Directors' report
Changes in the Group's operations in the first quarter of 2010
Changes in the Group's Estonian operations
There have not been any significant changes in the Group's Estonian
operations
compared with the fourth quarter of 2009. By the end of 2009 all
major
restructuring activities had been completed and from 2010 the
Group conducts its
core business in Estonia through two subgroups - Nordecon
Ehitus and Nordecon
Infra that specialise in buildings and infrastructure
construction respectively.
The parent of the Group acts as a holding company,
providing strategic
management and Group-wide support services.
Changes in the Group's foreign operations
Latvia
The Group entered the Latvian market at
the beginning of 2007 when the
acquisition of OÜ Kaurits provided
the Group with a significant interest in a
Latvian company - SIA Abagars
(later Nordecon Infra SIA). In order to avoid
subsequent conflicts of
interest, the Group acquired the majority shareholding
in the Latvian entity
in May 2008. The core business of the Latvian company was
construction of
water and wastewater networks. Business volumes in Latvia grew
rapidly and
the company won and performed numerous large public procurement
projects.
However, rapid business growth was accompanied by growth in
operational risks which, in combination with drastic deterioration in the
economic environment, caused difficulties in collecting payments from
customers
including parties related to state and local governments.
As a result, in February 2010 the board of Nordecon
International AS resolved to
divest the Group's 56% interest in Nordecon Infra
SIA since it was evident that
in the foreseeable future the entity would be
operating with a loss. The stake
was sold to an individual (a
non-controlling shareholder). After the
transaction, the Group
does not have any ownership interests in companies
domiciled in Latvia.
The financial aspects of the transaction are described in
greater detail in
note 4 to the interim consolidated financial statements.
In the next few
years, the Group will continue project-based business in Latvia
through its
Estonian subsidiaries, involving partners where necessary. However,
the
continuation of project-based operations assumes the availability of
profitable projects.
Belarus
The Group has signed a contract with a Finnish food industry company
under which
it is going to build a factory in Belarus. The project will be
performed through
the Group's wholly-held Belarusian subsidiary Eurocon Stroi
IOOO whose
establishment was completed in January 2010. At the
moment, this is the Group's
only project in Belarus. The Group used a similar
strategy, i.e. contracts
tendered by well-known Nordic or Baltic
companies, for penetrating the Ukrainian
market more than ten years ago. The
Group is not holding any negotiations
regarding other projects and
according to the corporate development strategy
penetration of the
Belarusian market in 2010 is not a priority. The year 2010
and the above
project will serve as a basis for getting to know the market and
conducting
subsequent analyses.
Ukraine
There have been no significant changes in the Group's Ukrainian
operations
compared with the fourth quarter of 2009.
Major changes in the Group's structure in the first
quarter of 2010
Nordecon International AS
In January, the establishment proceedings of
Eurocon Stroi IOOO, a company
founded by Nordecon International AS and
Nordecon Ehitus AS, were completed. The
shareholders' interests are 70% and
30% respectively. The company was
established for performing
project-based construction work. Since Belarus is one
of the Group's target
markets, then in line with the corporate strategy the
majority
shareholding in the entity belongs to the Group's parent company.
In
February, Nordecon International AS sold its 56% stake in the Latvian
subsidiary Nordecon Infra SIA along with interests in its subsidiaries. The
subsidiary was sold to an external party (a non-controlling shareholder).
After
the transaction, the Group has no ownership interests in companies
registered in
Latvia.
AS Eston Ehitus
In March, AS Eston Ehitus established a subsidiary OÜ
Kaasa Vara. The share
capital of the subsidiary is 40 thousand kroons (3
thousand euros). At the
moment, the company does not conduct active
business operations. The company was
established for performing the corporate
rehabilitation plans of major debtors
of AS Eston Ehitus.
Eurocon Ukraine TOV
In March, Eurocon Ukraine TOV
sold its 99% stake in the subsidiary Bukovina
Development TOV. The entity
did not conduct any active business operations.
After the transaction,
the Group has no ownership interest in Bukovina
Development TOV.
Significant
structural changes after the reporting date
Nordecon
International AS
In
April, Nordecon International AS sold 100% of its shares in the Finnish
subsidiary Estcon OY to Group company Nordecon Betoon OÜ that is going to use
the subsidiary for performing concrete works in Finland. Finland is not one
of
the Group's target markets. Therefore, transfer of the investment is not
in
contradiction with the Group's general investment holding strategy.
Financial review
Margins
Nordecon International Group ended the first quarter of
2010 with a gross loss
of 23.7 million kroons (1.5 million euros). The
comparative period (first
quarter of 2009) ended with a gross profit of
36.9 million kroons (2.4 million
euros). The loss is mainly attributable to
the seasonal nature of the
construction business, unfavourable
weather conditions and stiff competition.
The seasonal nature of gross
profit development is presented in the following
table:
------------------------------------------------------------------------------
--
|
Percentage of annual | Q1 | Q2 | Q3 | Q4 | Total
|
| gross profit | | | | |
|
-----------------------------------------------------------------------------
---
|
2006 | 10% | 20% | 33% | 37% | 100%
|
-----------------------------------------------------------------------------
---
|
2007 | 13% | 30% | 26% | 31% | 100%
|
-----------------------------------------------------------------------------
---
|
2008 | 28% | 38% | 20% | 13% | 100%
|
-----------------------------------------------------------------------------
---
|
2009 | 27% | 35% | 59% | -21% | 100%
|
-----------------------------------------------------------------------------
---
The
past winter was considerably harsher for construction companies than the
previous ones. Abundance of snow and temperature fluctuations did not allow
continuing work on the majority of active projects or making preparations
for
new ones. On the other hand, regardless of the number of projects in
progress
and suspension of construction activity, companies were incurring
their fixed
operating costs. Moreover, the long and snowy winter had a
strong impact on road
care and maintenance activities that are performed
mostly in that period.
Performance of fixed-price maintenance contracts
in the first quarter of 2010
proved highly unprofitable because snow
clearing and de-icing operations were
much more time and labour consuming
than usual.
Notwithstanding the seasonal
impacts, we regret to report that the decline in
gross profit, which
started in 2008 owing to a significant deterioration in the
operating
environment, has continued. In all of the Group's markets profit
margins
have dropped year-over-year primarily on account of a steep decline in
demand. The main sector-specific trend has been the increasing excess of
construction capacities over the number of projects on offer. Demand that
is
insufficient for meeting the needs of all market players has heightened
pressure
for lowering the prices. In the light of the new trends emerging in
the
construction market, the Group intends to continue streamlining
its internal
processes (improving the efficiency of purchase of services,
cost cutting, etc)
so as to maintain its gross margin at a level that would
ensure that the year
will end in an operating profit.
Due to the incurrence of a gross loss, the Group
was unable to cover its
administrative expenses that totalled 18.3
million kroons (1.2 million euros).
Compared with the first quarter of 2009,
the Group has cut its administrative
expenses by 51%. Owing to a larger
than expected decrease in revenue, which may
be attributed to seasonal
factors, the ratio of administrative expenses to
revenue rose to 10.4%
(Q1 2009: 5.3%). However, management believes that the
implementation of
additional cost-cutting measures should reduce the Group's
annual
administrative expenses by around a third compared with 2009. This
should
ensure that the annual ratio of administrative expenses to revenue will
be at
the 5% level targeted by management.
Because of the above circumstances, the Group ended the first
quarter of 2010
with an operating loss of 45.6 million kroons (2.9 million
euros) (Q1 2009:
operating loss of 3.5 million kroons/0.2 million euros).
The Group's net loss for the period amounted to 25.1
million kroons (1.6 million
euros). Consolidated operating loss was reduced by
non-recurring finance income
from the sale of the loss-generating Latvian
operations (for further
information, see note 4 to the
consolidated interim financial statements). The
loss attributable to owners
of the parent Nordecon International AS amounted to
20.6 million kroons (1.3
million euros).
Cash flows
The Group's
operating activities for the first quarter of 2010 resulted in a net
cash
inflow of 36.9 million kroons (2.4 million euros), a significant
improvement the net outflow of 79.6 million kroons (5.9 million euros) posted
for the first quarter of 2009. The positive operating cash flow results
from
effective collection of receivables for work delivered in prior
periods, a
decrease in employee bonuses (the gross loss did not allow
making bonus
payments) and the deferral of some settlement terms of
projects started in 2009
to 2010 (e.g. those of institutions funded from the
state budget). Despite the
above, customers' contractual settlement terms
have become longer (particularly
in the case of public sector entities) and
owing to the ongoing economic
downturn there occur significant
settlement delays that give rise to overdue
accounts. The Group's ability
to maintain a positive net operating cash flow
depends on how well it can
adapt to the new economic environment (e.g. by
extending settlement
terms with subcontractors) and the extent to which
operating costs
can be cut.
The Group's
investing activities generated a net outflow of 7.4 million kroons
(0.5
million euros) compared with a net outflow of 75.2 million kroons (4.8
million euros) for the first quarter of 2009. A significant proportion of
cash
outflows from investing activities (9.9 million kroons/0.6 million
euros) are
attributable to outflows related to the disposal of the
subsidiary Nordecon
Infra SIA and the discontinuance of its
consolidation.
Financing activities for the first
quarter of 2010 resulted in a net cash
outflow of 61.2 million kroons
(3.9 million euros) while in the first quarter of
2009 financing activities
generated a net cash inflow of 38.2 million kroons
(2.4 million euros).
The structure of financing cash flows has changed because
the Group has
reduced borrowing and is settling its existing loan liabilities.
Key
financial figures and ratios
------------------------------------------------------------------------------
--
|
Figure / ratio | Q1 2010 | Q1 2009 | Q1 2008 | 2009
|
-----------------------------------------------------------------------------
---
|
Weighted average number | 30,756,72 | 30,756,728 | 30,756,728 | 30,756,728
|
| of shares (1) | 8 | | |
|
-----------------------------------------------------------------------------
---
|
Earnings per share (in | -0.67 | 0.23 | 1.50 | -1.49
|
| kroons) | | | |
|
-----------------------------------------------------------------------------
---
|
Earnings per share (in | -0.04 | 0.01 | 0.10 | -0.09
|
| euros) | | | |
|
-----------------------------------------------------------------------------
---
|
Revenue growth | -70.2% | -23.6% | 38.2% | -37.5%
|
-----------------------------------------------------------------------------
---
|
Average number of | 745 | 1,223 | 1,102 | 1,128
|
| employees | | | |
|
-----------------------------------------------------------------------------
---
|
Revenue per employee (in | 236 | 483 | 702 | 2,144
|
| thousands of kroons) | | | |
|
-----------------------------------------------------------------------------
---
|
Revenue per employee (in | 15 | 31 | 45 | 137
|
| thousands of euros) | | | |
|
-----------------------------------------------------------------------------
---
|
Personnel expenses to | 29.6% | 16.7% | 13.6% | 15.0%
|
| revenue | | | |
|
-----------------------------------------------------------------------------
---
|
Administrative expenses | 10.4% | 6.3% | 5.6% | 5.2%
|
| to revenue | | | |
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
EBITDA (in thousands of |-30,791(2) | 14,813 | 77,166 | 4,308 (2)
|
| kroons) | | | |
|
-----------------------------------------------------------------------------
---
|
EBITDA (in thousands of | -1,968 | 947 | 4,932 | 275
|
| euros) | | | |
|
-----------------------------------------------------------------------------
---
|
EBITDA margin | -17.5% | 2.5% | 10.0% | 0.2%
|
-----------------------------------------------------------------------------
---
|
Gross margin | -13.5% | 6.2% | 13.1% | 5.6%
|
-----------------------------------------------------------------------------
---
|
Operating margin | -25.9% | -0.6% | 7.9% | -5.2%
|
-----------------------------------------------------------------------------
---
|
Operating margin | -25.9% | -0.7% | 7.6% | -5.4%
|
| excluding gains on asset | | | |
|
| sales | | | |
|
-----------------------------------------------------------------------------
---
|
Net margin | -14.3% | -0.1% | 5.8% | -3.7%
|
-----------------------------------------------------------------------------
---
|
Return on invested | -1.7% | 0.5% | 3.9% | -4.1%
|
| capital | | | |
|
-----------------------------------------------------------------------------
---
|
Return on assets | -2.6% | -0.2% | 2.8% | -6.0%
|
-----------------------------------------------------------------------------
---
|
Return on equity | -3.6% | -0.1% | 5.4% | -11.4%
|
-----------------------------------------------------------------------------
---
|
Equity ratio | 44.0% | 37.5% | 38.0% | 37.1%
|
-----------------------------------------------------------------------------
---
|
Gearing | 22.8% | 31.8% | 18.9% | 26.4%
|
-----------------------------------------------------------------------------
---
|
Current ratio | 1.74 | 1.28 | 1.65 | 1.47
|
-----------------------------------------------------------------------------
---
|
| 31 March | 31 March | 31 March | 31 Dec
|
| | 2010 | 2009 | 2008 |
2009
|
-----------------------------------------------------------------------------
---
|
Order book (in thousands | 1,386,332 | 1,714,175 | 3,368,680 | 1,530,661
|
| of kroons) | | | |
|
-----------------------------------------------------------------------------
---
|
Order book (in thousands | 88,603 | 109,556 | 215,298 | 97,827
|
| of euros) | | | |
|
-----------------------------------------------------------------------------
---
(1)
For comparability, the weighted average number of shares is the number of
shares after the bonus issues.
(2) On calculating EBITDA, non-cash expenses included depreciation and
amortisation as well as impairment losses on goodwill.
------------------------------------------------------------------------------
--
|
Earnings per share (EPS) = net | Operating margin excluding gains on
|
| profit attributable to equity | asset sales = (operating profit -
|
| holders of the parent / weighted | gains on sale of property, plant
and |
| average number of shares outstanding | equipment - gains on sale of
real |
| Revenue per employee = revenue / | estate) / revenue
|
| average number of employees | Net margin = net profit
for the |
| Personnel expenses to revenue = | period / revenue
|
| personnel expenses / revenue | Return on invested
capital = (profit |
| Administrative expenses to revenue = | before tax +
interest expense) / the |
| administrative expenses / revenue | period's
average (interest-bearing |
| EBITDA = earnings before interest, |
liabilities + equity) |
| taxes, depreciation and
| Return on assets = operating profit / |
| amortisation
| the period's average total assets |
| EBITDA margin = EBITDA / revenue
| Return on equity = net profit for the |
| Gross margin = gross profit /
| period /the period's average total |
| revenue
| equity |
| Operating margin =
operating profit | Equity ratio = total equity / total |
| / revenue
| equity and liabilities |
|
| Gearing = (interest-bearing |
|
| liabilities - cash and cash |
|
| equivalents) / (interest bearing |
|
| liabilities + equity) |
|
| Current ratio = total current assets |
|
| / total current liabilities
|
-----------------------------------------------------------------------------
---
Performance
by geographical market
In the
first quarter of 2010, revenue earned outside Estonia accounted for
around 4% of the Group's total revenue. A year ago, the contribution of
foreign
markets was around 17%. The decrease results from the Group's
decision to sell
its Latvian operations in 2010 (see also the chapter Major
changes in the
Group's structure in the first quarter of 2010). In
addition, in contrast to the
first quarter of 2009, the Group did not earn any
revenue from Lithuania. The
Group's Ukrainian revenues have remained stable
compared with the first quarter
of 2009. Further information on the Group's
vision of its further operations in
Latvia, Lithuania and Ukraine can be
found in the chapter Outlooks of the
Group's geographical markets.
------------------------------------------------------------------------------
--
|
| Q1 2010 | Q1 2009 | Q1 2008 | 2009
|
-----------------------------------------------------------------------------
---
|
Estonia | 96% | 83% | 82% | 86%
|
-----------------------------------------------------------------------------
---
|
Ukraine | 4% | 3% | 16% | 3%
|
-----------------------------------------------------------------------------
---
|
Lithuania | 0% | 2% | 2% | 0%
|
-----------------------------------------------------------------------------
---
|
Latvia | 0% | 12% | 0% | 11%
|
-----------------------------------------------------------------------------
---
Revenue
distribution between different geographical segments is a consciously
deployed strategy by which the Group avoids excessive reliance on a single
market. Although in the long-term perspective the Group's strategy foresees
increasing foreign operations, in the short-term perspective the Group
will
focus on its home market and seizing opportunities in an environment
that it
knows best and where the risks are smaller.
Performance by business line
The core business of Nordecon International Group is general
contracting and
project management in buildings and infrastructure
construction. The Group is
involved, among other things, in the
construction of commercial and industrial
buildings and facilities, road
construction and maintenance, environmental
engineering, concrete works
and real estate development.
Consolidated revenue
for the first quarter of 2010 amounted to 176.0 million
kroons (11.2
million euros), a 70% decrease from the 590.7 million kroons (37.8
million
euros) generated in the first quarter of 2009. Above all, the downturn
is
attributable to a significant decline in the demand for construction
services
in all of the Group's markets and exceptionally snowy and cold winter
that had
the strongest impact on the Infrastructure segment where most
operations are
performed outdoors. In addition, the absolute revenue
figure has been impacted
by stiff competition that has lowered the
construction prices.
The Group aims to maintain the
revenues generated by its business segments
(Buildings and
Infrastructure) in balance as this helps disperse risks and
provides a
more solid foundation under stressed circumstances when one segment
experiences shrinkage. In view of estimated demand for apartments, in
subsequent
years the proportion of housing construction revenue will remain
within the
strategically set 20% limit.
Segment revenue
In the first quarter of 2010, the revenue generated by
the Buildings segment
clearly exceeded that of the Infrastructure segment.
The situation is somewhat
paradoxical because for some time most of the
construction market tenders have
been for the Infrastructure segment
(projects financed by the state and with the
support of the EU structural
funds). This is also reflected in the Group's order
book where 77% of active
construction contracts are related to the
Infrastructure
segment. The Group's management believes that the situation that
emerged in
the first quarter is temporary and in subsequent quarters the
contribution of the Infrastructure segment will increase. The larger revenue
of
the Buildings segment can be explained by tough weather conditions, which
prevailed during the period and had the strongest adverse impact on the
Infrastructure segment. If in buildings construction some work can
also be done
indoors, then during an exceptionally cold and snowy winter
proper construction
of roads, complex structures and outdoor networks is
practically impossible.
In the first three months of 2010, the Buildings
and Infrastructure segments
generated revenue of 126.0 million kroons (8.1
million euros) and 48.5 million
kroons (3.1 million euros) respectively. The
corresponding figures for the first
quarter of 2009 were 339.5 million kroons
(21.7 million euros) and 246.5 million
kroons (15.8 million euros)
respectively.
Revenue distribution
between segments*
------------------------------------------------------------------------------
--
|
Business segments | Q1 2010 | Q1 2009 | Q1 2008 | 2009
|
-----------------------------------------------------------------------------
---
|
Buildings | 72% | 58% | 80% | 45%
|
-----------------------------------------------------------------------------
---
|
Infrastructure | 28% | 42% | 20% | 55%
|
-----------------------------------------------------------------------------
---
*
In connection with the entry into force of IFRS 8 Operating Segments, the
Group has changed segment reporting in its financial statements. In
Directors'
report the Ukrainian and EU Buildings segments which are
disclosed separately in
the financial statements are presented as a single
segment. In addition, the
segment information presented in Directors'
report does not include the
disclosures on “other segments” that are
presented in the financial statements.
Revenue distribution within segments
Distribution of projects within
the Buildings segment has changed significantly
compared with a year ago as
well as historical annual averages. There are two
main reasons for this.
The scarcity of projects forces companies to compete in
all market segments
and the number of contracts awarded is small compared with
bids made. Such a
situation does not allow concentrating on a specific business
area. Another
important factor is the overall economic environment. During the
past year,
private companies' investments in commercial and industrial buildings
and
facilities have been almost nonexistent while mainly local governments'
investments in schools, nurseries and public buildings have increased, partly
thanks to the support received from the EU structural funds. The proportion
of
industrial buildings in the Group's portfolio is large mainly because of
the
ongoing construction of the Ahtme peak load boiler plant. The Group
builds
apartment buildings for external customers as a general
contractor, not a
developer. Revenue distribution within the segment
should remain similar
throughout the rest of the year.
------------------------------------------------------------------------------
--
|
Revenue distribution in the | Q1 2010 | Q1 2009 | Q1 2008 | 2009
|
| Buildings segment | | | |
|
-----------------------------------------------------------------------------
---
|
Commercial buildings | 22% | 75% | 63% | 66%
|
-----------------------------------------------------------------------------
---
|
Industrial and warehouse | 28% | 8% | 14% | 10%
|
| facilities | | | |
|
-----------------------------------------------------------------------------
---
|
Public buildings | 34% | 12% | 15% | 18%
|
-----------------------------------------------------------------------------
---
|
Apartment buildings | 16% | 4% | 8% | 6%
|
-----------------------------------------------------------------------------
---
In
the Infrastructure segment, a major revenue source is road maintenance,
which
in the first quarter contributed around 66% of the revenue generated by
the road
construction and maintenance sub-segment. In the second quarter, road
construction will begin which will contribute a major proportion of
revenue also
in 2010. The annual proportion of hydraulic engineering that
contributed a
minimal percentage of revenue in the first quarter depends
on the ports'
investment policy, which in the current economic climate
is very conservative.
The construction of other engineering facilities
(water and wastewater networks)
is an area where the Group has won many
tenders. Therefore, the contribution of
other engineering projects will
remain relatively large throughout the year. The
contribution of environmental
engineering is expected to increase compared with
2009.
------------------------------------------------------------------------------
--
|
Revenue distribution in the | Q1 2010 | Q1 2009 | Q1 2008 | 2009
|
| Infrastructure segment | | | |
|
-----------------------------------------------------------------------------
---
|
Road construction and | 52% | 20% | 41% | 49%
|
| maintenance | | | |
|
-----------------------------------------------------------------------------
---
|
Civil engineering (including | 3% | 22% | 11% | 12%
|
| hydraulic engineering) | | | |
|
-----------------------------------------------------------------------------
---
|
Other engineering | 30% | 17% | 5% | 31%
|
-----------------------------------------------------------------------------
---
|
Environmental engineering | 15% | 41% | 43% | 8%
|
-----------------------------------------------------------------------------
---
Order
book
At
31 March 2010, the Group's order book stood at 1,386 million kroons (88.6
million euros), approximately 19% down from the 1,714 million kroons (109.6
million euros) posted a year ago. Over the past quarters, the decline in
the
Group's order book has decelerated and levelled off at around 1,350 to
1,500
million kroons (86 to 95 million euros). In a situation where in
many segments
of the construction market the decrease in input prices has
ceased or been
replaced by a rise, the Group's management will focus,
above all, on improving
the profitability of the contract portfolio, not its
size or growth rate.
------------------------------------------------------------------------------
--
|
| Q1 2010 | Q1 2009 | Q1 2008 | 2009
|
-----------------------------------------------------------------------------
---
|
Order book, in thousands of | 1,386,33 | 1,714,175 | 3,368,680 | 1,530,661
|
| kroons | 2 | | |
|
-----------------------------------------------------------------------------
---
|
Order book, in thousands of | 88,603 | 109,556 | 215,298 | 97,827
|
| euros | | | |
|
-----------------------------------------------------------------------------
---
The
order book of the Infrastructure segment has grown year-over-year. At 31
March 2010 it accounted for 77% of the Group's total order book (31 March
2009:
65%). On the other hand, the total value of the portfolio has decreased
due to
the downturn in the construction market. In absolute terms, the order
book
figures have also been influenced by a major fall in construction
prices
compared with previous periods. This trend is going to change.
Between the reporting date (31 March 2010) and the date of
release of this
report, Group companies have been awarded additional
construction contracts of
approximately 205 million kroons (13 million
euros).
People and personnel expenses
In the first quarter of 2010, the
Group (including the parent and the
subsidiaries) employed, on
average, 745 people including around 350 engineers
and technical personnel
(ETP). The significant decrease in the number of staff
is attributable to
the continuing enforcement of the Group's cost-cutting policy
as well as the
divestment of the Latvian subsidiary Nordecon Infra SIA in the
first
quarter of 2010. At the end of 2009, the Nordecon Infra subgroup employed
over 160 people. In addition to disposals of companies, the number of staff
has
decreased on account of downsizing (lay-offs and termination of
contracts). In a
market situation where construction volumes may shrink even
further, the number
of staff may decrease also during the year. However, due
to the seasonal nature
of the business, in the second and third quarters the
number of staff should
increase because additional staff will be hired for
the performance of specific
projects under fixed term contracts.
Average number of the Group's employees
(including the parent and its
subsidiaries):
------------------------------------------------------------------------------
--
|
| Q1 2010 | Q1 2009 | Q12008 | 2009
|
-----------------------------------------------------------------------------
---
|
ETP | 354 | 499 | 456 | 467
|
-----------------------------------------------------------------------------
---
|
Workers | 391 | 624 | 646 | 661
|
-----------------------------------------------------------------------------
---
|
Total average | 745 | 1,223 | 1,102 | 1,128
|
-----------------------------------------------------------------------------
---
The
Group's personnel expenses for the first quarter of 2010 including all
associated taxes totalled 52.1 million kroons (3.3 million euros), a 47%
decrease compared with the 98.5 million kroons (6.3 million euros) incurred
in
the first quarter of 2009.
Personnel expenses have declined on account of downsizing and the
cutting of
basic salaries. In 2009, employee salaries were lowered at all
Group entities;
the average pay-cut for engineers and technical personnel
was 15%. The
performance pay of project staff that is linked to the
projects' profit margins
has also dropped.
In the first quarter of 2010, the remuneration
of the members of the council of
Nordecon International AS including social
security charges amounted to 392
thousand kroons (25 thousand euros). The
corresponding figure for the first
quarter of 2009 was also 392 thousand
kroons (25 thousand euros). The
remuneration and benefits of the
members of the board of Nordecon International
AS including social security
charges totalled 567 thousand kroons (36 thousand
euros) compared with 886
thousand kroons (57 thousand euros) for the first
quarter of 2009. The
remuneration of the board has decreased because in the
comparative period
the board had three members whereas currently the number is
two.
Share and
shareholders
ISIN code EE3100039496
Short name of the
security NCN1T
Nominal
value 10.00 kroons / 0.64 euros
Total
number of securities issued 30,756,728
Number of listed securities 30,756,728
Listing date 18 May 2006
The share capital of Nordecon
International AS consists of 30,756,728 ordinary
shares with a par value of
10 Estonian kroons each. Owners of ordinary shares
are entitled to
dividends as distributed from time to time. Each share carries
one vote at
the general meetings of Nordecon International AS.
Summarised trading results
Share trading history (EEK)
------------------------------------------------------------------------------
--
|
Price | Q1 2010 | Q1 2009 | Q1 2008
|
-----------------------------------------------------------------------------
---
|
Open | 25.35 | 16.43 | 76.51
|
-----------------------------------------------------------------------------
---
|
High | 40.68 | 20.34 | 76.51
|
-----------------------------------------------------------------------------
---
|
Low | 25.03 | 8.61 | 58.05
|
-----------------------------------------------------------------------------
---
|
Last closing price | 30.04 | 9.54 | 62.59
|
-----------------------------------------------------------------------------
---
|
Traded volume | 2,014,452 | 881,595 | 758,958
|
-----------------------------------------------------------------------------
---
|
Turnover, millions | 66.15 | 10.55 | 49.70
|
-----------------------------------------------------------------------------
---
|
Listed volume (31 March), | 30,757 | 30,757 | 30,757
|
| thousands | | |
|
-----------------------------------------------------------------------------
---
|
Market capitalisation (31 | 923.94 | 293.42 | 1,925.08
|
| March), millions | | |
|
-----------------------------------------------------------------------------
---
Share
trading history (EUR)
------------------------------------------------------------------------------
--
|
Price | Q12010 | Q1 2009 | Q1 2008
|
-----------------------------------------------------------------------------
---
|
Open | 1.62 | 1.05 | 4.89
|
-----------------------------------------------------------------------------
---
|
High | 2.60 | 1.30 | 4.89
|
-----------------------------------------------------------------------------
---
|
Low | 1.60 | 0.55 | 3.71
|
-----------------------------------------------------------------------------
---
|
Last closing price | 1.92 | 0.61 | 4.00
|
-----------------------------------------------------------------------------
---
|
Traded volume | 2,014,452 | 881,595 | 758,958
|
-----------------------------------------------------------------------------
---
|
Turnover, millions | 4.23 | 0.67 | 3.18
|
-----------------------------------------------------------------------------
---
|
Listed volume (31 March), | 30,757 | 30,757 | 30,757
|
| thousands | | |
|
-----------------------------------------------------------------------------
---
|
Market capitalisation (31 | 59.05 | 18.75 | 123.04
|
| March), millions | | |
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
Shareholder
structure
The
largest shareholders of Nordecon International AS at 31 March 2010
------------------------------------------------------------------------------
--
|
Shareholder | Number of | Ownership
|
| | shares |
interest
|
-----------------------------------------------------------------------------
---
|
AS Nordic Contractors | 16,507,464 | 53.67
|
-----------------------------------------------------------------------------
---
|
Skandinaviska Enskilda Banken Ab Clients | 2,702,282 | 8.79
|
-----------------------------------------------------------------------------
---
|
State Street Bank and Trust Omnibus | 1,147,911 | 3.73
|
| Account A Fund | |
|
-----------------------------------------------------------------------------
---
|
ING Luxembourg S.A. | 1,111,853 | 3.61
|
-----------------------------------------------------------------------------
---
|
Ain Tromp | 678,960 | 2.21
|
-----------------------------------------------------------------------------
---
|
ASM Investments OÜ | 519,600 | 1.69
|
-----------------------------------------------------------------------------
---
|
SEB Pank AS | 427,033 | 1.39
|
-----------------------------------------------------------------------------
---
|
Aivo Kont | 339,480 | 1.10
|
-----------------------------------------------------------------------------
---
The
shareholder structure of Nordecon International AS at 31 March 2010
------------------------------------------------------------------------------
--
|
| Number of | Ownership
|
| | shareholders |
interest
|
-----------------------------------------------------------------------------
---
|
Shareholders with interest | 2 | 62.46
|
| exceeding 5% | |
|
-----------------------------------------------------------------------------
---
|
Shareholders with interest between | 6 | 13.74
|
| 1% and 5% | |
|
-----------------------------------------------------------------------------
---
|
Shareholders with interest below 1% | 2,031 | 23.80
|
-----------------------------------------------------------------------------
---
|
Total | 2,039 | 100.00
|
-----------------------------------------------------------------------------
---
Shares
controlled by members of the council of Nordecon International AS at 31
March 2010
------------------------------------------------------------------------------
--
|
Council | | Number of | Ownership
|
| | | shares |
interest
|
-----------------------------------------------------------------------------
---
|
Toomas Luman (AS | Chairman of the | 16,559,144 | 53.84
|
| Nordic Contractors, OÜ | Council | |
|
| Luman ja Pojad)(1) | | |
|
-----------------------------------------------------------------------------
---
|
Ain Tromp | Member of the | 678,960 | 2.21
|
| | Council | |
|
-----------------------------------------------------------------------------
---
|
Alar Kroodo (ASM | Member of the | 519,600 | 1.69
|
| Investments OÜ) (1) | Council | |
|
-----------------------------------------------------------------------------
---
|
Andri Hõbemägi | Member of the | 40,000 | 0.13
|
| | Council | |
|
-----------------------------------------------------------------------------
---
|
Tiina Mõis | Member of the | 0 | 0.00
|
| | Council | |
|
-----------------------------------------------------------------------------
---
|
Meelis Milder | Member of the | 0 | 0.00
|
| | Council | |
|
-----------------------------------------------------------------------------
---
(1)
Companies controlled by the individual
Shares controlled by members of the
board of Nordecon International AS at 31
March 2010
------------------------------------------------------------------------------
--
|
Board | | Number of | Ownership
|
| | | shares |
interest
|
-----------------------------------------------------------------------------
---
|
Jaano Vink | Chairman of | 34,000 | 0.11%
|
| | the Board | |
|
-----------------------------------------------------------------------------
---
|
Priit Tiru | Member of the | 0 | 0.00%
|
| | Board | |
|
-----------------------------------------------------------------------------
---
Members
of the board and council of Nordecon International AS and companies
controlled by them have not been granted any share options under which they
could acquire shares in Nordecon International AS in subsequent periods.
Outlooks of the Group's geographical markets
Estonia
According to assessment of the Group's management, in 2010 the
Estonian
construction market will be characterised by the following
features:
- Total demand in the construction market will remain
heavily dependent on
public procurement tenders and projects performed with
the support of the
European Union funds. Project initiation success depends on
the administrative
capabilities of the central and local government which have
improved compared
with previous periods. However, the demand resulting from
public sector
projects will not be able to compensate for the steep
contraction of the
buildings construction market that remains abandoned by
most private companies
and individuals. Accordingly, the Group's management
forecasts that by the end
of 2010 the total volume of the construction market
will have decreased by over
50% compared with 2008.
- The number of
residential and general buildings construction companies is
decreasing.
Companies engaged in the sector are seeking opportunities for
penetrating also other market segments such as infrastructure. This has
heightened competition which, in turn, has increased the number of
companies
going bankrupt or needing corporate rehabilitation. The trend
will continue in
2010. The Group does not forecast a significant number of
mergers or takeovers
because in the current market situation this would not
have sufficient business
rationale.
- In 2010 the decrease in construction prices is
expected to cease after which
the prices are expected to start rising compared
with 2008-2009. In such a
situation, performance of construction contracts
concluded at unreasonably low
margins or below cost may have extremely adverse
consequences and may cause
serious financial difficulties for companies that
have not noticed the trend or
have been forced to ignore it due to cash flow
problems.
- Banks have divided companies operating in the construction
market into
different risk categories. Banks' risk exposures still include the
real estate
and investment loans granted to companies that were engaged in
real estate
development. In 2010, the survival of a number of companies will
depend on the
banks' risk management principles. On the other hand, the banks
have announced
that they are again ready to start financing the construction
sector although
to a limited extent.
- In 2009 building materials
manufacturers that had significantly increased
their output during the growth
phase of the market experienced continuing
shrinkage in demand and,
consequently, greater strain in meeting the
obligations taken for increasing
their capacities. To date, the decline in
building materials prices
has
halted and in 2010 prices are expected to start rising. Because of
the
increasing importance of infrastructure projects, the key
competitive
advantages will include industry-specific (engineering and
technical)
expertise, experience and references as well as the availability of
relevant
resources.
- Shrinkage in construction volumes has caused
continuously rising unemployment
among construction workers. The ensuing
growth in the supply of labour will help
construction companies control their
personnel expenses.
Construction projects' financing
principles have changed. There are now
additional requirements to the
funding to be provided by the builder during the
construction period.
Moreover, contractual settlement terms have lengthened and
there are
settlement defaults. All this will increase the companies' liquidity
risks.
Nordecon International Group operates in accordance with its long-term
objectives that are adjusted for changes in the external environment.
The Group has prepared for changes in the economic environment by:
- Sustaining focus on cost-cutting and seeking effective technical
solutions
that should halt year-over-year decrease in profit margins in 2010
and
ultimately ensure profitability
- Upholding the practice of conducting
thorough preliminary analyses of the
customers' solvency and creditworthiness
and dealing resolutely with the
collection of overdue receivables
-
Mitigating risks through a more conservative portfolio design that takes into
account the fact that input prices have turned (or are turning) to a rise
-
Focusing primarily on the home market
Latvia and Lithuania
In February 2010, the Group sold
its loss-generating Latvian subsidiary Nordecon
Infra SIA whose core business
was construction of water and wastewater networks.
According to the Group's
assessment, the Latvian construction market will be
undergoing extensive
adjustment to the recessionary environment through
2010-2011.
Therefore, in the next few years the Group will continue operating in
Latvia
on a project basis, through its Estonian subsidiaries, involving
partners
where necessary. Continuation of project-based business assumes that
the
projects can be performed profitably. The decision does not change
the Group's
strategic objectives in the Latvian market, i.e. the objective
of operating in
Latvia in the future through local subsidiaries engaged in
buildings and
infrastructure construction (see the chapter The Group's
structure by 2013).
Recent economic developments in Lithuania have been
similar to the ones in the
other Baltic countries. Slowdown in investment,
both in the public and private
sectors, and similar factors have had a
direct impact on the construction
market. The commercial and
residential construction markets (the Group as a
general contractor not a
developer) have contracted visibly and the launch of
any new private sector
projects in the near future is unlikely.
In response to
this, the operations of the Group's Lithuanian subsidiary
Nordecon
Statyba UAB (formerly UAB Eurocon LT) have been essentially suspended
and
the Group is monitoring the market situation. The temporary suspension of
operations does not cause any major costs for the Group. The Group's
management
does not exclude the possibility that the Lithuanian operations
will remain
suspended also after 2010. The decision does not change the
Group's strategic
objectives in the Lithuanian construction market (see the
chapter The Group's
structure by 2013) and does not imply the sale or
liquidation of the company.
Ukraine
In Ukraine, the Group will continue mainly
as a general contractor and project
manager in the construction of
commercial buildings and production facilities.
In 2009, the number of
projects started in the buildings construction market
decreased
substantially. The situation in the sector is not expected to improve
until
after the first half of 2010. This implies, above all, the need for tight
cost control.
Activities on development projects that require major investment have
been
suspended to minimise the risks until the situation in the
Ukrainian and global
financial markets eases up (the Group has currently an
interest in two
development projects that have been conserved).
The main risks in the Ukrainian market are
connected with the low administrative
efficiency of the central and local
governments and the judicial system,
inflation, and the availability
of quality construction inputs. Demand is mainly
undermined by the customers'
lack of financing. To date, the weakening of the
local currency that began
in 2008 has stopped and the Group's exposure to
market-based currency
risk has decreased considerably. It is also clear that the
political climate
has stabilised after the presidential elections, which may
pave the way
for an improvement in the general economic climate. This, in turn,
would
revive investment by local and foreign companies who account for a
significant proportion of the Group's customers in the Ukrainian market.
Notwithstanding the above, the Group believes that the construction
market of a
country with a population of 46 million will offer excellent
business
opportunities also in the future. The Group's key success
factor is relatively
little competition among project management companies
(the Group offers flexible
construction management in combination with
European practices and competencies)
compared with the real needs of a
normally functioning construction market. The
Group's management is confident
that the current crisis in the Ukrainian
construction market and
economy as a whole will transform the local
understanding and
expectations of general contracting and project management in
the
construction business, which will improve the Group's position in the
long-term perspective significantly.
Description of the main risks
Business risks
To mitigate the risks arising from the seasonal nature of the
construction
business (primarily the weather conditions during the
winter months), the Group
has acquired road maintenance contracts that
generate year-round business. In
addition, Group companies are constantly
seeking new technical solutions that
would allow working more efficiently
under changeable weather conditions.
To manage their daily construction
risks, Group companies purchase Contractors'
All Risks insurance. Depending
on the nature of the project, both general frame
agreements and specially
tailored project-specific contracts are used. In
addition, as a rule,
subcontractors are required to secure the performance of
their obligations
with a bank guarantee issued for the benefit of a Group
company. To
remedy builder-caused deficiencies which may be detected during the
warranty
period, all Group companies create warranties provisions. At 31
December 2010, the provisions (including current and non-current ones)
totalled
14.3 million kroons (0.9 million euros). The corresponding figure at
31 March
2009 was 13.9 million kroons (0.9 million euros).
Credit risk
For credit risk management, a potential customer's
settlement behaviour and
creditworthiness are analysed already in the
tendering stage. Subsequent to the
signature of a contract, the customer's
settlement behaviour is monitored on an
ongoing basis from the making of an
advance payment to adherence to the
contractual settlement schedule,
which usually depends on the documentation of
the delivery of work
performed. We believe that the system in place allows us to
respond to
customers' settlement difficulties with sufficient speed. As at the
end of
the reporting period, our customers' settlement behaviour was good,
considering the economic situation; however, there were also some large
problem
customers. The proportion of overdue receivables has increased,
increasing the
probability of credit losses also in subsequent periods. In
accordance with the
Group's accounting policies, all receivables that are
more than 180 days overdue
or in respect of which no additional settlement
agreements have been reached are
recognised as an expense.
In the first quarter of 2010, net gain on
doubtful receivables (recoveries of
items written down in previous periods
exceeded the amount of items written down
in the reporting period) amounted to
0.1 million kroons (0 million euros). In
the first quarter of 2009, net
loss on doubtful receivables amounted to 0.9
million kroons (0.1 million
euros).
Liquidity risk
Free funds are placed
in overnight or fixed-interest term deposits with the
largest banks in
the markets where the Group operates. To ensure timely
settlement of
liabilities, approximately two weeks' working capital is kept in
current
accounts or overnight deposits. Where necessary, overdraft facilities
are
used. At the reporting date, the Group's current assets exceeded its
current
liabilities 1.74-fold (31 March 2009: 1.28-fold) and available cash
funds
totalled 193.7 million kroons (12.4 million euros) (31 March
2009: 179.6 million
kroons / 11.5 million euros), providing a sufficient
liquidity buffer for
operating in an economic environment that is more
complicated than in the
previous year.
Interest rate risk
The Group's interest-bearing liabilities
to banks have mainly fixed interest
rates. Finance lease liabilities have
floating interest rates and are linked to
EURIBOR. At 31 March 2010, the
Group's interest-bearing loans and borrowings
totalled 456.0 million
kroons (29.1 million euros), a 209.8 million kroon (13.4
million euro)
decrease year-over-year. Interest expense for the first quarter of
2010
amounted to 4.6 million kroons (0.3 million euros). Compared with the
first
quarter of 2009, interest expense has contracted by 3.8 million kroons
(0.2
million euros) thanks to a decline in the EURIBOR base rate and a
decrease in
loans and borrowings.
The Group's interest rate risk results mainly from two
factors: an increase in
the base rate for floating interest rates (EURIBOR)
and insufficient operating
cash flow that may render the Group unable to
settle its interest expense. The
first factor is mitigated by fixing, where
possible, the interest rates of
liabilities during the period of low
market interest rates. The realisation of
the cash flow risk depends on the
success of operating activities. The Group
does not use derivatives to
hedge the interest rate risk.
Currency risk
As a rule,
construction contracts and subcontractors' service contracts are made
in the
currency of the host country: in Estonia in Estonian kroons (EEK) and in
Ukraine in Ukrainian hryvnas (UAH). In connection with shrinkage in
operations
in Latvia and Lithuania, currency risks in those countries are no
longer
relevant. Services purchased from other countries are mostly
priced in euros,
which does not constitute a currency risk for the Group's
Estonian entities.
The Group's foreign exchange gains and losses result
mainly from its Ukrainian
operations because the Ukrainian national currency
floats against the euro and,
consequently, against the Estonian kroon. To
date, the weakening of the
Ukrainian hryvna against the euro that
began in the last quarter of 2008 has
ceased. The Group's exchange gains
and losses for the first quarter of 2010
resulted in a net exchange gain
of 2.7 million kroons (0.2 million euros). In
the first quarter of 2009,
the Group's exchange differences resulted in a gain
of 2.1 million kroons
(0.1 million euros).
Condensed
consolidated interim statement of financial position
------------------------------------------------------------------------------
--
|
EEK`000 | 31 March 2010 | 31 December 2009
|
-----------------------------------------------------------------------------
---
|
ASSETS | |
|
-----------------------------------------------------------------------------
---
|
Current assets | |
|
-----------------------------------------------------------------------------
---
|
Cash and cash equivalents | 193,650 | 225,191
|
-----------------------------------------------------------------------------
---
|
Trade and other receivables | 437,984 | 644,704
|
-----------------------------------------------------------------------------
---
|
Prepayments | 23,064 | 30,595
|
-----------------------------------------------------------------------------
---
|
Inventories | 381,598 | 389,328
|
-----------------------------------------------------------------------------
---
|
Non-current assets held for sale | 5,020 | 4,617
|
-----------------------------------------------------------------------------
---
|
Total current assets | 1,041,316 | 1,294,435
|
-----------------------------------------------------------------------------
---
|
Non-current assets | |
|
-----------------------------------------------------------------------------
---
|
Investments in equity accounted | 2,181 | 2,191
|
| investees | |
|
-----------------------------------------------------------------------------
---
|
Other investments | 414 | 414
|
-----------------------------------------------------------------------------
---
|
Trade and other receivables | 33,502 | 33,329
|
-----------------------------------------------------------------------------
---
|
Investment property | 87,975 | 87,975
|
-----------------------------------------------------------------------------
---
|
Property, plant and equipment | 173,297 | 204,115
|
-----------------------------------------------------------------------------
---
|
Intangible assets | 244,767 | 268,233
|
-----------------------------------------------------------------------------
---
|
Total non-current assets | 542,137 | 596,257
|
-----------------------------------------------------------------------------
---
|
TOTAL ASSETS | 1,583,453 | 1,890,692
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
LIABILITIES | |
|
-----------------------------------------------------------------------------
---
|
Current liabilities | |
|
-----------------------------------------------------------------------------
---
|
Loans and borrowings | 180,363 | 262,959
|
-----------------------------------------------------------------------------
---
|
Trade payables | 234,353 | 377,925
|
-----------------------------------------------------------------------------
---
|
Other payables | 66,867 | 94,580
|
-----------------------------------------------------------------------------
---
|
Deferred income | 107,515 | 136,438
|
-----------------------------------------------------------------------------
---
|
Provisions | 8,078 | 10,364
|
-----------------------------------------------------------------------------
---
|
Total current liabilities | 597,176 | 882,266
|
-----------------------------------------------------------------------------
---
|
Non-current liabilities | |
|
-----------------------------------------------------------------------------
---
|
Loans and borrowings | 275,636 | 294,328
|
-----------------------------------------------------------------------------
---
|
Trade payables | 5,006 | 4,846
|
-----------------------------------------------------------------------------
---
|
Other payables | 1,500 | 1,500
|
-----------------------------------------------------------------------------
---
|
Provisions | 7,041 | 7,041
|
-----------------------------------------------------------------------------
---
|
Total non-current liabilities | 289,183 | 307,715
|
-----------------------------------------------------------------------------
---
|
TOTAL LIABILITIES | 886,359 | 1,189,981
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
EQUITY | |
|
-----------------------------------------------------------------------------
---
|
Share capital | 307,567 | 307,567
|
-----------------------------------------------------------------------------
---
|
Statutory capital reserve | 40,024 | 40,012
|
-----------------------------------------------------------------------------
---
|
Translation reserve | -3,767 | -3,201
|
-----------------------------------------------------------------------------
---
|
Retained earnings | 324,685 | 345,280
|
-----------------------------------------------------------------------------
---
|
Total equity attributable to equity | 668,509 | 689,658
|
| holders of the parent | |
|
-----------------------------------------------------------------------------
---
|
Non-controlling interest | 28,585 | 11,053
|
-----------------------------------------------------------------------------
---
|
TOTAL EQUITY | 697,094 | 700,711
|
-----------------------------------------------------------------------------
---
|
TOTAL LIABILITIES AND EQUITY | 1,583,453 | 1,890,692
|
-----------------------------------------------------------------------------
---
-----------------------------------------------------------------------
---------
|
EUR`000 | 31 March 2010 | 31 December 2009
|
-----------------------------------------------------------------------------
---
|
ASSETS | |
|
-----------------------------------------------------------------------------
---
|
Current assets | |
|
-----------------------------------------------------------------------------
---
|
Cash and cash equivalents | 12,376 | 14,392
|
-----------------------------------------------------------------------------
---
|
Trade and other receivables | 27,992 | 41,204
|
-----------------------------------------------------------------------------
---
|
Prepayments | 1,474 | 1,955
|
-----------------------------------------------------------------------------
---
|
Inventories | 24,389 | 24,883
|
-----------------------------------------------------------------------------
---
|
Non-current assets held for sale | 321 | 295
|
-----------------------------------------------------------------------------
---
|
Total current assets | 66,552 | 82,729
|
-----------------------------------------------------------------------------
---
|
Non-current assets | |
|
-----------------------------------------------------------------------------
---
|
Investments in equity accounted | 139 | 140
|
| investees | |
|
-----------------------------------------------------------------------------
---
|
Other investments | 26 | 26
|
-----------------------------------------------------------------------------
---
|
Trade and other receivables | 2,141 | 2,130
|
-----------------------------------------------------------------------------
---
|
Investment property | 5,623 | 5,623
|
-----------------------------------------------------------------------------
---
|
Property, plant and equipment | 11,076 | 13,045
|
-----------------------------------------------------------------------------
---
|
Intangible assets | 15,643 | 17,143
|
-----------------------------------------------------------------------------
---
|
Total non-current assets | 34,649 | 38,108
|
-----------------------------------------------------------------------------
---
|
TOTAL ASSETS | 101,201 | 120,837
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
LIABILITIES | |
|
-----------------------------------------------------------------------------
---
|
Current liabilities | |
|
-----------------------------------------------------------------------------
---
|
Loans and borrowings | 11,527 | 16,806
|
-----------------------------------------------------------------------------
---
|
Trade payables | 14,978 | 24,154
|
-----------------------------------------------------------------------------
---
|
Other payables | 4,274 | 6,045
|
-----------------------------------------------------------------------------
---
|
Deferred income | 6,871 | 8,720
|
-----------------------------------------------------------------------------
---
|
Provisions | 516 | 662
|
-----------------------------------------------------------------------------
---
|
Total current liabilities | 38,167 | 56,387
|
-----------------------------------------------------------------------------
---
|
Non-current liabilities | |
|
-----------------------------------------------------------------------------
---
|
Loans and borrowings | 17,616 | 18,811
|
-----------------------------------------------------------------------------
---
|
Trade payables | 320 | 310
|
-----------------------------------------------------------------------------
---
|
Other payables | 96 | 96
|
-----------------------------------------------------------------------------
---
|
Provisions | 450 | 450
|
-----------------------------------------------------------------------------
---
|
Total non-current liabilities | 18,482 | 19,667
|
-----------------------------------------------------------------------------
---
|
TOTAL LIABILITIES | 56,649 | 76,054
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
EQUITY | |
|
-----------------------------------------------------------------------------
---
|
Share capital | 19,657 | 19,657
|
-----------------------------------------------------------------------------
---
|
Statutory capital reserve | 2,558 | 2,557
|
-----------------------------------------------------------------------------
---
|
Translation reserve | -241 | -205
|
-----------------------------------------------------------------------------
---
|
Retained earnings | 20,751 | 22,067
|
-----------------------------------------------------------------------------
---
|
Total equity attributable to equity | 42,726 | 44,077
|
| holders of the parent | |
|
-----------------------------------------------------------------------------
---
|
Non-controlling interest | 1,826 | 706
|
-----------------------------------------------------------------------------
---
|
TOTAL EQUITY | 44,552 | 44,784
|
-----------------------------------------------------------------------------
---
|
TOTAL LIABILITIES AND EQUITY | 101,201 | 120,837
|
-----------------------------------------------------------------------------
---
Condensed
consolidated interim statement of comprehensive income
------------------------------------------------------------------------------
--
|
EEK`000 | Q1 2010 | Q1 2009 | 2009
|
-----------------------------------------------------------------------------
---
|
Revenue | 175,996 | 590,664 | 2,418,880
|
-----------------------------------------------------------------------------
---
|
Cost of sales | -199,727 | -553,809 | -2,282,575
|
-----------------------------------------------------------------------------
---
|
Gross profit / loss | -23,731 | 36,855 | 136,305
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Distribution expenses | -1,997 | -2,223 | -9,416
|
-----------------------------------------------------------------------------
---
|
Administrative expenses | -18,268 | -37,404 | -125,206
|
-----------------------------------------------------------------------------
---
|
Other operating income | 676 | 1,689 | 25,592
|
-----------------------------------------------------------------------------
---
|
Other operating expenses | -2,245 | -2,423 | -154,014
|
-----------------------------------------------------------------------------
---
|
Operating loss | -45,565 | -3,506 | -126,739
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Finance income | 39,234 | 18,775 | 86,513
|
-----------------------------------------------------------------------------
---
|
Finance expenses | -18,790 | -13,782 | -33,934
|
-----------------------------------------------------------------------------
---
|
Net finance income | 20,444 | 4,993 | 52,579
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Share of loss of equity | -10 | -2,644 | -7,666
|
| accounted investees | | |
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Loss before income tax | -25,131 | -1,157 | -81,826
|
-----------------------------------------------------------------------------
---
|
Income tax expense | 0 | 618 | -7,618
|
-----------------------------------------------------------------------------
---
|
Loss for the period | -25,131 | -539 | -89,444
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Other comprehensive income / | | |
|
| expense: | | |
|
-----------------------------------------------------------------------------
---
|
Exchange differences on | -566 | -1,480 | 905
|
| translating foreign operations | | |
|
-----------------------------------------------------------------------------
---
|
Total other comprehensive | -566 | -1,480 | 905
|
| income / expense for the period | | |
|
-----------------------------------------------------------------------------
---
|
TOTAL COMPREHENSIVE EXPENSE FOR | -25,697 | -2,019 | -88,539
|
| THE PERIOD | | |
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
-------------------------------------------------------------------------
-------
|
Loss attributable to: | | |
|
-----------------------------------------------------------------------------
---
|
- Owners of the parent | -20,595 | 7,046 | -45,740
|
-----------------------------------------------------------------------------
---
|
- Non-controlling interests | -4,536 | -7,585 | -43,704
|
-----------------------------------------------------------------------------
---
|
Loss for the period | -25,131 | -539 | -89,444
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Total comprehensive expense | | |
|
| attributable to: | | |
|
-----------------------------------------------------------------------------
---
|
- Owners of the parent | -21,161 | 8,438 | -44,835
|
-----------------------------------------------------------------------------
---
|
- Non-controlling interests | -4,536 | -10,457 | -43,704
|
-----------------------------------------------------------------------------
---
|
Total comprehensive expense for | -25,697 | -2,019 | -88,539
|
| the period | | |
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Earnings per share attributable | | |
|
| to owners of the parent: | | |
|
-----------------------------------------------------------------------------
---
|
Basic earnings per share (EEK) | -0.67 | 0.23 | -1.49
|
-----------------------------------------------------------------------------
---
|
Diluted earnings per share | -0.67 | 0.23 | -1.49
|
| (EEK) | | |
|
-----------------------------------------------------------------------------
---
-----------------------------------------------------------------------
---------
|
EUR`000 | Q1 2010 | Q1 2009 | 2009
|
-----------------------------------------------------------------------------
---
|
Revenue | 11,248 | 37,750 | 154,595
|
-----------------------------------------------------------------------------
---
|
Cost of sales | -12,765 | -35,395 | -145,883
|
-----------------------------------------------------------------------------
---
|
Gross profit / loss | -1,517 | 2,355 | 8,711
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Distribution expenses | -128 | -142 | -602
|
-----------------------------------------------------------------------------
---
|
Administrative expenses | -1,168 | -2,391 | -8,002
|
-----------------------------------------------------------------------------
---
|
Other operating income | 43 | 108 | 1,636
|
-----------------------------------------------------------------------------
---
|
Other operating expenses | -144 | -155 | -9,843
|
-----------------------------------------------------------------------------
---
|
Operating loss | -2,912 | -224 | -8,100
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Finance income | 2,508 | 1,200 | 5,529
|
-----------------------------------------------------------------------------
---
|
Finance expenses | -1,201 | -881 | -2,169
|
-----------------------------------------------------------------------------
---
|
Net finance income | 1,307 | 319 | 3,360
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Share of loss of equity | -1 | -169 | -490
|
| accounted investees | | |
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Loss before income tax | -1,606 | -74 | -5,230
|
-----------------------------------------------------------------------------
---
|
Income tax expense | 0 | 39 | -487
|
-----------------------------------------------------------------------------
---
|
Loss for the period | -1,606 | -34 | -5,717
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Other comprehensive income / | | |
|
| expense: | | |
|
-----------------------------------------------------------------------------
---
|
Exchange differences on | -36 | -95 | 58
|
| translating foreign operations | | |
|
-----------------------------------------------------------------------------
---
|
Total other comprehensive | -36 | -95 | 58
|
| income / expense for the period | | |
|
-----------------------------------------------------------------------------
---
|
TOTAL COMPREHENSIVE EXPENSE FOR | -1,642 | -129 | -5,659
|
| THE PERIOD | | |
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
-------------------------------------------------------------------------
-------
|
Loss attributable to: | | |
|
-----------------------------------------------------------------------------
---
|
- Owners of the parent | -1,316 | 450 | -2,923
|
-----------------------------------------------------------------------------
---
|
- Non-controlling interests | -290 | -485 | -2,793
|
-----------------------------------------------------------------------------
---
|
Loss for the period | -1,606 | -34 | -5,717
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Total comprehensive expense | | |
|
| attributable to: | | |
|
-----------------------------------------------------------------------------
---
|
- Owners of the parent | -1,352 | 539 | -2,865
|
-----------------------------------------------------------------------------
---
|
- Non-controlling interests | -290 | -668 | -2,793
|
-----------------------------------------------------------------------------
---
|
Total comprehensive expense for | -1,642 | -129 | -5,659
|
| the period | | |
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Earnings per share attributable | | |
|
| to owners of the parent: | | |
|
-----------------------------------------------------------------------------
---
|
Basic earnings per share (EUR) | -0.04 | 0.01 | -0.10
|
-----------------------------------------------------------------------------
---
|
Diluted earnings per share | -0.04 | 0.01 | -0.10
|
| (EUR) | | |
|
-----------------------------------------------------------------------------
---
Condensed
consolidated interim statement of cash flows
------------------------------------------------------------------------------
--
|
| EEK`000 | EUR`000
|
-----------------------------------------------------------------------------
---
|
| Q1 2010 | Q1 2009 | Q1 2010 | Q12009
|
-----------------------------------------------------------------------------
---
|
Cash flows from operating | | | |
|
| activities | | | |
|
-----------------------------------------------------------------------------
---
|
Cash receipts from customers | 344,499 | 661,510 | 22,017 | 42,278
|
-----------------------------------------------------------------------------
---
|
Cash paid to suppliers | -224,911 | -585,205 | -14,374 | -37,401
|
-----------------------------------------------------------------------------
---
|
VAT paid | -20,906 | -23,439 | -1,336 | -1,498
|
-----------------------------------------------------------------------------
---
|
Cash paid to and for | -61,594 | -126,515 | -3,937 | -8,086
|
| employees | | | |
|
-----------------------------------------------------------------------------
---
|
Income tax paid | -168 | -6,002 | -11 | -384
|
-----------------------------------------------------------------------------
---
|
Net cash from / used in | 36,920 | -79,651 | 2,359 | -5,091
|
| operating activities | | | |
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Cash flows from investing | | | |
|
| activities | | | |
|
-----------------------------------------------------------------------------
---
|
Acquisition of property, | -811 | -530 | -52 | -34
|
| plant and equipment | | | |
|
-----------------------------------------------------------------------------
---
|
Acquisition of intangible | 0 | -7,500 | 0 | -479
|
| assets | | | |
|
-----------------------------------------------------------------------------
---
|
Proceeds from sale of | 422 | 1,130 | 27 | 72
|
| property, plant and equipment | | | |
|
| and intangible assets | | | |
|
-----------------------------------------------------------------------------
---
|
Acquisition of subsidiaries, | 0 | -6,776 | 0 | -433
|
| net of cash acquired | | | |
|
-----------------------------------------------------------------------------
---
|
Cash outflow on the disposal | -9,899 | 0 | -633 | 0
|
| of subsidiaries | | | |
|
-----------------------------------------------------------------------------
---
|
Acquisition of associates | 0 | -6,000 | 0 | -383
|
-----------------------------------------------------------------------------
---
|
Proceeds from disposal of | 0 | 6,724 | 0 | 430
|
| associates | | | |
|
-----------------------------------------------------------------------------
---
|
Acquisition of interests in | 0 | -20,000 | 0 | -1,279
|
| joint ventures | | | |
|
-----------------------------------------------------------------------------
---
|
Loans granted | -1,173 | -53,747 | -75 | -3,435
|
-----------------------------------------------------------------------------
---
|
Repayment of loans granted | 2,660 | 6,092 | 170 | 389
|
-----------------------------------------------------------------------------
---
|
Dividends received | 31 | 0 | 2 | 0
|
-----------------------------------------------------------------------------
---
|
Interest received | 1,325 | 5,457 | 85 | 349
|
-----------------------------------------------------------------------------
---
|
Net cash used in investing | -7,445 | -75,150 | -476 | -4,803
|
| activities | | | |
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Cash flows from financing | | | |
|
| activities | | | |
|
-----------------------------------------------------------------------------
---
|
Proceeds from loans received | 19,121 | 122,911 | 1,222 | 7,855
|
-----------------------------------------------------------------------------
---
|
Repayment of loans received | -65,749 | -63,576 | -4,202 | -4,063
|
-----------------------------------------------------------------------------
---
|
Payment of finance lease | -11,127 | -12,462 | -711 | -796
|
| liabilities | | | |
|
-----------------------------------------------------------------------------
---
|
Interest paid | -3,390 | -8,374 | -217 | -535
|
-----------------------------------------------------------------------------
---
|
Other payments made | -86 | -315 | -6 | -20
|
-----------------------------------------------------------------------------
---
|
Net cash used in / from | -61,231 | 38,184 | -3,914 | 2,440
|
| financing activities | | | |
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Net cash flow | -31,756 | -116,617 | -2,031 | -7,454
|
-----------------------------------------------------------------------------
---
---------------------------------------------------------------------------
-----
|
Cash and cash equivalents at | 225,191 | 296,184 | 14,392 | 18,930
|
| beginning of period | | | |
|
-----------------------------------------------------------------------------
---
|
Effect of exchange rate | 215 | 76 | 15 | 5
|
| fluctuations | | | |
|
-----------------------------------------------------------------------------
---
|
Decrease in cash and cash | -31,756 | -116,617 | -2,031 | -7,454
|
| equivalents | | | |
|
-----------------------------------------------------------------------------
---
|
Cash and cash equivalents at | 193,650 | 179,643 | 12,376 | 11,481
|
| end of period | | | |
|
-----------------------------------------------------------------------------
---
Nordecon
International is a group of construction companies whose core business
is
general contracting and construction management in the construction
of
buildings and infrastructures in Estonia, Lithuania and Ukraine. In
addition,
in Estonia our companies act as independent contractors in road
construction
and maintenance, environmental engineering, the assembly of
reinforced concrete
elements, and the performance of cast-on-site concrete
works. The parent of the
Group is Nordecon International AS, a company
registered and located in
Tallinn, Estonia. In addition to the parent company,
there are more than 15
subsidiaries in the Group. The consolidated revenue of
the Group in 2009 was
2.4 billion kroons (155 million euros). Currently
Nordecon International Group
employs nearly 750 people. Since 18 May 2006, the
company's shares have been
quoted in the main list of the NASDAQ OMX Tallinn
Stock Exchange.
1 euro = 15.6466 kroons
Raimo Talviste
Nordecon
International AS
Head of Finance and Investor Relations
Tel: +372 615
4445
Email: raimo.talviste@nordecon.com
www.nordecon.com