Börsiteade

Pealkiri

2013 6 months and II quarter consolidated unaudited interim report

Teade

Tallinn, Estonia, 2013-08-08 15:31 CEST (GLOBE NEWSWIRE) --



MANAGEMENT REPORT

Overview of the 6 months and Q2 results

-- Profitability: net profit in 6M 2013 was EUR 4.0 million (6M 2012: EUR 0.6
million) and net profit in Q2 was EUR 2.3 million (Q2 2012: EUR 0.4          
million).                                                                    
-- Revenue has increased:                                                    
6M 2013 revenue was EUR 113.7 million (6M 2012: EUR 106.9 million).          
Revenue in Q2 was EUR 65.9 million (Q2 2012: EUR 59.1 million), which has    
increased 11.5% compared to the same period last year.                       
-- Strong cash position:                                                     
by the end of the reporting period, the group had EUR 33.8 million in cash   
and cash equivalents (incl. EUR 2.5 million short-term deposits), equity     
EUR 115.5 million (48.8% of total assets). Comparable figures in 2012 were   
accordingly EUR 11.7 million and EUR 109.9 million (48.5% of total assets).  
-- Secured order book is stable:                                             
In Q2 2013, EUR 51 million worth of new contracts were signed (Q2 2012:      
EUR 97 million) and as at 30 June 2013, the group’s secured order book       
amounted to EUR 184 million (30 June 2012: EUR 233 million).                 



                               6M ’13   6M ’12  Varianc  Q2 ’13  Q2 ’12  Varianc
                                                      e                        e
Revenue             million     113.7    106.9    +6.4%    65.9    59.1   +11.5%
                      EUR                                                       
Gross profit        million       9.8      5.0   +95.0%     5.6     2.5  +120.5%
                      EUR                                                       
Gross profit           %          8.6      4.7   +83.2%     8.5     4.3   +97.7%
 margin                                                                         
Net profit          million       4.0      0.6  +599.5%     2.3     0.4  +438.7%
 (parent)             EUR                                                       
Net profit margin      %          3.6      0.5  +557.2%     3.5     0.7  +382.9%
EPS                   EUR        0.23     0.03  +599.5%    0.13    0.02  +438.7%
                                                                                
                              30.06.1  30.06.1  Varianc                         
                                    3        2        e                         
ROE (on yearly         %          9.6     -5.3  +279.8%                         
 basis)                                                                         
Equity ratio           %         48.8     48.5    +0.8%                         
Secured order       million       184      233   -21.0%                         
 book                 EUR                                                       
Total assets        million     236.6    226.8    +4.3%                         
                      EUR                                                       
Number of           people        943      957    -1.5%                         
 employees                                                                      

Background information and major changes introduced in the corporate structure

AS Merko Ehitus is a holding company incorporating construction and real estate
development companies offering integrated construction solutions in Estonia,
Latvia and Lithuania. Major construction companies incorporated under the
holding company include AS Merko Ehitus Eesti (100%), SIA Merks (100%), UAB
Merko Statyba (100%), as well as the AS Merko Ehitus Eesti group companies
Tallinna Teede AS (100%) and AS Merko Infra (100%). 

The main activity of the holding company is development and implementation of
the strategies of Merko Ehitus group’s separate business areas primarily
through long-term planning of resources. The Management Board of the holding
company AS Merko Ehitus has two members: Andres Trink and Tõnu Toomik. 

AGM and changes in the management structure of AS Merko Ehitus

The general meeting of the shareholders was held on 5 June 2013. The general
meeting resolved to approve the annual report and the profit allocation
proposal for 2012. Pursuant to the profit allocation proposal, a dividend
payable of EUR 5.3 million (EUR 0.3 per share) was recognised in the
consolidated balance sheet as at 30 June 2013. The dividends were paid out to
shareholders on 3 July 2013. 

In addition, the annual general meeting resolved to recall Member of the
Supervisory Board Tõnu Toomik in connection with the Supervisory Board's
resolution to appoint Tõnu Toomik as Member of the Management Board of AS Merko
Ehitus. The Supervisory Board of AS Merko Ehitus resolved to recall Member of
the Management Board Viktor Mõisja from 5 June 2013, with Mr Mõisja continuing
service in the engineering division of the company’s subsidiary AS Merko Ehitus
Eesti, and to appoint the former member of the Supervisory Board Tõnu Toomik as
a new member of the Management Board. 

Changes in the legal structure of the group

In the second quarter of 2013, OÜ Baltic Electricity Engineering, a 100%
subsidiary of AS Merko Ehitus, was renamed OÜ Merko Investments. The private
limited company has a share capital of EUR 10,000. 

On 22 May 2013, AS Merko Ehitus concluded an intra-group transaction, disposing
a 100% stake in SIA Merks, a subsidiary engaged in construction, to OÜ Merko
Investments, which is fully owned by AS Merko Ehitus. The transaction served
the technical purpose of reorganising the legal structure of the group. 

By 4 July 2013, the liquidation of Merko Ukraine LLC, initiated in the autumn
of 2012, was completed, with the company deleted from the registers. 

On 10 June 2013, the shareholders of OÜ Unigate, a 50%-owned joint venture of
AS Merko Ehitus, resolved to increase the nominal value of the share of the
joint venture by EUR 887.07 to EUR 6,000 with the aim of bringing the company’s
share capital into line with the requirements arising from the Commercial Code.
A monetary contribution of EUR 350,000 was made by both shareholders, with the
nominal value of the share capital amounting to EUR 444 and the share premium
to EUR 349,556. 

On 17 July 2013, UAB Merko Bustas, a 100% subsidiary of AS Merko Ehitus,
established a 100% subsidiary UAB Kražiu Projektas in Lithuania, with a share
capital of LTL 10,000 (EUR 2,896). The subsidiary was established with the aim
of acquiring registered immovables for development purposes in Lithuania. 


OPERATING RESULTS

Business activities

Key financial indicators (in million of euros):

                                              6M 2013  6M 2012  Q2 2013  Q2 2012
Revenue                                                                         
Estonia                                          92.8     94.2     55.3     52.3
Latvia                                           17.5      8.5      9.2      4.6
Lithuania                                         3.4      4.2      1.4      2.2
Revenue total                                   113.7    106.9     65.9     59.1
                                             -----------------------------------
                                             -----------------------------------
                                                                                
Gross profit                                      9.8      5.0      5.6      2.5
                                                                        --------
                                             -----------------------------------
                                                                                
Operating profit (EBIT)                           5.1      1.1      2.8      0.5
                                                               -----------------
                                             -----------------------------------
                                                                                
attributable to equity holders of the parent      4.0      0.6      2.3      0.4
attributable to non-controlling interest        (0.0)    (0.1)    (0.1)    (0.0)
Net profit                                        4.0      0.5      2.2      0.4
                                             -----------------------------------
                                             -----------------------------------
                                                                                
Earnings per share (EPS), in euros               0.23     0.03     0.13     0.02
                                             -----------------------------------
                                             -----------------------------------
                                                                                
Pecuniary means at the end of period            33.8*     11.7    33.8*     11.7
                                             -----------------------------------

* incl short-term deposits in the amount of EUR 2.5 million


Revenue and gross profit

Merko Ehitus group generated a total of EUR 113.7 million in revenue in 6
months of 2013. 81.6% of the revenue was generated in Estonia, 15.4% in Latvia
and 3.0% in Lithuania (6 months of 2012: 84.0% in Estonia, 14.0% in Latvia and
2.0% in Lithuania). Compared to the 6 months of 2012 the group revenue
increased by 6.4%. During the reporting period, orders from the private sector
have increased, but the majority of revenue is still related to projects
financed with support from the EU structural funds – state orders. Revenue in
Q2 2013 was EUR 65.9 million, which has increased 11.5% compared to the
previous year (Q2 2012: EUR 59.1 million). The increase in revenue, compared to
last year, can be mainly attributed to projects pursued in the general
construction segment. 

In 6 months of 2013 the group’s gross profit from development and construction
activities totalled EUR 9.8 million (6 months of 2012: EUR 5.0 million). The
gross profit in Q2 2013 was EUR 5.6 million (Q2 2012: EUR 2.5 million). Both
the six-month (8.6%) and the quarterly (8.5%) gross profit margin has improved
by approximately 4%, compared to the same period last year (first six months of
2012: 4.7%; Q2 2012: 4.3%). Key contributors to the rise in the profit margin
are the road construction segment and the real estate development segment. At
the same time, the margin has fallen at the expense of the profitability of the
general construction and engineering segments. The scarcity of projects and the
ever-tightening competition in the construction sector pose a huge challenge in
the maintaining of the current gross profit margin for new procurements in all
segments, but especially in general construction, where competition and the
number of companies participating at the procurements is the highest. 

Net profit

In 6 months of 2013, the group’s pre-tax profit totalled EUR 4.5 million and
net profit was EUR 4.0 million as compared to the pre-tax profit or EUR 0.8
million and net profit of EUR 0.6 million in 6 months of 2012. Group’s net
profit margin was 3.6% (6 months of 2012: 0.5%). 

In Q2 of 2013, the group’s pre-tax profit totalled EUR 2.6 million and net
profit was EUR 2.3 million as compared to the pre-tax profit or EUR 0.4 million
and net profit of EUR 0.4 million in Q2 of 2012. Group’s quarterly result is
comparable to years 2010 and 2009 level, but the profit margins were higher in
those years. 

Business segments

The group manages business activities in the following areas at activity:

  -- General construction - 
includes the construction of buildings for different purposes including
     offices, hotels, museums, culture and business centres, social, production
     and service buildings as well as buildings of various industrial structures
.
  -- Engineering construction - 
The engineering construction segment of Merko builds port structures,
     landfilling areas at landfills, various road structures (tunnels,
     overpasses, bridges), water and sewerage pipelines, water treatment plants
     and other complex engineering and environmental projects
.
  -- Road construction - In this segment, Merko carries out road construction
     and builds the associated infrastructure. In addition, we carry out road
     maintenance works and maintenance repair.
  -- Real estate development - including development of apartment projects,
     long-term financial investments and commercial real estate projects.

General construction

General construction       6M 2013  6M 2012  Varianc  Q2 2013  Q2 2012  Variance
 million EUR                                       e                            
Revenue                       33.5     23.2   +44.3%     20.9     11.8    +77.8%
% of revenue                 29.4%    21.7%             31.7%    19.9%          
Gross profit                   1.2      1.9   -34.1%      0.8      1.1    -30.4%
Gross profit margin           3.7%     8.1%              3.7%     9.4%          

In the first half-year of 2013, the revenue of the general construction segment
increased by 44.3% from the same period last year. At the same time, the gross
profit of the segment has decreased, mainly due to the pressure on the margins
exerted by tightening competition caused by the scarcity of projects. While in
2012 the market was primarily dominated by public sector projects, the 2013 has
seen an increase also in private sector orders. Nevertheless, public
procurements continue to make up a bulk of the work-in-progress. 

Our major projects in the II quarter included reconstruction work at the
North-Estonia Medical Centre in Mustamäe, construction of KTN Tallinn logistics
centre (II construction phase, I stage) and Tondiraba ice arena. 

Engineering or infrastructure construction

Civil engineering    6M 2013  6M 2012  Variance  Q2 2013  Q2 2012  Variance
million EUR                                                                
Revenue                 45.5     55.3    -17.7%     24.8     29.6    -16.3%
% of revenue           40.0%    51.8%              37.6%    50.1%          
Gross profit             3.9      3.3    +19.8%      1.6      1.7     -5.7%
Gross profit margin     8.7%     6.0%               6.4%     5.7%          

The revenue of the civil engineering segment amounted to EUR 45.5 million in
the first half-year (6 months of 2012: EUR 55.3 million), which is 17.7% less
than in 2012. The decrease from the previous year is mainly due to a drop in
the volume of pipeline projects. In the second quarter of 2013, our main
projects included the reconstruction of pipelines in Vääna-Jõesuu and the
closing of industrial waste and semi-coke landfill in Kohtla-Järve. The said
area continues to form the largest proportion in the group’s revenue (6 months
of 2013: 40.0%). The gross profit of the civil engineering segment amounted to
EUR 3.9 million (6 months of 2012: EUR 3.3 million) and the gross profit margin
was 8.7% (6 months of 2012: 6.0%). The positive shift is mainly due to the fact
that the results of loss-making projects had already been recorded in the
previous period. 

The civil engineering segment includes challenges, primarily in connection with
the end of the 2007-2013 EU budgeting period and due to the fact that the pace
of launching new projects has decreased. 

Road construction

Road construction    6M 2013  6M 2012  Variance  Q2 2013  Q2 2012  Variance
million EUR                                                                
Revenue                 22.6     18.5    +21.9%     14.8     11.1    +32.9%
% of revenue           19.8%    17.3%              22.4%    18.8%          
Gross profit             2.7     -0.7   +474.3%      2.3     -0.9   +360.0%
Gross profit margin    12.2%    -4.0%              15.2%    -7.8%          

The revenue of the road construction segment amounted to EUR 22.6 million in
the first half-year of 2013, which means a 21.9% increase from 2012. In the
first half-year of 2013, the segment earned a gross profit of EUR 2.7 million,
which yields a gross profit margin of 12.2%. The increase in both revenue and
profit was supported by the increase in road construction and maintenance
volumes in the second quarter of 2013. 

We continue with our largest construction project of constructing the Ülemiste
traffic junction, the final completion of which is scheduled for the end of
2013. 

Real estate development

Real estate development  6M 2013  6M 2012  Variance  Q2 2013  Q2 2012  Variance
million EUR                                                                    
Revenue                     11.7      9.1    +27.8%      5.2      5.9    -13.1%
% of revenue               10.3%     8.5%               7.8%    10.1%          
Gross profit                 1.9      0.6   +211.6%      1.0      0.4   +116.9%
Gross profit margin        16.1%     6.6%              18.7%     7.5%          

A total of 94 apartments were sold in 6 months of 2013 at the total value of
EUR 10.8 million (excl. VAT), (6 months of 2012: 67 apartments and EUR 8.0
million, respectively). At the end of the period, Merko Ehitus group’s
inventory comprised 62 completed but not yet sold apartments (24 in Estonia, 14
in Latvia and 24 in Lithuania). 

The following table lists the apartment projects in progress:

Project                  Town/Country     Completion time  No of apartments
Räägu 9                Tallinn, Estonia     2013 summer           20       
Eha 4 / Paldiski 17    Tallinn, Estonia     2013 summer           27       
Vaarika 5               Tartu, Estonia      2013 summer           15       
Pallasti 46, 48, 50    Tallinn, Estonia     2013 autumn           69       
Grostonas 17             Riga, Latvia       2013 autumn           62       
Tedre 55               Tallinn, Estonia     2014 spring           47       
                                                                  240      
Started in Q2 2013                                                         
Pärna Avenue 8          Tartu, Estonia     2013 year-end          42       
Grostonas 19             Riga, Latvia       2014 autumn           82       
Mokslininku II stage  Vilnius, Lithuania    2014 autumn           54       
Kentmanni 6            Tallinn, Estonia    2014 year-end          92       
                                                                  270      
                                                          -----------------
Total                                                             510      
                                                          -----------------

Two previously frozen development projects were re-launched in the second
quarter of 2013. In Tallinn, the company launched construction of the Kentmanni
6 residential and commercial building (number of apartments in the new design:
92), a project frozen in 2008. The first two floors of the building have been
designed as commercial space, with the remaining 12 floors allocated for
apartments. Two underground parking lots had been constructed for the building
by the end of 2008. The building is scheduled to be completed at the end of
2014. 

In the second quarter of 2013, we partially re-launched the Pärna Avenue
development project (42 apartments) in Raadi, Tartu. As at 30 June 2013, the
company thus has a single frozen project in Tartu – the 158-apartment project
shelved in 2007. 

In addition, we launched new development projects in both Riga and Vilnius in
the second quarter of 2013. The development project launched in Riga
constitutes a continuation of the apartment building which is nearing
completion at Grostonas 17 in the Skanstese district – we will build an
82-apartment residential building just next to it. In Vilnius, we will proceed
with the second stage of the Mokslininku project (54 apartments). 

One of our objectives is to keep a moderate portfolio of land plots to ensure
stable implementation of property development projects considering the market
conditions. At the same time the real estate market has become more selective –
key aspects considered in the evaluation of risks prior to the launch of each
project are the location, scale of development, design solutions and the target
group. In view of the low mortgage interest rates and the limited supply on the
market of new apartments over the last three years, demand and transaction
activity in the apartment market has grown moderately. 

Secured Order Book

As at 30 June 2013, the group’s secured order book amounted to EUR 184 million
as compared to EUR 233 million as at 30 June 2012. The group does not include
residential building projects developed by the group and development of the
investment property in the order book. 

In second quarter of 2013, EUR 51 million worth of new contracts were signed
(without own developments) as compared to EUR 97 million in same period
previous year. Public procurement remained the greatest contributor to the
volume of contracts concluded in the second quarter of 2012. Major contracts
included the design and construction of the Narva City water treatment plant
(EUR 21 million), reconstruction of the North-Estonia Medical Centre in
Mustamäe (EUR 24 million) and reconstruction of the Ülemiste traffic
interchange (EUR 8 million). The table below shows the largest construction
contracts that were signed in the second quarter of 2013: 

Brief description of contract     Cost      Completion time  Country
                               million EUR                          
Tondiraba ice-arena               22.5         June 2014     Estonia
Nurmevälja logistics centre        7-8          Q1 2014      Estonia
Baloži boiler house                4.3         July 2014      Latvia
Konsum supermarket in Narva        3.1         May 2014      Estonia

After the balance sheet date, a contract was concluded on 18 July 2013 between
the AS Merko Ehitus group company AS Merko Ehitus Eesti and the AS Olympic
Entertainment Group company Kesklinna Hotelli OÜ for the construction of a
hotel and entertainment complex in Tallinn. The hotel will be operated by the
international hotel chain Hilton Worldwide. The contract value is nearly EUR 31
million. Demolition work on the present-day Park Hotel & Casino will commence
in October 2013, with the construction of the new building to be launched in
February 2014. The work is scheduled to be delivered in December 2015. 

Furthermore, on 1 August 2013, SIA Merks – a Latvian-based subsidiary of AS
Merko Ehitus – concluded a contract with Liep?ja City Government for the
construction of the multi-functional Lielais Dzintars centre in Liep?ja. The
contract value is EUR 28.3 million, with the work scheduled to be delivered in
July 2015. 

Although public procurements make up a bulk of the construction orders for
2013, the private sector has shown signs of recovery in all Baltic States in
the first half of 2013. Considering the expiry of the current EU budget period
in the second half of 2013, we are expecting a decrease in the volume of public
procurements. Consequently, it will prove quite a challenge to keep the volume
of new contracts at its current level (the level for 2012). 

Cash flows

The cash position of the group is stable. As at the end of the reporting
period, the cash and cash equivalents of Merko Ehitus group amounted to EUR
31.3 million (as at 30 June 2012: EUR 11.7 million). The group also has EUR 2.5
million in short-term deposits with a maturity term of more than 3 months. The
strategic cash position and investment capability of the holding company AS
Merko Ehitus has improved during the year. 

The 6-month cash flow from operating activity was positive at EUR 3.2 million
(6 months of 2012: negative EUR 4.4 million), cash flow from investing activity
was negative at EUR 3.2 million (6 months of 2012: negative EUR 1.5 million)
and the cash flow from financing activity was negative at EUR 3.9 million (6
months of 2012: negative EUR 0.9 million). The cash flow from operating
activity was mostly influenced by the negative change in trade and other
receivables related to operating activities EUR 16.2 million, by the positive
change in trade and other payables related to operating activities EUR 13.1
million, by the operating profit EUR 5.1 million and positive change in
construction contracts recognised under the stage of completion method EUR 4.1
million. 

The share of public orders remains high in the consolidated cash flows, with
long terms of payment (an average of 56 days after registered delivery of the
work) and a persistent burden on current assets, including cash flow
management. To support cash flows arising from operating activity, the group
has been prudent in raising additional external capital, including factoring.
At the same time, the debt ratio has remained at a moderate level (13.9% as at
6 months of 2013). 

Cash flows from investing activities include the acquisition of short-term
deposit with a maturity term of more than 3 months in the amount of EUR -2.5
million, while the balance of other investments and acquisition of PPE was EUR
-0.7 million. 

The net of loans received and loans repaid in connection with development
projects amounted to EUR -2.9 million, factoring to EUR -0.4 million and
financial lease repayments to EUR -0.6 million in the cash flow from financing
activities. 

The Q2 2013 cash flow from operating activity was negative at EUR 1.9 million
(Q2 2012: positive EUR 1.5 million), cash flow from investing activity was
negative at EUR 0.5 million (Q2 2012: negative EUR 1.1 million) and the cash
flow from financing activity was positive at EUR 0.3 million (Q2 2012: positive
EUR 2.6 million). The negative quarterly cash flow from operating activities
was mainly conditioned by the current asset outflow related to the launch of
large-scale projects in the last quarter of the year. 

Cash flow from financing activities amounted to EUR 2.6 million in the second
quarter of 2012 – EUR 2.3 million higher than the EUR 0.3 million in the second
quarter of 2013. This difference can mainly be attributed to the low level of
debt financing used for the residential development projects. 

Financial ratios
(per share attributable to equity holders of the parent company)

                                      6M      6M      6M      Q2      Q2      Q2
                                    2013    2012    2011    2013    2012    2011
Income statement                                                                
 summary                                                                        
Revenue                  million   113.7   106.9    75.0    65.9    59.1    48.9
                           EUR                                                  
Gross profit             million     9.8     5.0   (2.4)     5.6     2.5   (1.0)
                           EUR                                                  
Gross profit margin        %         8.6     4.7    -3.2     8.5     4.3    -2.0
Operating profit         million     5.1     1.1   (7.2)     2.8     0.5   (3.4)
                           EUR                                                  
Operating profit           %         4.5     1.0    -9.6     4.3     0.9    -6.9
 margin                                                                         
Profit before tax        million     4.5     0.8   (7.5)     2.6     0.4   (3.4)
                           EUR                                                  
EBT margin                 %         4.0     0.8   -10.0     3.9     0.7    -7.0
Net profit               million     4.0     0.5   (7.5)     2.2     0.4   (3.4)
                           EUR                                                  
equity holders of the    million     4.0     0.6   (7.6)     2.3     0.4   (3.5)
 parent                    EUR                                                  
non-controlling          million   (0.0)   (0.1)     0.1   (0.1)   (0.0)     0.1
 interest                  EUR                                                  
Net profit margin          %         3.6     0.5   -10.1     3.5     0.7    -7.1
                                                                                
Other income statement                                                          
 figures                                                                        
EBITDA margin              %         5.5     2.2    -8.3     5.2     1.9    -6.0
General expense ratio      %         5.0     4.6     6.7     4.7     4.2     5.2
Gross earnings ratio       %         9.6     8.2    10.7     9.3     7.9     8.7
Revenue per employee    thousand     130     118      80      75      65      52
                           EUR                                                  
                                                                                
                                  30.06.  30.06.  30.06.                        
                                      13      12      11                        
Other key figures                                                               
ROE                        %         9.6    -5.3    -7.9                        
ROA                        %         4.8    -2.7    -4.8                        
ROIC                       %        10.0    -3.3    -5.8                        
                                                                                
Equity ratio               %        48.8    48.5    53.7                        
Debt ratio                 %        13.9    17.6    16.6                        
                                                                                
Current ratio            times       1.9     1.8     2.0                        
Quick ratio              times       1.1     0.9     0.9                        
Accounts receivable       days        50      56      55                        
 turnover                                                                       
Accounts payable          days        38      48      42                        
 turnover                                                                       
                                                                                
Average number of        people      878     903     937                        
 employees (group)                                                              
                                                                                
Secured Order Book       million     184     233     219                        
                           EUR                                                  

Employees and remuneration

The number of the group’s employees decreased by 14 in the last 12 months
(-1.5%) and as at 30 June 2013, the group had a total of 943 employees
(including fixed-term and part-time employees). 

The group’s objective is to pay its employees competitive salary. The interests
of employees and the company are balanced by performance-based remuneration.
Gross wages and salaries paid to employees in 6 months of 2013 totalled EUR
10.9 million, of which base wages and salaries accounted for 72.0% and bonuses
accounted for 28.0% (6 months of 2012: EUR 8.8 million, of which base wages and
salaries were 83.5% and bonuses were 16.5%). In a year, gross wages and
salaries increased by 24.7%, including a 7.4% increase in base wages and
salaries and a 112.5% increase in bonuses. 

Share and shareholders

         Information on security          
             Issuer  AS Merko Ehitus      
   Name of security  Share of Merko Ehitus
Residency of issuer  Estonia              
Stock Exchange List  Main List            
               ISIN  EE3100098328         
      Nominal value  without nominal value
   No of securities  17,700,000           
    Volume of issue  12,000,000           
           Currency  EUR                  
    Date of listing  11 August 2008       

The shares of Merko Ehitus have been listed in the main list of NASDAQ OMX
Tallinn. A total of 1051 transactions were conducted with the shares of Merko
Ehitus in 6 months of 2013, with 0.36 million shares traded, generating a
turnover of EUR 2.45 million. The lowest share price amounted to EUR 5.71 and
the highest to EUR 7.70 per share. The closing price of the share was EUR 6.44
on 30 June 2013. As at 30 June 2013, the market value of AS Merko Ehitus
amounted to EUR 114 million. 

                                    30.06.2013  30.06.2012  30.06.2011
No of shares                        17,700,000  17,700,000  17,700,000
Earnings per share (EPS), in euros        0.23        0.03       -0.43
Equity per share, in euros                6.55        6.27        6.91
P/B (price to book ratio)                 0.98        0.99        1.14
P/E (price / earnings ratio)              8.86      -18.68      -14.35
Market value, million EUR                  114         110         139

Main shareholders of AS Merko Ehitus as of 30 June 2013 and the change compared
to the previous quarter: 

                                   No of     % of total     % of total    Varian
                                   shares    30.06.2013     31.03.2013      ce  
AS Riverito                       12,742,6         71.99%         71.99%       -
                                        86                                      
ING Luxembourg S.A., clients       974,126          5.50%          5.50%       -
Skandinaviska Enskilda Banken      845,611          4.78%          4.90%  -21,95
 Ab, clients                                                                   7
Firebird Republics Fund Ltd        302,395          1.71%          1.71%       -
Arvo Nõges                         178,600          1.01%          1.00%    +900
State Street Bank and Trust        153,018          0.86%          0.86%       -
 Omnibus Account a Fund No OM01                                                 
Skandinaviska Enskilda Banken      143,191          0.81%          0.76%  +8,000
 Finnish clients                                                                
Clearstream Banking Luxembourg     140,947          0.80%          0.58%  +38,45
 S.A. clients                                                                  0
SEB Elu- ja Pensionikindlustus     128,020          0.72%          0.72%       -
 AS                                                                             
AS Midas Invest                    121,185          0.68%          0.67%  +2,630

Dividend policy

The distribution of dividends to the shareholders of the company is recorded as
a liability in the financial statements as of the moment when the payment of
dividends is approved by the company’s shareholders. 

A dividend payable of EUR 5.3 million (EUR 0.3 per share) has been recognised
in the consolidated balance sheet as at 30 June 2013. The dividends were paid
out to shareholders on 3 July 2013. 

At the meeting held on 8 April 2013, the Management Board and Supervisory Board
of AS Merko Ehitus reviewed the company’s strategic development trends and
approved the long-term financial objectives until 2018, under which a new
objective of paying the shareholders 50-70% of the annual profit as dividends
was established. 


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
in thousand euros, unaudited

                                                                  2013      2012
                                                              6 months  6 months
                                                                                
Revenue                                                        113,743   106,855
Cost of goods sold                                            (103,918  (101,817
                                                                     )         )
Gross profit (loss)                                              9,825     5,038
                                                                                
Marketing expenses                                             (1,391)     (902)
Administrative and general expenses                            (4,339)   (4,056)
Other operating income                                           1,218     1,132
Other operating expenses                                         (186)     (120)
Operating profit (loss)                                          5,127     1,092
                                                                                
Finance income/costs                                             (614)     (277)
incl. finance income/costs from investments in associates         (70)       182
and joint ventures                                                              
finance income/costs from other long-term investments               23         -
interest expense                                                 (416)     (643)
foreign exchange gain                                            (167)        56
other financial income (expenses)                                   16       128
Profit (loss) before tax                                         4,513       815
Corporate income tax expense                                     (521)     (305)
Net profit (loss) for current period                             3,992       510
                                                             -------------------
incl. net profit (loss) attributable to equity holders of        4,050       579
 the parent                                                                     
net profit (loss) attributable to non-controlling interest        (58)      (69)
                                                                                
Other comprehensive income (loss)                                               
Currency translation differences of foreign entities             (148)        88
Comprehensive income (loss) for the period                       3,844       598
                                                             -------------------
                                                             -------------------
incl. net profit (loss) attributable to equity holders of        3,902       667
 the parent                                                                     
net profit (loss) attributable to non-controlling interest        (58)      (69)
                                                                                
Earnings per share for profit (loss) attributable to              0.23      0.03
equity holders of the parent (basic and diluted, in euros)                      


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
in thousand euros, unaudited

                                                                 2013       2012
                                                                   II         II
                                                              quarter    quarter
                                                                                
Revenue                                                        65,884     59,064
Cost of goods sold                                           (60,294)   (56,529)
Gross profit (loss)                                             5,590      2,535
                                                                                
Marketing expenses                                              (735)      (474)
Administrative and general expenses                           (2,383)    (2,008)
Other operating income                                            510        561
Other operating expenses                                        (142)       (97)
Operating profit (loss)                                         2,840        517
                                                                                
Finance income/costs                                            (281)      (118)
incl. finance income/costs from investments in associates        (36)         77
and joint ventures                                                              
finance income/costs from other long-term investments              10          -
interest expense                                                (206)      (330)
foreign exchange gain                                            (57)        119
other financial income (expenses)                                   8         16
Profit (loss) before tax                                        2,559        399
Corporate income tax expense                                    (327)       (36)
Net profit (loss) for current period                            2,232        363
                                                           ---------------------
                                                           ---------------------
incl. net profit (loss) attributable to equity holders of       2,284        424
 the parent                                                                     
net profit (loss) attributable to non-controlling interest       (52)       (61)
                                                                                
Other comprehensive income (loss)                                               
Currency translation differences of foreign entities              (7)        111
Comprehensive income (loss) for the period                                      
incl. net profit (loss) attributable to equity holders of       2,225        474
 the parent                                                                     
                                                           ---------------------
                                                           ---------------------
net profit (loss) attributable to non-controlling interest      2,277        535
Other comprehensive income (loss)                                (52)       (61)
                                                                                
Earnings per share for profit (loss) attributable to             0.13       0.02
equity holders of the parent (basic and diluted, in euros)                      


CONSOLIDATED STATEMENT OF FINANCIAL POSITION
in thousand euros, unaudited

                                                                             
                                                       30.06.2013  31.12.2012
ASSETS                                                                       
                                                                             
Current assets                                                               
Cash and cash equivalents                                  31,329      35,316
Short-term deposits                                         2,500           -
Trade and other receivables                                71,853      60,343
Prepaid corporate income tax                                   33         478
Inventories                                                83,844      82,830
Total current assets                                      189,559     178,967
                                                                             
Non-current assets                                                           
Long-term financial assets                                 25,949      24,378
Deferred income tax assets                                  1,817       1,919
Investment property                                         3,418       3,566
Property, plant and equipment                              14,624      14,853
Intangible assets                                           1,276       1,365
Total non-current assets                                   47,084      46,081
                                                                             
TOTAL ASSETS                                              236,643     225,048
                                                      -----------------------
                                                      -----------------------
                                                                             
LIABILITIES AND EQUITY                                                       
                                                                             
Current liabilities                                                          
Borrowings                                                 12,854      16,299
Payables and prepayments                                   80,777      63,209
Income tax liability                                          115           -
Short-term provisions                                       4,053       6,165
Total current liabilities                                  97,799      85,673
                                                                             
Non-current liabilities                                                      
Long-term borrowings                                       19,992      19,205
Long-term interest liabilities                                  6           3
Long-term trade payables                                    1,727       1,553
Deferred corporate income tax liability                       406         327
Long-term provisions                                           10          20
Total non-current liabilities                              22,141      21,108
                                                                             
Total liabilities                                         119,940     106,781
                                                      -----------------------
                                                      -----------------------
                                                                             
Equity                                                                       
                                                                             
Non-controlling interest                                    1,180       1,342
Equity attributable to equity holders of the parent                          
Share capital                                              12,000      12,000
Statutory reserve capital                                   1,200       1,200
Currency translation differences                            (660)       (512)
Retained earnings                                         102,983     104,237
Total equity attributable to equity holders of parent     115,523     116,925
                                                                             
Total equity                                              116,703     118,267
                                                      -----------------------
                                                      -----------------------
                                                                             
TOTAL LIABILITIES AND EQUITY                              236,643     225,048
                                                      -----------------------


Signe Kukin
Group CFO
+372 650 1250
[email protected]