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2017 9 months and III quarter consolidated unaudited interim report

Merko Ehitus’s revenue for both Q3 of 2017 and the first 9 months of the year grew by close to one-quarter – Q3 revenue was EUR 86 million and 9-month revenue was EUR 214.8 million. The group’s net profit in Q3 was EUR 3.4 million and the 9-month figure was EUR 6.6 million. During the first 9 months of this year, the group concluded new contracts worth a total of EUR 304 million.

“The growth of revenue in the first nine months of this year has been supported by several major construction contracts in progress,” said the chairman of the Merko Ehitus management board, Andres Trink. “We are currently building large shopping centres in Tallinn and Riga, three hotels in Vilnius and a number of office buildings in Tallinn. All of the construction contracts have a tight time schedule; moreover, we must operate in a market situation where a shortage of resources in the form of design engineers and capable subcontractors is increasingly problematic. This puts great demands on our project teams when it comes to organising the work process, finding optimum solutions and adopting new technologies. Today we have a considerable portfolio of construction contracts, but it is not an easy task to realize it in a profitable manner, as we are exposed to both market risks and contract risks. We have had very rapid growth in Latvia, and there it is particularly important that we manage the risks. The developments in terms of volumes of engineering construction have been below expectations, as we have not been able to land new construction contracts in the expected volume.”

Merko Ehitus sold 47 apartments in Q3 and 286 apartments in the first nine months, totalling EUR 6.9 million and EUR 33.8 million, respectively (not including VAT). In nine months, Merko has launched construction of approximately 500 apartments, having invested EUR 39 million into the development projects launched this year and projects already under way. “Sales of apartments have generally gone according to plan this year, although considering the favourable market situation, the sales tempo could be even faster on some projects. In addition, we are dissatisfied with the pace of proceedings on building permits and planning documents. In the framework of our long-term apartment development strategy, we have acquired a total of EUR 8.6 million in new registered immovables. In Q3, we bought out our co-investor in the immovable properties located on the Maarjamäe limestone cliff in the Lasnamäe district of Tallinn, which hold long-term potential for developing more than 1,000 apartments,” said Andres Trink.

In Q3 of 2017, Merko Ehitus posted revenue of EUR 86.0 million, EBIDTA of 5.0 million, profit before taxes of 3.9 million and net profit of EUR 3.4 million. The group’s figures for the first nine months of 2017 were revenue of EUR 214.8 million, EBITDA of EUR 11.0 million, profit before taxes of EUR 8.2 million and net profit of EUR 6.6 million. In the first 9 months of 2017, the group has entered into new contracts with a total value of EUR 304 million, and EUR 87 million in Q3 alone, including the construction of the Alfa shopping centre expansion in Riga, renovation of Neringa Hotel in Vilnius, the Embassy of the People’s Republic of China in Estonia, and the renovation and reconstruction of the office building of the Norwegian chancellor of justice in Oslo.

As of 30 September 2017, Merko Ehitus had a contract portfolio of EUR 396.4 million compared to EUR 256.4 million in the same period in the previous year. Among major projects in progress in Q3 in Estonia there were the construction of T1 Mall of Tallinn shopping centre, Maakri Kvartal, Öpiku Maja’s building B, Noblessner residential quarter, Pärnu mnt 22 office building, the Tapa military base barracks, and infrastructure for the airport tram line and the Tallinn ring road’s Juuliku junction. In Latvia, the biggest projects in progress were the Akropole and Alfa shopping centres, the Z Towers complex and the Ventspils music school and concert hall; in Lithuania, the Radisson Blu Hotel Lietuva expansion, the Philip Morris plant, the Narbuto 5 office building and the Rinktines Urban development project. In Norway, the biggest projects in progress in Q3 were the addition to the Blakstad hospital building and the Akersgata 8 office building