------------------------------------------------------------------

As anticipated, at the end of the first half-year roughly two thirds of the     
revenue generated by the Infrastructure segment is attributable to road         
construction and maintenance. The construction of other engineering facilities  
(mostly water and wastewater networks) is an area where the Group has won many  
tenders. Therefore, the contribution of other engineering projects will remain  
relatively large throughout the year. The contribution of environmental         
engineering projects (e.g. the closure of landfills) has remained stable        
compared with 2009. Hydraulic engineering that depends heavily on the ports'    
investment policies has plummeted to an all-time low and its recovery in the    
second half-year is not likely.                                                 
--------------------------------------------------------------------------------
| Revenue distribution in the   |  6M 2010 |   6M 2009 |   6M 2008 |      2009 |
| Infrastructure segment        |          |           |           |           |
--------------------------------------------------------------------------------
| Road construction and         |      65% |       32% |       51% |       49% |
| maintenance                   |          |           |           |           |
--------------------------------------------------------------------------------
| Specialist engineering        |       1% |       17% |       26% |       12% |
| (including hydraulic          |          |           |           |           |
| engineering)                  |          |           |           |           |
--------------------------------------------------------------------------------
| Other engineering             |      26% |       38% |       19% |       31% |
--------------------------------------------------------------------------------
| Environmental engineering     |       8% |       14% |        4% |        8% |
--------------------------------------------------------------------------------


Order book                                                                      
At 30 June 2010, the Group's order book stood at 1,399.4 million kroons (89.4   
million euros), approximately 11% down from the 1,568.0 million kroons (100.2   
million euros) posted a year ago. Over the past quarters, the decline in the    
Group's order book has decelerated and levelled off at around 1,350 to 1,500    
million kroons (86 to 95 million euros).                                        
--------------------------------------------------------------------------------
|                             |   6M 2010 |   6M 2009 |   6M 2008 |       2009 |
--------------------------------------------------------------------------------
| Order book, in thousands of | 1,399,433 | 1,568,004 | 3,196,937 |  1,530,661 |
| kroons                      |           |           |           |            |
--------------------------------------------------------------------------------
| Order book, in thousands of |    89,440 |   100,214 |   204,322 |     97,827 |
| euros                       |           |           |           |            |
--------------------------------------------------------------------------------
At 66% the Infrastructure segment continues to account for a significant        
proportion of the Group's total order book (HY1 2009: 68%).
                     
The value of the order portfolio has decreased due to the downturn in the       
construction market. In absolute terms, the order book figures have also been   
influenced by the year-over-year decrease in construction prices. In many       
segments of the construction market the decrease in input prices has ceased or  
turned to a rise. Therefore, in the near future the Group's management will     
focus mainly on improving the profitability of the contract portfolio rather    
than increasing its size or growth rate.
                                        
Between the reporting date (30 June 2010) and the date of release of this       
report, Group companies have been awarded additional construction contracts of  
approximately 95 million kroons (6 million euros).                              


People
                                                                          
Staff and personnel expenses                                                    
In the first half of 2010, the Group (including the parent and the subsidiaries)
employed, on average, 797 people including around 360 engineers and technical   
personnel (ETP). A significant one-off decrease in the number of staff is       
attributable to the divestment of the Latvian subsidiary Nordecon Infra SIA in  
the first quarter of 2010. At the end of 2009, the Nordecon Infra SIA subgroup  
employed over 160 people. In addition to disposals of companies, the number of  
staff has decreased on account of downsizing (lay-offs and termination of       
contracts). In a situation where construction volumes are expected to continue  
shrinking throughout the year, the headcount may decrease even further. However,
due to the seasonal nature of the business, in the second and third quarters the
number of staff should increase through fixed-term contracts.                   
Average number of the Group's employees (including the parent and its           
subsidiaries):                                                                  
--------------------------------------------------------------------------------
|                     |     6M 2010 |     6M 2009 |     6M 2008 |         2009 |
--------------------------------------------------------------------------------
| ETP                 |         362 |         480 |         493 |          467 |
--------------------------------------------------------------------------------
| Workers             |         435 |         707 |         716 |          661 |
--------------------------------------------------------------------------------
| Total average       |         797 |       1,187 |       1,209 |        1,128 |
--------------------------------------------------------------------------------
The Group's personnel expenses for the first half of 2010 including associated  
taxes totalled 108.7 million kroons (6.9 million euros), a 42% decrease compared
with the 188.4 million kroons (12.0 million euros) incurred in the first half of
2009.
                                                                           
Personnel expenses have declined on account of downsizing and the cutting of    
basic salaries. In 2009, employee salaries were lowered at all Group entities;  
the average pay-cut for engineers and technical personnel was 15%. The          
performance pay of project staff that is linked to the projects' profit margins 
has also dropped.
                                                               
In the first half of 2010, the remuneration of the members of the council of    
Nordecon International AS including social security charges amounted to 783     
thousand kroons (50 thousand euros). The corresponding figure for the first half
of 2009 was also 718 thousand kroons (46 thousand euros). The remuneration and  
benefits of the members of the board of Nordecon International AS including     
social security charges totalled 1,128 thousand kroons (72 thousand euros)      
compared with 1,674 thousand kroons (107 thousand euros) for the first half of  
2009. The remuneration of the board has decreased because in the comparative    
period the board had three members whereas the current number is two.           


Outlooks of the Group's geographical markets                                    

Estonia                                                                         
According to the assessment of the Group's management, in 2010 the Estonian     
construction market will be characterised by the following features:            
- Total demand in the construction market will remain heavily dependent on
public procurement tenders and projects performed with the support of the
European Union funds. Project initiation success depends on the administrative 
capabilities of the central and local government which have improved compared   
with previous periods. However, the demand resulting from public sector projects
will not be able to compensate for the steep contraction of the buildings       
construction market that remains abandoned by most private sector companies and 
individuals. Accordingly, the Group's management forecasts that by the end of   
2010 the total volume of the construction market will have decreased by over 50%
compared with 2008.
                                                             
- The number of residential and general buildings construction companies is 
decreasing. Companies engaged in the sector are seeking opportunities for       
penetrating also other market segments such as infrastructure. This has         
heightened competition which, in turn, has increased the number of companies    
going bankrupt or needing corporate rehabilitation. The trend will continue     
through 2010. The Group does not forecast a significant number of mergers or    
takeovers because in the current market situation this would not have sufficient
business rationale.
                                                             
- In 2010 the decrease in construction prices is expected to cease after which
the prices are expected to start rising compared with 2008-2009. In such a 
situation, performance of construction contracts concluded at unreasonably low  
margins or below cost may have extremely adverse consequences and may cause     
serious financial difficulties for companies that have not noticed the trend or 
have been forced to ignore it due to cash flow problems.
                        
- Banks have divided companies operating in the construction market into
different risk categories. Banks' risk exposures still include the real estate
and investment loans granted to companies that were engaged in real estate 
development. In 2010, the survival of a number of companies will depend on the  
banks' risk management principles. On the other hand, the banks have announced  
that they are again ready to start financing the construction sector although to
a limited extent.
                                                               
- In 2009 building materials manufacturers that had significantly increased
their output during the growth phase of the market experienced continuing
shrinkage in demand and, consequently, greater strain in meeting the
obligations taken for increasing their capacities. To date, the decline in
building materials prices 
has halted and in 2010 prices are expected to start rising.                     
Because of the increasing importance of infrastructure projects, the key        
competitive advantages will include industry-specific (engineering and          
technical) expertise, experience and references as well as the availability of  
relevant resources.
                                                             
- Shrinkage in construction volumes has caused continuously rising unemployment 
among construction workers. The ensuing growth in the supply of labour will help
construction companies control their personnel expenses.                        

- Construction projects' financing principles have changed. There are now 
additional requirements to the funding to be provided by the builder during the 
construction period. Moreover, contractual settlement terms have lengthened and 
there are settlement defaults. All this will increase the companies' liquidity  
risks.                                                                          

Latvia and Lithuania                                                            
In February 2010, the Group sold its loss-generating Latvian subsidiary Nordecon
Infra SIA whose core business was construction of water and wastewater networks.
According to the Group's assessment, the Latvian construction market will be    
undergoing extensive adjustment to the recessionary environment through         
2010-2011. Therefore, in the next few years the Group will continue operating in
Latvia on a project basis, through its Estonian subsidiaries, involving partners
where necessary. Continuation of project-based business assumes that the        
projects can be performed profitably. The decision does not change the Group's  
long-term strategic objectives in the Latvian market, i.e. the objective of     
operating there in the future through local subsidiaries.
                       
Recent economic developments in Lithuania have been similar to the ones in the  
other Baltic countries. Slowdown in investment, both in the public and private  
sectors, and similar factors have had a direct impact on the construction       
market. The commercial and residential construction markets (the Group as a     
general contractor not a developer) have contracted visibly and the launch of   
any new private sector projects in the near future is unlikely.
                 
In response to this, the operations of the Group's Lithuanian subsidiary        
Nordecon Statyba UAB have been suspended and the Group is monitoring the market 
situation. The temporary suspension of operations does not cause any major costs
for the Group. The Group's management does not exclude the possibility that the 
Lithuanian operations will remain suspended also after 2010. The decision does  
not change the Group's long-term strategic objectives in the Lithuanian         
construction market, i.e. the objective of operating there in the future through
local subsidiaries.                                                             

Ukraine                                                                         
In Ukraine, the Group will continue mainly as a general contractor and project  
manager in the construction of commercial buildings and production facilities.  
In 2009, the number of projects started in the buildings construction market    
decreased substantially. The situation in the sector is not expected to improve 
until after the second half of 2010. This implies, above all, the need for tight
cost control.
                                                                   
Activities on development projects that require major investment have been      
suspended to minimise the risks until the situation in the Ukrainian and global 
financial markets eases up (the Group has currently interests in two development
projects that have been conserved)                                              

The main risks in the Ukrainian market are connected with the low administrative
efficiency of the central and local government and the judicial system,         
inflation, and the availability of quality construction inputs. Demand is mainly
undermined by the customers' lack of financing. To date, the weakening of the   
local currency that began in 2008 has stopped and the Group's exposure to       
market-based currency risk has decreased considerably. It is also clear that the
political climate has stabilised after the presidential elections, which may    
pave the way for an improvement in the general economic climate. This, in turn, 
would revive investment by local and foreign companies who account for a        
significant proportion of the Group's customers in the Ukrainian market.        

Notwithstanding the above, the Group believes that the construction market of a 
country with a population of 46 million will offer excellent business           
opportunities also in the future. The Group's key success factor is relatively  
little competition among project management companies (the Group offers flexible
construction management in combination with European practices and competencies)
compared with the real needs of a normally functioning construction market. The 
Group's management is confident that the current crisis in the Ukrainian        
construction market and economy as a whole will transform the local             
understanding and expectations of general contracting and project management in 
the construction business, which will improve the Group's position significantly
in the long-term perspective.                                                   


Description of the main risks                                                   

Business risks                                                                  
Management believes that in the next few years the main business risk will be   
stiff competition that induces construction companies to bid unreasonably low   
prices in a situation where input prices have started rising and may cause steep
losses. The situation is aggravated by the fact that the need for winning       
contracts that would cover fixed costs and overheads at a level ensuring normal 
operating capacities is increasing. The Group's management expects to mitigate  
the risks by tight cost control and effective cost cutting as well as detailed  
and precise analyses of new projects.
                                           
To mitigate the risks arising from the seasonal nature of the construction      
business (primarily the weather conditions during the winter months), the Group 
has acquired road maintenance contracts that generate year-round business. In   
addition, Group companies are constantly seeking new technical solutions that   
would allow working more efficiently under changeable weather conditions.       

To manage their daily construction risks, Group companies purchase Contractors' 
All Risks insurance. Depending on the nature of the project, both general frame 
agreements and specially tailored project-specific contracts are used. In       
addition, as a rule, subcontractors are required to secure the performance of   
their obligations with a bank guarantee issued for the benefit of a Group       
company. To remedy builder-caused deficiencies which may be detected during the 
warranty period, all Group companies create warranties provisions. At 30 June   
2010, the provisions (including current and non-current ones) totalled 13.4     
million kroons (0.9 million euros). At 30 June 2009, the corresponding figure   
was 15.1 million kroons (1.0 million euros).                                    

Credit risk                                                                     
For credit risk management, a potential customer's settlement behaviour and     
creditworthiness are analysed already in the tendering stage. Subsequent to the 
signature of a contract, the customer's settlement behaviour is monitored on an 
ongoing basis from the making of an advance payment to adherence to the         
contractual settlement schedule, which usually depends on the documentation of  
the delivery of work performed. We believe that the system in place allows us to
respond to customers' settlement difficulties with sufficient speed. At the end 
of the reporting period, our customers' settlement behaviour was good in the    
current economic situation; however, there were also some large problem         
customers. The proportion of overdue receivables has increased, which heightens 
the risk of future credit losses. In accordance with the Group's accounting     
policies, all receivables that are more than 180 days overdue or in respect of  
which no additional settlement agreements have been reached are recognised as an
expense.                                                                        

In the first half of 2010, net gain on doubtful receivables (recoveries of items
written down in previous periods exceeded the amount of items written down in   
the reporting period) amounted to 0.1 million kroons (0 million euros). In the  
first half of 2009, net loss on doubtful receivables amounted to 9.2 million    
kroons (0.6 million euros).                                                     

Liquidity risk                                                                  
Free funds are placed in overnight or fixed-interest term deposits with the     
largest banks in the markets where the Group operates. To ensure timely         
settlement of liabilities, approximately two weeks' working capital is kept in  
current accounts or overnight deposits. Where necessary, overdraft facilities   
are used. At the reporting date, the Group's current assets exceeded its current
liabilities 1.53-fold (30 June 2009: 1.36-fold) and available cash funds        
totalled 163.9 million kroons (10.5 million euros) (30 June 2009: 158.1 million 
kroons / 10.1 million euros), providing a sufficient liquidity buffer for       
operating in conditions that are more complicated than in the previous year.    

Interest rate risk                                                              
The Group's interest-bearing liabilities to banks have mainly fixed interest    
rates. Finance lease liabilities have floating interest rates and are linked to 
EURIBOR. At 30 June 2010, the Group's interest-bearing loans and borrowings     
totalled 440.7 million kroons (28.2 million euros), a 179.0 million kroon (11.4 
million euro) decrease year-over-year. Interest expense for the first half of   
2010 amounted to 7.7 million kroons (0.5 million euros). Compared with the first
half of 2009, interest expense has contracted by 8.0 million kroons (0.5 million
euros) in connection with a decline in the EURIBOR base rate and a decrease in  
loans and borrowings.                                                           

The Group's interest rate risk results mainly from two factors: an increase in  
the base rate for floating interest rates (EURIBOR) and insufficient operating  
cash flow that may render the Group unable to settle its interest expense. The  
first factor is mitigated by fixing, where possible, the interest rates of      
liabilities during the period of low market interest rates. The realisation of  
the cash flow risk depends on the success of operating activities. The Group    
does not use derivatives to hedge the interest rate risk.                       

Currency risk                                                                   
As a rule, construction contracts and subcontractors' service contracts are made
in the currency of the host country: in Estonia in Estonian kroons (EEK) and in 
Ukraine in Ukrainian hryvnas (UAH). In connection with shrinkage in operations  
in Latvia and Lithuania, the currency risks of those countries are no longer    
relevant. Services purchased from other countries are mostly priced in euros,   
which does not constitute a currency risk for the Group's Estonian entities.    
The Group's foreign exchange gains and losses result mainly from its Ukrainian  
operations because the Ukrainian national currency floats against the euro and, 
consequently, against the Estonian kroon. To date, the weakening of the         
Ukrainian hryvna against the euro that began in the last quarter of 2008 has    
ceased. The Group's exchange gains and losses for the first half of 2010        
resulted in a net exchange loss of 0.9 million kroons (0.1 million euros). In   
the first half of 2009, exchange differences resulted in a gain of 0.3 million  
kroons (0 million euros).                                                       


Condensed consolidated interim statement of financial position                  
--------------------------------------------------------------------------------
| EEK`000                                    |   30 June 2010 |    31 December |
|                                            |                |           2009 |
--------------------------------------------------------------------------------
| ASSETS                                     |                |                |
--------------------------------------------------------------------------------
| Current assets                             |                |                |
--------------------------------------------------------------------------------
| Cash and cash equivalents                  |        163,911 |        225,191 |
--------------------------------------------------------------------------------
| Trade and other receivables                |        593,601 |        644,704 |
--------------------------------------------------------------------------------
| Prepayments                                |         36,198 |         30,595 |
--------------------------------------------------------------------------------
| Inventories                                |        395,293 |        389,328 |
--------------------------------------------------------------------------------
| Non-current assets held for sale           |          5,542 |          4,617 |
--------------------------------------------------------------------------------
| Total current assets                       |      1,194,545 |      1,294,435 |
--------------------------------------------------------------------------------
| Non-current assets                         |                |                |
--------------------------------------------------------------------------------
| Investments in equity accounted investees  |          1,584 |          2,191 |
--------------------------------------------------------------------------------
| Other investments                          |            414 |            414 |
--------------------------------------------------------------------------------
| Trade and other receivables                |         34,696 |         33,329 |
--------------------------------------------------------------------------------
| Investment property                        |         77,135 |         87,975 |
--------------------------------------------------------------------------------
| Property, plant and equipment              |        164,275 |        204,115 |
--------------------------------------------------------------------------------
| Intangible assets                          |        244,036 |        268,233 |
--------------------------------------------------------------------------------
| Total non-current assets                   |        522,140 |        596,257 |
--------------------------------------------------------------------------------
| TOTAL ASSETS                               |      1,716,685 |      1,890,692 |
--------------------------------------------------------------------------------
| LIABILITIES                                |                |                |
--------------------------------------------------------------------------------
| Current liabilities                        |                |                |
--------------------------------------------------------------------------------
| Loans and borrowings                       |        170,855 |        262,959 |
--------------------------------------------------------------------------------
| Trade payables                             |        406,945 |        377,925 |
--------------------------------------------------------------------------------
| Other payables                             |         79,358 |         94,580 |
--------------------------------------------------------------------------------
| Deferred income                            |        116,210 |        136,438 |
--------------------------------------------------------------------------------
| Provisions                                 |          6,368 |         10,364 |
--------------------------------------------------------------------------------
| Total current liabilities                  |        779,736 |        882,266 |
--------------------------------------------------------------------------------
| Non-current liabilities                    |                |                |
--------------------------------------------------------------------------------
| Loans and borrowings                       |        269,856 |        294,328 |
--------------------------------------------------------------------------------
| Trade payables                             |          3,023 |          4,846 |
--------------------------------------------------------------------------------
| Other payables                             |          1,500 |          1,500 |
--------------------------------------------------------------------------------
| Provisions                                 |          7,041 |          7,041 |
--------------------------------------------------------------------------------
| Total non-current liabilities              |        281,420 |        307,715 |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES                          |      1,061,156 |      1,189,981 |
--------------------------------------------------------------------------------
| EQUITY                                     |                |                |
--------------------------------------------------------------------------------
| Share capital                              |        307,567 |        307,567 |
--------------------------------------------------------------------------------
| Statutory capital reserve                  |         40,024 |         40,012 |
--------------------------------------------------------------------------------
| Translation reserve                        |         -4,686 |         -3,201 |
--------------------------------------------------------------------------------
| Retained earnings                          |        286,006 |        345,280 |
--------------------------------------------------------------------------------
| Total equity attributable to equity        |        628,911 |        689,658 |
| holders of the parent                      |                |                |
--------------------------------------------------------------------------------
| Non-controlling interest                   |         26,617 |         11,053 |
--------------------------------------------------------------------------------
| TOTAL EQUITY                               |        655,528 |        700,711 |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES AND EQUITY               |      1,716,685 |      1,890,692 |
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
| EUR`000                                    |   30 June 2010 |    31 December |
|                                            |                |           2009 |
--------------------------------------------------------------------------------
| ASSETS                                     |                |                |
--------------------------------------------------------------------------------
| Current assets                             |                |                |
--------------------------------------------------------------------------------
| Cash and cash equivalents                  |         10,476 |         14,392 |
--------------------------------------------------------------------------------
| Trade and other receivables                |         37,938 |         41,204 |
--------------------------------------------------------------------------------
| Prepayments                                |          2,313 |          1,955 |
--------------------------------------------------------------------------------
| Inventories                                |         25,264 |         24,883 |
--------------------------------------------------------------------------------
| Non-current assets held for sale           |            354 |            295 |
--------------------------------------------------------------------------------
| Total current assets                       |         76,345 |         82,729 |
--------------------------------------------------------------------------------
| Non-current assets                         |                |                |
--------------------------------------------------------------------------------
| Investments in equity accounted investees  |            101 |            140 |
--------------------------------------------------------------------------------
| Other investments                          |             26 |             26 |
--------------------------------------------------------------------------------
| Trade and other receivables                |          2,218 |          2,130 |
--------------------------------------------------------------------------------
| Investment property                        |          4,930 |          5,623 |
--------------------------------------------------------------------------------
| Property, plant and equipment              |         10,499 |         13,045 |
--------------------------------------------------------------------------------
| Intangible assets                          |         15,597 |         17,143 |
--------------------------------------------------------------------------------
| Total non-current assets                   |         33,371 |         38,108 |
--------------------------------------------------------------------------------
| TOTAL ASSETS                               |        109,716 |        120,837 |
--------------------------------------------------------------------------------
| LIABILITIES                                |                |                |
--------------------------------------------------------------------------------
| Current liabilities                        |                |                |
--------------------------------------------------------------------------------
| Loans and borrowings                       |         10,920 |         16,806 |
--------------------------------------------------------------------------------
| Trade payables                             |         26,008 |         24,154 |
--------------------------------------------------------------------------------
| Other payables                             |          5,072 |          6,045 |
--------------------------------------------------------------------------------
| Deferred income                            |          7,427 |          8,720 |
--------------------------------------------------------------------------------
| Provisions                                 |            407 |            662 |
--------------------------------------------------------------------------------
| Total current liabilities                  |         49,834 |         56,387 |
--------------------------------------------------------------------------------
| Non-current liabilities                    |                |                |
--------------------------------------------------------------------------------
| Loans and borrowings                       |         17,246 |         18,811 |
--------------------------------------------------------------------------------
| Trade payables                             |            194 |            310 |
--------------------------------------------------------------------------------
| Other payables                             |             96 |             96 |
--------------------------------------------------------------------------------
| Provisions                                 |            450 |            450 |
--------------------------------------------------------------------------------
| Total non-current liabilities              |         17,986 |         19,667 |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES                          |         67,820 |         76,054 |
--------------------------------------------------------------------------------
| EQUITY                                     |                |                |
--------------------------------------------------------------------------------
| Share capital                              |         19,657 |         19,657 |
--------------------------------------------------------------------------------
| Statutory capital reserve                  |          2,558 |          2,557 |
--------------------------------------------------------------------------------
| Translation reserve                        |           -299 |           -205 |
--------------------------------------------------------------------------------
| Retained earnings                          |         18,279 |         22,067 |
--------------------------------------------------------------------------------
| Total equity attributable to equity        |         40,195 |         44,077 |
| holders of the parent                      |                |                |
--------------------------------------------------------------------------------
| Non-controlling interest                   |          1,701 |            706 |
--------------------------------------------------------------------------------
| TOTAL EQUITY                               |         41,896 |         44,784 |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES AND EQUITY               |        109,716 |        120,837 |
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
|  EEK`000                 | Q2 2010 | Q2 2009 |     6M  | 6M  2009 |     2009 |
|                          |         |         |    2010 |          |          |
--------------------------------------------------------------------------------
| Revenue                  | 409,202 | 634,430 | 585,200 | 1,225,094| 2,418,880|
|                          |         |         |         |          |          |
--------------------------------------------------------------------------------
| Cost of sales            |-430,677 |-586,932 |-630,404 |-1,140,741|-2,282,575|
|                          |         |         |         |          |          |
--------------------------------------------------------------------------------
| Gross profit / loss      | -21,475 |  47,498 | -45,206 |   84,353 |  136,305 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Distribution expenses    |  -1,129 |  -2,140 |  -3,126 |   -4,363 |   -9,416 |
--------------------------------------------------------------------------------
| Administrative expenses  | -17,289 | -27,946 | -35,557 |  -65,350 | -125,206 |
--------------------------------------------------------------------------------
| Other operating income   |   4,982 |  18,209 |   5,658 |   19,898 |   25,592 |
--------------------------------------------------------------------------------
| Other operating expenses |  -5,088 | -26,950 |  -7,333 |  -29,373 | -154,014 |
--------------------------------------------------------------------------------
| Operating profit / loss  | -39,999 |   8,671 | -85,564 |    5,165 | -126,739 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Finance income           |   3,047 |  12,128 |  42,281 |   30,903 |   86,513 |
--------------------------------------------------------------------------------
| Finance expenses         |  -4,437 |  -9,131 | -23,227 |  -22,913 |  -33,934 |
--------------------------------------------------------------------------------
| Net finance income /     |  -1,390 |   2,997 |  19,054 |    7,990 |   52,579 |
| expense                  |         |         |         |          |          |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Share of profit / loss   |    -621 |     538 |    -631 |   -2,106 |   -7,666 |
| of equity accounted      |         |         |         |          |          |
| investees                |         |         |         |          |          |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit / loss before     | -42,010 |  12,206 | -67,141 |   11,049 |  -81,826 |
| income tax               |         |         |         |          |          |
--------------------------------------------------------------------------------
| Income tax expense /     |   1,814 |  -6,513 |   1,814 |   -5,895 |   -7,618 |
| income                   |         |         |         |          |          |
--------------------------------------------------------------------------------
| Profit / loss for the    | -40,196 |   5,693 | -65,327 |    5,154 |  -89,444 |
| period                   |         |         |         |          |          |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other comprehensive      |         |         |         |          |          |
| income / expense:        |         |         |         |          |          |
--------------------------------------------------------------------------------
| Exchange differences on  |    -919 |    -231 |  -1,485 |   -1,711 |      905 |
| translating foreign      |         |         |         |          |          |
| operations               |         |         |         |          |          |
--------------------------------------------------------------------------------
| Total other              |    -919 |    -231 |  -1,485 |   -1,711 |      905 |
| comprehensive income /   |         |         |         |          |          |
| expense for the period   |         |         |         |          |          |
--------------------------------------------------------------------------------
| TOTAL COMPREHENSIVE      | -41,115 |   5,462 | -66,812 |    3,443 |  -88,539 |
| INCOME / EXPENSE FOR THE |         |         |         |          |          |
| PERIOD                   |         |         |         |          |          |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit / loss            |         |         |         |          |          |
| attributable to:         |         |         |         |          |          |
--------------------------------------------------------------------------------
| - Owners of the parent   | -38,679 |  14,130 | -59,274 |   21,176 |  -45,740 |
--------------------------------------------------------------------------------
| - Non-controlling        |  -1,517 |  -8,437 |  -6,053 |  -16,022 |  -43,704 |
| interests                |         |         |         |          |          |
--------------------------------------------------------------------------------
| Profit / loss for the    | -40,196 |   5,693 | -65,327 |    5,154 |  -89,444 |
| period                   |         |         |         |          |          |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total comprehensive      |         |         |         |          |          |
| income / expense         |         |         |         |          |          |
| attributable to:         |         |         |         |          |          |
--------------------------------------------------------------------------------
| - Owners of the parent   | -39,598 |  14,031 | -60,759 |   22,469 |  -44,835 |
--------------------------------------------------------------------------------
| - Non-controlling        |  -1,517 |  -8,569 |  -6,053 |  -19,026 |  -43,704 |
| interests                |         |         |         |          |          |
--------------------------------------------------------------------------------
| Total comprehensive      | -41,115 |   5,462 | -66,812 |    3,443 |  -88,539 |
| income / expense         |         |         |         |          |          |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per share       |         |         |         |          |          |
| attributable to owners   |         |         |         |          |          |
| of the parent:           |         |         |         |          |          |
--------------------------------------------------------------------------------
| Basic earnings per share |   -1.26 |    0.46 |   -1.93 |     0.69 |    -1.49 |
| (EEK)                    |         |         |         |          |          |
--------------------------------------------------------------------------------
| Diluted earnings per     |   -1.26 |    0.46 |   -1.93 |     0.69 |    -1.49 |
| share (EEK)              |         |         |         |          |          |
--------------------------------------------------------------------------------


--------------------------------------------------------------------------------
| EUR`000                  | Q2 2010 | Q2 2009 | 6M 2010 |  6M 2009 |     2009 |
--------------------------------------------------------------------------------
| Revenue                  |  26,153 |  40,547 |  37,401 |   78,298 |  154,595 |
--------------------------------------------------------------------------------
| Cost of sales            | -27,525 | -37,512 | -40,290 |  -72,907 | -145,883 |
--------------------------------------------------------------------------------
| Gross profit / loss      |  -1,372 |   3,036 |  -2,889 |    5,391 |    8,711 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Distribution expenses    |     -72 |    -137 |    -200 |     -279 |     -602 |
--------------------------------------------------------------------------------
| Administrative expenses  |  -1,105 |  -1,786 |  -2,273 |   -4,177 |   -8,002 |
--------------------------------------------------------------------------------
| Other operating income   |     319 |   1,164 |     362 |    1,272 |    1,636 |
--------------------------------------------------------------------------------
| Other operating expenses |    -325 |  -1,722 |    -469 |   -1,877 |   -9,843 |
--------------------------------------------------------------------------------
| Operating profit / loss  |  -2,555 |     554 |  -5,469 |      330 |   -8,100 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Finance income           |     195 |    775, |   2,702 |    1,975 |    5,529 |
--------------------------------------------------------------------------------
| Finance expenses         |    -284 |    -584 |  -1,484 |   -1,464 |   -2,169 |
--------------------------------------------------------------------------------
| Net finance income /     |     -89 |     192 |   1,218 |      511 |    3,360 |
| expense                  |         |         |         |          |          |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Share of profit / loss   |     -40 |      34 |     -40 |     -135 |     -490 |
| of equity accounted      |         |         |         |          |          |
| investees                |         |         |         |          |          |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit / loss before     |  -2,684 |     780 |  -4,291 |      706 |   -5,230 |
| income tax               |         |         |         |          |          |
--------------------------------------------------------------------------------
| Income tax expense /     |     116 |   -416, |     116 |     -377 |     -487 |
| income                   |         |         |         |          |          |
--------------------------------------------------------------------------------
| Profit / loss for the    |  -2,568 |     364 |  -4,175 |      329 |   -5,717 |
| period                   |         |         |         |          |          |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other comprehensive      |         |         |         |          |          |
| income / expense:        |         |         |         |          |          |
--------------------------------------------------------------------------------
| Exchange differences on  |     -59 |     -15 |     -95 |     -109 |       58 |
| translating foreign      |         |         |         |          |          |
| operations               |         |         |         |          |          |
--------------------------------------------------------------------------------
| Total other              |     -59 |     -15 |     -95 |     -109 |       58 |
| comprehensive income /   |         |         |         |          |          |
| expense for the period   |         |         |         |          |          |
--------------------------------------------------------------------------------
| TOTAL COMPREHENSIVE      |  -2,627 |     349 |  -4,270 |      220 |   -5,659 |
| INCOME / EXPENSE FOR THE |         |         |         |          |          |
| PERIOD                   |         |         |         |          |          |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Profit / loss            |         |         |         |          |          |
| attributable to:         |         |         |         |          |          |
--------------------------------------------------------------------------------
| - Owners of the parent   |  -2,471 |     903 |  -3,788 |    1,353 |   -2,923 |
--------------------------------------------------------------------------------
| - Non-controlling        |     -97 |    -539 |    -387 |   -1,024 |   -2,793 |
| interests                |         |         |         |          |          |
--------------------------------------------------------------------------------
| Profit / loss for the    |  -2,568 |     364 |  -4,175 |      329 |   -5,717 |
| period                   |         |         |         |          |          |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total comprehensive      |         |         |         |          |          |
| income / expense         |         |         |         |          |          |
| attributable to:         |         |         |         |          |          |
--------------------------------------------------------------------------------
| - Owners of the parent   |  -2,530 |     897 |  -3,883 |    1,436 |   -2,865 |
--------------------------------------------------------------------------------
| - Non-controlling        |     -97 |    -548 |    -387 |   -1,216 |   -2,793 |
| interests                |         |         |         |          |          |
--------------------------------------------------------------------------------
| Total comprehensive      |  -2,627 |     349 |  -4,270 |      220 |   -5,659 |
| income / expense         |         |         |         |          |          |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per share       |         |         |         |          |          |
| attributable to owners   |         |         |         |          |          |
| of the parent:           |         |         |         |          |          |
--------------------------------------------------------------------------------
| Basic earnings per share |   -0.08 |    0.03 |   -0.12 |     0.04 |    -0.10 |
| (EUR)                    |         |         |         |          |          |
--------------------------------------------------------------------------------
| Diluted earnings per     |   -0.08 |    0.03 |   -0.12 |     0.04 |    -0.10 |
| share (EUR)              |         |         |         |          |          |
--------------------------------------------------------------------------------


Condensed consolidated interim statement of cash flows                          
--------------------------------------------------------------------------------
|                             |        EEK`000        |        EUR`000         |
--------------------------------------------------------------------------------
|                             |   6M 2010 |   6M 2009 |   6M 2010 |    6M 2009 |
--------------------------------------------------------------------------------
| Cash flows from operating   |           |           |           |            |
| activities                  |           |           |           |            |
--------------------------------------------------------------------------------
| Cash receipts from          |   720,137 | 1,448,843 |    46,025 |     92,598 |
| customers                   |           |           |           |            |
--------------------------------------------------------------------------------
| Cash paid to suppliers      |  -559,476 |-1,234,214 |   -35,757 |    -78,880 |
|                             |           |           |           |            |
--------------------------------------------------------------------------------
| VAT paid                    |   -31,452 |   -37,767 |    -2,010 |     -2,414 |
--------------------------------------------------------------------------------
| Cash paid to and for        |  -117,850 |  -225,462 |    -7,532 |    -14,410 |
| employees                   |           |           |           |            |
--------------------------------------------------------------------------------
| Income tax paid             |      -558 |    -8,538 |       -36 |       -546 |
--------------------------------------------------------------------------------
| Net cash from / used in     |    10,801 |   -57,138 |       690 |     -3,652 |
| operating activities        |           |           |           |            |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flows from investing   |           |           |           |            |
| activities                  |           |           |           |            |
--------------------------------------------------------------------------------
| Acquisition of property,    |    -1,217 |      -839 |       -78 |        -54 |
| plant and equipment         |           |           |           |            |
--------------------------------------------------------------------------------
| Acquisition of intangible   |         0 |    -7,530 |         0 |       -481 |
| assets                      |           |           |           |            |
--------------------------------------------------------------------------------
| Proceeds from sale of       |     5,371 |     4,762 |       343 |        304 |
| property, plant and         |           |           |           |            |
| equipment and intangible    |           |           |           |            |
| assets                      |           |           |           |            |
--------------------------------------------------------------------------------
| Proceeds from sale of       |    10,600 |      -200 |       677 |        -13 |
| investment property         |           |           |           |            |
--------------------------------------------------------------------------------
| Acquisition of              |         0 |   -11,720 |         0 |       -749 |
| subsidiaries, net of cash   |           |           |           |            |
| acquired                    |           |           |           |            |
--------------------------------------------------------------------------------
| Disposal of subsidiaries,   |    -9,648 |         0 |      -617 |          0 |
| net of cash transferred     |           |           |           |            |
--------------------------------------------------------------------------------
| Acquisition of associates   |       -24 |    -6,000 |        -2 |       -383 |
--------------------------------------------------------------------------------
| Proceeds from disposal of   |         0 |     7,465 |         0 |        477 |
| associates                  |           |           |           |            |
--------------------------------------------------------------------------------
| Acquisition of interests in |         0 |   -20,000 |         0 |     -1,278 |
| joint ventures              |           |           |           |            |
--------------------------------------------------------------------------------
| Loans granted               |    -2,788 |   -54,803 |      -178 |     -3,502 |
--------------------------------------------------------------------------------
| Repayment of loans granted  |     2,763 |    38,094 |       177 |      2,435 |
--------------------------------------------------------------------------------
| Dividends received          |        61 |         0 |         4 |          0 |
--------------------------------------------------------------------------------
| Interest received           |     2,102 |     9,707 |       134 |        620 |
--------------------------------------------------------------------------------
| Net cash from / used in     |     7,220 |   -41,064 |       461 |     -2,624 |
| investing activities        |           |           |           |            |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flows from financing   |           |           |           |            |
| activities                  |           |           |           |            |
--------------------------------------------------------------------------------
| Proceeds from loans         |    36,669 |   141,095 |     2,344 |      9,018 |
| received                    |           |           |           |            |
--------------------------------------------------------------------------------
| Repayment of loans received |   -88,798 |  -108,970 |    -5,675 |     -6,965 |
--------------------------------------------------------------------------------
| Dividends paid              |         0 |   -31,933 |         0 |     -2,041 |
--------------------------------------------------------------------------------
| Payment of finance lease    |   -21,145 |   -25,305 |    -1,351 |     -1,618 |
| liabilities                 |           |           |           |            |
--------------------------------------------------------------------------------
| Interest paid               |    -6,361 |   -14,444 |      -407 |       -923 |
--------------------------------------------------------------------------------
| Other payments made         |        56 |      -381 |         4 |        -24 |
--------------------------------------------------------------------------------
| Net cash used in financing  |   -79,579 |   -39,938 |    -5,085 |     -2,553 |
| activities                  |           |           |           |            |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash flow               |   -61,558 |  -138,140 |    -3,934 |     -8,829 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash and cash equivalents   |   225,191 |   296,184 |    14,392 |     18,930 |
| at beginning of period      |           |           |           |            |
--------------------------------------------------------------------------------
| Effect of exchange rate     |       278 |        45 |        18 |          3 |
| fluctuations                |           |           |           |            |
--------------------------------------------------------------------------------
| Decrease  in cash and cash  |   -61,558 |  -138,140 |    -3,934 |     -8,829 |
| equivalents                 |           |           |           |            |
--------------------------------------------------------------------------------
| Cash and cash equivalents   |   163,911 |   158,089 |    10,476 |     10,104 |
| at end of period            |           |           |           |            |
--------------------------------------------------------------------------------


Nordecon International is a group of construction companies whose core business
is general contracting and construction management in the construction of
buildings and infrastructures in Estonia, Lithuania and Ukraine. In addition,
in Estonia our companies act as independent contractors in road construction
and maintenance, environmental engineering, the assembly of reinforced concrete
elements, and the performance of cast-on-site concrete works. The parent of the
Group is Nordecon International AS, a company registered and located in
Tallinn, Estonia. In addition to the parent company, there are more than 15
subsidiaries in the Group. The consolidated revenue of the Group in 2009 was
2.4 billion kroons (155 million euros). Currently Nordecon International Group
employs nearly 750 people. Since 18 May 2006, the company's shares have been
quoted in the main list of the NASDAQ OMX Tallinn Stock Exchange. 

1 euro = 15.6466 kroons


Raimo Talviste
Nordecon International AS
Head of Finance and Investor Relations
Tel: +372 615 4445
Email: [email protected] 
www.nordecon.com