Börsiteade

Pealkiri

2021 II quarter and 6 months consolidated interim report (unaudited)

Teade

The  results for  the first  six months  of 2021 are  characterized by  a slight
decrease  in  operating  volumes,  a  decrease  in profitability and a continued
increase in the order book compared to the same period of the previous year.
The  Nordecon Group's  backlog increased  by 44% compared  to the same period in
2020. As  at 31 June  2021, the volume  of the  order book  amounted to 269,448
thousand  euros. In the second  quarter of 2021, new contracts  worth a total of
69,938 thousand  euros were entered into, to which another 81,771 thousand euros
worth  of new contracts  were added in  July. A number  of large-scale contracts
will also provide a significant construction volume for 2022 and 2023 as well.
The Group's sales revenue for the first half of 2021 was 117,966 thousand euros,
which  is a decrease of approximately 14% compared to the same period last year.
An  important part of the decrease in  sales revenue comes from foreign markets,
but  a slight decrease also took place  in Estonia. By segments, compared to the
same  period last  year, sales  revenue has  decreased in  the buildings segment
(19%)  and increased  in the  infrastructure segment  (9%). The  decrease in the
sales  revenue of the buildings  segment is affected by  the situation where the
order book includes several large-scale design and construction contracts, where
the long design period precedes the construction activities.
The  Group's gross profit has  decreased compared to the  same period last year,
amounting  to 1.1% in the first half of the year (H1 2020: 4.4%) and 2.0% in the
second  quarter (Q2 2020: 5.9%). The  main factor influencing  the result of the
first half of the buildings segment is the significant increase in input prices,
which  mainly affects the  profitability of contracts  concluded in 2020. At the
end  of the  second quarter,  the prices  of raw  materials and supplies somehow
stabilized,  which is  expected to  reduce the  negative impact  of rising input
prices  in the coming quarters.  The result is also  affected by the significant
one-off  costs related to the completion of the construction of the Nysäter wind
farm.  A decline in asphalt concrete production and laying works, resulting from
the  nature of the infrastructure segment's  order book, has increased the share
of uncovered fixed costs affecting thereby the profitability of the segment.
In  addition to the above-mentioned increase in input prices, the performance of
both  segments is also affected by  material supply problems, which put pressure
on  the  completion  schedules  of  construction  contracts. In the light of the
general  price increase, the Group  has reduced general administrative expenses,
which  have  decreased  by  approximately  27% compared  to  the 6 months of the
previous year.
There  were no significant events in foreign  markets in Finland and Ukraine. In
Sweden,  however, on 22 July 2021, Swencn AB applied to the Nacka District Court
in   Stockholm  to  initiate  restructuring  proceedings.  The  purpose  of  the
restructuring  is to ensure equal treatment of creditors and the continuation of
Swencn  AB's operations. The initiation of the restructuring does not affect the
economic  activities of other companies in the  Nordecon Group, the set goals or
their fulfilment.

Condensed consolidated interim statement of financial position

 EUR'000                                            30 June 2021 31 December 2020
-------------------------------------------------------------------------------
 ASSETS

 Current assets

 Cash and cash equivalents                               7,732           12,576

 Trade and other receivables                            55,790           50,029

 Prepayments                                             3,425            2,678

 Inventories                                            28,942           22,454

 Total current assets                                   95,889           87,737


 Non-current assets

 Other investments                                          26               26

 Trade and other receivables                             8,811            8,654

 Investment property                                     5,639            5,639

 Property, plant and equipment                          18,110           18,053

 Intangible assets                                      14,995           14,966

 Total non-current assets                               47,581           47,338

 TOTAL ASSETS                                          143,470          135,075



 LIABILITIES

 Current liabilities

 Borrowings                                             19,002           18,508

 Trade payables                                         55,044           47,390

 Other payables                                          9,944           11,814

 Deferred income                                        13,698            7,738

 Provisions                                              1,118            1,059

 Total current liabilities                              98,806           86,509


 Non-current liabilities

 Borrowings                                              7,090            7,352

 Trade payables                                          3,563            2,332

 Provisions                                              1,593            1,647

 Total non-current liabilities                          12,246           11,331

 TOTAL LIABILITIES                                     111,052           97,840



 EQUITY

 Share capital                                          14,379           14,379

 Own (treasury) shares                                   (660)            (660)

 Share premium                                             635              635

 Statutory capital reserve                               2,554            2,554

 Translation reserve                                     2,829            2,423

 Retained earnings                                      10,503           14,543

 Total equity attributable to owners of the
 parent                                                 30,240           33,874

 Non-controlling interests                               2,178            3,361

 TOTAL EQUITY                                           32,418           37,235

 TOTAL LIABILITIES AND EQUITY                          143,470          135,075

Condensed consolidated interim statement of comprehensive income

 EUR'000                            H1 2021  Q2 2021   H1 2020  Q2 2020      2020
-------------------------------------------------------------------------------
 Revenue                          117,966   68,979   136,798   81,874   296,082

 Cost of sales                  (116,660) (67,580) (130,791) (77,055) (285,086)

 Gross profit                       1,306    1,399     6,007    4,819    10,996



 Marketing and distribution
 expenses                           (214)    (108)     (202)     (74)     (528)

 Administrative expenses          (2,833)  (1,362)   (3,860)  (2,061)   (7,073)

 Other operating income               127       92       178       29       453

 Other operating expenses            (29)      (6)     (110)     (57)     (273)

 Operating profit (loss)          (1,643)       15     2,013    2,656     3,575



 Finance income                       537      132       249      193     2,995

 Finance costs                      (665)    (376)   (1,241)      338   (2,678)

 Net finance income (costs)         (128)    (244)     (992)      531       317

 Share of profit of equity-
 accounted investees                    0        0       479      510       734



 Profit (loss) before income
 tax                              (1,771)    (229)     1,500    3,697     4,626

 Income tax expense                 (619)    (250)      (81)     (81)     (508)

 Profit (loss) for the period     (2,390)    (479)     1,419    3,616     4,118



 Other comprehensive income
 (expense):
 Items that may be
 reclassified subsequently to
 profit or loss

 Exchange differences on
 translating foreign
 operations                           406      587       815    (434)     1,254

 Total other comprehensive
 income (expense)                     406      587       815    (434)     1,254

 TOTAL COMPREHENSIVE INCOME
 (EXPENSE)                        (1,984)      108     2,234    3,182     5,372



 Profit (loss) attributable
 to:

 - Owners of the parent           (2,148)    (584)     (156)    2,513     2,466

 - Non-controlling interests        (242)      105     1,575    1,103     1,652

 Profit (loss) for the period     (2,390)    (479)     1,419    3,616     4,118



 Comprehensive income
 (expense) attributable to:

 - Owners of the parent           (1,742)        3       659    2,079     3,720

 - Non-controlling interests        (242)      105     1,575    1,103     1,652

 Comprehensive income
 (expense) for the period         (1,984)      108     2,234    3,182     5,372



 Earnings per share
 attributable to owners of
 the parent:

 Basic earnings per share (EUR)      (0.07)   (0.02)    (0.01)     0.08      0.08

 Diluted earnings per share
 (EUR)                               (0.07)   (0.02)    (0.01)     0.08      0.08

Condensed consolidated interim statement of cash flows

  EUR'000                                                    H1 2021     H1 2020
-------------------------------------------------------------------------------
  Cash flows from operating activities

  Cash receipts from customers                             142,892     154,207

  Cash paid to suppliers                                 (124,977)   (132,626)

  VAT paid                                                 (4,387)     (6,055)

  Cash paid to and for employees                          (13,075)    (13,658)

  Income tax paid                                            (616)        (81)

  Net cash from (used in) operating activities               (163)       1,787



  Cash flows from investing activities

  Paid on acquisition of property, plant and equipment       (104)       (102)

  Proceeds from sale of property, plant and equipment          158         165

  Paid on acquisition of intangible assets                    (16)           0

  Acquisition of a subsidiary                                    0         (2)

  Cash received on acquisition of a subsidiary                   0       3,605

  Loans provided                                              (25)        (14)

  Repayments of loans provided                                  60          21

  Dividends received                                             0         251

  Interest received                                              4           5

  Net cash from investing activities                            77       3,929



  Cash flows from financing activities

  Proceeds from loans received                               1,418       1,228

  Repayments of loans received                             (1,243)     (2,077)

  Lease payments made                                      (1,574)     (1,487)

  Interest paid                                              (545)       (508)

  Dividends paid                                           (2,814)       (472)

  Net cash used in financing activities                    (4,758)     (3,316)



  Net cash flow                                            (4,844)       2,400



  Cash and cash equivalents at beginning of period          12,576       7,032

  Effect of movements in foreign exchange rates                  0        (11)

  Increase (decrease) in cash and cash equivalents         (4,844)       2,400

  Cash and cash equivalents at end of period                 7,732       9,421

Financial review

Financial performance

Nordecon ended the first half of 2021 with a gross profit of EUR1,306 thousand (H1
2020: EUR6,007  thousand) and  gross margins  that were  considerably lower than a
year  earlier:  1.1% for  the  first  half-year (H1 2020: 4.4%) and 2.0% for the
second  quarter  (Q2  2020: 5.9%). Gross  margin  dropped in both main operating
segments. The gross margins of the Buildings segment were 2.5% for the half-year
and  2.8% for the second quarter compared with 5.0% and 5.5% in the same periods
last  year. The segment's half-year results  were strongly influenced by one-off
expenses  incurred in connection with the completion of work on the Nysäter wind
farm  but the key factor  was a significant rise  in input prices, which affects
mainly the profitability of contracts secured in 2020. Materials prices began to
stabilise  at the  end of  the second  quarter and,  if the trend continues, the
downsides  of a rise in input prices  should decrease in the following quarters.
The  Infrastructure segment ended the first half  of 2021 with a slight loss and
thus  a  negative  gross  margin  of  0.5% (H1  2020: a positive gross margin of
3.4%). Its  gross  margin  for  the  second  quarter was 3.2% (Q2 2020: 8.7%). A
decline  in asphalt concrete production and laying works has increased the share
of  uncovered fixed costs. The performance of  both segments was undermined by a
surge  in input prices as  well as supply-chain disruptions  which are making it
difficult to meet contractual delivery dates.
The  group's  administrative  expenses  for  the  first half of 2021 were EUR2,833
thousand.  Compared to the first half of 2020, administrative expenses decreased
by  around 27% (H1 2020: EUR3,860 thousand), mainly through a decline in personnel
expenses.  The ratio of  administrative expenses to  revenue (12 months rolling)
decreased to 2.2% (H1 2020: 2.8%).
The  group's operating loss for  the first half of  2021 was EUR1,643 thousand (H1
2020: an  operating profit of EUR2,013 thousand).  EBITDA amounted to EUR92 thousand
(H1 2020: EUR3,694 thousand).
The  group's finance income and costs are affected by exchange rate fluctuations
in  the group's  foreign markets.  During the  period, the  exchange rate of the
Ukrainian  hryvnia strengthened against the euro by around 8% while the exchange
rate  of  the  Swedish  krona/euro  exchange  rate did not change significantly.
Translation  of  the  loans  provided  to  the  group's  Ukrainian  and  Swedish
subsidiaries in euros into the local currencies gave rise to an exchange gain of
EUR408  thousand in total (H1 2020: the exchange loss on movements in the exchange
rate  of  the  Ukrainian  hryvnia  was  EUR704  thousand  and the exchange gain on
movements in the exchange rate of the Swedish krona was EUR132 thousand)).
The  group incurred  a net  loss of  EUR2,390 thousand  (H1 2020: a  net profit of
EUR1,419  thousand). The loss  attributable to owners  of the parent, Nordecon AS,
was EUR2,148 thousand (H1 2020: a loss of EUR156 thousand).

Cash flows

Operating  activities produced a net cash outflow  of EUR163 thousand in the first
half  of 2021 (H1  2020: an inflow  of EUR1,787  thousand). Operating cash flow is
strongly  influenced by the fact that the  contracts signed with most public and
private sector customers do not require them to make advance payments, while the
group  has to make  prepayments to subcontractors  and suppliers. In particular,
there  has been  rapid year-on-year  growth in  prepayments for  materials. Cash
inflow  is also reduced by contractual retentions, which extend from 5 to 10% of
the contract price and are released at the end of the construction period only.
Investing  activities resulted in a net cash inflow of EUR77 thousand (H1 2020: an
inflow of 3,929 thousand). Cash flow was strongly influenced by investments made
in  the acquisition  of property,  plant and  equipment and intangible assets of
EUR120  thousand (H1 2020: EUR102 thousand) and  proceeds from the sale of property,
plant and equipment of EUR158 thousand (H1 2020: EUR165 thousand). Cash flow for the
comparative  period  was  strongly  influenced  by  the transformation of Embach
Ehitus  OÜ from an associate  into a subsidiary, which  generated cash inflow of
EUR3,605 thousand, and dividends received of EUR251 thousand.
Financing  activities generated a net cash outflow of EUR4,758 thousand (H1 2020:
an  outflow of EUR3,316 thousand). The largest  items were loan and lease payments
and  dividends  paid.  Proceeds  from  loans  received totalled EUR1,418 thousand,
consisting of the use of the overdraft facility and development loans (H1 2020:
EUR1,228  thousand).  Repayments  of  loans  received  totalled  EUR1,243  thousand,
consisting  of regular repayments of  long-term investment and development loans
(H1  2020: EUR2,077 thousand) Lease  payments totalled EUR1,574  thousand (H1 2020:
EUR1,487  thousand). Dividends paid  in the first  half of 2021 amounted to EUR2,814
thousand (H1 2020: EUR472 thousand).
The  group's cash and cash equivalents  at 30 June 2021 totalled EUR7,732 thousand
(30 June 2020: EUR9,421 thousand).

Key financial figures and ratios

 Figure/ratio                     H1 2021      H1 2020      H1 2019        2020
-------------------------------------------------------------------------------
 Revenue (EUR'000)                  117,966      136,798      100,441     296,082

 Revenue change                     (14)%          36%         (5)%       26.5%

 Net profit (loss) (EUR'000)        (2,390)        1,419        (574)       4,118

 Net profit (loss)
 attributable to owners of
 the parent (EUR'000)               (2,148)        (156)        (793)       2,466

 Weighted average number of
 shares                        31,528,585   31,528,585   31,528,585  31,528,585

 Earnings per share (EUR)            (0.07)         0.00       (0.03)        0.08

 Administrative expenses to
 revenue                             2.4%         2.8%         3.0%        2.4%

 Administrative expenses to
 revenue (rolling)                   2.2%         2.8%         2.9%        2.4%

 EBITDA (EUR'000)                        92        3,694        1,281       7,003

 EBITDA margin                       0.1%         2.7%         1.3%        2.4%

 Gross margin                        1.1%         4.4%         3.3%        3.7%

 Operating margin                  (1.4)%         1.5%       (0.2)%        1.2%

 Operating margin excluding
 gain on asset sales               (1.4)%         1.5%       (0.3)%        1.2%

 Net margin                        (2.0)%         1.0%       (0.6)%        1.4%

 Return on invested capital        (2.1)%         3.3%         0.6%        9.3%

 Return on equity                  (6.9)%         4.1%       (1.8)%       11.8%

 Equity ratio                       22.6%        25.8%        25.5%       27.6%

 Return on assets                  (1.7)%         1.1%       (0.5)%        3.3%

 Gearing                            31.4%        26.8%        36.7%       21.1%

 Current ratio                       0.97         1.00         0.93        1.01

                             30 June 2021 30 June 2020 30 June 2019 31 Dec 2020
-------------------------------------------------------------------------------
 Order book
 (EUR'000)                          269,448      187,018      179,691     215,796
-------------------------------------------------------------------------------

Performance by geographical market

The  revenue contribution  of foreign  markets has  decreased. Revenue generated
outside  Estonia accounted  for around  4% of the  group's total revenue for the
first half of 2021 compared with 12% a year earlier.

            H1 2021   H1 2020   H1 2019   2020
-----------------------------------------------
  Estonia       96%       88%       91%    82%

  Finland        3%        5%        4%     6%

  Sweden         0%        6%        2%    11%

  Ukraine        1%        1%        3%     1%

Revenue  generated in the  Swedish market decreased  significantly year on year,
dropping  below 1% of the group's total  revenue, while the revenue contribution
of  the Ukrainian market remained  comparable to a year  earlier. In Finland, we
continue  to focus on  the provision of  subcontracting services in the concrete
works segment.
Geographical  diversification  of  the  revenue  base  is a consciously deployed
strategy  by which we mitigate the risks  resulting from excessive reliance on a
single  market. However,  conditions in  some of  our chosen foreign markets are
also   volatile   and  strongly  affect  our  current  results.  Increasing  the
contribution of foreign markets is one of Nordecon's strategic goals.

Performance by business line

Segment revenues

We  strive to  maintain the  revenues of  our operating  segments (Buildings and
Infrastructure)  as balanced  as possible  in the  light of  market developments
because  this  helps  diversify  risks  and  provides  better  opportunities for
continuing  construction operations in more  challenging circumstances where the
volumes  of one  subsegment decline  sharply while  another begins  to grow more
rapidly.
The  groups' revenue  for the  first half  of 2021 was EUR117,966 thousand, around
14% less  than a  year earlier  when revenue  amounted to EUR136,798 thousand. The
decline  is largely attributable to revenue from foreign operations that dropped
by  68%. Revenue generated in Estonia decreased by 6% compared to the first half
of  2020. In segment terms, revenue from the Buildings segment decreased by 19%
while  revenue from  the Infrastructure  segment grew  by 9% year  on year. In a
situation  where the order book  of the Buildings has  grown and includes large-
scale design and construction contracts, the segment's revenue decline is partly
attributable  to  the  fact  that  design activities, which precede construction
operations, are time-consuming.
The  low  volumes  of  infrastructure  construction  that  affected  the  entire
construction  market also influenced the group's revenue structure. In the first
half  of 2021, the Buildings and the Infrastructure segment generated revenue of
EUR91,557  thousand and EUR26,217 thousand,  respectively. The corresponding figures
for the first half of 2020 were EUR112,607 thousand and EUR24,106 thousand.

  Revenue by operating segment   H1 2021   H1 2020   H1 2019   2020
--------------------------------------------------------------------
  Buildings                          78%       81%       74%    72%

  Infrastructure                     22%       19%       26%    28%

Subsegment revenues

In  the Buildings  segment, the  revenues of  all subsegments  decreased year on
year.  The  revenue  contributions  of  the  commercial,  public,  and apartment
buildings  subsegments were practically  equal and the  revenue generated by the
industrial and warehouse facilities subsegment continued to be modest.
The  largest projects under construction  in the commercial buildings subsegment
were  a  seven-floor  commercial  building  in  Rotermann City and the LEED Gold
compliant  Alma Tomingas office building in Ülemiste City in Tallinn and an IKEA
store in Rae rural municipality near Tallinn.
The  order  book  of  the  public  buildings  subsegment has grown considerably,
supporting  the  subsegment's  annual  revenue  growth.  During  the period, the
subsegment's  largest  projects  were  a  basic  school  in  Järveküla, an upper
secondary  school on  the island  of Saaremaa,  the Medical  Campus of the Tartu
University  Hospital,  a  family  health  centre  in  Tartu, an extension to the
building  of the Estonian Foreign Intelligence Service in Rahumäe tee in Tallinn
and a barracks in Paldiski.
A  significant share  of the  group's apartment  building projects is located in
Tallinn. During the period under review, the largest of them were the design and
construction of the first two phases of the Kalaranna quarter and the design and
construction of the Tiskreoja housing estate on the western border of the city.
The  group  also  continues  to  build  its  own housing development projects in
Tallinn  and Tartu (reported in the  apartment buildings subsegment). During the
period,  work continued on the construction of the first two apartment buildings
in  the Mõisavahe  homes project  (https://moisavahe.ee) and  the development of
plots  for Kivimäe Süda - a new housing estate in the Nõmme district in Tallinn.
In  carrying out our own development  activities, we carefully monitor potential
risks in the housing development market.
The  share  of  revenue  generated  by  the  industrial and warehouse facilities
subsegment  remained stable year  on year. We  are working mostly on small-scale
projects  with an average cost of EUR2 million. The largest projects of the period
were a two-floor warehouse and office building in the Tähetorni Technopark and a
logistics centre for the packaging supplier Pakendikeskus AS in Tallinn.

  Buildings segment           H1 2021   H1 2020   H1 2019   2020
-----------------------------------------------------------------
  Commercial buildings            31%       30%       35%    23%

  Public buildings                30%       34%       24%    37%

  Apartment buildings             30%       27%       33%    28%

  Industrial and warehouses        9%        9%        8%    12%

In  the  Infrastructure  segment,  the  largest  revenue contributor is the road
construction  and maintenance  subsegment, which  increased its  revenue year on
year.  A major share of its revenue resulted from contracts secured in 2020, the
largest  of which are the construction the Väo junction on the eastern border of
Tallinn  and  the  performance  of  earthworks  on  the Võõbu-Mäo section of the
Tallinn-Tartu  road. We also  continued to deliver  road maintenance services in
Järva and Hiiu counties and the Kose maintenance area in Harju county.
The  group has  won several  contracts for  the construction  of small harbours.
During  the period, work  was done on  the construction of  Salmistu harbour and
Vasknarva boat harbour and the expansion of berths in Roomassaare harbour on the
island  of Saaremaa,  which accounted  for a  major share  of the revenue of the
specialist engineering subsegment.

  Infrastructure segment      H1 2021   H1 2020   H1 2019   2020
-----------------------------------------------------------------
  Road construction               86%       80%       77%    74%

  Specialist engineering           5%        5%        0%     4%

  Environmental engineering        5%        1%        3%     1%

  Other engineering                4%       14%       20%    21%

Order book

The group's order book (backlog of contracts signed but not yet performed) stood
at EUR269,448 thousand at 30 June 2021, a 44% increase year on year. In the second
quarter,   we  signed  new  contracts  of  EUR69,938  thousand  (Q2  2020: EUR47,850
thousand).
Between  the  reporting  date  (30  June  2021) and  the date of release of this
report,  group companies have  secured additional construction  contracts in the
region of EUR81,771 thousand, the largest of which include:

  * the design and construction of apartment buildings with commercial space in
    the Vektor development project at Pärnu mnt 137 in Tallinn with an
    approximate cost of EUR38,000 thousand;
  * the construction of an office building at Ahtri 4 in Tallinn with an
    approximate cost of EUR16,700 thousand.

                    30 June 2021 30 June 2020 30 June 2019 31 Dec 2020
----------------------------------------------------------------------
 Order book (EUR'000)      269,448      187,018      179,691     215,796

The  proportions of the  two main operating  segments in the  group's order book
have   not   changed  substantially:  the  Buildings  segment  still  dominates,
accounting for 79%, while the Infrastructure accounts for 21% of the total order
book  (30 June 2020: 76% and 24%, respectively). Compared with 30 June 2020, the
order  book  of  the  Buildings  segment  has  grown  by  50% and  that  of  the
Infrastructure segment by 27%.
A  major share of  the value of  new contracts signed  in the second quarter was
made  up of  contracts secured  by the  Buildings segment,  the largest of which
were:

  * the construction of concrete structures for the Kemi bioproduct mill in
    Northern Finland with an approximate cost of EUR6,800 thousand.
  * the design and construction of the Luccaranna housing estate to be built
    near the sea on the western border of Tallinn with an approximate cost of
    EUR25,700 thousand.
  * the design and construction of phase two of the Tiskreoja housing estate to
    be built on the western border of Tallinn with an approximate cost of
    EUR10,600 thousand.

A  major share of  the order book  of the Buildings  segment is also  made up of
contracts  secured in the first quarter of 2021 and earlier periods, the largest
of  them including the construction of the main building of the Estonian Foreign
Intelligence  Service in Tallinn,  an IKEA store  in Rae rural municipality near
Tallinn,  a dairy  complex for  E?Piim in  Paide, phase  III of  the Maarjamõisa
Medical  Campus of the  Tartu University Hospital,  the LEED Gold compliant Alma
Tomingas office building in Ülemiste City in Tallinn and the first two phases of
apartment buildings in the Kalaranna quarter in Tallinn.
In  the  Infrastructure  segment,  the  order  book of the road construction and
maintenance subsegment is still the largest, accounting for 87% of the segment's
total order book. The largest contracts signed in the second quarter were:

  * the design and construction of the outdoor space around Terminal D in Old
    City Harbour with an approximate cost of EUR5,900 thousand;
  * the reconstruction and rehabilitation of national roads in Hiiu county with
    an approximate cost of EUR3,500 thousand.

The  order book also includes some large-scale contracts awarded to the group in
the  first  quarter  of  2021: the  construction  of  2+2 passing  lanes  on the
Kärevere-Kardla  section  of  the  Tallinn-Tartu-Võru-Luhamaa  road,  additional
earthworks  on the Võõbu-Mäo section of the Tallinn-Tartu road, the construction
of  a wind  farm in  the Targale  rural municipality  in Latvia and expansion of
berths in Roomassaare harbour on the island of Saaremaa.
Based  on the size of the group's order  book, including the share of work to be
performed  in 2022 and 2023, and  fierce competition in  the general contracting
market,  the group's  management expects  that in  2021 the group's revenue will
decline  somewhat compared to 2020. The current situation along with the rise in
input prices and supply-chain disruptions, which affect mainly contracts secured
in  2020, have put  profit margins  under strong  pressure. In an environment of
stiff competition, we have avoided taking unjustified risks whose realisation in
the  contract  performance  phase  would  have  an adverse impact on the group's
results.  Our main  focus is  on cost  control as  well as  pre-construction and
design activities where we can harness our professional competitive advantages.

People

Employees and personnel expenses

The   group  employed,  on  average,  680 people,  including  426 engineers  and
technical  personnel, in the  first half of  2021. Headcount decreased by around
4% year on year.

Average  number of  employees at  group entities  (including the  parent and the
subsidiaries):

                  H1 2021   H1 2020   H1 2019   2020
-----------------------------------------------------
  ETP                 426       442       405    450

  Workers             254       265       273    258

  Total average       680       707       678    708

The  group's personnel expenses for the first half of 2021, including all taxes,
totalled  EUR12,020 thousand  compared with  EUR13,703 thousand  for the same period
last  year.  Personnel  expenses  decreased  by  around 12% year on year, mainly
through  a decrease in the number of  employees, a reduction of salaries carried
out in the middle of 2020 and a decline in the share of performance bonuses.
The service fees of the members of the council of Nordecon AS for the first half
of 2021 amounted to EUR75 thousand and associated social security charges totalled
EUR25 thousand (H1 2020: EUR93 thousand and EUR31 thousand, respectively).
The  service fees of  the members of  the board of  Nordecon AS amounted to EUR182
thousand and associated social security charges totalled EUR60 thousand (H1 2020:
EUR266 thousand and EUR88 thousand, respectively).

Labour productivity and labour cost efficiency

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:

                                                 H1 2021 H1 2020 H1 2019  2020
------------------------------------------------------------------------------
 Nominal labour productivity (rolling), (EUR '000)   403.3   385.7   321.5 422.9

 Change against the comparative period, %           4.6%   20.0%  (1.8)% 24.2%



 Nominal labour cost efficiency (rolling), (EUR)      10.9     9.7     9.3  10.9

 Change against the comparative period, %          12.7%    3.7%  (6.3)% 18.0%

The  group's  nominal  labour  productivity  and  nominal labour cost efficiency
improved  year on  year, mainly  through a  decline in  the number  of staff and
personnel expenses.

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