Börsiteade

Pealkiri

2020 9 months and III quarter consolidated unaudited interim report

Teade

COMMENTARY FROM MANAGEMENT

Merko  Ehitus posted revenue  of EUR 79.7 million  and a net  profit of EUR 4.9
million  in the third quarter of 2020, the respective growth were 8.6% and 92%.
The  group's 9-month revenue amounted  to EUR 209 million and  net profit to EUR
13.1 million. In 9 months of 2020, Merko sold 534 apartments.

The  majority  of  group's  profit  has  come  from  the  sale  of apartments in
previously  launched projects. Merko sold the  most apartments in Vilnius, where
the  good work done  in the last  couple of years  has borne fruit. The share of
apartment  development in Merko's business has  grown - therefore, the quarterly
results may vary considerably, depending on when the projects are finished.

In  the first 9 months of 2020, Merko's sales revenue in the area of real estate
development  grew  more  than  three  times  compared  to the same period in the
preceding year, and the number of apartments sold increased more than 2.5 times.
The  largest apartment development projects  include Uus-Veerenni, Lahekalda and
Pikaliiva  in Tallinn, Gai?ezers  and Viesturd?rzs in  Riga, and Vilneles Slenis
and Rinktin?s Urban in Vilnius.

The  majority  of  construction  contracts  concluded  in  9 months  are  public
procurements.   According to  the management,  there will  be no increase in the
orders  in the Baltic  construction market in  the coming 12 months. The group's
companies  concluded new contracts for EUR  248 million in the first 9 months of
2020 and  for EUR 72.9 million in  the third quarter. The  largest of those were
the establishment of the third stage of the Mustamäe medical campus of the North
Estonia  Medical Centre, the  renovation of Nordic  Hotel Forum and Tallink City
Hotel in Estonia and the construction of the Orkla waffle and biscuit factory in
?dazhi  as well as a kindergarten in Salaspils,  both in Latvia. As at the end of
September, the group's secured order book balance was EUR 251.2 million.

In  the third quarter, the largest projects  in progress were the Tallinn School
of Music and Ballet, the Arte Gymnasium, Terminal D parking house at the Tallinn
passenger  port, a data  centre in Harju  County, the reconstruction of Aaspere-
Haljala  road section, and the design  and construction of the infrastructure of
the  Republic of Estonia's  southeast land border.  In Latvia, work continued on
the  school building and dormitory in Pinki and Lidl logistics centre as well as
the  reconstruction of the  Riga Technical University  Civil Engineering Faculty
building.  In Lithuania,  the major  ongoing projects  included Hotel Neringa in
Vilnius,  wind  park  infrastructure  facilities  in  Telshiai  district, and, in
Kaunas, the district police headquarter building and NATO barracks.

OVERVIEW OF THE III QUARTER AND 9 MONTHS RESULTS

PROFITABILITY
2020 9 months'  profit before tax was EUR  13.9 million and Q3 2020 was EUR 5.1
million  (9M  2019: EUR  10.3 million  and  Q3  2019 was EUR 2.8 million), which
brought the profit before tax margin to 6.6% (9M 2019: 4.5%).
Net profit attributable to equity holders of the parent in 9 months 2020 was EUR
13.1 million  (9M 2019: EUR 7.0 million) and  Q3 2020 net profit attributable to
equity  holders of the parent was EUR 4.9 million (Q3 2019: EUR 2.5 million). 9
months  net profit margin was  6.2% (9M 2019: 3.1%). Compared to 9 months 2020,
the  net  profitability  of  2019 was  influenced  by,  among  other  things,  a
significantly  increased  income  tax  expense:  in  Q2,  the group's income tax
expense  on  paid  dividends  was  EUR  2.7 million. In 2020, the group's parent
company has not paid dividends.

REVENUE
Q3  2020 revenue was EUR 79.7 million  (Q3 2019: EUR 73.4 million) and 9 months'
revenue  was EUR  209.5 million (9M  2019: EUR 227.6 million). 9 months' revenue
decreased by 8.0% compared to same period last year. The share of revenue earned
outside Estonia in 9 months 2020 was 47.6% (9M 2019: 53.2%).

SECURED ORDER BOOK
As  at 30 September 2020, the  group's secured order  book was EUR 251.2 million
(30 September 2019: EUR 152.2 million). In 9 months 2020, group companies signed
new  contracts in the amount of  EUR 248.0 million (9M 2019: EUR 127.6 million).
In  Q3 2020, new  contracts were  signed in  the amount  of EUR 72.9 million (Q3
2019: EUR 41.6 million).

REAL ESTATE DEVELOPMENT
In  9 months 2020, the group sold a  total of 534 apartments (incl. 3 apartments
in  a joint venture); in 9 months 2019, the group sold 206 apartments (incl. 36
apartments  in a joint venture). The group  earned a revenue of EUR 67.0 million
from  sale of own developed apartments  in 9 months 2020 and EUR 20.2 million in
9 months  2019. In Q3 of 2020 a total  of 165 apartments (incl. 1 apartment in a
joint  venture) were sold,  compared to 106 apartments  (incl. 3 apartments in a
joint venture) in Q3 2019, and earned a revenue of EUR 21.0 million from sale of
own developed apartments (Q3 2019: EUR 10.9 million).

CASH POSITION
At  the end of the reporting period, the  group had EUR 25.4 million in cash and
cash  equivalents,  and  equity  of  EUR  143.3 million (53.0% of total assets).
Comparable  figures as at 30 September 2019 were EUR 13.4 million and EUR 121.1
million  (39.4%  of  total  assets),  respectively. As at 30 September 2020, the
group's  net  debt  stood  at  EUR  25.2 million  (30  September 2019: EUR 71.0
million).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros

                             2020      2019         2020         2019      2019
                         9 months  9 months  III quarter  III quarter 12 months

 Revenue                  209,480   227,620       79,747       73,418   326,779

 Cost of goods sold     (184,268) (206,723)     (71,018)     (67,191) (291,958)

 Gross profit              25,212    20,897        8,729        6,227    34,821



 Marketing expenses       (3,157)   (2,626)      (1,284)        (842)   (4,260)

 General and
 administrative
 expenses                 (8,148)   (8,841)      (2,755)      (2,600)  (12,988)

 Other operating income     1,714     1,740          592          510     2,983

 Other operating
 expenses                 (1,316)   (1,222)         (64)        (969)   (1,318)

 Operating profit          14,305     9,948        5,218        2,326    19,238



 Finance income/costs       (432)       363        (122)          460     1,085

 incl. finance
 income/costs from
 joint venture                204       845          112          642     1,766

 interest expense           (530)     (471)        (200)        (185)     (656)

 foreign exchange gain
 (loss)                      (12)         -          (8)            4         -

 other financial income
 (expenses)                  (94)      (11)         (26)          (1)      (25)

 Profit before tax         13,873    10,311        5,096        2,786    20,323



 Corporate income tax
 expense                  (1,227)   (2,983)        (441)         (95)   (3,833)



 Net profit for
 financial year            12,646     7,328        4,655        2,691    16,490

 incl. net profit
 attributable to equity
 holders of the parent     13,071     7,003        4,896        2,550    16,270

 net profit
 attributable to non-
 controlling interest       (425)       325        (241)          141       220



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

 Currency translation
 differences of foreign
 entities                   (117)      (10)           11         (39)        13

 Comprehensive income
 for the period            12,529     7,318        4,666        2,652    16,503

 incl. net profit
 attributable to equity
 holders of the parent     12,939     7,002        4,895        2,522    16,281

 net profit
 attributable to non-
 controlling interest       (410)       316        (229)          130       222

 Earnings per share for
 profit attributable to
 equity holders of the
 parent (basic and
 diluted, in EUR)            0.74      0.40         0.28         0.14      0.92

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros

                                               30.09.2020 30.09.2019 31.12.2019

 ASSETS

 Current assets

 Cash and cash equivalents                         25,353     13,355     24,749

 Trade and other receivables                       44,518     72,280     50,413

 Prepaid corporate income tax                          91         94        104

 Inventories                                      153,433    183,056    166,226

                                                  223,395    268,785    241,492

 Non-current assets

 Investments in joint venture                       2,702      1,577      2,498

 Other long-term loans and receivables             16,238     10,590     11,094

 Investment property                               13,955     14,077     14,047

 Property, plant and equipment                     13,152     11,336     11,919

 Intangible assets                                    664        777        777

                                                   46,711     38,357     40,335



 TOTAL ASSETS                                     270,106    307,142    281,827



 LIABILITIES

 Current liabilities

 Borrowings                                        24,221     41,750     20,725

 Payables and prepayments                          60,916     84,643     69,585

 Income tax liability                               1,325        309        812

 Short-term provisions                              5,775      7,675      7,976

                                                   92,237    134,377     99,098

 Non-current liabilities

 Long-term borrowings                              26,365     42,571     43,001

 Deferred income tax liability                      1,635      1,589      1,682

 Other long-term payables                           2,785      2,653      3,491

                                                   30,785     46,813     48,174



 TOTAL LIABILITIES                                123,022    181,190    147,272



 EQUITY

 Non-controlling interests                          3,807      4,893      4,217

 Equity attributable to equity holders of the
 parent

 Share capital                                      7,929      7,929      7,929

 Statutory reserve capital                            793        793        793

 Currency translation differences                   (842)      (722)      (710)

 Retained earnings                                135,397    113,059    122,326

                                                  143,277    121,059    130,338

 TOTAL EQUITY                                     147,084    125,952    134,555



 TOTAL LIABILITIES AND EQUITY                     270,106    307,142    281,827

Interim  report is attached to the announcement and are also published on NASDAQ
Tallinn and Merko's web page (group.merko.ee (https://group.merko.ee/en/)).

Priit Roosimägi
Head of Group Finance Unit
AS Merko Ehitus
+372 650 1250
[email protected] (mailto:[email protected])

AS Merko Ehitus (group.merko.ee (http://group.merko.ee/en/)) group consists of
AS Merko Ehitus Eesti in Estonia, SIA Merks in Latvia, UAB Merko Statyba in
Lithuania and Peritus Entreprenør AS in Norway. Besides providing construction
service as a main contractor, the group's other major area of activity is
apartment development. As at the end of 2019, the group employed 694 people, and
the group's revenue for 2019 was EUR 327 million.