Annual Report • Feb 10, 2022
Annual Report
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Financial report for the fourth quarter and twelve months of 2021 (unaudited)
| Business name | Nordecon AS |
|---|---|
| Registry number | 10099962 |
| Address | Toompuiestee 35, 10149 Tallinn, Estonia |
| Domicile | Republic of Estonia |
| Telephone | +372 615 4400 |
| [email protected] | |
| Corporate website | www.nordecon.com |
| Core business lines | Construction of residential and non-residential buildings (EMTAK 4120) |
| Construction of roads and motorways (EMTAK 4211) | |
| Road maintenance (EMTAK 4211) | |
| Construction of utility projects for fluids (EMTAK 4221) | |
| Construction of water projects (EMTAK 4291) | |
| Construction of other civil engineering projects (EMTAK 4299) | |
| Financial year | 1 January 2021 – 31 December 2021 |
| Reporting period | 1 January 2021 – 31 December 2021 |
| Council | Toomas Luman (chairman of the council), Andri Hõbemägi, Vello Kahro, Andre Luman |
| Board | Gerd Müller (chairman of the board), Priit Luman, Maret Tambek |
| Auditor | KPMG Baltics OÜ |
| Nordecon group at a glance | 3 |
|---|---|
| Directors' report | 4 |
| Condensed consolidated interim financial statements | 22 |
| Consolidated statement of financial position | 22 |
| Consolidated statement of comprehensive income | 23 |
| Consolidated statement of cash flows | 24 |
| Consolidated statement of changes in equity | 25 |
| NOTE 1. Significant accounting policies | 26 |
| NOTE 2. Trade and other receivables | 26 |
| NOTE 3. Inventories | 26 |
| NOTE 4. Property, plant and equipment and intangible assets | 27 |
| NOTE 5. Borrowings | 27 |
| NOTE 6. Lease liabilities | 27 |
| NOTE 7. Earnings per share | 28 |
| NOTE 8. Segment reporting – operating segments | 28 |
| NOTE 9. Segment reporting – geographical information | 30 |
| NOTE 10. Cost of sales | 30 |
| NOTE 11. Administrative expenses | 30 |
| NOTE 12. Other operating income and expenses | 31 |
| NOTE 13. Finance income and costs | 31 |
| NOTE 14. Transactions with related parties | 31 |
| Statements and signatures | 33 |
Nordecon AS (previous names AS Eesti Ehitus and Nordecon International AS) began operating as a construction company in 1989. Since then, we have grown to become one of the leading construction groups in Estonia and a strong player in all segments of the construction market.
For years, our business strategy has been underpinned by a consistent focus on general contracting and project management and a policy of maintaining a reasonable balance between building and infrastructure construction. Our core business is supported by road maintenance, concrete works and other services that provide added value, improve our operating efficiency and help manage risks.
Nordecon's specialists offer high-quality integrated solutions in the construction of commercial, residential, industrial and public buildings as well as infrastructure – roads, utility networks and port facilities. In addition, we are involved in the construction of concrete structures, leasing out heavy construction equipment, and road maintenance.
Besides Estonia, group entities operate in Sweden, Finland and Ukraine.
Nordecon AS is a member of the Estonian Association of Construction Entrepreneurs and the Estonian Chamber of Commerce and Industry and has been awarded international quality management certificate ISO 9001, international environmental management certificate ISO 14001 and international occupational health and safety certificate OHSAS 18001.
Nordecon AS's shares have been listed on the Nasdaq Tallinn Stock Exchange since 18 May 2006.
To be the preferred partner in the construction industry for customers, subcontractors and employees.
To offer our customers building and infrastructure construction solutions that meet their needs and fit their budget and thus help them maintain and increase the value of their assets.
We are professional builders – we apply appropriate construction techniques and technologies and observe generally accepted quality standards. Our people are results-oriented and go-ahead; we successfully combine our extensive industry experience with the opportunities provided by innovation.
We are reliable partners – we keep our promises and do not take risks at the expense of our customers. Together, we can overcome any construction challenge and achieve the best possible results.
We act openly and transparently. We observe best practice in the construction industry and uphold and promote it in society as a whole.
We support employee development through needs-based training and career opportunities consistent with their experience. We value our people and provide them with a modern work environment that encourages creativity and a motivation system that fosters initiative.
The group's strategic business agenda and targets for the period 2019-2022
In Ukraine, we are mainly involved in general contracting and project management in the segment of building construction. Political and economic instability continues to restrict the adoption of business decisions. We expect that in 2022 our business volumes in Ukraine will remain at a level comparable to 2021. We assess the situation in the Ukrainian construction market regularly and are ready to restructure our operations as and when necessary. We continue to seek opportunities to exit our two real estate projects, which have been put on hold, or signing a construction contract with a prospective new owner. So far, the political tensions which have been rising since the last quarter of 2021 have not affected the behaviour of market participants or caused any problems in daily business operations.
In Finland, we have been offering mainly subcontracting services in the concrete work segment. The local concrete work market allows competing for projects where the customer wishes to source all concrete works from one reliable partner. However, in recent years we have also secured some smaller general contracts. Our policy is to maintain a rational approach and avoid taking excessive risks.
In the Swedish market, we offer mainly the construction of residential and non-residential buildings in the central part of the country. In gaining experience in the new market, we have prioritised quality and adherence to deadlines, which has left its mark on profitability. The Swedish construction market began to recover in 2021 and it is anticipated that the year 2022 will see market growth, particularly in the building construction segment.
The main factors which affect the group's business volumes and profit margins are competition in the construction market, changes in demand for construction services and rapidly rising input prices. Demand for construction services continues to be strongly influenced by the volume of public investments, particularly in the infrastructure segment. Public investments, in turn, depend partly on the co-financing received from the EU structural funds.
Bid prices are under strong competitive pressure, especially in the infrastructure segment, and bidders increasingly include not only rival general contractors but also former subcontractors. This is mainly attributable to the central and local governments' policy to keep the eligibility requirements for public contracts low. As a result, quality and timely completion are sometimes sacrificed to the lowest price. We acknowledge the risks involved in performing contracts signed in an environment of stiff competition and the current economic uncertainties. In setting our prices in such an environment, we strive to ensure a reasonable balance of the risks associated with contract performance and tight cost control.
Our action plan foresees flexible resource allocation aimed at finding more profitable contracts and performing them effectively. According to our business model, Nordecon operates in all segments of the construction market. Therefore, we are somewhat better positioned than companies that operate in only one narrow segment.
Our business is also influenced by seasonal changes in weather conditions, which have the strongest impact on infrastructure construction where a lot of work is done outdoors (road construction, earthworks, etc.). Our strategy is to counteract the seasonality of infrastructure operations with building construction that is less exposed to seasonal fluctuations. Our long-term goal is to be flexible and keep our two operating segments in relative balance. Where possible, our entities also implement various technical solutions that help them work efficiently in changing conditions. Investments in digital solutions which allow planning and managing construction processes more precisely grew substantially in 2021. A key challenge for the construction sector is low productivity, which is attributable to the shortage of time in the preparatory and planning phases and outdated process management methods. Nordecon expects the digital solutions it has implemented to deliver a rise in productivity in 2022 already.
To manage their daily construction risks, group companies purchase contractors' all risks insurance. Depending on the nature of the project and the requests of the customer, both general frame agreements and special, projectspecific insurance contracts are used. In addition, as a rule, subcontractors are required to secure the performance of their obligations with a bank guarantee provided to a group company or the group retains part of the amount due until the contract has been completed. To remedy construction deficiencies which may be detected during the warranty period, group companies create warranty provisions based on their historical experience. The group's warranty provisions (including current and non-current) at 31 December 2021 totalled €1,335 thousand (31 December 2020: €1,287 thousand).
In addition to managing the risks directly related to construction operations, in the past few years we have sought to mitigate the risks inherent in pre-construction activities. In particular, this applies to the bidding process, i.e. compliance with the procurement terms and budgeting. The errors made in the planning stage are usually irreversible and, in a situation where the price is contractually fixed, will cause a direct financial loss.
The group's credit losses for the period totalled €2,144 thousand (2020: €157 thousand). A major share of the credit losses resulted from expensing the receivables due from a customer of the Swedish subsidiary. The overall credit risk exposure of the portfolio of receivables is low because the solvency of prospective customers is evaluated, the share of public sector customers is large and customers' settlement behaviour is continuously monitored. The main indicator of the realisation of credit risk is a settlement default that exceeds 180 days along with no activity on the part of the debtor that would confirm the intent to settle.
The group remains exposed to higher than usual liquidity risk. At the reporting date, the group's current ratio was 0.94 (31 December 2020: 1.01). The key factors that influence the current ratio are the classification of the group's loans to its Ukrainian associate as non-current and the banks' general policy not to refinance interest-bearing liabilities (particularly overdrafts) for a period exceeding 12 months.
Because the political and economic situation in Ukraine continues to be complicated, we believe that the group's Ukrainian investment properties cannot be realised in the short term. Accordingly, a receivable for the loans provided to the Ukrainian associate of €8,481 thousand was classified as non-current at the reporting date.
For better cash flow management, we use overdraft facilities and factoring by which we counter the mismatch between the settlement terms agreed with customers and subcontractors. Under IFRS EU, borrowings have to be classified into current and non-current based on contract terms in force at the reporting date. The group's shortterm borrowings at 31 December 2021 totalled €16,289 thousand (31 December 2020: €18,508 thousand). A significant share of current borrowings is made up of overdrafts which are expected to be extended after the reporting date.
The group's cash and cash equivalents as at the reporting date amounted to €9,031 thousand (31 December 2020: €12,576 thousand).
The group's interest-bearing liabilities to banks have both fixed and floating interest rates. Lease liabilities have mainly floating interest rates. The base rate for most floating-rate contracts is EURIBOR. The group's interest-bearing liabilities decreased by €2,167 thousand compared with a year earlier. Both lease and loan liabilities decreased. Interest-bearing borrowings at 31 December 2021 totalled €23,694 thousand (31 December 2020: €25,861 thousand). Interest expense for the 2021 was €982 thousand (2020: €1,078 thousand).
The main source of interest rate risk is a possible rise in the base rates of floating interest rates. In the light of the group's relatively heavy loan burden, this would increase interest expense significantly, which would have an adverse impact on profit. We mitigate the risk by pursuing a policy of entering, where possible, into fixed-rate contracts when the market interest rates are low. As regards loan products offered by banks, observance of the policy has proved difficult and most new contracts have floating interest rates.
As a rule, the prices of construction contracts and subcontracts are fixed in the currency of the host country, i.e. in the euro (€), the Ukrainian hryvnia (UAH) and the Swedish krona (SEK).
The exchange rate of the hryvnia is volatile because the conflict between Ukraine and Russia has caused tensions in Ukraine's political and economic environment and the National Bank of Ukraine discontinued determining the national currency's indicative exchange rate at the beginning of 2015. In 2021, the hryvnia strengthened against the euro by nearly 12%. As a result, the group's Ukrainian subsidiaries, which have to translate their euro-denominated loans into the local currency, recognised a foreign exchange gain of €711 thousand (2020: a loss of €1,485 thousand). Exchange gains and losses on financial instruments are recognised in Finance income and Finance costs, respectively. The translation of receivables and liabilities from operating activities did not give rise to any exchange gains or losses.
Our Ukrainian and non-Ukrainian entities' reciprocal receivables and liabilities that are related to the construction business and denominated in hryvnias do not give rise to exchange gains or losses. The loans provided to the Ukrainian associate in euros do not give rise to exchange differences to be reported in the group's accounts either.
The Swedish krona strengthened against the euro by around 2% in 2021. The translation of a loan provided to the Swedish subsidiary in euros into the local currency gave rise to an exchange gain of €16 thousand (2020: a loss of €24 thousand). Exchange gains and losses on financial instruments are recognised in Finance income and Finance costs, respectively. The translation of receivables and liabilities from operating activities did not give rise to any exchange gains or losses. In the comparative period, there was an exchange loss of €48 thousand, which was recognised in Other operating expenses.
We have not acquired derivatives to hedge currency risk.
Finding a permanent quality workforce is a challenge for the entire construction sector and one of the main factors that influences business performance. To strengthen Nordecon's reputation as an employer and make sure that we will have employees in the future, we collaborate with educational institutions. Consistent employee development is essential and one of our acknowledged priorities. We also rely on our subcontractors' ability to find personnel with the required skills and qualifications.
We strive to minimise the health and safety risks of people working on our construction sites, including our own teams and those of our subcontractors, by applying all measures required by law and our own management systems. Subcontractors are responsible for ensuring the safety of their operations and employees while our role is to create conditions that enable and foster compliance with safety regulations.
Construction activities have a direct impact on wildlife, soil and the physical environment. Therefore, in conducting our operations we strive to protect the surrounding environment and nature as much as possible. The group's assets and operations which have the strongest impact on the environment and thus involve the highest environmental risks are asphalt plants, quarries used for the extraction of construction materials and road construction operations. The main environmental protection measures on construction sites include efficient use of materials and proper waste management. Excessive waste, leakage, spillage, pollution, destruction of wildlife and other damage to the environment is prevented by complying with legal requirements. All of the group's construction entities have implemented environmental management standard ISO 14001.
Nordecon is one of the leading construction companies in the Estonian market. Therefore, it is important for us to be aware of the risks involved in breaching honest and ethical business practices. We have put in place internal procedures and policies, observe the rules of the Tallinn Stock Exchange and work with external and internal auditors as well as supervisory agencies. We make every effort to ensure that our entities' management quality, organisational culture and internal communication emphasise zero tolerance for dishonest, unethical and corrupt behaviour. Transparent decisions and open communication are underpinned by effective internal cooperation and external communication. Openness is also supported by the continuously increasing implementation of IT solutions.
The group's structure at 31 December 2021, including interests in subsidiaries and associates *
* The structure does not include the subsidiaries OÜ Eesti Ehitus, OÜ Aspi, OÜ Linnaehitus, OÜ NOBE, OÜ Eston Ehitus, Infra Ehitus OÜ, Kalda Kodu OÜ, Kastani Kinnisvara OÜ, EE Ressursid OÜ, SweNCN OÜ, Nordecon Statyba UAB, Eurocon Bud TOV, Technopolis-2 TOV and the associate V.I. Center TOV, which currently do not engage in any significant business activities. The first five were established to protect business names. Nor does the structure include investments in entities in which the group's interest is less than 20%.
There were no changes in our Estonian operations during the period under review. The group was involved in building and infrastructure construction, providing services in practically all market subsegments. A significant share of the core business was conducted by the parent, Nordecon AS, which is also a holding company for the group's larger subsidiaries. In addition to the parent, construction management services were rendered by the subsidiaries Nordecon Betoon OÜ (brand name NOBE) and Embach Ehitus OÜ.
As regards our other main business lines, we continued to provide concrete services (Nordecon Betoon OÜ), lease out heavy construction machinery and equipment (Kaurits OÜ) and render regional road maintenance services (Tariston AS).
We did not enter any new operating segments in Estonia.
There were no changes in our Ukrainian operations during the period under review. In 2021, our business activity in Ukraine remained at a level comparable to a year earlier. The group maintains a conservative approach: we sign contracts only when we are certain that the risks involved are reasonable given the circumstances.
Real estate development activities which require major investments remain suspended to minimise risks until the situation in Ukraine improves (we have currently interests in two development projects that have been put on hold). To safeguard the investments made and the loans provided, the group and the co-owners have privatised the property held by the associate V.I. Center TOV and created mortgages on it.
The group's subsidiary Nordecon Betoon OÜ and its Finnish subsidiary NOBE Rakennus OY continued to provide subcontracting services in the concrete work segment in Finland. In the past two years, they have also been awarded some small general contracts.
In 2021, we completed work on construction projects started in 2019 and 2020. On 22 July 2021, Swencn AB filed an application with the Nacka District Court in Stockholm, Sweden, to initiate corporate restructuring proceedings. Through restructuring, Swencn AB wants to overcome the difficulties in paying bills, restructure creditors' claims and improve its liquidity. Nacka District Court initiated the restructuring proceedings on 22 July 2021 and the first meeting of the creditors, where Swencn AB also presented the restructuring plan, was held on 19 August 2021. The purpose of the restructuring is to ensure equal treatment of creditors and the continuation of the activities of Swencn AB. The restructuring proceedings were still in progress at 31 December 2021.
Swencn AB does not have any ongoing construction projects but the company is seeking new opportunities to continue its business in the Swedish market.
| 2021 | 2020 | 2019 | |
|---|---|---|---|
| Estonia | 94% | 82% | 89% |
| Finland | 3% | 6% | 4% |
| Ukraine | 2% | 1% | 2% |
| Latvia | 1% | 0% | 0% |
| Sweden | 0% | 11% | 5% |
Revenue earned outside Estonia decreased substantially in 2021, accounting for 6% of the group's total revenue.
The contribution of foreign markets declined primarily due to the impact of the Swedish market where sales plummeted because previously started projects were being completed and no new contracts were signed. The share of Finnish revenues decreased as well. Revenue earned in Ukraine remained stable year on year. The group also does project-based work in Latvia where we were building a wind farm in 2021.
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 affect our current results. Our vision of the group's foreign operations is described in the chapter Outlooks of the group's geographical markets".
We strive to maintain the revenues of our two main operating segments (Buildings and Infrastructure) as balanced as possible because this helps diversify risks and provides better opportunities for continuing construction operations in more challenging market conditions where the volumes of one or several subsegments substantially decline.
The group's revenue for 2021 was €288,534 thousand, 2.5% down from a year earlier when revenue amounted to €296,082 thousand. Revenue decline is attributable to a decrease in foreign revenues, particularly no revenue from the Swedish market. Revenue generated in Estonia grew by 13% compared with a year earlier. In segment terms, revenue from the Buildings segment decreased by 5%, primarily due to the revenue change in the Swedish market, while revenue from the Infrastructure segment grew by 7% year on year. In a situation where the order book of the Buildings segment has grown to include large-scale design and construction contracts, the segment's revenue is also affected by the fact that design activities, which precede construction, take a long time.
The low volumes of infrastructure construction that continue to affect the entire construction market also influence the group's revenue structure. In 2021, the Buildings and the Infrastructure segment generated revenue of €216,070 thousand and €72,115 thousand, respectively. The corresponding figures for 2020 were €228,515 thousand and €67,142 thousand (see note 8).
| Revenue by operating segment* | 2021 | 2020 | 2019 |
|---|---|---|---|
| Buildings | 75% | 72% | 70% |
| Infrastructure | 25% | 28% | 30% |
* In the directors' report, projects have been allocated to operating segments based on their nature (i.e. building or infrastructure construction). In the segment reporting presented in the consolidated financial statements, allocation is based on the subsidiaries' main field of activity (as required by IFRS 8 Operating Segments). In the consolidated financial statements, the results of a subsidiary that is primarily engaged in infrastructure construction are presented in the Infrastructure segment. In the directors' report, the revenues of such a subsidiary are presented based on their nature. The differences between the two reports are not significant because in general group entities specialise in specific areas except for the subsidiary Nordecon Betoon OÜ that is involved in both building and infrastructure construction. The figures for the parent are allocated in both parts of the report based on the nature of the work.
In the Buildings segment, the revenue contributions of the commercial, public, and apartment buildings subsegments were practically equal while the revenue generated by the industrial and warehouse facilities subsegment continued to be modest. Revenue from the commercial and the industrial and warehouse facilities subsegments grew by 21% and 13% year-on-year, respectively. Revenue from the apartment buildings subsegment remained stable and revenue from the public buildings subsegment decreased by around 23%.
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 an IKEA concept store in Rae rural municipality near Tallinn.
The order book of the public buildings subsegment has grown considerably, supporting the subsegment's revenue growth in 2022. The largest projects completed in the reporting period included an upper secondary school on the island of Saaremaa, a family health centre in Tartu, an extension to the building of the Estonian Foreign Intelligence Service in Rahumäe tee in Tallinn, and a barracks in Paldiski. We continued work on the Medical Campus of the Tartu University Hospital and the main building of the Estonian Internal Security Service in Tallinn.
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 housing estate 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 construction of the first two apartment buildings in the Mõisavahe housing estate in Tartu (https://moisavahe.ee) and the development of plots for Kivimäe Süda – a new housing estate in the Nõmme district in Tallinn. The period's revenue from own development projects amounted to €3,097 thousand (2020: €2,866 thousand). In carrying out our own development activities, we carefully monitor potential risks in the housing development market.
The largest ongoing project in the industrial and warehouse facilities subsegment is the construction of a factory complex for the dairy company E-Piim in Paide. However, most of the subsegment's projects are small, with an average cost of €2 million. The largest projects of the period were a two-floor warehouse and office building in the Tähetorni Technopark, a logistics centre for the packaging supplier Pakendikeskus in Tallinn, and a production building for Viljandi Aken ja Uks in Piiri street in Viljandi.
| Revenue breakdown in the Buildings segment | 2021 | 2020 | 2019 |
|---|---|---|---|
| Apartment buildings | 29% | 28% | 27% |
| Commercial buildings | 29% | 23% | 36% |
| Public buildings | 28% | 37% | 29% |
| Industrial and warehouse facilities | 14% | 12% | 8% |
In the Infrastructure segment, the largest revenue contributor is the road construction and maintenance subsegment, which increased its revenue by around 11% year on year. The period's largest ongoing projects were the construction of the Väo junction on the eastern border of Tallinn and 2+2 passing lanes on the Kärevere-Kardla section of the Tallinn-Tartu-Võru-Luhamaa road, the performance of earthworks on the Võõbu-Mäo section of the Tallinn-Tartu road, and the reconstruction and rehabilitation of national roads in Hiiu county. We also delivered 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 and the expansion of berths in Roomassaare harbour on the island of Saaremaa, which accounted for a major share of the specialist engineering revenue.
| Revenue breakdown in the Infrastructure segment | 2021 | 2020 | 2019 |
|---|---|---|---|
| Road construction and maintenance | 87% | 74% | 78% |
| Other engineering | 10% | 21% | 18% |
| Environmental engineering | 3% | 1% | 3% |
| Specialist engineering (including hydraulic engineering) | 0% | 4% | 1% |
The Nordecon group ended 2021 with a gross profit of €4,021 thousand (2020: €10,996 thousand) and a gross margin of 1.4% (2020: 3.7%). Gross margins decreased in both operating segments. The gross margin of the Buildings segment was 2.0% for the year and a negative 0.7% for the fourth quarter (2020: 3.6%; Q4 2020: 0.7%). The figures of the Infrastructure segment were 1.0% for the year and a negative 1.4% for the fourth quarter (2020: 5.1%; Q4 2020: 6.1%). The gross margin of the Buildings segment was mainly influenced by:
• Growth in input prices, which mainly affected contracts signed in 2020. The prices of raw materials and supplies stabilised somewhat in the third quarter but soaring energy prices and labour costs had a strong impact on fourth-quarter inputs.
• Supply chain disruptions, which continue to put pressure on the timely completion of construction projects. Extensions of contract terms cause additional costs.
• One-off losses in the Swedish market. The costs related to the completion of two projects (the Nysäter wind farm and an apartment building) totalled €3,346 thousand.
The performance of the Infrastructure segment was also influenced by the upswing in materials prices, especially the prices of metal and energy carriers, which increased the production cost of asphalt concrete. Another factor was the order book structure: the share of projects involving the production and laying of asphalt concrete was small and thus the share of uncovered fixed costs was higher than usual.
The group's administrative expenses for 2021 were €6,053 thousand. Compared with 2020, administrative expenses decreased by around 14% (2020: €7,073 thousand), mainly through a decline in personnel expenses (see note 11). The ratio of administrative expenses to revenue (12 months rolling) was 2.1% (2020: 2.4%).
The group ended 2021 with an operating loss of €4,336 thousand (2020: operating profit of €3,575 thousand). Operating profit was affected by the recognition of credit losses of €2,144 thousand. A major share of the credit losses resulted from expensing the receivables due from a customer of the Swedish subsidiary. EBITDA was negative at €797 thousand and EBITDA margin was negative at 0.3% (2020: positive at €7,003 thousand and 2.4%).
The group's finance income and costs are affected by exchange rate fluctuations in the group's foreign markets (see the chapter Financial risks). During the period, the Ukrainian hryvnia strengthened against the euro by around 12% while the Swedish krona strengthened against the euro by around 2%. Translation of the loans provided to the group's subsidiaries in euros into the Ukrainan hryvnias and Swedish krona gave rise to exchange gains of €711 thousand and €16 thousand, respectively (2020: an exchange loss of €1,485 thousand and an exchange gain of €24 thousand, respectively). Finance income for 2020 was also influenced by the sale of the group's investment in the associate Pigipada OÜ, which produced sales gain of €2,749 thousand (see note 13).
The group incurred a net loss of €5,506 thousand (2020: earned a net profit of €4,118 thousand). The loss attributable to owners of the parent, Nordecon AS, was €6,310 thousand (2020: a profit of €2,466 thousand).
Operating activities produced a net cash inflow of €7,365 thousand in 2021 (2020: €2,443 thousand). The key factor that affects operating cash flow is the mismatch between the settlement terms agreed with customers and suppliers. 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 materials suppliers. The share of prepayments increased in 2021 due to the COVID-19 pandemic. 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 €312 thousand (2020: 8,286 thousand). Investments in the acquisition of property, plant and equipment and intangible assets totalled €251 thousand (2020: €271 thousand) and proceeds from the sale of property, plant and equipment amounted to €489 thousand (2020: €332 thousand). Cash flow for the comparative period was strongly influenced by the reclassification of Embach Ehitus OÜ from an associate into a subsidiary, which generated cash inflow of €3,605 thousand, and the sale of the investment in the associate Pigipada OÜ, which generated cash inflow of €3,596 thousand.
Financing activities generated a net cash outflow of €11,225 thousand (2020: an outflow of €5,165 thousand). The largest items were loan and lease payments. Proceeds from loans received totalled €1,922 thousand, consisting of the use of overdraft facilities and development loans (2020: €2,026 thousand). Repayments of loans received totalled €3,766 thousand, consisting of regular repayments of long-term investment and development loans (2020: €2,629 thousand). Lease payments totalled €3,318 thousand (2020: €3,086 thousand). Dividends paid in 2021 amounted to €5,000 thousand (2020: €472 thousand).
The group's cash and cash equivalents at 31 December 2021 totalled €9,031 thousand (31 December 2020: €12,576 thousand). Management's commentary on liquidity risks is presented in the chapter Description of the main risks.
| Figure/ratio | 2021 | 2020 | 2019 |
|---|---|---|---|
| Revenue (€'000) | 288,534 | 296,082 | 234,071 |
| Revenue change | (2.5)% | 26.5% | 4.7% |
| Net profit (loss) (€'000) | (5,506) | 4,118 | 4,149 |
| Net profit (loss) attributable to owners of the parent (€'000) | (6,310) | 2,466 | 3,378 |
| Average number of shares | 31,528,585 | 31,528,585 | 31,528,585 |
| Earnings per share (€) | (0.20) | 0.08 | 0.11 |
| Administrative expenses to revenue | 2.1% | 2.4% | 2.9% |
| EBITDA(€'000) | (797) | 7,003 | 7,311 |
| EBITDA margin | (0.3)% | 2.4% | 3.1% |
| Gross margin | 1.4% | 3.7% | 5.0% |
| Operating margin | (1.5)% | 1.2% | 1.8% |
| Operating margin excluding gain on asset sales | (1.6)% | 1.1% | 1.7% |
| Net margin | (1.9)% | 1.4% | 1.8% |
| Return on invested capital | (6.5)% | 9.3% | 10.0% |
| Return on equity | (16.8)% | 11.8% | 12.5% |
| Equity ratio | 20.8% | 27.6% | 27.9% |
| Return on assets | (4.1)% | 3.3% | 3.7% |
| Gearing | 28.3% | 21.1% | 33.8% |
| Current ratio | 0.94 | 1.01 | 1.01 |
| At 31 December | 2021 | 2020 | 2019 |
| Order book (€'000) | 266,856 | 215,796 | 227,545 |
| Revenue change = (revenue for the reporting period / revenue for the previous period) – 1 * 100 Earnings per share (EPS) = net profit or loss attributable to owners of the parent / weighted average number of shares outstanding Administrative expenses to revenue = (administrative expenses / |
Return on invested capital = ((profit or loss before tax + interest expense) / the period's average (interest-bearing liabilities + equity)) * 100 |
|---|---|
| Return on equity = (net profit or loss for the period / the period's average total equity) * 100 |
|
| revenue) * 100 | Equity ratio = (total equity / total liabilities and equity) * 100 |
| EBITDA = operating profit or loss + depreciation and amortisation + impairment losses on goodwill |
Return on assets = (net profit or loss for the period / the period's average total assets) * 100 |
| EBITDA margin = (EBITDA / revenue) * 100 | Gearing = ((interest-bearing liabilities – cash and cash equivalents) / |
| Gross margin = (gross profit or loss / revenue) * 100 | (interest-bearing liabilities + equity)) * 100 |
| Operating margin = (operating profit or loss / revenue) * 100 | Current ratio = total current assets / total current liabilities |
| Operating margin excluding gain on asset sales = ((operating profit or loss – gain on sales of non-current assets – gain on sales of real estate) / revenue) * 100 |
|
| Net margin = (net profit or loss for the period / revenue) * 100 |
The group's order book (backlog of contracts signed but not yet performed) stood at €266,856 thousand at 31 December 2021, a 24% increase year on year. In 2021, we signed new contracts of €314,758 thousand, including contracts of €37,612 thousand signed in the fourth quarter. The corresponding figures for 2020 were €236,577 thousand and €55,511 thousand. The group was equally successful in winning both public and private contracts.
| At 31 December | 2021 | 2020 | 2019 |
|---|---|---|---|
| Order book (€'000) | 266,856 | 215,796 | 227,545 |
The proportions of the two main operating segments in the group's order book have not changed substantially: the Buildings segment continues to dominate with 87% while the share of the Infrastructure segment is 13% (31 December 2020: 81% and 19%, respectively). Compared with 31 December 2020, the order book of the Buildings segment has grown by 37% and the order book of the Infrastructure segment had decreased by 34%. The decline in the Infrastructure order book is attributable to a lack of large-scale contracts with the Transport Administration.
A significant share of the order book of the Buildings segment is made up of contracts signed in 2021, the largest of which include: the design and construction of commercial and residential complex Vektor, the construction of the main building of the Estonian Foreign Intelligence Service and office building Roseni Maja in Tallinn and the design and construction of warehouses and related outdoor infrastructure for the Centre for Defence Investment in Harju county. The order book also includes some large-scale contracts signed in earlier periods such as the construction of phase III of the Maarjamõisa Medical Campus of the Tartu University Hospital and a factory complex for E-Piim in Paide.
A major share of the value of new contracts signed in the fourth quarter was made up of contracts secured by the Buildings segment, the largest of which were:
In the Infrastructure segment, the order book of the road construction and maintenance subsegment is still the largest, accounting for nearly 88% of the segment's order book. The largest projects include: the construction of 2+2 passing lanes on the Kärevere-Kardla section of the Tallinn-Tartu-Võru-Luhamaa road, the design and construction of the outdoor space around Terminal D in Old City Harbour in Tallinn and the construction of access roads for the premises of the IKEA concept store and a new Kurna-Tuhala circular intersection in Rae rural municipality. We also continued to deliver road maintenance services in Järva county under a five-year contract signed in 2020.
Based on the size of the group's order book, including the share of work to be performed in 2023, management expects that in 2022 the group's revenue will grow compared with 2021. The uptrend in the prices of energy carriers and labour costs, however, will continue to increase input prices and thus undermine profit margins. 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. To mitigate the input price risk, we have been signing cost-plus contracts with private sector customers (these are contracts with an open book arrangement under which we can invoice the customer based on the actual costs incurred plus the agreed margin). Our focus remains on cost control as well as pre-construction and design activities, where we can harness our professional competitive advantages.
The group's average number of employees in 2021 was 685, including 434 engineers and technical personnel (ETP). Headcount decreased by around 3% year on year.
| 2021 | 2020 | 2019 | |
|---|---|---|---|
| ETP | 434 | 450 | 414 |
| Workers | 251 | 258 | 273 |
| Total average | 685 | 708 | 687 |
The group's personnel expenses for 2021, including all taxes, totalled €25,054 thousand compared with €27,130 thousand for 2020. Personnel expenses decreased by around 8% year on year, mainly through a decrease in the number of employees, a decline in the share of performance bonuses, and a reduction of salaries carried out in the middle of 2020.
The service fees of the members of the council of Nordecon AS for 2021 amounted to €150 thousand and associated social security charges totalled €50 thousand (2020: €165 thousand and €54 thousand, respectively).
The service fees of the members of the board of Nordecon AS amounted to €369 thousand and associated social security charges totalled €122 thousand (2020: €432 thousand and €143 thousand, respectively).
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:
| 2021 | 2020 | 2019 | |
|---|---|---|---|
| Nominal labour productivity (rolling), (€ '000) | 420.8 | 422.9 | 340.6 |
| Change against the comparative period, % | -0.5% | 24.2% | 4.7% |
| Nominal labour cost efficiency (rolling), (€) | 11.5 | 10.9 | 9.2 |
| Change against the comparative period, % | 5.5% | 18.0% | -5.0% |
Nominal labour productivity (rolling) = (past four quarters' revenue) / (past four quarters' average number of employees) Nominal labour cost efficiency (rolling) = (past four quarters' revenue) / (past four quarters' personnel expenses)
The group's nominal labour productivity for the period remained essentially at the same level as a year earlier. Nominal labour cost efficiency improved year on year, supported by a decrease in personnel expenses.
| Nordecon AS ordinary share |
|---|
| Nordecon AS |
| EE3100039496 |
| NCN1T |
| No par value* |
| 32,375,483 |
| 32,375,483 |
| 18 May 2006 |
| Nasdaq Tallinn, Baltic Main List |
| Construction and engineering |
| OMX Baltic Industrials GI; OMX Baltic Industrials PI; OMX Baltic Construction & Materials GI; OMX Baltic Construction & Materials PI; OMX_Baltic_GI; OMX_Baltic_PI; OMX Tallinn_GI |
*In connection with Estonia's accession to the euro area on 1 January 2011 and based on amendments to the Estonian Commercial Code which took effect on 1 July 2010 as well as a resolution adopted by the annual general meeting of Nordecon AS in May 2011, the company's share capital was converted from EEK 307,567,280 (Estonian kroons) to €19,657,131.9. Concurrently with the conversion, the company adopted shares with no par value.
In July 2014, Nordecon AS issued 1,618,755 new shares with a total cost of €1,581,523.64, increasing share capital by €1,034,573.01 to €20,691,704.91, and acquired the same number of own (treasury) shares for the same price. The share capital of Nordecon AS consists of 32,375,483 ordinary registered shares with no par value.
Owners of ordinary shares are entitled to dividends as distributed from time to time. Each share carries one vote at the general meeting of Nordecon AS.
Movements in the share price are in euros and daily turnover in the bar chart is in thousands of euros.
| Index/equity | 1 January 2021* | 31 December 2021 | +/- |
|---|---|---|---|
| OMX Tallinn | 1,343.72 | 2,001.03 | 48.92% |
| NCN1T | €1.14 | €1.20 | 5.26% |
* Closing price on the Nasdaq Tallinn Stock Exchange at 31 December 2020
| Price | 2021 | 2020 | 2019 |
|---|---|---|---|
| Open | 1.15 | 1.04 | 0.91 |
| High | 1.84 | 1.21 | 1.09 |
| Low | 1.08 | 0.78 | 0.89 |
| Last closing price | 1.20 | 1.14 | 1.03 |
| Traded volume (number of securities traded) | 7,037,117 | 6,021,881 | 3,254,930 |
| Turnover, € million | 9.32 | 5.99 | 3.24 |
| Listed volume (31 December), thousand | 32,375 | 32,375 | 32,375 |
| Market capitalisation (31 December), € million | 38.85 | 36.91 | 33.35 |
| Shareholder | Number of shares | Ownership interest (%) |
|---|---|---|
| AS Nordic Contractors | 16,933,515 | 52.30 |
| Luksusjaht AS | 4,278,403 | 13.22 |
| Toomas Luman | 651,500 | 2.01 |
| Olegs Radcenko | 584,867 | 1.81 |
| SEB Pank AS clients | 425,000 | 1.31 |
| Lembit Talpsepp | 364,239 | 1.13 |
| Mati Kalme | 271,000 | 0.84 |
| SEB Life and Pension Baltic SE Estonian branch | 255,000 | 0.79 |
| Genadi Bulatov | 250,600 | 0.77 |
| Svenska Handelsbanken clients | 210,556 | 0.65 |
| Number of shareholders | Ownership interest (%) | |
|---|---|---|
| Shareholders with interest exceeding 5% | 2 | 65.52 |
| Shareholders with interest from 1% to 5% | 4 | 6.26 |
| Shareholders with interest below 1% | 6,199 | 25.60 |
| Holder of own (treasury) shares | 1 | 2.62 |
| Total | 6,206 | 100 |
| Council member | Number of shares | Ownership interest (%) | |
|---|---|---|---|
| Toomas Luman (AS Nordic Contractors, OÜ Luman ja Pojad)* |
Chairman of the Council | 17,612,165 | 54.40 |
| Andri Hõbemägi | Member of the Council | 50,000 | 0.15 |
| Vello Kahro | Member of the Council | 10,000 | 0.03 |
| Sandor Liive | Member of the Council | 0 | 0.00 |
| Andre Luman | Member of the Council | 25,000 | 0.08 |
| Total | 17,697,165 | 54.66 |
* Companies controlled by the individual
| Board member | Number of shares | Ownership interest (%) | |
|---|---|---|---|
| Gerd Müller | Chairman of the Board | 0 | 0.00 |
| Priit Luman | Member of the Board | 7,000 | 0.02 |
| Maret Tambek | Member of the Board | 0 | 0.00 |
| Total | 7,000 | 0.02 |
The annual general meeting that convened on 27 May 2014 approved a share option plan aimed at motivating the executive management of Nordecon AS by including them among the company's shareholders to ensure consistency in the company's management and improvement of the company's performance, and to enable the executive management to benefit from their contribution to growth in the value of the company's share. Under the share option plan, the company granted options for acquiring up to 1,618 thousand shares in Nordecon AS. An option could be exercised when three years had passed since the signature of the option agreement but not before the general meeting had approved the company's annual report for 2016.
To satisfy the terms and conditions of the option plan, in July 2014 Nordecon AS issued a total of 1,618 thousand new shares with a total cost of €1,582 thousand, increasing share capital by €1,035 thousand to €20,692 thousand, and acquired the same number of own (treasury) shares at the same price.
The annual general meeting that convened on 24 May 2017 approved some changes to the option plan. The term for exercising a share option was extended. An option could be exercised within 15 months after the general meeting had approved Nordecon AS's annual report for 2016. In addition, the conditions for exercising the options granted to persons who at the grant date were members of the board were amended.
The annual general meeting that convened on 23 May 2018 adopted some amendments to the share option plan which grant Nordecon AS's chairman of the board the right to acquire up to 200,000 shares and each member of the board the right to acquire up to 129,500 shares in Nordecon AS. An option may be exercised when three years have passed since the signature of the option agreement but not before the general meeting has approved the company's annual report for 2020. Exercise of the options is linked to the achievement of the group's EBITDA target for 2020 (from €6,083 thousand to €12,167 thousand). In connection with the achievement of the EBITDA target for 2020, the members of the board of Nordecon AS are entitled to acquire 69,408 shares in total under the share option plan.
At 31 December 2021, options for the acquisition of 229,857 shares had been exercised, options for the acquisition of 1,229,907 shares had expired and options for the acquisition of 88,991 shares were still exercisable.
The board confirms that the Directors' report presents fairly all significant events that occurred during the reporting period as well as their impact on the condensed consolidated interim financial statements, contains a description of the main risks and uncertainties and provides an overview of significant transactions with related parties.
Gerd Müller Chairman of the Board 10 February 2022 Priit Luman Member of the Board 10 February 2022 Maret Tambek Member of the Board 10 February 2022
| €'000 | Note | 31 December 2021 | 31 December 2020 |
|---|---|---|---|
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 9,031 | 12,576 | |
| Trade and other receivables | 2 | 48,091 | 50,029 |
| Prepayments | 4,947 | 2,638 | |
| Inventories Total current assets |
3 | 25,637 87,706 |
22,454 87,697 |
| Non-current assets | |||
| Investments in equity-accounted investees | 0 | 0 | |
| Other investments | 76 | 26 | |
| Trade and other receivables | 2 | 9,206 | 8,654 |
| Investment property | 5,599 | 5,639 | |
| Property, plant and equipment | 17,433 | 18,053 | |
| Intangible assets | 15,051 | 14,966 | |
| Total non-current assets | 47,365 | 47,338 | |
| TOTAL ASSETS | 135,071 | 135,035 | |
| LIABILITIES | |||
| Current liabilities | |||
| Borrowings Trade payables |
5, 6 | 16,289 57,287 |
18,508 46,932 |
| Other payables | 7,496 | 12,232 | |
| Deferred income | 11,539 | 7,738 | |
| Provisions | 707 | 1,059 | |
| Total current liabilities | 93,318 | 86,469 | |
| Non-current liabilities | |||
| Borrowings Trade payables |
5, 6 | 7,405 4,178 |
7,352 2,332 |
| Provisions | 2,044 | 1,647 | |
| Total non-current liabilities | 13,627 | 11,331 | |
| TOTAL LIABILITIES | 106,945 | 97,800 | |
| EQUITY | |||
| Share capital | 14,379 | 14,379 | |
| Own (treasury) shares | (660) | (660) | |
| Share premium | 635 | 635 | |
| Statutory capital reserve | 2,554 | 2,554 | |
| Translation reserve | 1,948 | 2,423 | |
| Retained earnings | 6,341 | 14,543 | |
| Total equity attributable to owners of the parent | 25,197 | 33,874 | |
| Non-controlling interests | 2,929 | 3,361 | |
| TOTAL EQUITY | 28,126 | 37,235 | |
| TOTAL LIABILITIES AND EQUITY | 135,071 | 135,035 |
| €'000 | Note | Q4 2021 | 12M 2021 | Q4 2020 | 12M 2020 |
|---|---|---|---|---|---|
| Revenue Cost of sales Gross profit (loss) |
8, 9 10 |
79,640 (80,514) (874) |
288,534 (284,513) 4,021 |
78,418 (76,937) 1,481 |
296,082 (285,086) 10,996 |
| Marketing and distribution expenses Administrative expenses Other operating income Other operating expenses Operating profit (loss) |
11 12 12 |
(165) (1,786) 321 (2,171) (4,675) |
(559) (6,053) 519 (2,264) (4,336) |
(142) (1,761) 180 (135) (377) |
(528) (7,073) 453 (273) 3,575 |
| Finance income Finance costs Net finance income (costs) |
13 13 |
81 (378) (297) |
958 (1,320) (362) |
2,725 (576) 2,149 |
2,995 (2,678) 317 |
| Share of profit (loss) of equity-accounted investees | 0 | 0 | (232) | 734 | |
| Profit (loss) before income tax Income tax expense Profit (loss) for the period |
(4,972) (166) (5,138) |
(4,698) (808) (5,506) |
1,540 (426) 1,114 |
4,626 (508) 4,118 |
|
| Other comprehensive income (expense): Items that may be reclassified subsequently to profit or |
|||||
| loss Exchange differences on translating foreign operations Total other comprehensive income (expense) TOTAL COMPREHENSIVE INCOME (EXPENSE) |
85 85 (5,053) |
(475) (475) (5,981) |
(121) (121) 993 |
1,254 1,254 5,372 |
|
| Profit (loss) attributable to: | |||||
| - Owners of the parent - Non-controlling interests Profit (loss) for the period |
(5,514) 376 (5,138) |
(6,310) 804 (5,506) |
1,426 (312) 1,114 |
2,466 1,652 4,118 |
|
| Comprehensive income attributable to: - Owners of the parent - Non-controlling interests Comprehensive income (expense) for the period |
(5,429) 376 (5,053) |
(6,785) 804 (5,981) |
1,305 (312) 993 |
3,720 1,652 5,372 |
|
| Earnings per share attributable to owners of the | |||||
| parent: Basic earnings per share (€) Diluted earnings per share (€) |
7 7 |
(0.17) (0.17) |
(0.20) (0.20) |
0.05 0.05 |
0.08 0.08 |
| €'000 | Note | 12M 2021 | 12M 2020 |
|---|---|---|---|
| Cash flows from operating activities Cash receipts from customers1 Cash paid to suppliers2 VAT paid Cash paid to and for employees Income tax paid Net cash from operating activities |
352,378 (310,183) (8,140) (25,893) (797) 7,365 |
345,552 (305,500) (9,909) (27,409) (291) 2,443 |
|
| Cash flows from investing activities Paid on acquisition of property, plant and equipment Paid on acquisition of intangible assets Proceeds from sale of property, plant and equipment Cash received on acquisition of a subsidiary Proceeds from sale of an investment in an associate Loans provided Repayments of loans provided Dividends received Interest received Net cash from investing activities |
4 | (232) (19) 489 0 0 (34) 96 0 12 312 |
(254) (17) 332 3,605 3,596 (17) 44 974 23 8,286 |
| Cash flows from financing activities Proceeds from loans received Repayments of loans received Lease payments made Interest paid Dividends paid Other payments Net cash used in financing activities |
1,922 (3,766) (3,318) (1,051) (5,000) (12) (11,225) |
2,026 (2,629) (3,086) (927) (472) (77) (5,165) |
|
| Net cash flow | (3,548) | 5,564 | |
| Cash and cash equivalents at beginning of period Effect of movements in foreign exchange rates Increase (decrease) in cash and cash equivalents Cash and cash equivalents at end of period |
12,576) 3 (3,548) 9,031 |
7,032 (20) 5,563 12,576 |
1Line item Cash receipts from customers includes VAT paid by customers.
2Line item Cash paid to suppliers includes VAT paid.
| Equity attributable to owners of the parent | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| €'000 | Share capital |
Treasury shares |
Capital reserve |
Share premium |
Translation reserve |
Retained earnings |
Total | Non controlling interests |
Total |
| Balance at | |||||||||
| 31 December 2019 | 14,379 | (660) | 2,554 | 635 | 1,169 | 12,383 | 30,460 | 2,313 | 32,773 |
| Profit for the period | 0 | 0 | 0 | 0 | 0 | 2,466 | 2,466 | 1,652 | 4,118 |
| Other comprehensive | |||||||||
| income | 0 | 0 | 0 | 0 | 1,254 | 0 | 1,254 | 0 | 1,254 |
| Changes in non | |||||||||
| controlling interests | 0 | 0 | 0 | 0 | 0 | 1,497 | 1,497 | (132) | 1,365 |
| Transactions with | |||||||||
| owners | |||||||||
| Dividend declared | 0 | 0 | 0 | 0 | 0 | (1,892) | (1,892) | 0 | (1,892) |
| Dividend distributed | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (472) | (472) |
| Cancellation of | |||||||||
| dividend | 0 | 0 | 0 | 0 | 0 | 89 | 89 | 0 | 89 |
| Total transactions | |||||||||
| with owners | 0 | 0 | 0 | 0 | 0 | (1,803) | (1,803) | (472) | (2,275) |
| Balance at | |||||||||
| 31 December 2020 | 14,379 | (660) | 2,554 | 635 | 2,423 | 14,543 | 33,874 | 3,361 | 37,235 |
| Loss for the period | 0 | 0 | 0 | 0 | 0 | (6,310) | (6,310) | 804 | (5,506) |
| Other comprehensive | |||||||||
| expense | 0 | 0 | 0 | 0 | (475) | 0 | (475) | 0 | (475) |
| Transactions with | |||||||||
| owners | |||||||||
| Dividend distributed | 0 | 0 | 0 | 0 | 0 | (1,892) | (1,892) | (1,236) | (3,128) |
| Total transactions | |||||||||
| with owners | 0 | 0 | 0 | 0 | 0 | (1,892) | (1,892) | (1,236) | (3,128) |
| Balance at | |||||||||
| 31 December 2021 | 14,379 | (660) | 2,554 | 635 | 1,948 | 6,341 | 25,197 | 2,929 | 28,126 |
Nordecon AS is a company incorporated and domiciled in Estonia. The address of the company's registered office is Toompuiestee 35, 10149 Tallinn, Estonia. Nordecon AS's majority shareholder and the party controlling the Nordecon group is AS Nordic Contractors that holds 52.3% of the shares in Nordecon AS. The Nordecon AS shares have been listed on the Nasdaq Tallinn Stock Exchange since 18 May 2006.
The condensed consolidated interim financial statements as at and for the period ended 31 December 2021 have been prepared in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting as adopted by the European Union. The condensed interim financial statements do not contain all the information presented in the annual financial statements and should be read in conjunction with the group's latest published annual financial statements as at and for the year ended 31 December 2020.
According to management's assessment, the condensed consolidated interim financial statements of Nordecon AS for the fourth quarter and twelve months of 2021 give a true and fair view of the group's financial performance and the parent and all its subsidiaries that are included in the financial statements are going concerns. The condensed consolidated interim financial statements have not been audited or otherwise checked by auditors and contain only the consolidated financial statements of the group.
| €'000 | Note | 31 December 2021 | 31 December 2020 |
|---|---|---|---|
| Current items | |||
| Trade receivables | 31,160 | 32,331 | |
| Retentions receivable | 6,063 | 2,117 | |
| Receivables from related parties | 211 | 494 | |
| Other receivables | 78 | 113 | |
| Total receivables and loans provided | 37,840 | 35,055 | |
| Due from customers for contract work | 10,579 | 14,974 | |
| Total current trade and other receivables | 48,091 | 50,029 | |
| €'000 | Note | 31 December 2021 | 31 December 2020 |
| Non-current items | |||
| Loans to related parties | 14 | 8,481 | 8,237 |
| Receivables from related parties | 328 | 299 | |
| Other non-current receivables | 397 | 118 | |
| Total non-current trade and other receivables | 9,206 | 8,654 |
| €'000 | 31 December 2021 | 31 December 2020 |
|---|---|---|
| Raw materials and consumables | 3,886 | 3,007 |
| Work in progress | 9,119 | 5,559 |
| Apartments for sale | 230 | 400 |
| Properties purchased for development and pre-development costs | 12,402 | 13,488 |
| Total inventories | 25,637 | 22,454 |
Additions to property, plant and equipment in 2021 totalled €3,214 thousand (2020: €2,539 thousand) and comprised of equipment and construction machinery required for the group's operating activities.
Proceeds from the sale of property, plant and equipment amounted to €489 thousand (see the statement of cash flows). Proceeds from the sale of property, plant and equipment in 2020 totalled €332 thousand. Gain on the sale of property, plant and equipment amounted to €280 thousand (2020: €199 thousand) (note 12).
There were no significant transactions with intangible assets in 2021.
| €'000 | Note | 31 December 2021 | 31 December 2020 |
|---|---|---|---|
| Short-term portion of long-term loans | 3,074 | 9,640 | |
| Lease liabilities | 6 | 2,967 | 3,131 |
| Short-term bank loans | 10,248 | 5,737 | |
| Total current borrowings | 16,289 | 18,508 |
| €'000 | Note | 31 December 2021 | 31 December 2020 |
|---|---|---|---|
| Long-term portion of long-term bank loans | 1,073 | 827 | |
| Derivative financial instruments | 0 | 1 | |
| Lease liabilities | 6 | 6,332 | 6,524 |
| Total non-current borrowings | 7,405 | 7,352 |
| €'000 | 31 December 2021 | 31 December 2020 |
|---|---|---|
| Lease liabilities at end of period, of which | 9,299 | 9,655 |
| Not later than 1 year | 2,967 | 3,131 |
| Later than 1 year and not later than 5 years | 6,332 | 6,524 |
| Base currency € | 9,299 | 9,655 |
| Interest rate for contracts denominated in €1 | 2.0%-4.0% | 2.0%-4.0% |
| Frequency of payments | Monthly | Monthly |
1 Includes leases with floating interest rates
| Lease payments | ||
|---|---|---|
| €'000 | 12M 2021 | 12M 2020 |
| Principal payments made during the period | 3,318 | 3,086 |
| Interest payments made during the period | 300 | 203 |
Basic earnings per share are calculated by dividing the profit or loss attributable to owners of the parent by the weighted average number of shares outstanding during the period. Diluted earnings per share are calculated by dividing the profit or loss attributable to owners of the parent by the average number of shares outstanding during the period, both adjusted for the effects of all dilutive equity instruments.
| €'000 | 12M 2021 | 12M 2020 |
|---|---|---|
| Profit (loss) for the period attributable to owners of the parent (€'000) | (6,310) | 2,466 |
| Average number of shares (thousand) | 31,528 | 31,528 |
| Basic earnings per share (€) | (0.20) | 0.08 |
| Diluted earnings per share (€) | (0.20) | 0.08 |
At the reporting date, Nordecon AS had no dilutive share options. Therefore, diluted earnings per share equal basic earnings per share.
The group's chief operating decision maker is the board of the parent company Nordecon AS. This group of persons monitors the group's internally generated financial information on a regular basis to better allocate the resources and assess their utilisation. Reportable operating segments are identified by reference to monitored information.
The group's reportable operating segments are:
Reportable operating segments are engaged in the provision of construction services in the buildings and infrastructure segments.
The prices applied in inter-segment transactions do not differ significantly from market prices. The chief operating decision maker reviews inter-segment transactions separately and analyses their proportion in segment revenue. Respective figures are separately outlined in segment reporting.
The chief operating decision maker assesses the performance of an operating segment and utilisation of the resources allocated to it through the segment's profit. The profit of an operating segment is its gross profit, which does not include major exceptional expenses (such as non-recurring asset write-downs). Items after the gross profit of an operating segment (including marketing and distribution expenses, administrative expenses, interest expense and income tax expense) are not used by the chief operating decision maker to assess the performance of the segment.
According to management's assessment, inter-segment transactions are conducted on regular market terms, which do not differ significantly from the terms applied in transactions with third parties.
| €'000 | |||
|---|---|---|---|
| Q4 2021 | Buildings | Infrastructure | Total |
| Total revenue | 61,471 | 18,100 | 79,571 |
| Of which: General contracting services | 58,481 | 15,089 | 73,570 |
| Subcontracting services | 282 | 2,032 | 2,314 |
| Own development activities | 2,708 | 0 | 2,708 |
| Road maintenance services | 0 | 776 | 776 |
| Rental services | 0 | 203 | 203 |
| Inter-segment revenue | 0 | (14) | (14) |
| Revenue from external customers | 61,471 | 18,086 | 79,557 |
| Gross loss of the segment | (436) | (253) | (689) |
€'000
| Q4 2020 | Buildings | Infrastructure | Total |
|---|---|---|---|
| Total revenue | 59,077 | 19,131 | 78,208 |
| Of which: General contracting services | 56,451 | 14,679 | 71,130 |
| Subcontracting services | 2,215 | 3,224 | 5,439 |
| Own development activities | 411 | 0 | 411 |
| Road maintenance services | 0 | 1,006 | 1,006 |
| Rental services | 0 | 222 | 222 |
| Inter-segment revenue | 0 | (15) | (15) |
| Revenue from external customers | 59,077 | 19,116 | 78,193 |
| Gross profit of the segment | 419 | 1,175 | 1,594 |
| €'000 | |||
|---|---|---|---|
| 12M 2021 | Buildings | Infrastructure | Total |
| Total revenue | 216,070 | 72,200 | 288,270 |
| Of which: General contracting services | 204,692 | 53,171 | 257,863 |
| Subcontracting services | 8,281 | 13,929 | 22,210 |
| Own development activities | 3,097 | 0 | 3,097 |
| Road maintenance services | 0 | 3,814 | 3,814 |
| Rental services | 0 | 1,285 | 1,285 |
| Inter-segment revenue | 0 | (85) | (85) |
| Revenue from external customers | 216,070 | 72,115 | 288,185 |
| Gross profit of the segment | 4,250 | 712 | 4,962 |
| €'000 | |||
|---|---|---|---|
| 12M 2020 | Buildings | Infrastructure | Total |
| Total revenue | 228,516 | 67,733 | 296,248 |
| Of which: General contracting services | 211,852 | 58,166 | 270,018 |
| Subcontracting services | 12,447 | 4,322 | 16,769 |
| Own development activities | 2,866 | 0 | 2,866 |
| Investment property | 1,350 | 0 | 1,350 |
| Road maintenance services | 0 | 3,845 | 3,845 |
| Rental services | 0 | 1,400 | 1,400 |
| Inter-segment revenue | 0 | (591) | (591) |
| Revenue from external customers | 228,515 | 67,142 | 295,657 |
| Gross profit of the segment | 8,327 | 3,396 | 11,723 |
| €'000 | 12M 2021 | Q4 2021 | 12M 2020 | Q4 2020 |
|---|---|---|---|---|
| Total revenues for reportable segments | 288,270 | 79,571 | 296,248 | 78,208 |
| Elimination of inter-segment revenues | (85) | (14) | (591) | (15) |
| Other revenue | 349 | 83 | 425 | 225 |
| Total revenue | 288,534 | 79,640 | 296,082 | 78,418 |
| €'000 | 12M 2021 | Q4 2021 | 12M 2020 | Q4 2020 |
|---|---|---|---|---|
| Total profit (loss) for reportable segments | 4,962 | (689) | 11,723 | 1,594 |
| Unallocated profit (loss) | (941) | (185) | (727) | (113) |
| Gross profit (loss) | 4,021 | (874) | 10,996 | 1,481 |
| Unallocated expenses: | ||||
| Marketing and distribution expenses | (559) | (165) | (528) | (142) |
| Administrative expenses | (6,053) | (1,786) | (7,073) | (1,761) |
| Other operating income and expenses | (1,745) | (1,850) | 180 | 45 |
| Operating profit (loss) | (4,336) | (4,675) | 3,575 | (377) |
| Finance income | 958 | 81 | 2,995 | 2,725 |
| Finance costs | (1,320) | (378) | (2,678) | (576) |
| Share of profit (loss) of equity-accounted investees | 0 | 0 | 734 | (232) |
| Profit (loss) before tax | (4,698) | (4,972) | 4,626 | 1,540 |
| €'000 | 12M 2021 | Q4 2021 | 12M 2020 | Q4 2020 |
|---|---|---|---|---|
| Estonia | 272,051 | 74,396 | 241,674 | 50,625 |
| Latvia | 3,801 | 3,801 | 0 | 0 |
| Finland | 8,293 | 294 | 17,359 | 7,127 |
| Sweden | 126 | -439 | 32,766 | 18,895 |
| Ukraine | 4,263 | 1,588 | 4,283 | 1,771 |
| Total revenue | 288,534 | 79,640 | 296,082 | 78,418 |
| €'000 | 12M 2021 | 12M 2020 |
|---|---|---|
| Cost of materials, goods and services | 259,320 | 258,920 |
| Personnel expenses | 22,019 | 23,062 |
| Depreciation expense | 2,621 | 2,520 |
| Other expenses | 553 | 584 |
| Total cost of sales | 284,513 | 285,086 |
| €'000 | 12M 2021 | 12M 2020 |
|---|---|---|
| Personnel expenses | 2,973 | 3,995 |
| Cost of materials, goods and services | 1,959 | 1,947 |
| Depreciation and amortisation expense | 918 | 908 |
| Other expenses | 203 | 223 |
| Total administrative expenses | 6,053 | 7,073 |
| €'000 | 12M 2021 | 12M 2020 |
|---|---|---|
| Other operating income | ||
| Gain on disposal of property, plant and equipment | 280 | 199 |
| Gain on sale of real estate | 28 | 19 |
| Gain on a bargain purchase | 0 | 139 |
| Other income | 211 | 96 |
| Total other operating income | 519 | 453 |
| €'000 | 12M 2021 | 12M 2020 |
| Other operating expenses | ||
| Foreign exchange loss | 0 | 48 |
| Net loss on recognition and reversal of impairment losses on receivables | 2,144 | 157 |
| Loss on write-off of property, plant and equipment | 8 | 7 |
| Other expenses | 112 | 61 |
Total other operating expenses 2,264 273
| €'000 | 12M 2021 | 12M 2020 |
|---|---|---|
| Finance income | ||
| Interest income on loans | 213 | 225 |
| Gain on sale of an investment in an associate | 0 | 2,749 |
| Foreign exchange gain | 731 | 1 |
| Other finance income | 14 | 20 |
| Total finance income | 958 | 2,995 |
| €'000 | 12M 2021 | 12M 2020 |
| Finance costs | ||
| Interest expense | 982 | 1,078 |
| Foreign exchange loss | 0 | 1,509 |
| Other finance costs | 338 | 91 |
| Total finance costs | 1,320 | 2,678 |
The group considers parties to be related if one controls the other or exerts significant influence on the other's operating decisions (assumes holding more than 20% of the voting power). Related parties include:
| €'000 | 12M 2021 | 12M 2020 | ||
|---|---|---|---|---|
| Counterparty | Purchases | Sales | Purchases | Sales |
| AS Nordic Contractors | 509 | 0 | 253 | 0 |
| Companies of the AS Nordic Contractors group | 231 | 8 | 2,147 | 11 |
| Companies related to owners of AS Nordic Contractors | 740 | 0 | 321 | 0 |
| Equity-accounted investees | 0 | 0 | 1,201 | 313 |
| Companies related to members of the council and board | 83 | 781 | 89 | 0 |
| Total | 1,563 | 789 | 4,011 | 324 |
| €'000 | 12M 2021 | 12M 2020 | ||
| Nature of transactions | Purchases | Sales | Purchases | Sales |
| Construction services | 0 | 781 | 1,201 | 21 |
| Transactions with goods | 740 | 0 | 321 | 0 |
| Lease and other services | 540 | 8 | 406 | 11 |
| Other transactions | 283 | 0 | 2,083 | 292 |
During the period, the group recognised interest income on loans to an associate of €217 thousand (2020: €216 thousand).
Total 1,563 789 4,011 324
| 31 December 2021 | 31 December 2020 | |||
|---|---|---|---|---|
| €'000 | Receivables | Liabilities | Receivables | Liabilities |
| AS Nordic Contractors | 0 | 16 | 0 | 15 |
| Companies of the AS Nordic Contractors group | 406 | 21 | 492 | 411 |
| Companies related to owners of AS Nordic Contractors |
130 | 135 | 0 | 58 |
| Associates – receivables and liabilities | 3 | 0 | 2 | 32 |
| Associate – loans and interest | 8,481 | 0 | 8,237 | 0 |
| Total | 9,020 | 172 | 8,731 | 516 |
The service fees of the members of the council of Nordecon AS for 2021 amounted to €150 thousand and associated social security charges totalled €50 thousand (2020: €165 thousand and €54 thousand, respectively).
The service fees of the members of the board of Nordecon AS for 2021 amounted to €369 thousand and associated social security charges totalled €122 thousand (2020: €432 thousand and €143 thousand, respectively).
The board of Nordecon AS acknowledges its responsibility for the preparation of the group's condensed consolidated interim financial statements for the fourth quarter and twelve months of 2021 and confirms that:
Gerd Müller Chairman of the Board 10 February 2022 Priit Luman Member of the Board 10 February 2022 Maret Tambek Member of the Board 10 February 2022
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