Börsiteade

Pealkiri

2022 3 months consolidated unaudited interim report

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COMMENTARY FROM MANAGEMENT

Merko  Ehitus sales revenue  in the first  quarter was EUR  68.4 million and net
profit  EUR 3.0 million. The sales revenue for the 3 months of 2022 increased by
14% compared  to the same  period of previous  year and net  profit decreased by
11%.

According  to the management of Merko  Ehitus, the situation on the construction
market continues to be extremely complicated due to global supply chain problems
and a rise in the cost of materials. The rapid price rise of construction inputs
last year was exacerbated by the war in Ukraine and sanctions imposed on Russia,
and   a  price  shock.  These  are  unforeseen  circumstances  whose  impact  on
performance  of construction  contracts is  yet to  become apparent.  In today's
situation,  mutual cooperation  of all  counterparties, including the customers,
will be very important to resolve challenges of a construction project.

On  the apartment market, the  supply of new apartments  has been in a declining
trend  for some time now,  while apartment prices have  grown quickly due to the
rise in construction prices. The war in Ukraine has amplified these developments
even  further. Accelerating inflation reduces purchasing  power on one hand, but
on  the other hand it encourages home buying and investment into real estate for
those  with capital and  lending capacity. According  to the management, Merko's
goal is to continue to provide a high-quality product and service to enable such
investments.

In  the first quarter, Merko delivered 126 apartments and one commercial area to
buyers.  Most of the apartments  to be delivered this  year will be completed in
the  H2. As  of the  end of  the quarter,  close to  1,700 apartments due  to be
completed  in  2022 and  2023 are  under  construction  in  Estonia,  Latvia and
Lithuania.  Of the apartments already  finished, only a few  are unsold and over
half  of the ones in progress have  already been reserved under preliminary sale
contracts.  The  largest  apartment  developments were Noblessner, Uus-Veerenni,
Odra,  Metsatuka and Lahekalda in Tallinn;  Erminurme in Tartu; Viesturd?rzs and
Mezhpils?ta in Riga, and Vilneles Skverai in Vilnius.

Although  the need for new buildings and infrastructure remains, adapting to the
rapid  growth of  construction prices  will take  time and  some of  the planned
investments  will be  put on  pause. Nor  are construction companies prepared to
enter  into longer-term contracts at a  fixed price given the current situation.
The  development of new supply  chains takes time and  it is unclear when and at
what  price levels a certain stabilization could take place. Preference is given
to  customers who are prepared to  offer flexibility the construction company in
covering  the price increase of  input prices, to focus  on the functionality of
the  object under construction and on timely completion, and not only on keeping
the cost to a minimum.

In  the  first  quarter  of  this  year,  the  group's  companies  entered  into
construction  contracts  worth  EUR  171 million,  of which the 100-million-euro
contract  for the construction of the Arter  quarter in Tallinn was the biggest.
The  secured  order-book  balance  grew  to  EUR  376 million  by the end of the
quarter,  and  three-quarters  of  the  portfolio  was made up by private sector
orders.  In Q1, Merko increased its  holding in the network construction company
AS Connecto Eesti from 35% to 50%.

In  the first quarter of 2022, the largest  objects in operation in Estonia were
the third phase of the third development phase of the Mustamäe medical campus of
the  North-Estonia Medical  Centre, the  Tallinn School  of Music and Ballet, St
John's School and the Arter quarter, and also the construction of infrastructure
segments  of the  Republic of  Estonia's southeast  land border.  In Latvia, the
Orkla  wafer and  biscuit production  plant, GUSTAVS  business centre, Elemental
Skanste office buildings, NATO facilities in ?dazhi and the Kauguri city park and
youth  house were in progress; and in  Lithuania, infrastructure for a number of
wind  farms  a  car  service  centre  in  Vilnius and the Continental Automotive
production building in Kaunas.

OVERVIEW OF THE 3 MONTHS RESULTS

PROFITABILITY
2022 3 months'  pre-tax profit  was EUR  3.5 million (3M 2021: EUR 3.7 million),
which brought the pre-tax profit margin to 5.1% (3M 2021: 6.2%).
Net  profit attributable to  shareholders for 3 months  2022 was EUR 3.0 million
(3M   2021: EUR  3.4 million)  and  3 months  net  profit  margin  was  4.4% (3M
2021: 5.6%).

REVENUE
2022 3 months'  revenue  was  EUR  68.4 million  (3M 2021: EUR 60.1 million). 3
months'  revenue increased by 13.8% compared to same period last year. The share
of revenue earned outside Estonia in 3 months 2022 was 56.2% (3M 2021: 36.9%).

SECURED ORDER BOOK
As  of 31 March 2022, the  group's secured order  book was EUR 376.1 million (31
March   2021: EUR  281.2 million).  In  3 months  2022, group  companies  signed
contracts in the amount of EUR 171.2 million (3M 2021: EUR 97.4 million).

REAL ESTATE DEVELOPMENT
In  3 months 2022, the group sold a  total of 126 apartments; in 3 months 2021,
the  group sold  90 apartments. The  group earned  a revenue of EUR 15.5 million
from  sale of own developed apartments  in 3 months 2022 and EUR 14.8 million in
3 months 2021.

CASH POSITION
At  the end of the reporting period, the  group had EUR 29.9 million in cash and
cash  equivalents,  and  equity  of  EUR  170.3 million (50.0% of total assets).
Comparable  figures as  of 31 March  2021 were EUR  54.8 million and  EUR 156.6
million  (58.1% of total assets), respectively. As of 31 March 2022, the group's
net debt was EUR 23.6 million (31 March 2021: negative EUR - 22.4 million).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
unaudited
in thousand euros

                                                        2022     2021      2021
                                                    3 months 3 months 12 months

 Revenue                                              68,426   60,107   339,375

 Cost of goods sold                                 (60,554) (53,133) (292,563)

 Gross profit                                          7,872    6,974    46,812



 Marketing expenses                                  (1,115)    (947)   (3,611)

 General and administrative expenses                 (3,723)  (2,715)  (13,925)

 Other operating income                                  686      675     3,508

 Other operating expenses                               (61)     (54)     (582)

 Operating profit                                      3,659    3,933    32,202



 Finance income/costs                                  (160)    (184)      (75)

 incl. finance income/costs from associates and
 joint venture                                           (2)        7       799

 interest expense                                      (162)    (146)     (681)

 foreign exchange gain (loss)                             52        -       (8)

 other financial income (expenses)                      (48)     (45)     (185)

 Profit before tax                                     3,499    3,749    32,127



 Corporate income tax expense                          (421)    (429)   (3,104)



 Net profit for financial year                         3,078    3,320    29,023

 incl. net profit attributable to equity holders of
 the parent                                            3,006    3,368    29,140

 net profit attributable to non-controlling
 interest                                                 72     (48)     (117)

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

 Currency translation differences of foreign
 entities                                                 16       23        33

 Comprehensive income for the period                   3,094    3,343    29,056

 incl. net profit attributable to equity holders of
 the parent                                            3,020    3,392    29,163

 net profit attributable to non-controlling
 interest                                                 74     (49)     (107)

 Earnings per share for profit attributable to
 equity holders of the parent (basic and diluted,
 in EUR)                                                0.17     0.19      1.65



CONSOLIDATED STATEMENT OF FINANCIAL POSITION
unaudited
in thousand euros

                                               31.03.2022 31.03.2021 31.12.2021

 ASSETS

 Current assets

 Cash and cash equivalents                         29,881     54,792     44,930

 Trade and other receivables                       57,331     35,362     55,484

 Prepaid corporate income tax                          53        320        114

 Inventories                                      187,848    126,748    160,593

                                                  275,113    217,222    261,121

 Non-current assets

 Investments in associates and joint ventures       9,377      2,361      7,703

 Other long-term loans and receivables             23,878     20,457     24,079

 Deferred income tax assets                           793        623        622

 Investment property                               13,803     13,897     13,828

 Property, plant and equipment                     16,966     14,484     16,350

 Intangible assets                                    653        721        669

                                                   65,470     52,543     63,251



 TOTAL ASSETS                                     340,583    269,765    324,372



 LIABILITIES

 Current liabilities

 Borrowings                                        11,554     13,626     11,636

 Payables and prepayments                         103,801     63,196     90,054

 Income tax liability                                 956      1,429        681

 Short-term provisions                              6,825      5,366      7,976

                                                  123,136     83,617    110,347

 Non-current liabilities

 Long-term borrowings                              41,938     18,767     41,001

 Deferred income tax liability                      3,159      3,032      3,112

 Other long-term payables                           2,244      3,570      2,900

                                                   47,341     25,369     47,013



 TOTAL LIABILITIES                                170,477    108,986    157,360



 EQUITY

 Non-controlling interests                          (153)      4,159      (227)

 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                   (777)      (790)      (791)

 Retained earnings                                162,314    148,688    159,308

                                                  170,259    156,620    167,239

 TOTAL EQUITY                                     170,106    160,779    167,012



 TOTAL LIABILITIES AND EQUITY                     340,583    269,765    324,372

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

Urmas Somelar
Head of Group Finance
AS Merko Ehitus
+372 650 1250
[email protected] (mailto:[email protected])

AS Merko Ehitus (group.merko.ee (https://group.merko.ee/en/)) group companies
develop real estate and construct buildings and infrastructure. We create a
better living environment and build the future. We operate in Estonia, Latvia,
Lithuania and Norway. As at the end of 2021, the group employed 670 people, and
the group's revenue for 2021 was EUR 339 million.