Published: 2021-05-06 08:00:00 CEST
Quarterly report

2021 first quarter consolidated interim report (unaudited)

The results of the first quarter of 2021 are characterised by a slight decrease in operating volumes compared to the same period of last year, due to projects completed in foreign markets, and new construction contracts concluded in record volumes.
The order book of Nordecon Group and the volume of contracts concluded in one quarter were the largest in the group's history. As of 31 March 2021, the volume of order book amounted to 281,431 thousand euros, which is approximately 23% more than in the comparable period last year. In the first quarter of 2021 new contracts were signed in total of 104,882 thousand euros worth. A number of large-scale contracts provide a significant volume of construction for 2022 and 2023.
Sales revenue for the reporting period, which was 48,987 thousand euros, is approximately 11% lower compared to the same quarter of the previous year. An important part of the decline in sales revenue is in foreign markets, where sales revenue has decreased by 73%, whereas Estonia's sales revenue has remained at a level comparable to the same period last year. The Group ended with -92 thousand euros gross profit in the first quarter.  Due to the seasonal nature of the construction, the result of the first quarter is influenced by a large share of uncovered fixed costs, especially in the segment of infrastructure.  This is mainly influenced by the asphalt concrete production and installation unit in road construction, where a large part of the fixed costs are necessary technical costs. In addition, the result was significantly influenced by the one-off costs associated with the completion of construction works of Nysäter wind farm in Sweden.
The net profit was influenced by the decrease in administrative expenses compared to the first quarter of 2020 and by the stronger currency exchange rate of the Ukrainian hryvnia, which had a significant impact on the financial income and costs of the group, against the euro. The net loss of the group decreased by approximately 13% compared to the same period last year, amounting to 1 911 thousand euros, of which the share of owners of the parent amounted to 1 564 thousand euros (decrease 41%).

Condensed consolidated interim statement of financial position

€’00031 March 202131 December 2020
Current assets  
Cash and cash equivalents8,41612,576
Trade and other receivables42,35250,029
Total current assets77,79387,737
Non-current assets
Other investments2626
Trade and other receivables8,9508,654
Investment property5,6395,639
Property, plant and equipment17,90318,053
Intangible assets14,97814,966
Total non-current assets47,49647,338
TOTAL ASSETS125,289135,075
Current liabilities  
Trade payables40,67847,390
Other payables8,61811,814
Deferred income10,3127,738
Total current liabilities78,69186,509
Non-current liabilities
Trade payables2,7202,332
Total non-current liabilities11,45511,331
Share capital14,37914,379
Own (treasury) shares (660)(660)
Share premium635635
Statutory capital reserve2,5542,554
Translation reserve2,2422,423
Retained earnings12,97914,543
Total equity attributable to owners of the parent32,12933,874
Non-controlling interests3,0143,361
TOTAL EQUITY35,14337,235

Condensed consolidated interim statement of comprehensive income

€’000 Q1 2021Q1 20202020
Revenue  48,987 54,924 296,082
Cost of sales (49,079)(53,736)(285,086)
Gross profit (loss) (92)1,18810,996
Marketing and distribution expenses (107)(128)(528
Administrative expenses (1,471)(1,799)(7,073)
Other operating income 35149453
Other operating expenses (23)(53)(273)
Operating profit (loss) (1,658)(643)3,575
Finance income 405562,995
Finance costs (289)(1,579)(2,678)
Net finance income (costs) 116(1,523)317
Share of profit (loss) of equity-accounted investees  0 (30) 734
Profit (loss) before income tax  (1,542)(2,196)4,626
Income tax expense (369)0(508)
Profit (loss) for the period (1,911)(2,196)4,118
Other comprehensive income (expense):
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations (181)1,2481,254
Total other comprehensive income (expense) (181)1,2481,254
Profit (loss) attributable to:    
- Owners of the parent (1,564)(2,669)2,466
- Non-controlling interests (347)4731,652
Profit (loss) for the period (1,911)(2,196)4,118
Comprehensive income (expense) attributable to:    
- Owners of the parent (1,745)(1,421)3,720
- Non-controlling interests (347)4731,652
Comprehensive income (expense) for the period (2,092)(948)5,372
Earnings per share attributable to owners of the parent:    
Basic earnings per share (€) (0.05)(0.08)0.08
Diluted earnings per share (€) (0.05)(0.08)0.08

Condensed consolidated interim statement of cash flows

€’000Q1 2021Q1 2020
Cash flows from operating activities  
Cash receipts from customers68,07570,309
Cash paid to suppliers(59,677)(63,575)
VAT paid(2,338)(2,936)
Cash paid to and for employees(6,215)(6,116)
Income tax paid(458)0
Net cash used in operating activities(613)(2,318)
Cash flows from investing activities  
Paid on acquisition of property, plant and equipment(43)(58)
Proceeds from sale of property, plant and equipment71138
Loans provided(5)(5)
Repayments of loans provided53
Acquisition of a subsidiary 0(2)
Cash received on acquisition of a subsidiary03,605
Dividends received0245
Interest received23
Net cash from investing activities303,929
Cash flows from financing activities  
Proceeds from loans received5393
Repayments of loans received(606)(891)
Dividends paid(1,884)0
Lease payments made(806)(737)
Interest paid(277)(276)
Other payments(10)0
Net cash used in financing activities(3,578)(1,511)
Net cash flow(4,161)100
Cash and cash equivalents at beginning of period12,5767,032
Effect of movements in foreign exchange rates1(3)
Increase (decrease) in cash and cash equivalents(4,161)100
Cash and cash equivalents at end of period8,4167,129

Financial review

Financial performance

Nordecon ended the first quarter of 2021 with a gross loss of €92 thousand (Q1 2020: a gross profit of €1,188 thousand) and a negative gross margin of 0.2% (Q1 2020: a positive gross margin of 2.2%). Due to the seasonal nature of the construction business, first-quarter results are affected by a large share of uncovered fixed costs, particularly in the Infrastructure segment. Above all, this applies to asphalt concrete production and laying in road construction where plant and equipment costs account for a major share of fixed costs. Although the Infrastructure segment improved its gross margin year on year, its loss had a significant impact on the group’s overall performance. The segment’s gross margin for the first quarter was negative at 5.7% compared with a negative margin of 12.8% in the same period last year. Margin improvement is mainly attributable to the large-scale earthworks. The Buildings segment earned a gross profit but its gross margin weakened almost twofold, dropping to 2.1% (Q1 2020: 4.5%). A key factor in the margin decline was one-off costs incurred on the completion of work on the Nysäter wind farm.
The group’s administrative expenses for the first quarter of 2021 were €1,471 thousand. Compared to the first quarter of 2020, administrative expenses decreased by around 18% (Q1 2020: €1,799 thousand), mainly through a decline in personnel expenses. The ratio of administrative expenses to revenue (12 months rolling) decreased to 2.3% (Q1 2020: 2.8%).
The group’s operating loss for the first quarter of 2021 was €1,658 thousand (Q1 2020: €643 thousand). EBITDA was negative at €811 thousand (Q1 2020: positive at €194 thousand).
The group’s finance income and costs are affected by exchange rate fluctuations in the group’s foreign markets. During the period, the exchange rate of the Ukrainian hryvnia strengthened against the euro by around 6.2% and the Swedish krona weakened against the euro by around 2%. Translation of the loans provided to the group’s Ukrainian and Swedish subsidiaries in euros into the local currencies gave rise to an exchange gain of €346 thousand and an exchange loss of €28 thousand (Q1 2020: an exchange loss of €1,338 thousand).
The group incurred a net loss of €1,911 thousand (Q1 2020: €2,196 thousand). The loss attributable to owners of the parent, Nordecon AS, was €1,564 thousand (Q1 2020: €2,669 thousand).

Cash flows

Operating activities produced a net cash outflow of €613 thousand in the first quarter of 2021 (Q1 2020: an outflow of €2,318 thousand). Negative operating cash flow is typical of the first quarter and stems from the cyclical nature of the construction business. The period’s larger fixed and preparation costs cause outflows to exceed inflows. Operating cash flow is also strongly influenced by the fact that the contracts signed with most public and private sector customers do not require them to make advance payments, while the group has to make prepayments to subcontractors and suppliers. In particular, there has been growth in prepayments for materials. Cash inflow is also reduced by contractual retentions, which extend from 5 to 10% of the contract price and are released at the end of the construction period only.
Investing activities resulted in a net cash inflow of €30 thousand (Q1 2020: an inflow of 3,929 thousand). Cash flow was influenced by payments made to purchase property, plant and equipment of €43 thousand (Q1 2020: €58 thousand) and proceeds from the sale of property, plant and equipment of €71 thousand (Q1 2020: €138 thousand). Cash flow for the comparative period was strongly influenced by the transformation of Embach Ehitus OÜ from an associate into a subsidiary, which generated cash inflow of €3,605 thousand.
Financing activities generated a net cash outflow of €3,578 thousand (Q1 2020: an outflow of €1,511 thousand). The largest item was a dividend distribution of €1,884 thousand (Q1 2020: no dividend distribution). Loan and lease payments totalled €606 thousand and €806 thousand, respectively (Q1 2020: €891 thousand and €737 thousand, respectively). Interest payments amounted to €277 thousand (Q1 2020: €276 thousand).
The group’s cash and cash equivalents as at 31 March 2021 totalled €8,416 thousand (31 March 2020: €7,129 thousand).

Key financial figures and ratios

Figure/ratioQ1 2021Q1 2020Q1 20192020
Revenue (€’000)48,98754,92434,524296,082
Revenue change(10.8)%59.1%(20.9)%26.5%
Net profit (loss) (€’000)(1,911)(2,196)(1,893)4,118
Net profit (loss) attributable to owners of the parent (€’000)(1,564)(2,669)(1,962)2,466
Average number of shares31,528,58531,528,58531,528,58531,528,585
Earnings per share (€)(0.05)(0.08)(0.06)0.08
Administrative expenses to revenue3.0%3.3%4.3%2.4%
Administrative expenses to revenue (rolling)2.3%2.8%3.1%2.4%
EBITDA (€’000)(811)194(1,018)7,003
EBITDA margin(1.7)%0.4%(2.9)%2.4%
Gross margin(0.2)%2.2%0.1%3.7%
Operating margin(3.4)%(1.2)%(5.1)%1.2%
Operating margin excluding gain on asset sales(3.4)%(1.2)%(5.2)%1.2%
Net margin(3.9)%(4.0)%(5.5)%1.4%
Return on invested capital(2.1)%(3.3)%(2.9)%9.3%
Return on equity(5.3)%(6.7)%(5.8)%11.8%
Equity ratio28.0%28.2%30.2%27.6%
Return on assets(1.8)%(2.1)%(1.8)%3.3%
Current ratio0.990.950.971.01
 31 March 202131March 202031 March 201931 Dec 2020
Order book (€’000)281,431229,018170,509215,796

Performance by geographical market

The revenue contribution of foreign markets has decreased. Revenue generated outside Estonia accounted for around 4% of the group’s total revenue for the first quarter of 2021 compared with 14% a year earlier.

 Q1 2021Q1 2020Q1 20192020

Revenue generated in Sweden and Finland decreased year on year due the completion of large-scale contracts at the end of 2020 and the start of 2021. We continue to bid for new contracts and to prepare for new projects. The amount and proportion of revenue generated in Ukraine remained stable.
Geographical diversification of the revenue base is a consciously deployed strategy by which we mitigate the risks resulting from excessive reliance on a single market. However, conditions in some of our chosen foreign markets are also volatile and strongly affect our current results. Increasing the contribution of foreign markets is one of Nordecon’s strategic goals.

Performance by business line

Segment revenues

We strive to maintain the revenues of our operating segments (Buildings and Infrastructure) as balanced as possible in the light of market developments because this helps diversify risks and provides better opportunities for continuing construction operations in more challenging circumstances where the volumes of one subsegment decline sharply while another begins to grow more rapidly.
The groups’ revenue for the first quarter of 2021 was €48,987 thousand, 10.8% less than a year earlier when revenue amounted to €54,924 thousand. The decline is largely attributable to foreign operations whose revenue contribution dropped by 73%. Revenue generated in Estonia remained comparable to the first quarter of 2020. In segment terms, revenue from the Buildings segment decreased by 23% while revenue from the Infrastructure segment grew by 86% year on year.
The low volumes of infrastructure construction that affected the entire construction market also influenced the group’s revenue structure. In the first quarter of 2021, the Buildings and the Infrastructure segment generated revenue of €37,833 thousand and €11,094 thousand, respectively. The corresponding figures for the first quarter of 2020 were €48,954 thousand and €5,959 thousand.

Revenue by operating segmentQ1 2021Q1 2020Q1 20192020

Subsegment revenues

In the Buildings segment, the revenues of all subsegments decreased year on year. The revenue contributions of the commercial, public and apartment buildings subsegments were practically equal and the revenue generated by the industrial and warehouse facilities subsegment continued to be modest.
The largest projects under construction in the commercial buildings subsegment were a seven-floor commercial building in Rotermann City and the LEED Gold compliant Alma Tomingas office building in Ülemiste City in Tallinn and a Lidl store in Tartu.
The order book of the public buildings subsegment has grown considerably, supporting the subsegment’s annual revenue growth. During the period, the subsegment’s largest projects were Kindluse Kool – a basic school in Järveküla, a sports and health centre in Kohtla-Järve, a family health centre in Tartu, an extension to the office building of the Estonian Foreign Intelligence Service at Rahumäe tee in Tallinn and a barracks in Paldiski.
A significant share of the group’s apartment building projects is located in Tallinn. During the period under review, the largest of them were the design and construction of the first two phases of the Kalaranna quarter and the design and construction of the Tiskreoja residential area on the western border of the city.
The group also continues to build its own housing development projects in Tallinn and Tartu (reported in the apartment buildings subsegment). During the period, work continued on the first two apartment buildings in the Mõisavahe homes project ( and the development of plots for Kivimäe Süda – a new residential area in the Nõmme district of Tallinn. In carrying out our own development activities, we carefully monitor potential risks in the housing development market.
The share of revenue generated by the industrial and warehouse facilities subsegment remained stable year on year. The group is working on smaller-scale projects with an average cost of €2 million. The largest projects of the period were a two-floor stock-office type commercial facility in the Tähetorni Technopark and a logistics centre for the packaging supplier Pakendikeskus AS in Tallinn.

Buildings breakdownQ1 2021Q1 2020Q1 20192020
Commercial buildings33%36%39%23%
Public buildings31%30%21%37%
Apartment buildings30%27%30%28%
Industrial and warehouses6%7%10%12%

In the Infrastructure segment, road construction and maintenance continued to dominate with revenues almost twice larger than in the same period last year. A major share of its revenue resulted from contracts secured in 2020, the largest of which are the construction the Väo junction on the eastern border of Tallinn and the performance of earthworks on the Võõbu-Mäo section of the Tallinn-Tartu road. The group also continued to deliver road maintenance services in Järva and Hiiu counties and the Kose maintenance area in Harju county.
The group has won several contracts for the construction of small harbours. During the period, work was done on the construction of Salmistu harbour and Vasknarva boat harbour, which accounted for a major share of the revenue of the specialist engineering subsegment.

Infrastructure breakdownQ1 2021Q1 2020Q1 20192020
Road construction88%77%65%74%
Specialist engineering6%14%0%4%
Environmental engineering5%4%2%1%
Other engineering1%5%33%21%

Order book

The group’s order book (backlog of contracts signed but not yet performed) stood at €281,431 thousand at 31 March 2021, a 23% increase year on year. In the first quarter of 2021, we signed new contracts of €104,882 thousand (Q1 2020: €43,325 thousand). Both figures (total order book and volume of contracts signed per quarter) are the largest in the group’s history.

 31 March 202131 March 202031 March 201931 Dec 2020
Order book (€’000)281,431229,018170,509215,796

The proportions of the two main operating segments in the group’s order book have not changed substantially: the Buildings segment still dominates, accounting for 80% while the Infrastructure accounts for 20% of the total order book (31 March 2020: 81% and 19%, respectively). Compared with 31 March 2020, the order book of the Buildings segment has grown by 22% and that of the Infrastructure segment by 27%.
A significant share of new contracts was secured by the Buildings segment, the largest of them including:

  • the extension and reconstruction of the main building of the Estonian Foreign Intelligence Service of around €42,300 thousand;
  • the construction of an IKEA concept store in Rae rural municipality near Tallinn of around €23,000 thousand;
  • the construction of apartment buildings in the Uusmäe residential area in the Saku small town near Tallinn of around €3,400 thousand.

A large share of the order book of the Buildings segment is also made up of contracts secured in prior periods, the largest of them including the construction of a dairy complex for E‑Piim in Paide, phase III of the Maarjamõisa Medical Campus of the Tartu University Hospital, the LEED Gold compliant Alma Tomingas office building in Ülemiste City in Tallinn and the first two phases of apartment buildings in the Kalaranna quarter in Tallinn.
Although new contracts were also signed in other subsegments of the Infrastructure segment, the road construction and maintenance order book is still the largest, accounting for 81% of the segment’s order book. The largest contracts signed during the period include:

  • the construction of 2+2 passing lanes on the Kärevere-Kardla section of the Tallinn-Tartu-Võru-Luhamaa road with a cost of €12,600 thousand;
  • additional earthworks on the Võõbu-Mäo section of the Tallinn-Tartu road with a cost of around €3,900 thousand;
  • the construction of a wind farm in the Targale rural municipality in Latvia – the total cost of the contract in which Nordecon Betoon OÜ is one of the joint contractors is around €13,500 thousand;
  • expansion of berths in Roomassaare harbour on the island of Saaremaa with a cost of around €2,600 thousand.

Based on the size of the group’s order book, including the share of work to be performed in 2022 and 2023, and fierce competition in the general contracting market, the group’s management expects that in 2021 the group’s revenue will decline somewhat compared to 2020. Customers are increasingly expecting that general contractors should lower their prices but the input prices charged by subcontractors have not decreased as anticipated. This has put profit margins under strong pressure. In an environment of stiff competition, we have avoided taking unjustified risks whose realisation in the contract performance phase would have an adverse impact on the group’s results. Our main focus is on cost control as well as pre-construction and design activities where we can harness our professional competitive advantages.


Employees and personnel expenses

The group had, on average, 675 employees, including 422 engineers and technical personnel, in the first quarter of 2021. Headcount decreased by around 3% year on year.

Average number of employees at group entities (including the parent and the subsidiaries):

 Q1 2021Q1 2020Q1 20192020
Total average675695662708

The group’s personnel expenses for the first quarter of 2021, including all taxes, totalled €5,931 thousand compared with €6,660 thousand for the same period last year. Personnel expenses decreased by around 11% year on year, mainly through a decrease in the number of employees, a reduction of salaries carried out in the middle of 2020 and a decline in the share of performance bonuses.
The service fees of the members of the council of Nordecon AS for the first quarter of 2021 amounted to €37 thousand and associated social security charges totalled €12 thousand (Q1 2020: €47 thousand and €15 thousand, respectively).
The service fees of the members of the board of Nordecon AS amounted to €99 thousand and associated social security charges totalled €33 thousand (Q1 2020: €132 thousand and €44 thousand, respectively).

Labour productivity and labour cost efficiency

We measure the efficiency of our operating activities using the following productivity and efficiency indicators, which are based on the number of employees and personnel expenses incurred:

 Q1 2021Q1 2020Q1 20192020
Nominal labour productivity (rolling), (€ ‘000)417.4365.8315.5418.2
Change against the comparative period, % 14.1%16%(1.5)%22.8%
Nominal labour cost efficiency (rolling), (€)
Change against the comparative period, %14.9%4.3%(8.4)%18.1%

The group’s nominal labour productivity and nominal labour cost efficiency improved year on year. The rise is attributable to growth in revenue generated in the past four quarters.

Andri Hõbemägi
Nordecon AS
Head of Investor Relations
Tel: +372 6272 022


NCN investor presentation Q1_2021.pdf