Börsiteade

Pealkiri

2014 III quarter and nine months consolidated interim report (unaudited)

Teade

<span style="font-size:11pt;">This announcement includes Nordecon AS’s
consolidated financial statements for the third quarter and nine months of 2014
(unaudited), overview of the key events influencing the period’s financial
result, outlook for the market and description of the main risks.</span> 

<span style="font-size:11pt;">Interim report is attached to the announcement
and is also published on NASDAQ OMX Tallinn and Nordecon’s web page
(http://www.nordecon.com/root/en/for-investor/financial-reports/interim-reports)
.</span> 

<span style="font-size:11pt;">Period’s investor presentation are attached to
the announcement and are also published on Nordecon’s web page
(http://www.nordecon.com/root/en/for-investor/investor-presentations). 


Condensed consolidated interim statement of financial position</span>

<span     <span style="font-size:9pt;">30 September     <span
style="font-size:9pt;">31 December 
 style                                  2014</span>                            
     2013</span> 
="font 
-size: 
9pt;"> 
EUR’00 
0</spa 
n> 
--------------------------------------------------------------------------------
---------------- 
--------------------------------------------------------------------------------
---------------- 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
ASSETS 
</span 
> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
Curren 
t 
 asset 
s</spa 
n> 
<span     <span style="font-size:9pt;">7,704</span>   <span
style="font-size:9pt;">12,575</span> 
 style 
="font 
-size: 
9pt;"> 
Cash 
 and 
 cash 
 equiv 
alents 
</span 
> 
<span    <span style="font-size:9pt;">34,652</span>   <span
style="font-size:9pt;">28,101</span> 
 style 
="font 
-size: 
9pt;"> 
Trade 
 and 
 other 
 recei 
vables 
</span 
> 
<span     <span style="font-size:9pt;">1,429</span>    <span
style="font-size:9pt;">1,923</span> 
 style 
="font 
-size: 
9pt;"> 
Prepay 
ments< 
/span> 
<span    <span style="font-size:9pt;">26,346</span>   <span
style="font-size:9pt;">23,785</span> 
 style 
="font 
-size: 
9pt;"> 
Invent 
ories< 
/span> 
<span    <span style="font-size:9pt;">70,131</span>   <span
style="font-size:9pt;">66,384</span> 
 style 
="font 
-size: 
9pt;"> 
Total 
 curre 
nt 
 asset 
s</spa 
n> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
Non-cu 
rrent 
 asset 
s</spa 
n> 
<span       <span style="font-size:9pt;">771</span>      <span
style="font-size:9pt;">566</span> 
 style 
="font 
-size: 
9pt;"> 
Invest 
ments 
 in 
 equit 
y-acco 
unted 
 inves 
tees</ 
span> 
<span        <span style="font-size:9pt;">26</span>       <span
style="font-size:9pt;">26</span> 
 style 
="font 
-size: 
9pt;"> 
Other 
 inves 
tments 
</span 
> 
<span    <span style="font-size:9pt;">11,253</span>   <span
style="font-size:9pt;">10,645</span> 
 style 
="font 
-size: 
9pt;"> 
Trade 
 and 
 other 
 recei 
vables 
</span 
> 
<span     <span style="font-size:9pt;">3,560</span>    <span
style="font-size:9pt;">3,549</span> 
 style 
="font 
-size: 
9pt;"> 
Invest 
ment 
 prope 
rty</s 
pan> 
<span     <span style="font-size:9pt;">9,033</span>    <span
style="font-size:9pt;">9,030</span> 
 style 
="font 
-size: 
9pt;"> 
Proper 
ty, 
 plant 
 and 
 equip 
ment</ 
span> 
<span    <span style="font-size:9pt;">14,590</span>   <span
style="font-size:9pt;">14,494</span> 
 style 
="font 
-size: 
9pt;"> 
Intang 
ible 
 asset 
s</spa 
n> 
<span    <span style="font-size:9pt;">39,233</span>   <span
style="font-size:9pt;">38,310</span> 
 style 
="font 
-size: 
9pt;"> 
Total 
 non-c 
urrent 
 asset 
s</spa 
n> 
<span   <span style="font-size:9pt;">109,364</span>  <span
style="font-size:9pt;">104,694</span> 
 style 
="font 
-size: 
9pt;"> 
TOTAL 
 ASSET 
S</spa 
n> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
LIABIL 
ITIES< 
/span> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
Curren 
t 
 liabi 
lities 
</span 
> 
<span    <span style="font-size:9pt;">26,396</span>   <span
style="font-size:9pt;">23,875</span> 
 style 
="font 
-size: 
9pt;"> 
Loans 
 and 
 borro 
wings< 
/span> 
<span    <span style="font-size:9pt;">30,252</span>   <span
style="font-size:9pt;">26,372</span> 
 style 
="font 
-size: 
9pt;"> 
Trade 
 payab 
les</s 
pan> 
<span     <span style="font-size:9pt;">6,539</span>    <span
style="font-size:9pt;">7,982</span> 
 style 
="font 
-size: 
9pt;"> 
Other 
 payab 
les</s 
pan> 
<span     <span style="font-size:9pt;">3,053</span>    <span
style="font-size:9pt;">6,102</span> 
 style 
="font 
-size: 
9pt;"> 
Deferr 
ed 
 incom 
e</spa 
n> 
<span       <span style="font-size:9pt;">508</span>      <span
style="font-size:9pt;">913</span> 
 style 
="font 
-size: 
9pt;"> 
Provis 
ions</ 
span> 
<span    <span style="font-size:9pt;">66,748</span>   <span
style="font-size:9pt;">65,244</span> 
 style 
="font 
-size: 
9pt;"> 
Total 
 curre 
nt 
 liabi 
lities 
</span 
> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
Non-cu 
rrent 
 liabi 
lities 
</span 
> 
<span     <span style="font-size:9pt;">3,976</span>    <span
style="font-size:9pt;">3,303</span> 
 style 
="font 
-size: 
9pt;"> 
Loans 
 and 
 borro 
wings< 
/span> 
<span       <span style="font-size:9pt;">155</span>      <span
style="font-size:9pt;">156</span> 
 style 
="font 
-size: 
9pt;"> 
Trade 
 payab 
les</s 
pan> 
<span        <span style="font-size:9pt;">96</span>       <span
style="font-size:9pt;">96</span> 
 style 
="font 
-size: 
9pt;"> 
Other 
 payab 
les</s 
pan> 
<span       <span style="font-size:9pt;">969</span>      <span
style="font-size:9pt;">969</span> 
 style 
="font 
-size: 
9pt;"> 
Provis 
ions</ 
span> 
<span     <span style="font-size:9pt;">5,196</span>    <span
style="font-size:9pt;">4,524</span> 
 style 
="font 
-size: 
9pt;"> 
Total 
 non-c 
urrent 
 liabi 
lities 
</span 
> 
<span    <span style="font-size:9pt;">71,944</span>   <span
style="font-size:9pt;">69,768</span> 
 style 
="font 
-size: 
9pt;"> 
TOTAL 
 LIABI 
LITIES 
</span 
> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
EQUITY 
</span 
> 
<span    <span style="font-size:9pt;">20,692</span>   <span
style="font-size:9pt;">19,657</span> 
 style 
="font 
-size: 
9pt;"> 
Share 
 capit 
al</sp 
an> 
<span    <span style="font-size:9pt;">-1,582</span>        <span
style="font-size:9pt;">0</span> 
 style 
="font 
-size: 
9pt;"> 
Treasu 
ry 
 share 
s 
 </spa 
n> 
<span       <span style="font-size:9pt;">547</span>        <span
style="font-size:9pt;">0</span> 
 style 
="font 
-size: 
9pt;"> 
Share 
 premi 
um</sp 
an> 
<span     <span style="font-size:9pt;">2,554</span>    <span
style="font-size:9pt;">2,554</span> 
 style 
="font 
-size: 
9pt;"> 
Statut 
ory 
 capit 
al 
 reser 
ve</sp 
an> 
<span        <span style="font-size:9pt;">20</span>        <span
style="font-size:9pt;">0</span> 
 style 
="font 
-size: 
9pt;"> 
Other 
 reser 
ves</s 
pan> 
<span       <span style="font-size:9pt;">423</span>     <span
style="font-size:9pt;">-298</span> 
 style 
="font 
-size: 
9pt;"> 
Transl 
ation 
 reser 
ve</sp 
an> 
<span    <span style="font-size:9pt;">12,365</span>   <span
style="font-size:9pt;">10,681</span> 
 style 
="font 
-size: 
9pt;"> 
Retain 
ed 
 earni 
ngs</s 
pan> 
<span    <span style="font-size:9pt;">35,019</span>   <span
style="font-size:9pt;">32,594</span> 
 style 
="font 
-size: 
9pt;"> 
Total 
 equit 
y 
 attri 
butabl 
e to 
 owner 
s of 
 the 
 paren 
t</spa 
n> 
<span     <span style="font-size:9pt;">2,401</span>    <span
style="font-size:9pt;">2,332</span> 
 style 
="font 
-size: 
9pt;"> 
Non-co 
ntroll 
ing 
 inter 
ests</ 
span> 
<span    <span style="font-size:9pt;">37,420</span>   <span
style="font-size:9pt;">34,926</span> 
 style 
="font 
-size: 
9pt;"> 
TOTAL 
 EQUIT 
Y</spa 
n> 
<span   <span style="font-size:9pt;">109,364</span>  <span
style="font-size:9pt;">104,694</span> 
 style 
="font 
-size: 
9pt;"> 
TOTAL 
 LIABI 
LITIES 
 AND 
 EQUIT 
Y</spa 
n> 



<span style="font-size:11pt;">Condensed consolidated interim statement of
comprehensive income</span> 

<span   <span style="font-size:9pt;">Q3 2014</span>  <span
style="font-size:9pt;">Q3 2013</span>   <span style="font-size:9pt;">9M
2014</span>   <span style="font-size:9pt;">9M 2013</span>      <span
style="font-size:9pt;">2013</span> 
 style 
="font 
-size: 
9pt;"> 
EUR’00 
0</spa 
n> 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-------------------------------------------------------------------------- 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-------------------------------------------------------------------------- 
<span   <span style="font-size:9pt;"> 53,492</span>  <span
style="font-size:9pt;"> 59,236</span>   <span
style="font-size:9pt;">120,936</span>   <span
style="font-size:9pt;">134,733</span>  <span style="font-size:9pt;">
173,651</span> 
 style 
="font 
-size: 
9pt;"> 
Revenu 
e</spa 
n> 
<span   <span style="font-size:9pt;">-48,913</span>  <span
style="font-size:9pt;">-53,083</span>  <span
style="font-size:9pt;">-112,145</span>  <span
style="font-size:9pt;">-125,307</span>  <span
style="font-size:9pt;">-162,342</span> 
 style 
="font 
-size: 
9pt;"> 
Cost 
 of 
 sales 
</span 
> 
<span     <span style="font-size:9pt;">4,579</span>    <span
style="font-size:9pt;">6,153</span>     <span
style="font-size:9pt;">8,791</span>     <span
style="font-size:9pt;">9,426</span>    <span
style="font-size:9pt;">11,309</span> 
 style 
="font 
-size: 
9pt;"> 
Gross 
 profi 
t</spa 
n> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span>         <span style="font-size:9pt;"> </span>  
      <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span       <span style="font-size:9pt;">-76</span>     <span
style="font-size:9pt;">-142</span>      <span
style="font-size:9pt;">-420</span>      <span
style="font-size:9pt;">-281</span>      <span
style="font-size:9pt;">-452</span> 
 style 
="font 
-size: 
9pt;"> 
Market 
ing 
 and 
 distr 
ibutio 
n 
 expen 
ses</s 
pan> 
<span    <span style="font-size:9pt;">-1,535</span>   <span
style="font-size:9pt;">-1,240</span>    <span
style="font-size:9pt;">-4,006</span>    <span
style="font-size:9pt;">-3,567</span>    <span
style="font-size:9pt;">-4,922</span> 
 style 
="font 
-size: 
9pt;"> 
Admini 
strati 
ve 
 expen 
ses</s 
pan> 
<span       <span style="font-size:9pt;">129</span>      <span
style="font-size:9pt;">154</span>       <span style="font-size:9pt;">270</span>
      <span style="font-size:9pt;">360</span>       <span
style="font-size:9pt;">464</span> 
 style 
="font 
-size: 
9pt;"> 
Other 
 opera 
ting 
 incom 
e</spa 
n> 
<span      <span style="font-size:9pt;">-225</span>     <span
style="font-size:9pt;">-292</span>      <span
style="font-size:9pt;">-256</span>      <span
style="font-size:9pt;">-351</span>    <span
style="font-size:9pt;">-1,096</span> 
 style 
="font 
-size: 
9pt;"> 
Other 
 opera 
ting 
 expen 
ses</s 
pan> 
<span     <span style="font-size:9pt;">2,872</span>    <span
style="font-size:9pt;">4,633</span>     <span
style="font-size:9pt;">4,379</span>     <span
style="font-size:9pt;">5,587</span>     <span
style="font-size:9pt;">5,303</span> 
 style 
="font 
-size: 
9pt;"> 
Operat 
ing 
 profi 
t</spa 
n> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span>         <span style="font-size:9pt;"> </span>  
      <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span       <span style="font-size:9pt;">160</span>      <span
style="font-size:9pt;">124</span>       <span style="font-size:9pt;">486</span>
      <span style="font-size:9pt;">507</span>       <span
style="font-size:9pt;">668</span> 
 style 
="font 
-size: 
9pt;"> 
Financ 
e 
 incom 
e</spa 
n> 
<span      <span style="font-size:9pt;">-359</span>     <span
style="font-size:9pt;">-329</span>    <span
style="font-size:9pt;">-1,581</span>      <span
style="font-size:9pt;">-887</span>    <span
style="font-size:9pt;">-1,027</span> 
 style 
="font 
-size: 
9pt;"> 
Financ 
e 
 costs 
</span 
> 
<span      <span style="font-size:9pt;">-199</span>     <span
style="font-size:9pt;">-205</span>    <span
style="font-size:9pt;">-1,095</span>      <span
style="font-size:9pt;">-380</span>      <span
style="font-size:9pt;">-359</span> 
 style 
="font 
-size: 
9pt;"> 
Net 
 finan 
ce 
 costs 
</span 
> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span>         <span style="font-size:9pt;"> </span>  
      <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span      <span style="font-size:9pt;"> 186</span>     <span
style="font-size:9pt;"> 120</span>       <span
style="font-size:9pt;">208</span>       <span style="font-size:9pt;">197</span>
    <span style="font-size:9pt;"> -170</span> 
 style 
="font 
-size: 
9pt;"> 
Share 
 of 
 profi 
t/loss 
 of 
 equit 
y-acco 
unted 
 inves 
tees</ 
span> 
<span   <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span>               <span style="font-size:9pt;">
</span>         <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span     <span style="font-size:9pt;">2,859</span>    <span
style="font-size:9pt;">4,548</span>     <span
style="font-size:9pt;">3,492</span>     <span
style="font-size:9pt;">5,404</span>     <span
style="font-size:9pt;">4,774</span> 
 style 
="font 
-size: 
9pt;"> 
Profit 
 befor 
e 
 incom 
e 
 tax</ 
span> 
<span       <span style="font-size:9pt;">-63</span>      <span
style="font-size:9pt;">-51</span>      <span style="font-size:9pt;">-242</span>
      <span style="font-size:9pt;">-95</span>      <span
style="font-size:9pt;">-135</span> 
 style 
="font 
-size: 
9pt;"> 
Income 
 tax 
 expen 
se</sp 
an> 
<span     <span style="font-size:9pt;">2,796</span>    <span
style="font-size:9pt;">4,497</span>     <span
style="font-size:9pt;">3,250</span>     <span
style="font-size:9pt;">5,309</span>     <span
style="font-size:9pt;">4,639</span> 
 style 
="font 
-size: 
9pt;"> 
Profit 
 for 
 the 
 perio 
d</spa 
n> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span>         <span style="font-size:9pt;"> </span>  
      <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span>         <span style="font-size:9pt;"> </span>  
      <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
Other 
 compr 
ehensi 
ve 
 incom 
e 
Items 
 that 
 may 
 be 
 recla 
ssifie 
d 
 subse 
quentl 
y to 
 profi 
t or 
 loss< 
/span> 
<span       <span style="font-size:9pt;">-89</span>       <span
style="font-size:9pt;">82</span>       <span style="font-size:9pt;">721</span> 
      <span style="font-size:9pt;">49</span>       <span
style="font-size:9pt;">106</span> 
 style 
="font 
-size: 
9pt;"> 
Exchan 
ge 
 diffe 
rences 
 on 
 trans 
lating 
 forei 
gn 
 opera 
tions< 
/span> 
<span       <span style="font-size:9pt;">-89</span>       <span
style="font-size:9pt;">82</span>       <span style="font-size:9pt;">721</span> 
      <span style="font-size:9pt;">49</span>       <span
style="font-size:9pt;">106</span> 
 style 
="font 
-size: 
9pt;"> 
Total 
 other 
 compr 
ehensi 
ve 
 incom 
e/expe 
nse</s 
pan> 
<span     <span style="font-size:9pt;">2,707</span>    <span
style="font-size:9pt;">4,579</span>     <span
style="font-size:9pt;">3,971</span>     <span
style="font-size:9pt;">5,358</span>     <span
style="font-size:9pt;">4,745</span> 
 style 
="font 
-size: 
9pt;"> 
TOTAL 
 COMPR 
EHENSI 
VE 
 INCOM 
E</spa 
n> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span>         <span style="font-size:9pt;"> </span>  
      <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span>         <span style="font-size:9pt;"> </span>  
      <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
Profit 
 attri 
butabl 
e 
 to:</ 
span> 
<span     <span style="font-size:9pt;">2,386</span>    <span
style="font-size:9pt;">4,409</span>     <span
style="font-size:9pt;">2,607</span>     <span
style="font-size:9pt;">5,137</span>     <span
style="font-size:9pt;">4,642</span> 
 style 
="font 
-size: 
9pt;"> 
- 
 Owner 
s of 
 the 
 paren 
t</spa 
n> 
<span       <span style="font-size:9pt;">410</span>       <span
style="font-size:9pt;">88</span>       <span style="font-size:9pt;">643</span> 
     <span style="font-size:9pt;">172</span>        <span
style="font-size:9pt;">-3</span> 
 style 
="font 
-size: 
9pt;"> 
- 
 Non-c 
ontrol 
ling 
 inter 
ests</ 
span> 
<span     <span style="font-size:9pt;">2,796</span>    <span
style="font-size:9pt;">4,497</span>     <span
style="font-size:9pt;">3,250</span>     <span
style="font-size:9pt;">5,309</span>     <span
style="font-size:9pt;">4,639</span> 
 style 
="font 
-size: 
9pt;"> 
Profit 
 for 
 the 
 perio 
d</spa 
n> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span>         <span style="font-size:9pt;"> </span>  
      <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span   <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span>               <span style="font-size:9pt;">
</span>         <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
Total 
 compr 
ehensi 
ve 
 incom 
e 
 attri 
butabl 
e 
 to:</ 
span> 
<span     <span style="font-size:9pt;">2,297</span>    <span
style="font-size:9pt;">4,491</span>     <span
style="font-size:9pt;">3,328</span>     <span
style="font-size:9pt;">5,186</span>     <span
style="font-size:9pt;">4,748</span> 
 style 
="font 
-size: 
9pt;"> 
- 
 Owner 
s of 
 the 
 paren 
t</spa 
n> 
<span       <span style="font-size:9pt;">410</span>       <span
style="font-size:9pt;">88</span>       <span style="font-size:9pt;">643</span> 
     <span style="font-size:9pt;">172</span>        <span
style="font-size:9pt;">-3</span> 
 style 
="font 
-size: 
9pt;"> 
- 
 Non-c 
ontrol 
ling 
 inter 
ests</ 
span> 
<span     <span style="font-size:9pt;">2,707</span>    <span
style="font-size:9pt;">4,579</span>     <span
style="font-size:9pt;">3,971</span>     <span
style="font-size:9pt;">5,358</span>     <span
style="font-size:9pt;">4,745</span> 
 style 
="font 
-size: 
9pt;"> 
Total 
 compr 
ehensi 
ve 
 incom 
e for 
 the 
 perio 
d</spa 
n> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span>         <span style="font-size:9pt;"> </span>  
      <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span         <span style="font-size:9pt;"> </span>        <span
style="font-size:9pt;"> </span>         <span style="font-size:9pt;"> </span>  
      <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
Earnin 
gs per 
 share 
 attri 
butabl 
e to 
 owner 
s of 
 the 
 paren 
t:</sp 
an> 
<span      <span style="font-size:9pt;">0.08</span>     <span
style="font-size:9pt;">0.14</span>      <span
style="font-size:9pt;">0.08</span>      <span
style="font-size:9pt;">0.17</span>      <span
style="font-size:9pt;">0.15</span> 
 style 
="font 
-size: 
9pt;"> 
Basic 
 earni 
ngs 
 per 
 share 
 (EUR) 
</span 
> 
<span      <span style="font-size:9pt;">0.08</span>     <span
style="font-size:9pt;">0.14</span>      <span
style="font-size:9pt;">0.08</span>      <span
style="font-size:9pt;">0.17</span>      <span
style="font-size:9pt;">0.15</span> 
 style 
="font 
-size: 
9pt;"> 
Dilute 
d 
 earni 
ngs 
 per 
 share 
 (EUR) 
</span 
> 



<span style="font-size:11pt;">Condensed consolidated interim statement of cash
flows</span> 

<span    <span style="font-size:9pt;">9M 2014</span>   <span
style="font-size:9pt;">9M 2013</span> 
 style 
="font 
-size: 
9pt;"> 
EUR’00 
0</spa 
n> 
--------------------------------------------------------------------------------
------------------ 
--------------------------------------------------------------------------------
------------------ 
<span          <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
Cash 
 flows 
 from 
 opera 
ting 
 activ 
ities< 
/span> 
<span    <span style="font-size:9pt;">131,291</span>   <span
style="font-size:9pt;">136,517</span> 
 style 
="font 
-size: 
9pt;"> 
Cash 
 recei 
pts 
 from 
 custo 
mers1< 
/span> 
<span   <span style="font-size:9pt;">-118,250</span>  <span
style="font-size:9pt;">-125,826</span> 
 style 
="font 
-size: 
9pt;"> 
Cash 
 paid 
 to 
 suppl 
iers2< 
/span> 
<span     <span style="font-size:9pt;">-3,907</span>    <span
style="font-size:9pt;">-2,419</span> 
 style 
="font 
-size: 
9pt;"> 
VAT 
 paid< 
/span> 
<span    <span style="font-size:9pt;">-14,618</span>   <span
style="font-size:9pt;">-13,403</span> 
 style 
="font 
-size: 
9pt;"> 
Cash 
 paid 
 to 
 and 
 for 
 emplo 
yees</ 
span> 
<span       <span style="font-size:9pt;">-177</span>        <span
style="font-size:9pt;">-2</span> 
 style 
="font 
-size: 
9pt;"> 
Income 
 tax 
 paid< 
/span> 
<span     <span style="font-size:9pt;">-5,661</span>    <span
style="font-size:9pt;">-5,133</span> 
 style 
="font 
-size: 
9pt;"> 
Net 
 cash 
 used 
 in 
 opera 
ting 
 activ 
ities< 
/span> 
<span          <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span          <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
Cash 
 flows 
 from 
 inves 
ting 
 activ 
ities< 
/span> 
<span       <span style="font-size:9pt;">-284</span>      <span
style="font-size:9pt;">-315</span> 
 style 
="font 
-size: 
9pt;"> 
Paid 
 on 
 acqui 
sition 
 of 
 prope 
rty, 
 plant 
 and 
 equip 
ment</ 
span> 
<span        <span style="font-size:9pt;">-14</span>         <span
style="font-size:9pt;">0</span> 
 style 
="font 
-size: 
9pt;"> 
Paid 
 on 
 acqui 
sition 
 of 
 intan 
gible 
 asset 
s</spa 
n> 
<span        <span style="font-size:9pt;">185</span>       <span
style="font-size:9pt;">191</span> 
 style 
="font 
-size: 
9pt;"> 
Procee 
ds 
 from 
 sale 
 of 
 prope 
rty, 
 plant 
 and 
 equip 
ment</ 
span> 
<span       <span style="font-size:9pt;">-719</span>         <span
style="font-size:9pt;">0</span> 
 style 
="font 
-size: 
9pt;"> 
Acquis 
ition 
 of a 
 subsi 
diary< 
/span> 
<span          <span style="font-size:9pt;">0</span>      <span
style="font-size:9pt;">-350</span> 
 style 
="font 
-size: 
9pt;"> 
Acquis 
ition 
 of 
 inves 
tments 
 in 
 assoc 
iates< 
/span> 
<span          <span style="font-size:9pt;">1</span>         <span
style="font-size:9pt;">0</span> 
 style 
="font 
-size: 
9pt;"> 
Cash 
 from 
 liqui 
dation 
 of 
 inves 
tments 
 in 
 assoc 
iates< 
/span> 
<span       <span style="font-size:9pt;">-275</span>      <span
style="font-size:9pt;">-377</span> 
 style 
="font 
-size: 
9pt;"> 
Loans 
 provi 
ded</s 
pan> 
<span        <span style="font-size:9pt;">106</span>       <span
style="font-size:9pt;">202</span> 
 style 
="font 
-size: 
9pt;"> 
Repaym 
ent of 
 loans 
 provi 
ded</s 
pan> 
<span          <span style="font-size:9pt;">4</span>         <span
style="font-size:9pt;">4</span> 
 style 
="font 
-size: 
9pt;"> 
Divide 
nds 
 recei 
ved</s 
pan> 
<span          <span style="font-size:9pt;">4</span>       <span
style="font-size:9pt;">359</span> 
 style 
="font 
-size: 
9pt;"> 
Intere 
st 
 recei 
ved</s 
pan> 
<span       <span style="font-size:9pt;">-992</span>      <span
style="font-size:9pt;">-286</span> 
 style 
="font 
-size: 
9pt;"> 
Net 
 cash 
 used 
 in 
 inves 
ting 
 activ 
ities< 
/span> 
<span          <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span          <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
Cash 
 flows 
 from 
 finan 
cing 
 activ 
ities< 
/span> 
<span     <span style="font-size:9pt;">10,551</span>    <span
style="font-size:9pt;">10,243</span> 
 style 
="font 
-size: 
9pt;"> 
Procee 
ds 
 from 
 loans 
 recei 
ved</s 
pan> 
<span     <span style="font-size:9pt;">-5,887</span>    <span
style="font-size:9pt;">-3,760</span> 
 style 
="font 
-size: 
9pt;"> 
Repaym 
ent of 
 loans 
 recei 
ved</s 
pan> 
<span     <span style="font-size:9pt;">-1,110</span>    <span
style="font-size:9pt;">-1,310</span> 
 style 
="font 
-size: 
9pt;"> 
Paymen 
t of 
 finan 
ce 
 lease 
 liabi 
lities 
</span 
> 
<span       <span style="font-size:9pt;">-654</span>      <span
style="font-size:9pt;">-736</span> 
 style 
="font 
-size: 
9pt;"> 
Intere 
st 
 paid< 
/span> 
<span       <span style="font-size:9pt;">-940</span>      <span
style="font-size:9pt;">-107</span> 
 style 
="font 
-size: 
9pt;"> 
Divide 
nds 
 paid< 
/span> 
<span       <span style="font-size:9pt;">-175</span>         <span
style="font-size:9pt;">0</span> 
 style 
="font 
-size: 
9pt;"> 
Other 
 payme 
nts 
 made< 
/span> 
<span      <span style="font-size:9pt;">1,785</span>     <span
style="font-size:9pt;">4,330</span> 
 style 
="font 
-size: 
9pt;"> 
Net 
 cash 
 from 
 finan 
cing 
 activ 
ities< 
/span> 
<span          <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span     <span style="font-size:9pt;">-4,868</span>    <span
style="font-size:9pt;">-1,089</span> 
 style 
="font 
-size: 
9pt;"> 
Net 
 cash 
 flow< 
/span> 
<span          <span style="font-size:9pt;"> </span>         <span
style="font-size:9pt;"> </span> 
 style 
="font 
-size: 
9pt;"> 
 </spa 
n> 
<span     <span style="font-size:9pt;">12,575</span>    <span
style="font-size:9pt;">10,231</span> 
 style 
="font 
-size: 
9pt;"> 
Cash 
 and 
 cash 
 equiv 
alents 
 at 
 begin 
ning 
 of 
 perio 
d</spa 
n> 
<span         <span style="font-size:9pt;">-3</span>        <span
style="font-size:9pt;">-2</span> 
 style 
="font 
-size: 
9pt;"> 
Effect 
 of 
 excha 
nge 
 rate 
 fluct 
uation 
s on 
 cash 
 and 
 cash 
 equiv 
alents 
</span 
> 
<span     <span style="font-size:9pt;">-4,868</span>    <span
style="font-size:9pt;">-1,089</span> 
 style 
="font 
-size: 
9pt;"> 
Decrea 
se  in 
 cash 
 and 
 cash 
 equiv 
alents 
</span 
> 
<span      <span style="font-size:9pt;">7,704</span>     <span
style="font-size:9pt;">9,140</span> 
 style 
="font 
-size: 
9pt;"> 
Cash 
 and 
 cash 
 equiv 
alents 
 at 
 end 
 of 
 perio 
d</spa 
n> 

<span style="font-size:9pt;">1 </span><span style="font-size:8pt;">Line item
Cash receipts from customers includes VAT paid by customers.</span> 

<span style="font-size:9pt;">2 </span><span style="font-size:8pt;">Line item
Cash paid to suppliers includes VAT paid</span> 


Financial review

Financial performance

Nordecon group ended the first nine months of 2014 with a gross profit of 8,791
thousand euros (9M 2013: 9,426 thousand euros) and a gross margin of 7.3% (9M
2013: 7.0%). Most of the period’s profit was earned in the third quarter when
performance was not impacted by adverse weather conditions and the fixed costs
of a technological standstill that typically characterise the beginning of the
year. In contrast to the previous year, profit was not undermined by
loss-making contracts and all segments succeeded in either maintaining or
improving their profit margins. 

The Group’s management has highlighted the expected fall in demand and the
ensuing rise in competitive pressure in previous periods already (see also the
chapters Order book, Description of the main risks and Outlooks of the Group’s
geographical markets) and has enforced measures for maintaining and, possibly,
improving profitability in a situation where volumes decrease. We are aware
that rises in input prices pose a risk for long-term contracts and continue to
prioritize a contract’s anticipated profitability over revenue growth or
retention. 

The Group’s administrative expenses for the first nine months of 2014 totalled
4,006 thousand euros, 12% up on a year ago (9M 2013: 3,567 thousand euros). The
ratio of administrative expenses to revenue (12 months rolling) was 3.4% (9M
2013: 2.8%). Administrative expenses have grown through a rise in payroll
expenses and the provisions recognised in the third quarter based on the
Group’s performance indicators. Our cost-control measures continue to yield
strong results – administrative expenses remain below the target ceiling, i.e.
4% of revenue. 

Operating profit for the first nine months amounted to 4,379 thousand euros (9M
2013: 5,587 thousand euros) while EBITDA was 5,743 thousand euros (9M 2013:
7,088 thousand euros). 

Adverse movements in the euro/hryvna exchange rate gave rise to exchange losses
that were significantly larger than those of previous periods. The Ukrainian
hryvna weakened by around 33%, which meant that Group entities whose functional
currency is the hryvna had to re-measure their euro-denominated liabilities.
The Group’s exchange losses, which are reported within finance costs, totalled
817 thousand euros (9M 2013: an exchange loss of 43 thousand euros). The same
exchange loss gave rise to a positive 721 thousand-euro change in the
translation reserve reported in equity (9M 2013: a positive change of 49
thousand euros) and the net effect of the exchange loss on the Group’s net
assets was 96 thousand euros (9M 2013: a positive net effect of 6 thousand
euros). 

As a result, the Group’s net profit amounted to 3,250 thousand euros (9M 2013:
5,309 thousand euros) of which the profit attributable to owners of the parent,
Nordecon AS, was 2,607 thousand euros (9M 2013: 5,137 thousand euros). 

Cash flows

Operating activities for the first nine months of 2014 resulted in a net cash
outflow of 5,661 thousand euros (9M 2013: a net outflow of 5,133 thousand
euros). In a situation where operating activities generate a profit, negative
operating cash flow results primarily from a mismatch between the projects’
actual stage of completion (recognised revenue) and the amounts billed to
customers. Cash inflow is also reduced by the amounts retained under the terms
of construction contracts, which are released when construction activity ends.
Retentions extend from 5% to 10% of the volume of a contract, being comparable
to the profit margin. In addition, we continue to work on our own housing
development projects but the cash flows of such projects are negative until
sales commence. Projects completed in the previous year with higher than
expected profit margins have also resulted in larger performance bonuses and
accompanying tax charges. Operating cash flows continue to be influenced by a
mismatch in settlement terms: the ones agreed with customers are long and in
the case of public procurement mostly extend from 45 to 56 days while
subcontractors generally have to be paid within 21 to 45 days. 

Investing activities resulted in a net cash outflow of 992 thousand euros (9M
2013: a net outflow of 286 thousand euros). The largest one-off outflows
resulted from a loan of 250 thousand euros to an entity of AS Nordic
Contractors group (see note 14), a payment of 180 thousand euros made to
purchase the remaining shares in the subsidiary AS Eston Ehitus from the
non-controlling shareholders and acquisition of a further stake in Eurocon OÜ
for 539 thousand euros (see note 15). 

Financing activities resulted in a net cash inflow of 1,785 thousand euros (9M
2013: a net inflow of 4,330 thousand euros). Loan receipts exceeded loan
repayments by 4,664 thousand euros compared with 6,483 thousand euros a year
ago. The change is mainly attributable to changes in the Group’s overdraft
balances. 

Finance lease payments declined slightly year over year. Dividends distributed
in the period totalled 940 thousand euros (9M 2013: 107 thousand euros). 

At 30 September 2014, the Group’s cash and cash equivalents totalled 7,704
thousand euros (30 September 2013: 9,140 thousand euros). Management’s comments
on liquidity risks are presented in the chapter Description of the main risks. 



Key financial figures and ratios

<span      <span style="font-size:9pt;">9M 2014</span>     <span
style="font-size:9pt;">9M 2013</span>     <span style="font-size:9pt;">9M
2012</span>        <span style="font-size:9pt;">2013</span> 
 style 
="font 
-size: 
9pt;"> 
Figure 
/ratio 
</span 
> 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-------------------------------------- 
<span      <span style="font-size:9pt;">120,936</span>     <span
style="font-size:9pt;">134,733</span>     <span
style="font-size:9pt;">117,054</span>     <span
style="font-size:9pt;">173,651</span> 
 style 
="font 
-size: 
9pt;"> 
Revenu 
e 
 (EUR’ 
000)</ 
span> 
<span       <span style="font-size:9pt;">-10.2%</span>       <span
style="font-size:9pt;">15.1%</span>       <span
style="font-size:9pt;">13.4%</span>        <span
style="font-size:9pt;">8.9%</span> 
 style 
="font 
-size: 
9pt;"> 
Revenu 
e 
 chang 
e</spa 
n> 
<span        <span style="font-size:9pt;">3,250</span>       <span
style="font-size:9pt;">5,309</span>       <span
style="font-size:9pt;">1,988</span>       <span
style="font-size:9pt;">4,639</span> 
 style 
="font 
-size: 
9pt;"> 
Net 
 profi 
t 
 (EUR’ 
000)</ 
span> 
<span        <span style="font-size:9pt;">2,607</span>       <span
style="font-size:9pt;">5,137</span>       <span
style="font-size:9pt;">1,630</span>       <span
style="font-size:9pt;">4,642</span> 
 style 
="font 
-size: 
9pt;"> 
Profit 
 attri 
butabl 
e to 
 owner 
s of 
 the 
 paren 
t 
 (EUR’ 
000)</ 
span> 
<span   <span style="font-size:9pt;">30,756,728</span>  <span
style="font-size:9pt;">30,756,728</span>  <span
style="font-size:9pt;">30,756,728</span>  <span
style="font-size:9pt;">30,756,728</span> 
 style 
="font 
-size: 
9pt;"> 
Weight 
ed 
 avera 
ge 
 numbe 
r of 
 share 
s</spa 
n> 
<span         <span style="font-size:9pt;">0.08</span>        <span
style="font-size:9pt;">0.17</span>        <span
style="font-size:9pt;">0.05</span>        <span
style="font-size:9pt;">0.15</span> 
 style 
="font 
-size: 
9pt;"> 
Earnin 
gs per 
 share 
 (EUR) 
</span 
> 
<span         <span style="font-size:9pt;">3.3%</span>        <span
style="font-size:9pt;">2.6%</span>        <span
style="font-size:9pt;">3.4%</span>        <span
style="font-size:9pt;">2.8%</span> 
 style 
="font 
-size: 
9pt;"> 
Admini 
strati 
ve 
 expen 
ses to 
 reven 
ue</sp 
an> 
<span         <span style="font-size:9pt;">3.4%</span>        <span
style="font-size:9pt;">2.8%</span>        <span
style="font-size:9pt;">3.3%</span>        <span
style="font-size:9pt;">2.8%</span> 
 style 
="font 
-size: 
9pt;"> 
Admini 
strati 
ve 
 expen 
ses to 
 reven 
ue 
 (roll 
ing)</ 
span> 
<span        <span style="font-size:9pt;">5,743</span>       <span
style="font-size:9pt;">7,088</span>       <span
style="font-size:9pt;">3,735</span>       <span
style="font-size:9pt;">7,639</span> 
 style 
="font 
-size: 
9pt;"> 
EBITDA 
 (EUR’ 
000)</ 
span> 
<span         <span style="font-size:9pt;">4.7%</span>        <span
style="font-size:9pt;">5.3%</span>        <span
style="font-size:9pt;">3.2%</span>        <span
style="font-size:9pt;">4.4%</span> 
 style 
="font 
-size: 
9pt;"> 
EBITDA 
 margi 
n</spa 
n> 
<span         <span style="font-size:9pt;">7.3%</span>        <span
style="font-size:9pt;">7.0%</span>        <span
style="font-size:9pt;">5.1%</span>        <span
style="font-size:9pt;">6.5%</span> 
 style 
="font 
-size: 
9pt;"> 
Gross 
 margi 
n</spa 
n> 
<span         <span style="font-size:9pt;">3.6%</span>        <span
style="font-size:9pt;">4.1%</span>        <span
style="font-size:9pt;">1.8%</span>        <span
style="font-size:9pt;">3.1%</span> 
 style 
="font 
-size: 
9pt;"> 
Operat 
ing 
 margi 
n</spa 
n> 
<span         <span style="font-size:9pt;">3.5%</span>        <span
style="font-size:9pt;">4.0%</span>        <span
style="font-size:9pt;">1.4%</span>        <span
style="font-size:9pt;">2.9%</span> 
 style 
="font 
-size: 
9pt;"> 
Operat 
ing 
 margi 
n 
 exclu 
ding 
 gains 
 on 
 sale 
 of 
 real 
 estat 
e</spa 
n> 
<span         <span style="font-size:9pt;">2.7%</span>        <span
style="font-size:9pt;">3.9%</span>        <span
style="font-size:9pt;">1.7%</span>        <span
style="font-size:9pt;">2.7%</span> 
 style 
="font 
-size: 
9pt;"> 
Net 
 margi 
n</spa 
n> 
<span         <span style="font-size:9pt;">6.5%</span>        <span
style="font-size:9pt;">8.9%</span>        <span
style="font-size:9pt;">4.6%</span>        <span
style="font-size:9pt;">9.5%</span> 
 style 
="font 
-size: 
9pt;"> 
Return 
 on 
 inves 
ted 
 capit 
al</sp 
an> 
<span         <span style="font-size:9pt;">9.0%</span>       <span
style="font-size:9pt;">16.1%</span>        <span
style="font-size:9pt;">6.8%</span>       <span
style="font-size:9pt;">14.2%</span> 
 style 
="font 
-size: 
9pt;"> 
Return 
 on 
 equit 
y</spa 
n> 
<span        <span style="font-size:9pt;">34.2%</span>       <span
style="font-size:9pt;">27.0%</span>       <span
style="font-size:9pt;">25.7%</span>       <span
style="font-size:9pt;">33.4%</span> 
 style 
="font 
-size: 
9pt;"> 
Equity 
 ratio 
</span 
> 
<span         <span style="font-size:9pt;">3.0%</span>        <span
style="font-size:9pt;">4.4%</span>        <span
style="font-size:9pt;">1.8%</span>        <span
style="font-size:9pt;">4.3%</span> 
 style 
="font 
-size: 
9pt;"> 
Return 
 on 
 asset 
s</spa 
n> 
<span        <span style="font-size:9pt;">33.4%</span>       <span
style="font-size:9pt;">42.8%</span>       <span
style="font-size:9pt;">41.1%</span>       <span
style="font-size:9pt;">23.5%</span> 
 style 
="font 
-size: 
9pt;"> 
Gearin 
g</spa 
n> 
<span         <span style="font-size:9pt;">1.05</span>        <span
style="font-size:9pt;">1.12</span>        <span
style="font-size:9pt;">1.08</span>        <span
style="font-size:9pt;">1.02</span> 
 style 
="font 
-size: 
9pt;"> 
Curren 
t 
 ratio 
</span 
> 
                  <span style="font-size:9pt;">30 Sept            <span
style="font-size:9pt;">30 Sept            <span style="font-size:9pt;">30 Sept 
           <span style="font-size:9pt;">31 Dec 
                                           2014</span>                         
           2013</span>                                     2012</span>         
                           2013</span> 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-------------------------------------- 
<span       <span style="font-size:9pt;">92,455</span>      <span
style="font-size:9pt;">85,765</span>     <span
style="font-size:9pt;">146,070</span>      <span
style="font-size:9pt;">64,286</span> 
 style 
="font 
-size: 
9pt;"> 
Order 
 book 
 (EUR’ 
000)</ 
span> 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-------------------------------------- 

                                        

<span style="font-size:8pt;">Revenue    <span style="font-size:8pt;">Operating  
 change = (revenue for the reporting     margin excluding gains on sale of real 
 period/revenue for the previous         estate = ((operating profit -  gains on
 period) – 1*100</span>                  sale of non-current assets – gains on  
<span style="font-size:8pt;">Earnings    sale of real estate)/revenue)          
 per share (EPS) = net profit            *100</span>                            
 attributable to owners of the parent   <span style="font-size:8pt;">Net margin 
 / weighted average number of shares     = (net profit for the                  
 outstanding</span>                      period/revenue)</span><span            
<span                                    style="font-size:8pt;">*100</span>     
 style="font-size:8pt;">Administrative  <span style="font-size:8pt;">Return on  
 expenses to revenue = (administrative   invested capital = ((profit before tax 
 expenses/ revenue)</span><span          + interest expense)/ the period’s      
 style="font-size:8pt;">*100</span>      average (interest-bearing liabilities +
<span                                    equity))</span><span                   
 style="font-size:8pt;">Administrative   style="font-size:8pt;">*100</span>     
 expenses to revenue (rolling) = (past  <span style="font-size:8pt;">Return on  
 four quarters’ administrative           equity = (net profit for the period/   
 expenses/past four quarters’            the period’s average total             
 revenue)</span><span                    equity)</span><span                    
 style="font-size:8pt;">*100</span>      style="font-size:8pt;">*100</span>     
<span style="font-size:8pt;">EBITDA =   <span style="font-size:8pt;">Equity     
 operating profit + depreciation and     ratio = (total equity/ total           
 amortisation + impairment losses on     liabilities and equity)*100</span>     
 goodwill</span>                        <span style="font-size:8pt;">Return on  
<span style="font-size:8pt;">EBITDA      assets = (</span><span                 
 margin = (EBITDA/revenue)</span><span   style="font-size:8pt;">net profit for  
 style="font-size:8pt;">*100</span>      the period/ the period’s average total 
<span style="font-size:8pt;">Gross       assets</span><span                     
 margin = (gross                         style="font-size:8pt;">)*100</span>    
 profit/revenue)</span><span            <span style="font-size:8pt;">Gearing =  
 style="font-size:8pt;">*100</span>      ((interest-bearing liabilities – cash  
<span style="font-size:8pt;">Operating   and cash equivalents)/                 
 margin = (operating                     (interest-bearing liabilities +        
 profit/revenue)</span><span             equity))</span><span                   
 style="font-size:8pt;">*100</span>      style="font-size:8pt;">*100</span>     
                                        <span style="font-size:8pt;">Current    
                                         ratio = total current assets/ total    
                                         current liabilities</span>             
--------------------------------------------------------------------------------





Performance by geographical market

In the first nine months of 2014, around 6% of the Group’s revenue was
generated outside Estonia compared with 2% in the first nine months of 2013. 

                <span style="font-size:9pt;">9M          <span
style="font-size:9pt;">9M          <span style="font-size:9pt;">9M  <span
style="font-size:9pt;">2013</span> 
                                    2014</span>                             
2013</span>                              2012</span> 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
----------- 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
----------- 
<span   <span style="font-size:9pt;">94%</span>  <span
style="font-size:9pt;">98%</span>  <span style="font-size:9pt;">99%</span>  
<span style="font-size:9pt;">95%</span> 
 style 
="font 
-size: 
9pt;"> 
Estoni 
a</spa 
n> 
<span    <span style="font-size:9pt;">4%</span>   <span
style="font-size:9pt;">2%</span>   <span style="font-size:9pt;">1%</span>   
<span style="font-size:9pt;">5%</span> 
 style 
="font 
-size: 
9pt;"> 
Finlan 
d</spa 
n> 
<span    <span style="font-size:9pt;">2%</span>   <span
style="font-size:9pt;">0%</span>   <span style="font-size:9pt;">0%</span>   
<span style="font-size:9pt;">0%</span> 
 style 
="font 
-size: 
9pt;"> 
Ukrain 
e</spa 
n> 

Finnish revenues comprise revenue from concrete works performed in the building
construction segment. The contribution of the Finnish market has increased year
over year through growth in Finnish revenues, which has been amplified by a
year over year decrease in the Group’s total revenue. The contribution of the
Ukrainian market has increased because we started work under a building
construction contract. Still, foreign revenues for the year as a whole will
probably not prove significantly larger than those of 2013. 

Geographical diversification of the revenue base is a consciously deployed
strategy by which we mitigate the risks resulting from excessive concentration
on a single market. Our strategy foresees increasing foreign operations in the
longer term; for further information, see the chapter Strategic agenda for
2014-2017. Our vision of the Group’s operations in foreign markets is described
in the chapter Outlooks of the Group’s geographical markets. 



Performance by business line

<strong style="font-size: 11pt;">Segment revenues

The Group strives to maintain the revenues of its operating segments (Buildings
and Infrastructure) in balance as this helps disperse risks and provides better
opportunities for continuing construction operations in stressed circumstances
where one segment may experience shrinkage. 

Our revenue for the first nine months of 2014 amounted to 120,936 thousand
euros, a 10% decrease from the 134,733 thousand euros generated in the nine
months of 2013. A year ago, we were working on three large road construction
projects of around 70 million euros whose contribution to the period’s revenue
was considerable. Also, a year ago the volume of projects supported by the EU
structural funds was larger. We drew attention to the fact that the volume of
such projects would decline last year already. The revenues of the Buildings
segment increased as expected through a rise in both the number and average
cost of contracts secured from the private sector. 

Consequently, the revenues of our two operating segments, Buildings and
Infrastructure, for the first nine months of 2014 amounted to 76,690 thousand
euros and 40,951 thousand euros respectively. The corresponding figures for the
first nine months of 2013 were 52,294 thousand euros and 79,587 thousand euros
(see note 8). 

<span           <span style="font-size:9pt;">9M          <span
style="font-size:9pt;">9M          <span style="font-size:9pt;">9M  <span
style="font-size:9pt;">2013</span> 
 style                              2014</span>                             
2013</span>                              2012</span> 
="font 
-size: 
9pt;"> 
Operat 
ing 
 segme 
nts*</ 
span> 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
----------- 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
----------- 
<span   <span style="font-size:9pt;">63%</span>  <span
style="font-size:9pt;">38%</span>  <span style="font-size:9pt;">42%</span>  
<span style="font-size:9pt;">41%</span> 
 style 
="font 
-size: 
9pt;"> 
Buildi 
ngs</s 
pan> 
<span   <span style="font-size:9pt;">37%</span>  <span
style="font-size:9pt;">62%</span>  <span style="font-size:9pt;">58%</span>  
<span style="font-size:9pt;">59%</span> 
 style 
="font 
-size: 
9pt;"> 
Infras 
tructu 
re</sp 
an> 

<span style="font-size:8pt;">* In the directors’ report the Ukrainian buildings
segment and the EU buildings segment, which are disclosed separately in the
financial statements as required by IFRS 8 Operating Segments, are presented as
a single segment. </span> 

<span style="font-size:8pt;">In the directors’ report, projects have been
allocated to operating segments based on their nature (i.e. building or
infrastructure construction). In the segment reporting presented in the
financial statements, allocation is based on the subsidiaries’ main field of
activity (as required by IFRS 8 Operating Segments). In the financial
statements, the results of a subsidiary that is primarily engaged in
infrastructure construction are presented in the Infrastructure segment. In the
directors’ report, the revenues of such a subsidiary are presented based on
their nature. The differences between the two reports are not significant
because in general Group entities specialise in specific areas except for the
subsidiary Nordecon Betoon OÜ that is involved in both building and
infrastructure construction. The figures for the parent company are allocated
in both parts of the interim report based on the nature of the work. </span> 

<strong style="font-size: 11pt;">Sub-segment revenues

In the revenue structure of the Buildings segment, the contribution of public
buildings has decreased while the contributions of industrial and warehouse
facilities and apartment buildings have increased. The contribution of
commercial buildings has remained stable. The segment’s main revenue
contributors were contracts on the construction of commercial buildings in
Tallinn (the Stroomi shopping centre, an office building in Ülemiste City and
Eesti Loto Maja (a commercial building)) and Narva (an extension to the ASTRI
shopping centre). In Pärnu, we started the reconstruction of Estonia Spa. We
expect the investment activity of private sector customers to remain robust and
the contribution of the sub-segment to remain at a similar or even higher level
throughout the year. 

In the industrial and warehouse facilities sub-segment there has been a
structural shift. In previous years, most of the revenue resulted from
agricultural projects undertaken with the EU investment support. To date, the
share of EU-supported projects has decreased visibly and the main contributors
are warehouse facilities and logistics centres (e.g. the Smarten logistics
centre). The work done for companies engaged in heavy industry has increased as
well. Estonia’s economic growth is slowing but this has not yet had a negative
impact on the long-cycle investment plans launched by companies in 2012 and
2013. Accordingly, we expect the revenues of the sub-segment to remain stable. 

The competitive situation in the public buildings sub-segment is particularly
challenging: it is hard to win a contract without taking excessive risks but
our current policy is to avoid such risks. The largest projects of the period
were the construction of the Translational Medicine Centre of the University of
Tartu, the academic building of the NCO School of the Estonian National Defence
College, phase V of St Paul’s Church in Tartu and the Võru State Secondary
School. The first two were completed by the end of the reporting period. If
competition remains fierce, the contribution of the sub-segment is likely to
decline. 

Our apartment building revenues resulted mostly from general contracting. Major
revenue contributors were an apartment building at Pirita tee 26 and phase I in
the construction of the Tondi residential quarter in Tallinn. We have been
successful in selling the last apartments in our Tigutorn development project
where only one apartment is still for sale. We continue to sell apartment
ownerships in phase I and build phase II of our Magasini 29 development project
in Tallinn (www.magasini.ee) and have re-launched real estate development in
Tartu where two new buildings with a total of 35 apartments will be completed
in Tammelinn by the end of 2014 (www.tammelinn.ee). 

<span           <span style="font-size:9pt;">9M          <span
style="font-size:9pt;">9M          <span style="font-size:9pt;">9M  <span
style="font-size:9pt;">2013</span> 
 style                              2014</span>                             
2013</span>                              2012</span> 
="font 
-size: 
9pt;"> 
Revenu 
e 
 distr 
ibutio 
n 
 withi 
n 
 Build 
ings 
 segme 
nt</sp 
an> 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
----------- 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
----------- 
<span   <span style="font-size:9pt;">43%</span>  <span
style="font-size:9pt;">47%</span>  <span style="font-size:9pt;">24%</span>  
<span style="font-size:9pt;">45%</span> 
 style 
="font 
-size: 
9pt;"> 
Commer 
cial 
 build 
ings</ 
span> 
<span   <span style="font-size:9pt;">37%</span>  <span
style="font-size:9pt;">29%</span>  <span style="font-size:9pt;">28%</span>  
<span style="font-size:9pt;">29%</span> 
 style 
="font 
-size: 
9pt;"> 
Indust 
rial 
 and 
 wareh 
ouse 
 facil 
ities< 
/span> 
<span    <span style="font-size:9pt;">6%</span>  <span
style="font-size:9pt;">20%</span>  <span style="font-size:9pt;">44%</span>  
<span style="font-size:9pt;">21%</span> 
 style 
="font 
-size: 
9pt;"> 
Public 
 build 
ings</ 
span> 
<span   <span style="font-size:9pt;">14%</span>   <span
style="font-size:9pt;">4%</span>   <span style="font-size:9pt;">4%</span>   
<span style="font-size:9pt;">5%</span> 
 style 
="font 
-size: 
9pt;"> 
Apartm 
ent 
 build 
ings</ 
span> 

In the first nine months of 2014, the main revenue source in the Infrastructure
segment was road construction. The average cost of the sub-segment’s contracts
has fallen and operating volumes are not going to rise to the level of 2013
because procurement of large-scale design and construction work has been
replaced by smaller-scale reconstruction and repair work. Nevertheless, the
contribution of the sub-segment will remain the strongest, partly thanks to
road maintenance services delivered under long-term contracts in the Järva and
Hiiu counties and the Keila maintenance area. 

In specialist engineering, a major project was the construction of the Sõpruse
bridge boat harbour in Tartu. There is currently no information about any major
projects that might require hydraulic engineering work this year. The revenues
of the sub-segment may increase through other complex engineering work but
relevant revenue flows are likely to be irregular. 

The decline in EU support due to the change of budget periods has had a strong
impact on our environmental engineering and utility network construction (other
engineering) revenues, which have decreased more rapidly than the revenues of
other sub-segments. It is likely that the contributions of the two sub-segments
will see further contraction because a relatively large portion of their
revenue for the first nine months of 2014 resulted from long-term contracts
secured in the previous period. Most new contracts are small. 

<span           <span style="font-size:9pt;">9M          <span
style="font-size:9pt;">9M          <span style="font-size:9pt;">9M  <span
style="font-size:9pt;">2013</span> 
 style                              2014</span>                             
2013</span>                              2012</span> 
="font 
-size: 
9pt;"> 
Revenu 
e 
 distr 
ibutio 
n 
 withi 
n 
 Infra 
struct 
ure 
 segme 
nt</sp 
an> 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
----------- 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
----------- 
<span   <span style="font-size:9pt;">74%</span>  <span
style="font-size:9pt;">56%</span>  <span style="font-size:9pt;">49%</span>  
<span style="font-size:9pt;">54%</span> 
 style 
="font 
-size: 
9pt;"> 
Road 
 const 
ructio 
n and 
 maint 
enance 
</span 
> 
<span    <span style="font-size:9pt;">3%</span>   <span
style="font-size:9pt;">8%</span>  <span style="font-size:9pt;">15%</span>   
<span style="font-size:9pt;">8%</span> 
 style 
="font 
-size: 
9pt;"> 
Specia 
list 
 engin 
eering 
 (incl 
uding 
 hydra 
ulic 
 engin 
eering 
)</spa 
n> 
<span   <span style="font-size:9pt;">15%</span>  <span
style="font-size:9pt;">24%</span>  <span style="font-size:9pt;">31%</span>  
<span style="font-size:9pt;">26%</span> 
 style 
="font 
-size: 
9pt;"> 
Other 
 engin 
eering 
</span 
> 
<span    <span style="font-size:9pt;">8%</span>  <span
style="font-size:9pt;">12%</span>   <span style="font-size:9pt;">5%</span>  
<span style="font-size:9pt;">12%</span> 
 style 
="font 
-size: 
9pt;"> 
Enviro 
nmenta 
l 
 engin 
eering 
</span 
> 



Order book

At 30 September 2014, our order book (backlog of contracts signed but not yet
performed) stood at 92,455 thousand euros, an 8% increase compared with a year
ago. Both the Buildings and the Infrastructure segment increased their order
books. 

The order book of the Infrastructure segment grew by 5% thanks to work secured
by the road construction sub-segment. In other sub-segments of the
Infrastructure segment order books shrank. The largest decreases occurred in
contracts signed for the construction of utility networks (other engineering
sub-segment) and environmental engineering as in the last year of the EU
2007-2013 budget period allocations of relevant investment support were
expectedly smaller. The backlog of hydraulic engineering work decreased as
well. 

The order book of the Buildings segment grew by around 9%. The order book of
the commercial buildings sub-segment grew substantially, mostly thanks to a
rise in private sector investments. 

                   <span style="font-size:9pt;">9M             <span
style="font-size:9pt;">9M  <span style="font-size:9pt;">9M 2012</span>    <span
style="font-size:9pt;">2013</span> 
                                       2014</span>                             
   2013</span> 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
----------------------- 
<span   <span style="font-size:9pt;">92,455</span>  <span
style="font-size:9pt;">85,765</span>  <span
style="font-size:9pt;">146,070</span>  <span
style="font-size:9pt;">64,286</span> 
 style 
="font 
-size: 
9pt;"> 
Order 
 book 
 (EUR’ 
000)</ 
span> 

<span style="font-size:11pt;">At the reporting date, contracts secured by the
Buildings segment and the Infrastructure segment accounted for 70% and 30% of
our order book respectively (30 September 2013: 69% and 31% respectively). The
distribution is typical of the past year but radically different from the
preceding periods when the figures for the two segments were more or less
equal. It is likely that building construction contracts will continue to
dominate the order book in the next few years. In the current EU budget period
(2014-2020) investments in infrastructure construction, which to date have
mostly been made with the support of the EU structural funds, will not be as
large as in 2007-2013. In particular, this applies to 2014, which is becoming a
switchover year between two budget periods, where most efforts are directed at
preparatory administrative activities required for enabling the investments.
Hence, we expect the revenues of the Infrastructure segment to decline in 2014
(for further information, see the </span><em style="font-size: 11pt;">Business
risks<span style="font-size:11pt;"> section of the chapter </span><em
style="font-size: 11pt;">Description of the main risks<span
style="font-size:11pt;">).</span> 

We believe that in a situation where the market is expected to shrink, our
priority, at least in the current year,  cannot be increasing the Group’s
revenue or maintaining it at the level of 2013. Instead, the main focus must be
on improving profitability. Compared with the end of 2013, our order book has
grown by 44%. 

Between the reporting date (30 September 2014) and the date of release of this
report, Group companies have secured additional construction contracts in the
region of 7,939 thousand euros. 



People

Staff and personnel expenses

In the first nine months of 2014, the Group (the parent and the subsidiaries)
employed, on average, 751 people including 364 engineers and technical
personnel (ETP). Workforce has decreased compared with a year ago due to
shrinkage in operating volumes. 

<strong style="font-size: 11pt;">Average number of the Group’s employees (at
the parent and the subsidiaries) 

                <span style="font-size:9pt;">9M          <span
style="font-size:9pt;">9M          <span style="font-size:9pt;">9M  <span
style="font-size:9pt;">2013</span> 
                                    2014</span>                             
2013</span>                              2012</span> 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
----------- 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
----------- 
<span   <span style="font-size:9pt;">364</span>  <span
style="font-size:9pt;">360</span>  <span style="font-size:9pt;">372</span>  
<span style="font-size:9pt;">357</span> 
 style 
="font 
-size: 
9pt;"> 
ETP</s 
pan> 
<span   <span style="font-size:9pt;">387</span>  <span
style="font-size:9pt;">424</span>  <span style="font-size:9pt;">417</span>  
<span style="font-size:9pt;">400</span> 
 style 
="font 
-size: 
9pt;"> 
Worker 
s</spa 
n> 
<span   <span style="font-size:9pt;">751</span>  <span
style="font-size:9pt;">784</span>  <span style="font-size:9pt;">789</span>  
<span style="font-size:9pt;">757</span> 
 style 
="font 
-size: 
9pt;"> 
Total 
 avera 
ge</sp 
an> 

<span style="font-size:11pt;">The Group’s personnel expenses for the first nine
months of 2014 including all taxes totalled 14,357 thousand euros, 6% up on the
comparative period when the figure was 13,584 thousand euros. The rise is
mostly attributable to an increase in basic salaries as well as payment of
project-based performance pay. Personnel expenses (also for the comparative
period) include the provisions made in the third quarter for performance
bonuses that may be paid based on the Group’s performance indicators.</span> 

The service fees of the members of the council of Nordecon AS for the first
nine months of 2014 amounted to 166 thousand euros and associated social
security charges totalled 55 thousand euros (9M 2013: 120 thousand euros and 40
thousand euros respectively). 

The service fees of the members of the board of Nordecon AS amounted to 411
thousand euros and associated social security charges totalled 136 thousand
euros (9M 2013: 195 thousand euros and 64 thousand euros respectively). 

The fees (also for the previous year) include the provisions made in the third
quarter for performance bonuses that may be paid based on the Group’s
performance indicators. 

Labour productivity and labour cost efficiency

The period’s nominal labour productivity declined because revenue decreased and
bonus payments made in the context of increased profitability grew. In
comparative periods, the proportion of performance bonuses in the Group’s
personnel expenses was significantly smaller. In addition, basic salaries have
increased. 

We measure the efficiency of our operating activities using the following
productivity and efficiency indicators, which are based on the number of
employees and personnel expenses incurred: 

                   <span style="font-size:9pt;">9M            <span
style="font-size:9pt;">9M            <span style="font-size:9pt;">9M    <span
style="font-size:9pt;">2013</span> 
                                       2014</span>                             
  2013</span>                                2012</span> 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-------------------- 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
-------------------- 
<span    <span style="font-size:9pt;">218.8</span>  <span
style="font-size:9pt;">231.6</span>  <span style="font-size:9pt;">213.0</span> 
 <span style="font-size:9pt;">229.4</span> 
 style 
="font 
-size: 
9pt;"> 
Nomina 
l 
 labou 
r 
 produ 
ctivit 
y 
 (roll 
ing), 
 (EUR’ 
000)</ 
span> 
<span    <span style="font-size:9pt;">-5.5%</span>   <span
style="font-size:9pt;">8.7%</span>  <span style="font-size:9pt;">22.5%</span>  
 <span style="font-size:9pt;">9.9%</span> 
 style 
="font 
-size: 
9pt;"> 
Change 
 again 
st the 
 compa 
rative 
 perio 
d 
 </spa 
n> 
<span      <span style="font-size:9pt;">7.5</span>    <span
style="font-size:9pt;">9.5</span>   <span style="font-size:9pt;">10.4</span>   
 <span style="font-size:9pt;">8.4</span> 
 style 
="font 
-size: 
9pt;"> 
Nomina 
l 
 labou 
r cost 
 effic 
iency 
 (roll 
ing), 
 (EUR’ 
000)</ 
span> 
<span   <span style="font-size:9pt;">-21.9%</span>  <span
style="font-size:9pt;">-8.3%</span>  <span style="font-size:9pt;">18.5%</span> 
<span style="font-size:9pt;">-11.6%</span> 
 style 
="font 
-size: 
9pt;"> 
Change 
 again 
st the 
 compa 
rative 
 perio 
d</spa 
n> 



<span style="font-size:8pt;">Nominal labour productivity (rolling) = (past four 
 quarters’ revenue) / (past four quarters’ average number of employees)</span>  
<span style="font-size:8pt;">Nominal labour cost efficiency (rolling) = (past   
 four quarters’ revenue) / (past four quarters’ personnel expenses</span><span  
 style="font-size:8pt;">)</span>                                                
--------------------------------------------------------------------------------



Description of the main risks

Business risks

The main factors, which affect the Group’s business volumes and profit margins,
are competition in the construction market and changes in the demand for
construction services. 

Compared with a year ago, competition for public sector contracts has
intensified visibly. The volume of public sector investments decreased in 2013
and the prospects of maintaining volumes in 2014 are not good. There is strong
competitive pressure on builders’ bid prices although input prices mostly
continue to climb. Competition is particularly fierce in the building
construction segment. We acknowledge the risks inherent in the execution of
contracts concluded in an environment of stiff competition. Securing a
long-term construction contract at an unreasonably low price in a situation
where input prices cannot be lowered noticeably and competition is fierce
involves high risk, because the contract may quickly start generating a loss.
Thus, in price-setting we currently prioritize profitability over increasing or
retaining the revenue figure. 

In the next periods, demand for construction services will be driven by public
sector investments. In previous years, a major share of investments was made
with the assistance of allocations from the EU structural funds that were
determined, both in terms of size and timing, by the EU financial framework
2007-2013. In general, the amounts allocated to Estonia under the current EU
financial framework (2014-2020) are known (5.9 billion euros) but the volume
and schedule of investments involving construction work have not yet been
finalised. According to information released to date, the overall volume of
construction-related investments is going to decline compared with the previous
budget period and 2014 will become a so-called ‘gap’ year between the two
budget periods, where most efforts are directed at preparatory administrative
activities required for enabling the investments. 

In light of the above, it is likely that in 2014 our business volumes will
shrink, particularly in the Infrastructure segment where the proportion of
public sector investments has been the largest. Our action plan foresees
redirecting our resources (including some of the labour of the Infrastructure
segment) to increasing the proportion of contracts secured from the private
sector. According to our business model, Nordecon operates in all segments of
the construction market. Therefore, we are somewhat better positioned than
companies that operate in only one narrow (particularly some infrastructure)
segment. 

Our primary goal is to maintain profitability even when construction volumes
shrink. Thanks to decisions adopted in previous periods, we will not have to
undertake any extensive restructuring when construction volumes change. 

The Group’s business is also influenced by the fact that construction
operations are seasonal. The impacts of seasonal fluctuations are the strongest
in the Infrastructure segment where a lot of work is done outdoors (road and
port construction, earthwork, etc). To disperse the risk, we secure road
maintenance contracts that generate year-round business. Our business strategy
is to counteract seasonal fluctuations in infrastructure operations with
building construction that is less exposed to seasonality. Thus, we endeavour
to keep the two segments in balance (see also the chapter Performance by
business line). In addition, where possible, our companies implement
appropriate technical solutions that allow working efficiently even in
changeable weather conditions. 

Operational risks

To manage their daily construction risks, Group companies purchase contractors’
all risks insurance. Depending on the nature of the project and the requests of
the customer, both general frame agreements and special, project-specific
contracts are used. In addition, as a rule, subcontractors are required to
secure performance of their obligations with a bank guarantee provided to a
Group company or the Group retains part of the amount payable until the
completion of the contract. To remedy builder-caused deficiencies, which may be
detected during the warranty period, Group companies create warranty provisions
based on their historical experience. At 30 September 2014, the Group’s
warranty provisions (including current and non-current ones) totalled 1,096
thousand euros. The comparative figure for a year ago was 998 thousand euros. 

In addition to managing risks directly related to construction operations, in
recent years we have sought to mitigate the risks inherent in preliminary
activities. In particular, we have focused on the bidding process, i.e.
compliance with the procurement terms and conditions, and budgeting. The errors
made in the planning stage are usually irreversible and, in a situation where
the price is contractually fixed, may result in a direct financial loss. 

<strong style="font-size: 11pt;">Financial risks

Credit risk

In the period, the Group did not incur any major credit losses. The credit risk
exposure of the Group’s receivables continued to be low because the share of
public sector customers is significant and the customers’ settlement behaviour
is monitored on an ongoing basis. The main indicator of the realization of
credit risk is settlement default that exceeds 180 days coupled with no
activity on the part of the debtor that would confirm the intent to settle. 

In the first nine months of 2014, impairment losses incurred on receivables
amounted to 10 thousand euros (9M 2013: 261 thousand euros). 

Liquidity risk

The Group remains exposed to higher than usual liquidity risk resulting from a
mismatch between the long settlement terms demanded by customers (mostly 45 to
56 days) and increasingly shorter settlement terms negotiated by subcontractors
(mostly 21 to 45 days). The Group counteracts the differences in settlement
terms by using factoring where possible. 

At the reporting date, the Group’s current assets exceeded its current
liabilities 1.05-fold (30 September 2013: 1.12-fold). Factors influencing the
ratio include reclassification of loans provided to the Group’s Ukrainian
associates to non-current assets and the fact that generally banks do not
refinance interest-bearing liabilities for a period exceeding 12 months. 

The political situation in Ukraine remains tense and we believe that
realization of our Ukrainian investment properties may take longer than
originally expected. Accordingly, at the reporting date loan receivables from
our Ukrainian associates of 10,632 thousand euros were classified as
non-current assets. 

Interest-bearing liabilities account for a significant proportion of our
current liabilities. In accordance with IFRS EU, loan commitments have to be
classified into current and non-current liabilities based on the contractual
conditions effective at the reporting date. To date, banks have refinanced the
Group’s liabilities for periods not exceeding 12 months, which is why a
substantial portion of loans are classified as current liabilities although it
is probable that some borrowings (particularly overdraft facilities) will be
refinanced again when the 12 months have passed. 

At the reporting date, the Group’s cash and cash equivalents totalled 7,704
thousand euros (30 September 2013: 9,140 thousand euros). 

Interest rate risk

The Group’s interest-bearing liabilities to banks have both fixed and floating
interest rates. Finance lease liabilities have mainly floating interest rates.
The base rate for most floating-rate contracts is EURIBOR. At 30 September
2014, the Group’s interest-bearing loans and borrowings totalled 30,372
thousand euros, a decrease of 12,156 thousand euros year over year. An
important factor that contributed to the decrease was a decline in factoring.
Interest expense for the period amounted to 762 thousand euros, 21 thousand
euros down from a year ago. 

The main source of the Group’s interest rate risk is the possibility of a rapid
upsurge in the base rate of floating interest rates (EURIBOR, EONIA or the
creditor’s own base rate). In light of the Group’s relatively heavy loan burden
this would cause a significant increase in interest expense, which would have
an adverse impact on profit. We mitigate the risk by pursuing a policy of
entering, where possible, into fixed-rate contracts when the market interest
rates are low. As regards the loan products offered by banks, observance of the
policy has proved difficult and most new contracts have a floating interest
rate. The Group does not use derivative financial instruments to hedge its
interest rate risk. 

Currency risk

As a rule, the prices of construction contracts and subcontracts are fixed in
the currency of the host country, i.e. in euros (EUR) and Ukrainian hryvnas
(UAH). 

At the beginning of 2014, the political and economic environment in Ukraine
became strained due to the conflict between Ukraine and Russia, which caused
the exchange rate of the hryvna to tumble. Although in the third quarter the
fall began to slow, by the reporting date the hryvna had weakened against the
euro by around 33%. For the Group’s Ukrainian subsidiaries, this meant
additional exchange losses on the translation of their euro-denominated loan
commitments into the local currency. Relevant exchange losses totalled 817
thousand euros (9M 2013: an exchange loss of 43 thousand euros). 

Exchange gains and losses on financial instruments are reported within Finance
income and Finance costs in the statement of comprehensive income. Translation
of receivables and liabilities related to operating activities did not give
rise to any exchange gains or losses. 

The reciprocal receivables and liabilities of the Group’s Ukrainian and
non-Ukrainian entities (items connected with the construction business that are
denominated in hryvnas) do not give rise to any material exchange losses. Nor
do the loans provided to the Group’s Ukrainian associates in euros give rise to
exchange losses that ought to be recognised in the Group’s financial
statements. 

The Group has not acquired any derivatives to hedge its currency risk.


Outlooks of the Group’s geographical markets

Estonia

Processes and developments characterising the Estonian construction market

·   In 2014 public sector investment will decrease in connection with the
change of the EU budget periods because implementation of measures requires
time. Although during the 2014-2020 financial framework allocations to Estonia
will increase to 5.9 billion euros (2007-2013: 4.6 billion euros), support
payments from the structural funds that influence the construction market will
not increase significantly. Instead, compared with the previous budget period,
there will be an increase in allocations to projects not related to tangible
assets. 

Investments made by the largest public sector customers (state-owned real
estate company Riigi Kinnisvara AS and the National Road Administration), which
will reach the stage of conclusion of a construction contract in 2014 will
either not increase significantly or may even decrease. As a result, the
Estonian construction market (particularly segments related to infrastructure
construction) will shrink. The situation will be somewhat alleviated by private
customers’ increasing investment in building construction. 

·   The construction market will see further consolidation, particularly in the
field of general contracting in building construction where the number of
medium-sized operators (annual turnover of around 15-40 million euros) is still
too large, but the process will be slower than expected. Based on the past
three years’ experience it is likely that stiff competition and insufficient
demand will induce some general contractors to go slowly out of business or
shrink in size rather than merge with another or exit the market. However, it
is also increasingly common that two to four smaller players that are seeking
ways to remain in business will form a consortium to bid for major procurement
contracts, meet tendering terms and secure the required funding. 

·   Competition will increase in all segments of the construction market. We
see a rise in the average number of bidders for a contract and there is already
a notable gap between the lowest bids made by the winners and the average bids.
The situation is somewhat similar to 2009 when anticipation of a fall in demand
caused a rapid decline in construction prices, which triggered a slide in the
prices of many construction inputs. However, there are currently no massive
decreases in input prices and companies that are banking on this in the bidding
phase may run into difficulty. Construction prices and thus also profit margins
are under strong competitive pressure. 

·   In new housing development, the success of a project depends on the
developer’s ability to control the input prices included in the business plan
and thus to set an affordable sales price. Although the overall situation is
improving steadily, the offering of new residential real estate cannot be
increased dramatically because the prices of new apartments are relatively high
compared with the standard of living and the banks’ lending terms remain
strict.  Similarly to previous periods, successful projects include those that
create or fill a niche. 

·   The contracts signed with public sector customers continue to impose tough
conditions on construction companies: extensive obligations, strict sanctions,
various financial guarantees, long settlement terms, etc. Contractors cannot
implement more optimal solutions identified in the construction phase that
would reduce the construction or operating costs of the asset without sanctions
because procurement terms do not allow this. In a situation where public
procurement is based on underbidding, the above factors increase the risks of
all market participants. Still, compared to two or three years ago, the
situation has improved and in some respects procurement terms have become more
reasonable for construction companies. 

·   The prices of construction inputs will remain relatively stable. In the
short term, weakening demand may lower local subcontracting prices. However,
taking into account the subcontractors’ financial and human resources, the
decline cannot be substantial or long-lasting. In some areas, price
fluctuations are be unpredictable and, thus, notably greater and hard or even
impossible to influence (oil and metal products, certain materials and
equipment). 

·   Shortage of skilled labour (including project and site managers) will
persist. This will undermine not so much the companies’ performance
capabilities as the quality of carrying out the construction process, i.e.
delivering the service. Shrinkage in construction volumes in Estonia may
increase labour supply but not substantially. Labour migration to the Nordic
countries will remain steady and although those markets (particularly the
Finnish one) may also shrink, the number of job seekers that will return will
not increase considerably. Accordingly, the basic wage of construction-sector
employees will not decrease. Instead, the rise in the cost of living is
creating pressure for a wage increase. 

Latvia and Lithuania

In our opinion, the Latvian construction market, which was hit by a severe
downturn a few years ago, has not regained sufficient stability and similarly
to the Estonian market in 2014 it will probably see shrinkage in public sector
demand. Accordingly, it is unlikely that we will enter the Latvian construction
market permanently in 2014. 

In the next few years we may undertake some projects in Latvia through our
Estonian entities, involving partners where necessary. Undertaking a project
assumes that it can be performed profitably. The decision does not change our
strategy for the future, i.e. the objective of operating in our neighbouring
construction markets through local subsidiaries. 

The operations of our Lithuanian subsidiary, Nordecon Statyba UAB, are
suspended. We are monitoring market developments and may resume our Lithuanian
operations on a project basis. Temporary suspension of operations does not
cause any major costs for the Group and does not change our strategy for the
future, i.e. the objective of operating in the Lithuanian construction market
through local subsidiaries. 

Ukraine

The Group prefers to operate in Ukraine as a general contractor and project
manager that serves foreign private sector customers in the segment of building
construction. Even though the political situation in Ukraine shows signs of
improvement, it continues to restrict adoption of business decisions by
construction market participants. Regardless of this, we will continue our
business in Ukraine in 2014 and our current Ukrainian order book is
significantly larger than in the comparative period. We continue to monitor the
situation in the Ukrainian construction market closely and will restructure our
operations as appropriate. We also continue to seek opportunities for exiting
our two conserved real estate projects or signing a construction contract with
a potential new owner. 

Finland

In the Finnish market, we have been offering mainly subcontracting services in
the field of concrete works but based on experience gained, we have also
started to deliver some more complex services. The local concrete works market
provides opportunities for competing for projects where the customer wishes to
purchase all concrete works from one reliable partner. Nevertheless, we will
maintain a rational approach and will avoid taking excessive risks. We are not
planning to penetrate any other segments of the Finnish construction market
(general contracting, project management, etc). 



Nordecon is a group of construction companies whose core business is
construction project management and general contracting in the buildings and
infrastructures segment. Geographically the Group operates in Estonia, Ukraine
and Finland. The parent of the Group is Nordecon AS, a company registered and
located in Tallinn, Estonia. In addition to the parent company, there are more
than 10 subsidiaries in the Group. The consolidated revenue of the Group in
2013 was 174 million euros and net profit 4.6 million euros. Currently Nordecon
Group employs more than 700 people. Since 18 May 2006 the company's shares have
been quoted in the main list of the NASDAQ OMX Tallinn Stock Exchange. 




         Andri Hõbemägi
         Nordecon AS
         Head of Investor Relations
         Tel: +372 6272 022
         Email: [email protected]
         www.nordecon.com