AS Eesti Ehitus Financial Report February 09, 2007 Preliminary unaudited financial results for 2006 Revenue and segments Preliminary unaudited consolidated revenues for 2006 amounted to EEK 2.504 billion (E160 million), a solid 49.5 per cent increase on a year ago. In terms of business segments, the Residential and non-residential segment contributed 54 per cent (53.5 per cent growth) and the Civil engineering segment 46 per cent (43.6 per cent growth). In geographical terms, 91.5 per cent of the Group's revenue was earned in Estonia; Ukraine contributed 8.5 per cent (a year ago the corresponding figures were 93.5 per cent and 6.5 per cent). Revenue by segments Business segments 2004 2005 2006 Civil engineering 53% 45% 46% Residential and non-residential 47% 55% 54% Actual revenue structure 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 to maintain competitiveness and presence in every main segment of construction market. Compared to 2005, the Commercial buildings sub-segment has become the biggest one among Residential and non-residential segment whereas Residential buildings sub- segment has shown the biggest growth rate. Revenue allocation in the Residential and non-residential segment 2004 2005 2006 Residential buildings 10% 11% 17% Public buildings 44% 35% 18% Commercial buildings 24% 37% 41% Industrial and warehouse facilities 22% 17% 24% The largest sub-segment in Civil engineering segment is Road construction and maintenance, being also the biggest sub-segment in the whole Group. The fastest growing sub-segment in Civil engineering has been Environmental construction. At the end of 2006, the Group's order backlog totalled EEK 2.7 billion (E173 million) against EEK 1.2 billion (E79 million) a year ago. Profitability and cash flows In 2006, the Group's gross margin improved by 1.8 percentage point to 12.3 per cent (2005: 10.5 per cent). Two direct cost items affecting gross margin the most, labour costs and subcontracting and materials costs have increased at the slower pace than Group's revenues (33.4% and 49.1% respectively), contributing thereby to the improvement of the gross margin. The ratio of administrative expenses to revenue was 5.0 per cent (2005: 4.3 per cent), which outpaced revenue growth by 23.3 per cent, largely on account of an increase in labour costs,which, in turn was mostly affected by the results-based bonuses. Operating margin for 2006 was 8.2 per cent (a year ago 7.0 per cent), whereas operating margin excluding gains on sale of property and real estate was 7.1 per cent (a year ago 6.2 per cent). Preliminary unaudited consolidated net profit for 2006 amounted to a strong EEK 190.3 million (E12.2 million) against EEK 94 million (E6 million) earned a year ago. The profit attributable to equity holders of the parent amounted to EEK 176.9 million (E11.3 million) against EEK 86.8 million (E5.5 million) for 2005. Net operating cash flows have remained on the same level compared to a year ago. The figure for 2006 was EEK 152.6 million (E9.8 million) while a year ago operating cash flows were EEK 156.8 million (E10 million). Considering the preliminary financial results for 2006 and the Group's dividend policy, the Board will make to the ordinary general meeting of shareholders a reasoned proposal to payout dividends EEK 3 per share. The full interim report for the fourth quarter of 2006 will be disclosed on or about February 16, 2007. Significant ratios and figures Ratio / figure 2004 2005 2006 Revenue growth 47,5% 5,4% 49,5% Average number of employees 610 722 871 Revenue per employee, EEK thousands 2 603 2 319 2 875 Labour costs to revenue, % 9,2% 10,9% 10,9% Administrative expenses to revenue, % 3,4% 4,3% 5,0% EBITDA, EEK thousands 119 424 143 850 236 602 EBITDA margin, % 7,5% 8,6% 9,4% Gross margin, % 9,6% 10,5% 12,3% Operating margin, % 6,1% 7,0% 8,2% operating margin excluding gains on sale of property and real estate, % 6,0% 6,2% 7,1% Net margin, % 5,0% 5,6% 7,6% Return on invested capital, % 40,4% 31,1% 34,0% Return on assets, % 21,2% 15,8% 17,6% Return on equity, % 59,8% 59,9% 56,6% Equity ratio, % 32,5% 20,2% 35,1% Current ratio 1,28 1,14 1,33 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 Gross margin = gross profit / revenue Operating margin = operating profit / revenue Operating margin excluding gains on sale of property and real estate = (operating profit - gains on sale of property - gains on sale of real estate) / 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 Andri Hõbemägi AS Eesti Ehitus Tel: (+372) 6400 450 E-mail: eestiehitus@eestiehitus.ee