AS Eesti Ehitus Financial Report November 08,
2006
Financial results 9 months 2006
Directors' report
Corporate
profile
AS Eesti Ehitus is a construction group whose core business is the
construction
of buildings and structures in Estonia and Ukraine; the Group
acts both as a
general contractor and a project manager. In Estonia, the
Group also operates as
an independent contractor in road construction and
maintenance, environmental
engineering, and the assembly of reinforced
concrete elements and structures as
well as cast-on-site concrete
works.
The activities of the Group companies are as follows: the
parent and AS
Linnaehitus are engaged in general contracting and project
management. AS Aspi
and its subsidiaries build environmental structures and
roads and provide road
maintenance services. Over two thirds of the revenue
of OÜ Mapri Projekt results
from concrete works; in addition, the
company performs smaller general
construction contracts. OÜ Eurocon
coordinates the Group's construction and
development activities in
Ukraine. Its direct subsidiary Eurocon Ukraine LLC is
engaged in general
contracting and project management and owns interests in
companies
which develop real estate in and around Kiev and Lvov.
The parent of the
Group is AS Eesti Ehitus, a company registered and seated in
Tallinn,
Estonia. Since 18 May 2006 the company's shares have been listed in the
main
list of Tallinn Stock Exchange.
The unaudited consolidated financial
statements of AS Eesti Ehitus for the first
nine months of 2006 comprise the
parent company and its subsidiaries and the
Group's interests in
associates:
Company 30 Sept 30
Sept 31 Dec
2006 2005
2005
AS Linnaehitus subsidiary Estonia 100.0% 100.0%
100.0%
AS ASPI subsidiary Estonia 100.0% 100.0%
100.0%
AS Järva Teed subsidiary Estonia 100.0% 100.0%
100.0%
OÜ Hiiu Teed subsidiary Estonia 100.0% 100.0%
100.0%
OÜ Mapri Projekt subsidiary Estonia 52.0% 52.0%
52.0%
Estcon OY subsidiary Finland 100.0% 100.0%
100.0%
OÜ EE Elekter subsidiary Estonia 100.0% 100.0%
100.0%
OÜ Eurocon subsidiary Estonia 64.0% 64.0%
64.0%
Eurocon Ukraine LLC subsidiary Ukraine 61.4% 64.0%
64.0%
Passage Theatre LLC subsidiary Ukraine 61.4% 0.0%
64.0%
Eurocon West LLC subsidiary Ukraine 61.4% 0.0%
0.0%
Bukovina Developments LLC subsidiary Ukraine 60.8% 0.0%
0.0%
V.I. Center LLC associate Ukraine 49.2% 0.0%
42.7%
EA Reng Proekt LLC associate Ukraine 31.3% 0.0%
0.0%
Technopolis-2 LLC associate Ukraine 30.7% 32.0%
32.0%
Eurobeton LLC associate Ukraine 30.7% 0.0%
0.0%
OÜ Kastani Kinnisvara associate Estonia 26.0% 0.0%
0.0%
In the third quarter, an important change in the Group's
structure was the
establishment of EA Reng Proekt LLC in Ukraine. The
company whose core activity
is architectural and constructive engineering
design is a joint venture between
Eurocon Ukraine LLC and EA Reng AS. The
entity was founded in September 2006 to
provide the Group's Ukrainian
operations with top quality design support and to
allow EA Reng AS, one of
the leading Estonian design and engineering consulting
companies, to
penetrate a new market.
In addition, in July two changes occurred in the
Group's Ukrainian interests.
Firstly, Eurocon Ukraine LLC increased its
holding in V.I. Center LLC by 13.3
percentage points to 80 per cent.
Considering minority interests in OÜ Eurocon
and Eurocon Ukraine LLC, AS
Eesti Ehitus now owns 49.2 per cent of V.I. Center
LLC, which holds a
long-term lease on a 4.3-ha plot of commercial land on the
Kiev-Borispol
motorway.
Secondly, LSR-Ukraina LLC acquired a 50-per cent stake in
Eurobeton LLC, a
company which has invested in a 10.7-ha plot of industrial
land near Kiev. The
initial investment was financed by loans in equal parts
by Eurocon Ukraine LLC
and Santora Trade OÜ, a company belonging to the
same group as LSR-Ukraina LLC.
In Estonia, the subsidiary AS ASPI entered
into an agreement for the acquisition
of a 52-per cent stake in OÜ Kaurits,
a recognized company in the field of rental
of road construction and
earthwork machinery. The agreement was made on 4
September 2006. At the
date this interim report was authorized for issue, some
procedures
required for completing the transaction had not been
performed.
Therefore, the consolidated financial statements do not include the
results of OÜ
Kaurits.
In the first nine months of 2006, the Group
employed, on average, 857 people. At
the end of September, the number of
staff was 890 (including 57 outside Estonia),
with engineers and technical
personnel (ETP) accounting for 39.7 per cent of the
total. Labour costs for
the first nine months totalled EEK 170.5 million (E10.9
million), a 53.9
per cent increase on a year ago.
Due to a calculation error, the number and
proportion of ETP reported in the
interim report for the first half-year
were overstated. The correct information
is: at the end of the first six
months of 2006 the Group employed 948 people,
with ETP accounting for
34.9 per cent of the total. In the third quarter the
number of staff
shrank primarily on account of a decrease in temporary staff
employed in
road construction operations during the high season.
Average number of the
Group's employees
Period ETP Workers Total
average
First 9 months of 2006 317 540 857
First 6 months of
2006 303 523 826
First 9 months of 2005 256 461
717
2005 261 461 722
Revenue and
segments
Consolidated revenues for the first nine months of 2006 amounted
to EEK 1.765
billion (E112.8 million), a solid 39.7 per cent increase on a
year ago. In terms
of business segments, the Residential and non-residential
segment contributed 56
per cent (50.1 per cent growth) and the Civil
engineering segment 44 per cent
(28.4 per cent growth). In geographical
terms, 92.4 per cent of the Group's
revenue was earned in Estonia;
Ukraine contributed 7.6 per cent (a year ago the
corresponding figures were
93.5 per cent and 6.5 per cent).
Revenue by segments
Business segments
9 months 2006 9 months 2005 2005
Civil engineering
44% 48% 45%
Residential and non-residential 56%
52% 55%
In the third quarter, the contribution of the
Residential and non-residential
segment declined slightly and corresponds
now to the Group's long-term revenue
structure objective according to
which the two segments ought to generate more or
less equal
revenue.
Compared to the first nine months of 2005, the revenues
generated by the
Commercial buildings, Residential buildings, and
Industrial and warehouse
facilities sub-segments have been growing
steadily, whereas the contribution of
the Public buildings sub-segment has
shrunk. In the Commercial buildings and
Residential buildings
sub-segments, the best results were attained by AS
Linnaehitus; in the
Industrial and warehouse facilities sub-segment the largest
contributor was
AS Eesti Ehitus. Eurocon Ukraine LLC improved its position
and
contribution in the Commercial buildings and Industrial and warehouse
facilities
sub-segments. Since the Group does not intend to penetrate
the Ukrainian
residential buildings sector in the near future, we expect
the subsidiary to
remain focused on its current strengths both in
acquiring new business and
developing the services.
Revenue allocation
in the Residential and non-residential segment
9 months 2006 9 months 2005 2005
Residential buildings
13% 6% 11%
Public buildings
19% 42% 35%
Commercial buildings 44%
35% 37%
Industrial and warehouse facilities 24%
17% 17%
The rise of the Civil engineering segment
was triggered by large-scale road
construction contracts launched in
the summer, which rendered the Road
construction and maintenance
sub-segment the largest contributor to the Group's
revenues.
At the end
of the first nine months of 2006, the Group's order backlog totalled
EEK
2.2 billion (E141 million) against EEK 1.6 billion (E102.5 million) a
year
ago.
Profitability and cash flows
In the third quarter, the Group's
gross margin improved by one percentage point
to 10.9 per cent (9 months
2005: 9.0 per cent) and the growth in labour costs
began decelerating
although the figure for nine months still exceeds revenue
growth by 9.4
percentage points. By contrast, the growth in the largest direct
cost item
(subcontracting and materials costs) has been 3.8 percentage
points
slower than revenue growth.
At the end of nine months, the ratio of
administrative expenses to revenue was
4.2 per cent (9 months 2005: 3.8
per cent). Compared to a year ago, the growth in
administrative expenses has
outpaced revenue growth by 13.7 per cent, largely on
account of an increase
in labour costs.
Operating margin including other operating income for the
first nine months of
2006 was 8.1 per cent (a year ago 5.4 per cent),
whereas operating margin
excluding other operating income was 6.6 per cent
(a year ago 5.0 per cent).
Consolidated net profit for the first nine months
amounted to a strong EEK 115.9
million (E7.4 million) against EEK 50.3
million (E3.2 million) earned a year ago.
The profit attributable to equity
holders of the parent amounted to EEK 114.4
million (E7.3 million)
against EEK 40.1 million (E2.6 million) for the first nine
months of
2005.
Net operating cash flows have improved substantially both compared to
a year ago
and the beginning of the third quarter. The figure for the first
nine months of
2006 was EEK 34 million (E2.2 million) while a year ago
operating cash flows were
negative to the extent of EEK 18 million (E1.1
million).
Significant ratios and figures
Ratio / figure
9m 2006 9m 2005 2005
Weighted average number of
shares 10,561,532 3,056,486 3,160,631
Earnings per share,
EEK 10.8 13.1 27.5
Average number of
employees 857 717 723
Revenue per
employee, EEK thousands 2,059 1,762 2,319
Labour
costs to revenue, % 9.7% 8.8%
10.9%
Administrative expenses to revenue, % 4.2% 3.8%
4.3%
EBITDA, EEK thousands 165,432 87,277
143,850
EBITDA margin, % 9.4% 6.9%
8.6%
Operating margin, % 8.1% 5.4%
7.0%
Net margin, % 6.6% 4.0%
5.6%
Return on invested capital, % 24.8% 20.0%
31.1%
Return on assets, % 12.2% 9.5%
15.8%
Return on equity, % 39.6% 31.2%
59.9%
Equity ratio, % 28.3% 16.2%
20.2%
Current ratio 1.27 1.18
1.14
Order backlog, EEK thousands 2,200,663 1,599,362
1,232,349
Earnings per share = profit attributable to equity holders of
the parent /
weighted average number of shares
Revenue per employee = revenue
/ average number of employees
Labour costs to revenue = labour costs /
revenue
Administrative expenses to revenue = administrative expenses /
revenue
EBITDA = earnings before interest, taxes, depreciation and
amortisation
EBITDA margin = EBITDA / revenue
Operating margin = operating
profit / revenue
Net margin = net profit for the period / revenue
Return on
invested capital = (profit before tax + interest expense) / the
period's
average (interest-bearing liabilities + equity)
Return on assets = operating
profit / average total assets for the period
Return on equity = net profit for
the period / average total equity for the
period
Equity ratio = total equity
/ total equity and liabilities
Current ratio = total current assets / total
current liabilities
Consolidated balance sheet
Unaudited, in thousands of
Estonian kroons
30 Sept
2006 30 Sept 2005 31 Dec 2005
ASSETS
Current assets
Cash and cash equivalents 140 708 43 780
192 490
Trade receivables 483 845 298 341
210 944
Other receivables and prepayments 169 990 122 162
93 228
Inventories 261 340 159 680
140 360
Total current assets 1 055 883 623 963
637 022
Non-current assets
Shares in associates
6 001 21 210 21 309
Other investments
24 107 300 10 748
Investment property
5 975 2 607 2 601
Property, plant and equipment 151
006 104 007 134 871
Intangible assets 157
295 131 822 131 845
Total non-current assets 344
384 259 946 301 374
TOTAL ASSETS 1 400
267 883 909 938 396
LIABILITIES
Current liabilities
Interest-bearing loans and borrowings
79 607 57 531 117 650
Trade payables
296 009 226 440 129 174
Tax liabilities
45 129 10 926 29 200
Other payables and advances
410 001 232 513 278 741
Provisions 2
340 1 947 2 912
Total current liabilities 833
086 529 357 557 677
Non-current liabilities
Interest-bearing loans and borrowings 167 738 151 719 160
338
Other liabilities 1 794 58 060 29
126
Provisions 2 047 1 247 2
047
Total non-current liabilities 171 579 211 026 191
511
TOTAL LIABILITIES 1 004 665 740 383 749
188
EQUITY
Minority interest 11 236
5 675 12 257
Share capital 153 784
34 819 34 819
Share premium 108 465
8 192 8 192
Statutory capital reserve 4 158 3
000 4 158
Other reserves 1 333 834
795
Retained earnings 2 258 50 882
42 180
Profit for the period 114 368 40 124
86 807
TOTAL EQUITY 395 602 143 526
189 208
TOTAL LIABILITIES AND EQUITY 1 400 267 883 909
938 396
Unaudited, in thousands of euro
30 Sept 2006 30 Sept 2005 31 Dec 2005
ASSETS
Current assets
Cash and cash equivalents 8
993 2 798 12 302
Trade receivables 30
923 19 067 13 482
Other receivables and prepayments 10
864 7 808 5 958
Inventories 16 703
10 205 8 971
Total current assets 67 483
39 878 40 713
Non-current assets
Shares in
associates 384 1 355 1 362
Other
investments 1 541 20 687
Investment
property 381 167 166
Property, plant
and equipment 9 651 6 647 8 620
Intangible assets
10 053 8 425 8 426
Total non-current
assets 22 010 16 614 19 261
TOTAL ASSETS
89 493 56 492 59 974
LIABILITIES
Current liabilities
Interest-bearing loans and borrowings
5 088 3 677 7 519
Trade payables 18
918 14 472 8 256
Tax liabilities 2 884
698 1 866
Other payables and advances 26 204
14 860 17 815
Provisions 150
124 186
Total current liabilities 53 244 33
831 35 642
Non-current liabilities
Interest-bearing
loans and borrowings 10 720 9 697 10 247
Other liabilities
115 3 711 1 861
Provisions
131 80 131
Total non-current liabilities
10 966 13 488 12 239
TOTAL LIABILITIES
64 210 47 319 47 881
EQUITY
Minority interest 718 363
783
Share capital 9 829 2 225 2
225
Share premium 6 932 524
524
Statutory capital reserve 266 192
266
Other reserves 85 53
51
Retained earnings 144 3 252 2
696
Profit for the period 7 309 2 564 5
548
TOTAL EQUITY 25 283 9 173 12
093
TOTAL LIABILITIES AND EQUITY 89 493 56 492 59
974
Consolidated income statement
Unaudited, in thousands of Estonian
kroons
Q3, 2006 Q3, 2005 9m 2006 9m 2005
2005
Revenue 838 409 575 590 1 764 923 1 263 169 1
674 454
Cost of sales 738 445 517 096 1 572 832 1 150 024
1 498 375
Gross profit 99 964 58 494 192 091 113 145
176 079
Administrative expenses 28 247 17 450 74 178 48 361
72 495
Other operating income 889 800 27 029 6 199
18 603
Other operating expenses 1 563 783 2 777 3 051 4
359
Operating profit before 71 043 41 061 142 165 67 932 117
828
financing costs
Financing items
Financial income 2 175 2
306 4 829 3 648 6 381
Financial expenses 6 242 2
364 15 717 4 842 11 075
Net financing costs -4 067 -58
-10 888 -1 194 -4 694
Profit before tax 66 976 41
003 131 277 66 738 113 134
Income tax expense 4 625 1
611 15 426 16 488 19 159
Profit for the period 62 351 39
392 115 851 50 250 93 975
Attributable to
Equity holders of the parent 59 626 32 954 114 368 40 124 86 807
Minority interest 2 725 6 438 1 483 10 126 7
168
Basic earnings per share (EEK) 3,88 10,40 10,83 13,13
27,47
Diluted earnings per share (EEK 3,88 10,40 10,83 13,13
27,47
Unaudited, in thousands of euro
Q3, 2006 Q3, 2005 9m 2006 9m 2005 2005
Revenue
53 584 36 787 112 799 80 731 107 017
Cost of sales
47 195 33 048 100 522 73 500 95 764
Gross profit
6 389 3 739 12 277 7 231 11 253
Administrative
expenses 1 806 1 115 4 741 3 091 4 633
Other operating
income 57 51 1 727 396 1 189
Other operating
expenses 100 50 177 195 279
Operating profit
before 4 540 2 625 9 086 4 341 7 530
financing
costs
Financing items
Financial income 139 147 309
233 408
Financial expenses 398 151 1 005
309 708
Net financing costs -259 -4 -696 -76
-300
Profit before tax 4 281 2 621 8 390 4 265
7 230
Income tax expense 296 103 986 1 054
1 224
Profit for the period 3 985 2 518 7 404 3 211 6
006
Attributable to
Equity holders of the parent 3
811 2 106 7 309 2 564 5 548
Minority interest 174
412 95 647 458
Basic earnings per share (euro) 0,25
0,66 0,69 0,84 1,76
Diluted earnings per share (euro)0,25
0,66 0,69 0,84 1,76
Andri Hõbemägi
AS Eesti Ehitus
Tel:
(+372) 6400 450
E-mail: eestiehitus@eestiehitus.ee