DIRECTORS' REPORT
Eesti Ehitus is a group of construction companies whose core business is general
contracting and project management. Group entities are involved in the
construction of buildings and civil engineering in Estonia, Latvia, Lithuania
and Ukraine. In addition, in Estonia our companies act as independent
contractors in road construction and maintenance, environmental engineering, the
assembly of reinforced concrete elements, and the performance of cast-on-site
concrete works. The parent of the Group is AS Eesti Ehitus, a company registered
and located in Tallinn, Estonia. Since 18 May 2006, the parent company's shares
have been quoted in the main list of the NASDAQ OMX Tallinn Stock Exchange.
Our mission
We are committed to providing premier value added design and construction
services by creating a successful partnership with our customers.
We seek to add value to the company by motivating our employees and providing
them with clear development opportunities and a contemporary work environment.
Our vision
We strive to be a construction group that can always surpass the customer's
expectations.
Shared values
Quality
We are professionals - we apply appropriate and effective construction
techniques and technologies and observe generally accepted quality standards. We
provide our customers with integrated cost efficient solutions. We are
environmentally aware and operate sustainably. We value our employees by
providing them with a modern work environment which encourages creativity and a
motivation system which fosters initiative.
Reliability
We always keep our promises and honour our agreements. We act openly and
transparently. We consistently support and promote the best construction
practices. We do not take risks at the expense of our customers.
Innovation
We are innovative and creative engineers. We take maximum advantage of the
benefits offered by information technology. We inspire our employees to grow
through continuous training and balanced career opportunities.
The structure and business of Eesti Ehitus Group as of 30 September 2008
The unaudited consolidated financial statements for nine months ended 30
September 2008 comprise the parent and the parent's interests in the following
Group entities:
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| Direct and indirect ownership interests of AS Eesti Ehitus | |
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| Company | Domicile | 30 Sept | 30 Sept 2007 | 31 Dec 2007 |
| | | 2008 | | |
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| AS Linnaehitus | Estonia | 100.0% | 100.0% | 100.0% |
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| AS ASPI | Estonia | 100.0% | 100.0% | 100.0% |
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| AS Järva Teed | Estonia | 100.0% | 100.0% | 100.0% |
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| OÜ Hiiu Teed | Estonia | 100.0% | 100.0% | 100.0% |
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| Estcon OY | Finland | 100.0% | 100.0% | 100.0% |
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| OÜ EE Ressursid | Estonia | 100.0% | 100.0% | 100.0% |
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| UAB Eurocon LT | Lithuania | 70.0% | 100.0% | 70.0% |
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| OÜ Kaurits | Estonia | 66.0% | 52.0% | 52.0% |
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| Infra Ehitus OÜ | Estonia | 66.0% | 52.0% | 52.0% |
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| OÜ Eurocon | Estonia | 63.0% | 64.0% | 64.0% |
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| Eurocon Ukraine | Ukraine | 63.0% | 61.4% | 61.4% |
| TOV | | | | |
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| TOV Eurocon West | Ukraine | 63.0% | 61.4% | 61.4% |
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| Instar Property OÜ | Estonia | 63.0% | 0% | 0% |
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| TOV Instar | Ukraine | 63.0% | 0% | 0% |
| Property | | | | |
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| TOV Bukovina | Ukraine | 62.4% | 60.8% | 60.8% |
| Developments | | | | |
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| SIA Abagars | Latvia | 56.0% | 34.3% | 34.3% |
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| SIA Vides Tikli | Latvia | 56.0% | 34.3% | 34.3% |
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| MP Ukraine TOV | Ukraine | 52.6% | | |
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| OÜ Mapri Projekt | Estonia | 52.0% | 52.0% | 52.0% |
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| AS Eston Ehitus | Estonia | 52.0% | 0.0% | 52.0% |
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| OÜ DSN | Estonia | 43.6% | 34.3% | 34.3% |
| Ehitusmasinad | | | | |
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| TOV V.I. Center | Ukraine | 32.8% | 32.0% | 32.0% |
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| TOV EA Reng Proekt | Ukraine | 32.1% | 31.3% | 31.3% |
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| TOV Technopolis-2 | Ukraine | 31.5% | 30.7% | 30.7% |
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| P/S BKT | Latvia | 28.0% | 17.2% | 17.2% |
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| OÜ Kastani | Estonia | 26.0% | 26.0% | 26.0% |
| Kinnisvara | | | | |
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| OÜ Sepavara | Estonia | 26.0% | 0% | 26.0% |
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| OÜ Kalda Kodu | Estonia | 22.9% | 0% | 22.9% |
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| TOV Passage | Ukraine | 17.0% | 55.3% | 17.8% |
| Theatre | | | | |
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| OÜ Crislivnica | Estonia | 17.7% | 0% | 17.7% |
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| AS E-Trading | Estonia | 6.2% | 0% | 6.2% |
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| TOV European House | Ukraine | 0% | 0% | 6.1% |
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| TOV Baltik | Ukraine | 0% | 30.7% | 30.7% |
| Development | | | | |
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The business of Group entities
The Estonian entities of Eesti Ehitus Group provide services in all business
segments in which the Group is involved. The parent AS Eesti Ehitus, AS
Linnaehitus and AS Eston Ehitus are mainly engaged in general construction
contracting and project management. AS ASPI and its subsidiaries build
environmental structures and roads and provide road maintenance services. In
addition, ASPI group includes companies (Kaurits OÜ and DSN Ehitusmasinad) that
rent out construction machinery and equipment. OÜ Mapri Projekt earns a major
share of its revenue from concrete works.
The Group's Ukrainian subsidiaries operate in the residential and
non-residential segment. The largest Ukrainian subsidiaries Eurocon Ukraine TOV
and TOV Eurocon West build mostly commercial buildings and industrial and
warehouse facilities. EA Reng Proekt TOV provides design services. Other
Ukrainian subsidiaries are involved in the development of real estate and
construction projects in Kiev and Lvov.
The Latvian subsidiary, Abagars SIA, and its subsidiaries perform infrastructure
projects (such as the construction of pipelines beneath roads, etc) in the civil
engineering segment.
The Lithuanian subsidiary Eurocon LT UAB operates in the residential and
non-residential segment focusing on the construction of residential and
commercial premises.
Changes in the Group's structure in the first nine months of 2008
Acquisitions of interests and establishment of subsidiaries
On 5 February, OÜ Eurocon acquired a 4 per cent stake in Eurocon Ukraine TOV,
raising its interest in the entity to 100 per cent.
On 12 February, AS Eesti Ehitus acquired a 2.5 per cent stake in OÜ Eurocon from
a minority shareholder, increasing its holding in OÜ Eurocon to 66.5 per cent.
On 18 February, AS Eesti Ehitus' subsidiary OÜ Eurocon established a
wholly-owned subsidiary - Instar Property OÜ. At the date of establishment, the
share capital of Instar Property OÜ was 40,000 kroons (approx. 2,557 euros).
Instar Property OÜ operates as a holding company for the Group's direct and
indirect interests in development projects performed in Ukraine.
On 2 May, AS Eesti Ehitus' wholly-owned subsidiary AS ASPI performed a
transaction with its subsidiary OÜ Kaurits, acquiring a 56 per cent interest in
the Latvian entity SIA Abagars. After the transaction, AS ASPI's direct interest
in SIA Abagars is 56 per cent.
On 19 May, AS ASPI increased its shareholding in OÜ Kaurits by 14 per cent to 66
per cent.
On 8 September 2008, Mapri Projekt OÜ (a 52 per cent subsidiary of AS Eesti
Ehitus) and Eurocon Ukraine TOV (a wholly-owned subsidiary of Eurocon OÜ, which
is a 63 per cent subsidiary of AS Eesti Ehitus) established MP Ukraine TOV, a
company domiciled in Ukraine. The ownership interest of Mapri Projekt OÜ is 95
per cent and that of Eurocon Ukraine TOV 5 per cent.
Divestment of interests
On 4 April, AS Eesti Ehitus sold a 4 per cent interest in Eurocon OÜ to a
Ukrainian resident. The transaction was performed by increasing share capital.
On 10 April, AS Eesti Ehitus' subsidiary Eurocon Ukraine TOV divested a 33 per
cent stake in the Ukrainian company TOV Passage Theatre.
On 14 April, Eurocon Ukraine TOV divested a 50 per cent stake in the Ukrainian
company TOV Baltic Development.
In June, Eurocon Ukraine TOV signed an agreement in which it undertook to sell
its entire 10 per cent interest in the Ukrainian company TOV European House. By
30 September 2008, all terms and conditions of the sales agreement were
satisfied and AS Eesti Ehitus did not have an interest in TOV European House.
In June, Eurocon Ukraine TOV sold a 30 per cent stake in the Ukrainian company
TOV Passage Theatre, which had already been classified as a non-current asset
held for sale, making its interest in TOV Passage Theatre 27 per cent.
In September, OÜ Eurocon sold 8 per cent of its interest in the Ukrainian
property development company V.I. Center TOV, reducing its stake in the entity
to 28 per cent.
Financial review
Margins
Eesti Ehitus Group ended the first nine months of 2008 with a gross profit of
312.0 million kroons (19.9 million euros), a 10.1 per cent decrease from the
346.9 million kroons (22.2 million euros) earned a year ago.
Consolidated net profit for the period was 183.5 million kroons (11.7 million
euros). Compared with the 208.8 million kroons (13.3 million euros) generated in
the first nine months of 2007, net profit has decreased by 12.1 per cent. The
decline results mainly from the income tax expense triggered by the record
dividends distributed in 2008 for performance in prior periods, because at
around 227 million kroons (14.5 million euros) profit before tax is practically
the same as a year ago (9 months 2007: 226.3 million kroons or 14.5 million
euros).
As anticipated, margins were impacted by keen competition and continuing
deceleration in economic growth, which prompted a slump in the Estonian
construction market. The key profitability ratios monitored by the Group have
dropped mostly on account of the above reasons. Although the gross margin for
the first nine months was 10.7 per cent against 13.0 per cent a year ago, it is
a strong result in the context of the situation and the state of the industry.
Owing to operating and non-operating developments (a rise in dividend tax
expense), the period's operating and net margin dropped to 6.1 per cent and 6.3
per cent respectively (2007: 8.7 per cent and 7.9 per cent).
We have put a lot of effort in cost-cutting and despite the growth of the Group
and high inflation administrative expenses have not increased significantly. At
period end, the ratio of administrative expenses to revenue was 4.7 per cent
(2007: 4.4 per cent), an indication of effective cost management in the context
of the industry. We intend to maintain the ratio at a similar level also in the
future.
Cash flows
The Group's net operating cash flow for the first nine months was positive at
142.5 million kroons (9.1 million euros) while the corresponding figure for the
prior year was 28.7 million kroons (1.8 million euros). Operating cash flow has
improved, above all, thanks to an increase in receipts from customers including
settlements made on the completion of contracts.
Compared with the first nine months of 2007, when investing activities resulted
in a net inflow of 8.9 million kroons (0.6 million euros), in the reporting
period investment heightened giving rise to a net outflow of 158.6 million
kroons (10.1 million euros). Payments made for the acquisition of subsidiaries
including business combinations of prior periods (the acquisition of AS Eston
Ehitus in 2007) accounted for 206.9 million kroons (13.2 million euros) of the
outflow while inflow comprised mainly loan settlements and proceeds from the
disposal of investments in associates.
Financing activities for the first nine months of 2008 generated a net outflow
of 35.8 million kroons (2.3 million euros). A year ago, financing outflow was
37.9 million kroons (2.4 million euros). The net amount of loans received and
repaid during the first nine months of 2008 was positive at 140.0 million kroons
(8.9 million euros) against 69.1 million kroons (4.4 million euros) a year ago.
The largest one-off outflow resulted from the distribution of dividends, which
at 104.1 million kroons (6.7 million euros) were two times larger than in the
prior financial year.
In the first nine months of 2008, the Group's cash and cash equivalents
decreased by 52 million kroons (3.3 million euros); in the first nine months of
2007 the net change in cash and cash equivalents was close to nil (a decrease of
0.3 million kroons or 0.02 million euros).
At 30 September 2008, the Group's cash and cash equivalents stood at 184.1
million kroons (11.8 million euros) against 155 million kroons (9.9 million
euros) at 30 September 2007.
Key financial figures and ratios
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| Figure / ratio | 9 | 9 months | 9 months | Full year |
| | months | to | to | 2007 |
| | to | 30 Sept | 30 Sept | |
| | 30 Sept | 2007 | 2006 | |
| | 2008 | | | |
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| Weighted average number of | 30,756, | 30,756,7 | 30,756,72 | 30,756,72 |
| shares | 728 | 28 | 8 | 8 |
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| Earnings per share (in kroons) | 5.06 | 6.38 | 3.72 | 8.70 |
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| Earnings per share (in euros) | 0.32 | 0.41 | 0.24 | 0.56 |
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| Revenue growth | 9.9% | 50.7% | 39.7% | 49.9% |
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| Average number of employees | 1,267 | 1,113 | 882 | 1,103 |
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| Revenue per employee (in | 2,306 | 2,389 | 2,001 | 3,402 |
| thousands of kroons) | | | | |
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| Revenue per employee (in | 147 | 153 | 128 | 217 |
| thousands of euros) | | | | |
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| Personnel expenses to revenue, | 12.4% | 11.2% | 9.7% | 12.3% |
| % | | | | |
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| Administrative expenses to | 4.7% | 4.4% | 4.2% | 4.7% |
| revenue, % | | | | |
--------------------------------------------------------------------------------
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| EBITDA (in thousands of kroons) | 234,230 | 277,622 | 165,432 | 370,575 |
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| EBITDA (in thousands of euros) | 14,970 | 17,743 | 10,573 | 23,684 |
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| EBITDA margin, % | 8.0% | 10.4% | 9.4% | 9.9% |
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| Gross margin, % | 10.7% | 13.0% | 10.9% | 13.3% |
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| Operating margin, % | 6.1% | 8.7% | 8.1% | 8.2% |
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| Operating margin excluding | 6.0% | 8.4% | 6.6% | 7.8% |
| gains on asset sales, % | | | | |
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| Net margin, % | 6.3% | 7.9% | 6.6% | 7.7% |
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| Return on invested capital, % | 18.9% | 26.3% | 24.2% | 32.7% |
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| Return on assets, % | 7.7% | 13.4% | 12.0% | 17.1% |
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| Return on equity, % | 21.7% | 35.8% | 37.5% | 44.1% |
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| Equity ratio, % | 35.5% | 32.6% | 29.1% | 36.9% |
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| Gearing, % | 28.7% | 23.2% | 16.2% | 13.5% |
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| Current ratio | 1.42 | 1.38 | 1.27 | 1.30 |
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| As at | 30 Sept | 30 Sept | 30 Sept | 31 Dec |
| | 2008 | 2007 | 2006 | 2007 |
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| Order backlog (in thousands of | 3,042,6 | 3,161,95 | 2,200,663 | 2,526,652 |
| kroons) | 54 | 6 | | |
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| Order backlog (in thousands of | 194,461 | 202,086 | 140,648 | 161,482 |
| euros) | | | | |
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* For comparability, the weighted average number of shares is the number of
shares after the bonus issues.
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| Earnings per share (EPS) = net | Operating margin excluding gains on |
| profit attributable to equity | asset sales = (operating profit - |
| holders of the parent / weighted | gains on sale of property, plant and |
| average number of shares outstanding | equipment - gains on sale of real |
| Revenue per employee = revenue / | estate) / revenue |
| average number of employees | Net margin = net profit for the |
| Personnel expenses to revenue = | period / revenue |
| personnel expenses / revenue | Return on invested capital = (profit |
| Administrative expenses to revenue = | before tax + interest expense) / the |
| administrative expenses / revenue | period's average (interest-bearing |
| EBITDA = earnings before interest, | liabilities + equity) |
| taxes, depreciation and amortisation | Return on assets = operating profit / |
| EBITDA margin = EBITDA / revenue | the period's average total assets |
| Gross margin = gross profit / | Return on equity = net profit for the |
| revenue | period /the period's average total |
| Operating margin = operating profit | equity |
| / revenue | Equity ratio = total equity / total |
| | equity and liabilities |
| | Gearing = (interest-bearing |
| | liabilities - cash and cash |
| | equivalents) / (interest bearing |
| | liabilities + equity) |
| | Current ratio = total current assets |
| | / total current liabilities |
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Revenue
Revenue by geographical segments
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| | 9 months | 9 months to | 9 months to | Full year |
| | to | 30 Sept | 30 Sept | 2007 |
| | 30 Sept | 2007 | 2006 | |
| | 2008 | | | |
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| Estonia | 80.1% | 88.1% | 92.4% | 87.9% |
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| Ukraine | 13.4% | 11.9% | 7.6% | 11.6% |
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| Lithuania | 2.4% | 0% | 0% | 0.5% |
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| Latvia | 4.1% | 0% | 0% | 0% |
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Compared with prior periods, we have increased operations in Ukraine, Latvia and
Lithuania - if revenue earned outside Estonia during the first nine months of
2007 and full 2007 accounted for around 12 per cent of the total, the figure for
the first nine months of 2008 is 20 per cent. Revenue distribution across
different geographical segments is a consistently deployed strategy for
mitigating the risks arising from undue reliance on a single market.
Business review
The core business of Eesti Ehitus Group is general contracting and construction
management in the construction of buildings and structures. In addition, the
Group is involved in road construction and maintenance, environmental
engineering, concrete works and real estate development.
Consolidated revenue for the first nine months of 2008 was 2,921.7 million
kroons (186.7 million euros), a 10 per cent increase compared with the 2,659.4
million kroons (170 million euros) generated in the first nine months of 2007.
Revenue growth has been supported by the growth of the Group (addition of
consolidated entities).
The Group tries to keep the revenues generated by different segments in balance
as this helps disperse risks and provides a more solid foundation under stressed
circumstances. In line with the strategy, the proportion of residential
development revenue is consistently maintained at a relatively low level (at or
below 20 per cent).
The residential and non-residential segment contributed 1,840.4 million kroons
(117.6 million euros) and the civil engineering segment 1,037.4 million kroons
(66.3 million euros) of total construction contract revenue. The corresponding
figures for the first nine months of 2007 were 1,361.6 million kroons and
1,271.9 million kroons (87.0 million euros and 81.3 million euros) respectively.
The decrease in the revenue generated by the civil engineering segment results
mostly from the timing of major environmental and port construction projects.
Revenue distribution between the primary segments corresponds to management's
expectations and should harmonise by the year-end. The fact that the
contribution of the civil engineering segment will increase is also supported by
the order backlog as at 30 September 2008 where the contracts of the civil
engineering segment surpass those of the residential and non-residential segment
(see Order backlog and major construction contracts signed in 2008 in the
Directors' report).
In the residential and non-residential segment, revenue distribution has
remained stable with commercial buildings accounting for over 50 per cent of the
segment's revenue. The contribution of residential buildings sub-segment has
decreased in line with changes in the market situation. In the civil engineering
segment, the contribution of road construction and maintenance has increased
thanks to growth in road construction operations and the completion of several
major environmental engineering and port construction projects which in the same
period of 2007 were still in progress.
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| Revenue by segment | | | | |
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| Business segments | 9 months | 9 months | 9 months | Full year |
| | to | to | to | 2007 |
| | 30 Sept | 30 Sept | 30 Sept | |
| | 2008 | 2007 | 2006 | |
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| Residential and | 64% | 52% | 56% | 53% |
| non-residential | | | | |
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| Civil engineering | 36% | 48% | 44% | 47% |
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| Revenue distribution in the | 9 months | 9 months | 9 months | Full year |
| residential and | to | to | to | 2007 |
| non-residential segment | 30 Sept | 30 Sept | 30 Sept | |
| | 2008 | 2007 | 2006 | |
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| Commercial buildings | 59% | 58% | 44% | 61% |
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| Industrial and warehouse | 16% | 9% | 24% | 11% |
| facilities | | | | |
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| Public buildings | 14% | 19% | 19% | 16% |
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| Residential buildings | 11% | 14% | 13% | 12% |
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| Revenue distribution in the | 9 months | 9 months | 9 months | Full year |
| civil engineering segment | to | to | to | 2007 |
| | 30 Sept | 30 Sept | 30 Sept | |
| | 2008 | 2007 | 2006* | |
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| Road construction and | 52% | 37% | - | 41% |
| maintenance | | | | |
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| Port construction | 19% | 39% | - | 33% |
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| Other engineering | 23% | 12% | - | 13% |
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| Environmental engineering | 6% | 12% | - | 13% |
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* In 2006, the civil engineering segment was not divided into sub-segments.
Order backlog and major construction contracts signed in 2008
Order backlog
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| As at | 30 Sept | 30 Sept | 30 Sept | 31 Dec |
| | 2008 | 2007 | 2006 | 2007 |
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| Order backlog, in thousands of | 3,042,6 | 3,161,95 | 2,200,663 | 2,526,652 |
| kroons | 54 | 6 | | |
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| Order backlog, in thousands of | 194,461 | 202,086 | 140,648 | 161,482 |
| euros | | | | |
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At 30 September 2008, the Group's order backlog was 3,043 million kroons (194
million euros), a 4 per cent decrease compared with the 3,162 million kroons
(202 million euros) posted a year ago.
In the civil engineering segment, the order backlog has been growing, compared
with prior periods, since the first quarter of 2008. At period-end, the backlog
of the civil engineering segment accounted for 52 per cent of the Group's total
backlog portfolio (30 September 2007: 19 per cent), reflecting the situation in
the construction market where the decline in the residential and non-residential
segment outpaces the growth in the civil engineering segment. The growth in the
Group's order backlog has been significantly undermined by the construction
prices, which are considerably lower than a year ago.
Major construction contracts signed in the first nine months of 2008
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| Brief description | Cost | Country | Expected | |
| | | | delivery | |
| | (EEK | | | |
| | '000/EUR | | | |
| | '000) | | | |
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| Rehabilitation of the Rõhu-Puhja | 92,336 / | Eston | August 2009 |
| section of national road no 92 | 5,901 | ia | |
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| Construction of berths no 8 and 9 | 316,363 / | Eston | May 2009 |
| at Paldiski South Harbour | 20,219 | ia | |
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| Design and construction of the | 179,100 / | Eston | August 2010 |
| Science Centre AHHAA building | 11,447 | ia | |
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| Tarmeko KV interior decoration | 63,000 / | Eston | October 2008 |
| store in Tartu | 4,026 | ia | |
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| Väike-Paala business building in | 101,500 / | Eston | May 2009 |
| Tallinn | 6,487 | ia | |
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| Design and construction of the | 402,881 / | Eston | August 2010 |
| Mäo overtake on the Tallinn-Tartu | 25,749 | ia | |
| road | | | |
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| Extension of water and sewerage | 194,242 / | Latvi | December 2009 |
| networks in the Sempeteris | 12,414 | a | |
| district in Riga | | | |
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| Extension of the Lõunakeskus | 284,270 / | Eston | September 2009 |
| shopping centre in Tartu | 18,168 | ia | |
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| Construction of a leisure and | 112,398 / | Ukrai | May 2009 |
| shopping centre in the Darnitski | 7,184 | ne | |
| district in Kiev | | | |
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| Stage one in the construction of | 279,760 / | Estonia | December | |
| the Koidula railway border | 17,880 | | 2010 | |
| station (joint tender with Teede | | | | |
| REV-2) | | | | |
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| Construction of berth no 8 at | 79,000 / 5 | Estonia | October | |
| Virtsu Harbour | 049 | | 2009 | |
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People and personnel expenses
In the first nine months of 2008 the Group employed, on average, 1,267 people
including more than 500 engineers. The proportion of engineers and technical
personnel (ETP) has increased over the past couple of years due to the growth of
the Group and the size of the contracts. Compared with the first nine months of
2007, the number of staff has increased by approximately 200, mainly on account
of the addition of Eston Ehitus AS and the Latvian company Abagars SIA to the
list of the Group's subsidiaries.
Number of employees:
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| Period | ETP | Workers | Total average |
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| 9 months to 30 | 525 | 742 | 1,267 |
| September 2008 | | | |
--------------------------------------------------------------------------------
| 9 months to 30 | 413 | 675 | 1,088 |
| September 2007 | | | |
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| 9 months to 30 | 317 | 540 | 857 |
| September 2006 | | | |
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| Full year 2007 | 425 | 678 | 1,103 |
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The Group's personnel expenses for the first nine months of 2008, including all
relevant taxes, totalled 363.7 million kroons (23.2 million euros), a 22 per
cent increase on the 297.2 million kroons (19 million euros) incurred in the
same period in 2007. The growth in personnel expenses is attributable to the
acquisition of subsidiaries and the Group's remuneration policy (including the
award of performance-related consideration). However, the ratio of personnel
expenses to revenue has risen by only 1.2 percentage points (year-over-year) to
12.4 per cent.
In the first nine months of 2008, the remuneration of the Group's council
totalled 1,084 thousand kroons (69 thousand euros) and the remuneration of the
Group's board amounted to 13,550 thousand kroons (866 thousand euros). The
corresponding figures for the first nine months of 2007 were 810 thousand kroons
(52 thousand euros) and 7,722 thousand kroons (494 thousand euros) respectively.
The share and shareholders
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| ISIN code | EE3100039496 |
--------------------------------------------------------------------------------
| Short name of the security | EEH1T |
--------------------------------------------------------------------------------
| Nominal value | 10.00 kroons / 0.64 euros |
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| Total number of securities | 30,756,728 |
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| Number of listed securities | 30,756,728 |
--------------------------------------------------------------------------------
| Listing date | 18 May 2006 |
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Shareholder structure
The largest shareholders of AS Eesti Ehitus as at 30 September 2008:
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| Shareholder | Number of | Ownership |
| | shares | interest |
--------------------------------------------------------------------------------
| AS Nordecon | 18,807,464 | 61.15% |
--------------------------------------------------------------------------------
| ING Luxembourg S.A. | 1,111,853 | 3.62% |
--------------------------------------------------------------------------------
| Ain Tromp | 678,960 | 2.21% |
--------------------------------------------------------------------------------
| ASM Investmets OÜ | 519,600 | 1.69% |
--------------------------------------------------------------------------------
| JP Morgan Chase Bank / Dekabank Deutche | 500,000 | 1.63% |
| Girozentrale | | |
--------------------------------------------------------------------------------
| Skandinaviska Enskilda Banken AB clients | 458,758 | 1.49% |
--------------------------------------------------------------------------------
| Martin Sööt | 457,848 | 1.49% |
--------------------------------------------------------------------------------
| Central Securities Depository of | 432,782 | 1.41% |
| Lithuania | | |
--------------------------------------------------------------------------------
| Raul Rebane | 356,104 | 1.16% |
--------------------------------------------------------------------------------
| The Bank of New York Mellon Treaty | 353,323 | 1.15% |
| Omnibus | | |
--------------------------------------------------------------------------------
| Clearstream Banking Luxembourg S.A. | 339,910 | 1.11% |
| clients | | |
--------------------------------------------------------------------------------
| Aivo Kont | 339,480 | 1.10% |
--------------------------------------------------------------------------------
| Skandinaviska Enskilda Banken Finnish | 331,580 | 1.08% |
| clients | | |
--------------------------------------------------------------------------------
| State Street Munich Care of SSB Boston/ | 331,247 | 1.08% |
| DWS Polska Fundusz | | |
--------------------------------------------------------------------------------
Shareholder structure at 30 September 2008 according to the Estonian Central
Register of Securities:
--------------------------------------------------------------------------------
| | Number of shareholders | Ownership |
| | | interest |
--------------------------------------------------------------------------------
| Shareholders with interest | 1 | 61.15% |
| exceeding 5% | | |
--------------------------------------------------------------------------------
| Shareholders with interest | 12 | 20.20% |
| between 1% and 5% | | |
--------------------------------------------------------------------------------
| Shareholders with interest | 1,535 | 18.65% |
| below 1% | | |
--------------------------------------------------------------------------------
| Total | 1,548 | 100.00% |
--------------------------------------------------------------------------------
Shares controlled by members of the council and board of AS Eesti Ehitus as at
30 September 2008:
--------------------------------------------------------------------------------
| | | Number of | Ownership |
| | | shares | interest |
--------------------------------------------------------------------------------
| Toomas Luman | Chairman of the | 18,889,144 | 61.41% |
| (AS Nordecon, OÜ Luman | Council | | |
| ja Pojad)* | | | |
--------------------------------------------------------------------------------
| Ain Tromp | Member of the | 678,960 | 2.21% |
| | Council | | |
--------------------------------------------------------------------------------
| Alar Kroodo (ASM | Member of the | 519,600 | 1.69% |
| Investments OÜ)* | Council | | |
--------------------------------------------------------------------------------
| Andri Hõbemägi | Member of the | 34,000 | 0.11% |
| | Council | | |
--------------------------------------------------------------------------------
| Tiina Mõis | Member of the | 0 | 0.00% |
| | Council | | |
--------------------------------------------------------------------------------
| Meelis Milder | Member of the | 0 | 0.00% |
| | Council | | |
--------------------------------------------------------------------------------
* Companies controlled by the individual.
--------------------------------------------------------------------------------
| | | Number of | Ownership |
| | | shares | interest |
--------------------------------------------------------------------------------
| Jaano Vink | Chairman of | 34,000 | 0.11% |
| | the Board | | |
--------------------------------------------------------------------------------
| Avo Ambur | Member of the | 32,322 | 0.11% |
| | Board | | |
--------------------------------------------------------------------------------
| Erkki Suurorg | Member of the | 4,150 | 0.01% |
| | Board | | |
--------------------------------------------------------------------------------
| Sulev Luiga | Member of the | 1,000 | 0.00% |
| | Board | | |
--------------------------------------------------------------------------------
| Priit Pluutus | Member of the | 0 | 0.00% |
| | Board | | |
--------------------------------------------------------------------------------
Auditors and advisors
Based on a resolution by the general meeting of the shareholders, the auditor of
the Group's significant subsidiaries and sub-groups is KPMG Baltics AS with whom
the Group has an agreement for the audit of the financial statements for 2008,
2009 and 2010.
In other areas (valuation of assets, performance of due diligence procedures,
etc), the Group relies on the services of recognised professional advisors. The
advisor is selected by a tender.
Risks
Business risks
To manage their daily construction risks, Group companies purchase Contractors'
All Risks insurance. Depending on the nature of the project, both general frame
agreements and specially tailored project-specific contracts are used. In
addition, as a rule, subcontractors are required to secure the performance of
their obligations with a bank guarantee issued for the benefit of AS Eesti
Ehitus. To remedy builder-caused deficiencies which may be detected during the
warranty period, all Group companies create warranty provisions. At the end of
the first nine months of 2008, the provisions (including current and non-current
ones) totalled 10.3 million kroons (0.66 million euros). The corresponding
figure for the first nine months of 2007 was 12.3 million kroons (0.8 million
euros).
Credit risk
For credit risk management, a potential customer's settlement behaviour and
creditworthiness are analysed already in the tendering stage. Subsequent to the
conclusion of a contract, customers' settlement behaviour is monitored on an
ongoing basis from the making of an advance payment to adherence to the
contractual settlement schedule, which usually depends on the documentation of
the delivery of work performed. We believe that the system in place allows us to
respond to customers' settlement difficulties with sufficient speed. As at the
end of the reporting period, our customers' settlement practice was good. In
accordance with the Group's accounting policies, all receivables that are more
than 180 days overdue are recognised as an expense.
In the first nine months of 2008, income from the recovery of previously
expensed receivables surpassed losses from the write-down of receivables by 194
thousand kroons (12 thousand euros). In 2008 the Group has been consistent and
effective in its debt recovery operations. As a result, at 30 September 2008
items of 17.3 million kroons (1.1 million euros) which had been expensed in 2007
were classified as recoverable.
Liquidity risk
Free funds are placed in overnight or fixed-interest term deposits with the
largest banks in Estonia. To ensure timely settlement of liabilities,
approximately two weeks' working capital is kept in current accounts or
overnight deposits. Where necessary, overdraft facilities are used.
At the reporting date, the Group's current assets exceeded its current
liabilities 1.42-fold (30 September 2007: 1.38) and available cash funds
totalled 184 million kroons (11.8 million euros) (30 September 2007: 155.6
million kroons or 9.9 million euros). Together with unused overdraft facilities,
the cash balances provide a sufficient liquidity buffer for completing the
operating cycle in an economic environment which is more uncertain than last
year.
Interest rate risk
The loans taken from banks operating in Estonia, Latvia and Ukraine have mainly
fixed interest rates. Finance lease contracts have floating interest rates and
are linked to EURIBOR. Compared with the first nine months of 2007, the Group's
interest-bearing loans and borrowings have increased by 210 million kroons (13.4
million euros). At 30 September 2008, the Group's interest-bearing loans and
borrowings totalled 612.3 million kroons (39.1 million euros). Owing to the rise
in loans and borrowings, interest expense has grown by 12.9 million kroons (0.8
million euros) year-over-year to 28.3 million kroons (1.8 million euros).
Currency risk
As a rule, construction contracts and subcontractors' service contracts are made
in the currency of the host country: in Estonia contracts are made in Estonian
kroons (EEK), in Latvia in Latvian lats (LVL), in Lithuania in Lithuanian litas
(LTL) and in Ukraine in Ukrainian grivnas (UAH). A significant proportion of
services purchased from other countries are priced in the euro, which does not
constitute a currency risk for the Group's Estonian, Latvian and Lithuanian
entities.
In Ukraine, some materials supply contracts are made in euro. In addition, the
Group's parent AS Eesti Ehitus settles accounts with its Ukrainian subsidiary
Eurocon Ukraine TOV in euros but the volumes are immaterial. The Ukrainian
grivna fluctuates slightly against the US dollar. Therefore, in Ukraine the
fluctuations of the grivna against the euro give rise to a currency risk but
there are almost no reasonable possibilities for hedging the risk in cooperation
with local banks. In the first nine months of 2008, the Group's foreign exchange
loss from Ukrainian operations was 0.7 million kroons (0.04 million euros), 6.4
million kroons (0.4 million euros) down from the same period in 2007.
Future outlook
Estonia
We believe that in the next few years the economic slump will trigger the
following trends:
The construction sector will become more dependent on public procurement tenders
and the number and pricing of infrastructure, environmental and other projects
launched with the support of the European Union funds.
Housing development and construction volumes will shrink and the number of
related companies will decrease through consolidation. The consolidation process
will heighten competition and companies, which used to focus on the construction
of buildings, will move to other segments such as infrastructure construction,
which will increase competition in those segments.
Owing to the global financial crisis, the private sector will have greater
difficulty in financing new construction projects with debt capital. This will
further reduce demand for construction services. The strong setback may be
somewhat alleviated by a competition-induced decrease in prices, which will
render investment in construction projects more attractive than it was during
the boom of 2006 and 2007.
Building materials manufacturers who expanded capacities during the growth phase
of the market will be faced by face shrinking demand and, consequently, greater
strain in meeting the obligations taken for expansion.
Real estate developers' ability to service and repay existing loans will weaken
and their creditworthiness will decrease. For companies involved in general
construction contracting and project management, this may mean an increase in
doubtful and irrecoverable receivables.
The importance of infrastructure projects will increase and, accordingly,
critical success factors will include specialised engineering expertise and
experience and the availability of relevant resources.
The past years' labour deficit in the construction sector will decline and
growth in personnel expenses will decelerate.
Construction projects' financing schemes will change (settlement terms will
extend significantly) and additional requirements to the financing provided by
general contractors will impose pressure on the contractors' liquidity.
Eesti Ehitus Group operates in line with its long-term objectives, which are
adjusted to changes in the business environment. Strategic management is the
responsibility of the Group's board.
The Group has prepared itself for changes in the economic environment by
designing a project portfolio where risks are dispersed between activities (the
proportion of residential construction does not exceed 20 per cent) and markets.
We expect to maintain our position in the Estonian market by efficiently
harnessing our core competencies.
Latvia and Lithuania
The Latvian and Lithuanian construction markets are influenced by an economic
environment which is similar to the one prevailing in Estonia. In the near
future, the segments where the Group's subsidiaries are represented will be
subject to the following trends.
In Latvia the volumes of infrastructure projects financed by the state and local
government with the support of EU funding will remain stable or increase.
Construction activities will be mainly affected by high inflation.
In Lithuania there are strong prospects for continuing the construction of small
and medium-sized business and public buildings. The construction of apartment
houses (the Group as a general contractor not a developer) will decline. The
greatest risk is inflation and its impact on construction prices.
The Group's management will remain alert to developments in Latvia and Lithuania
because similarly to Estonia, their whole economy is or will soon be in
difficulty and, in one way or another, this will impact the construction sector.
The Group will focus on sustaining organic growth in Latvia and Lithuania,
taking into consideration changes in the economic environment. Significant
growth in those markets can only be achieved by additional investment.
Ukraine
In Ukraine, there will be demand for trading, logistics and office premises in
the commercial buildings segment.
We will continue acting as general contractors and project managers in the
construction of commercial buildings and production facilities. Activities on
development projects that require major investment will probably be suspended to
lower the risks until the situation in the Ukrainian and global financial
markets improves.
The main risks in the Ukrainian market are connected with the low administrative
efficiency of the national and local government, the dependence of the Ukrainian
currency on the US dollar, inflation and the availability of quality
construction inputs. Since October 2008 the Ukrainian monetary and banking
system has been under severe pressure that has a negative impact on the
Ukrainian economy, which has been growing, and the commencement of potential
construction and development projects.
Consolidated interim balance sheet
--------------------------------------------------------------------------------
| Unaudited | 30 Sept | 30 Sept | 31 Dec |
| EEK '000 | 2008 | 2007 | 2007 |
--------------------------------------------------------------------------------
| ASSETS | | | |
--------------------------------------------------------------------------------
| Current assets | | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 184,084 | 155,646 | 236,112 |
--------------------------------------------------------------------------------
| Trade receivables | 579,544 | 645,376 | 511,819 |
--------------------------------------------------------------------------------
| Other receivables and prepayments | 437,840 | 229,007 | 264,551 |
--------------------------------------------------------------------------------
| Deferred tax assets | 384 | 1,015 | 1,905 |
--------------------------------------------------------------------------------
| Inventories | 415,465 | 477,525 | 393,529 |
--------------------------------------------------------------------------------
| Non-current assets held for sale | 0 | 0 | 43,362 |
--------------------------------------------------------------------------------
| Total current assets | 1,617,317 | 1,509,569 | 1,451,277 |
--------------------------------------------------------------------------------
| Non-current assets | | | |
--------------------------------------------------------------------------------
| Long-term investments | 143,997 | 60,432 | 111,686 |
--------------------------------------------------------------------------------
| Investment property | 132,594 | 25,761 | 133,984 |
--------------------------------------------------------------------------------
| Property, plant and equipment | 279,512 | 266,998 | 221,748 |
--------------------------------------------------------------------------------
| Intangible assets | 305,323 | 167,479 | 273,223 |
--------------------------------------------------------------------------------
| Total non-current assets | 861,426 | 520,670 | 740,641 |
--------------------------------------------------------------------------------
| TOTAL ASSETS | 2,478,743 | 2,030,239 | 2,191,918 |
--------------------------------------------------------------------------------
| LIABILITIES | | | |
--------------------------------------------------------------------------------
| Current liabilities | | | |
--------------------------------------------------------------------------------
| Interest-bearing loans and borrowings | 159,529 | 130,699 | 135,856 |
--------------------------------------------------------------------------------
| Trade payables | 442,404 | 431,171 | 335,754 |
--------------------------------------------------------------------------------
| Other tax liabilities | 50,744 | 35,336 | 53,777 |
--------------------------------------------------------------------------------
| Income tax liability | 594 | 363 | 994 |
--------------------------------------------------------------------------------
| Other payables and advances received | 482,853 | 485,287 | 574,722 |
--------------------------------------------------------------------------------
| Provisions | 6,335 | 10,633 | 12,458 |
--------------------------------------------------------------------------------
| Total current liabilities | 1,142,459 | 1,093,489 | 1,113,561 |
--------------------------------------------------------------------------------
| Non-current liabilities | | | |
--------------------------------------------------------------------------------
| Interest-bearing loans and borrowings | 452,759 | 271,861 | 263,723 |
--------------------------------------------------------------------------------
| Other liabilities | 761 | 490 | 714 |
--------------------------------------------------------------------------------
| Deferred income tax liability | 63 | 0 | 0 |
--------------------------------------------------------------------------------
| Provisions | 3,938 | 1,697 | 4,328 |
--------------------------------------------------------------------------------
| Total non-current liabilities | 457,521 | 274,048 | 268,765 |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES | 1,599,980 | 1,367,537 | 1,382,326 |
--------------------------------------------------------------------------------
| EQUITY | | | |
--------------------------------------------------------------------------------
| Minority interest | 101,477 | 51,666 | 90,095 |
--------------------------------------------------------------------------------
| Share capital | 307,567 | 307,567 | 307,567 |
--------------------------------------------------------------------------------
| Share premium | 509 | 0 | 0 |
--------------------------------------------------------------------------------
| Statutory capital reserve | 34,800 | 11,666 | 11,766 |
--------------------------------------------------------------------------------
| Translation reserve | -1,957 | 3,480 | 2,354 |
--------------------------------------------------------------------------------
| Retained earnings | 436,367 | 288,323 | 397,810 |
--------------------------------------------------------------------------------
| Total equity attributable to equity | 777,286 | 611,036 | 719,497 |
| holders of the parent | | | |
--------------------------------------------------------------------------------
| TOTAL EQUITY | 878,763 | 662,702 | 809,592 |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES AND EQUITY | 2,478,743 | 2,030,239 | 2,191,918 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Consolidated interim balance sheet
--------------------------------------------------------------------------------
| Unaudited | 30 Sept | 30 Sept | 31 Dec 2007 |
| EUR '000 | 2008 | 2007 | |
--------------------------------------------------------------------------------
| ASSETS | | | |
--------------------------------------------------------------------------------
| Current assets | | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 11,765 | 9,948 | 15,090 |
--------------------------------------------------------------------------------
| Trade receivables | 37,040 | 41,311 | 32,711 |
--------------------------------------------------------------------------------
| Other receivables and prepayments | 27,983 | 14,636 | 16,908 |
--------------------------------------------------------------------------------
| Deferred tax assets | 25 | 65 | 122 |
--------------------------------------------------------------------------------
| Inventories | 26,553 | 30,519 | 25,151 |
--------------------------------------------------------------------------------
| Non-current assets held for sale | 0 | 0 | 2,771 |
--------------------------------------------------------------------------------
| Total current assets | 103,365 | 96,479 | 92,754 |
--------------------------------------------------------------------------------
| Non-current assets | | | |
--------------------------------------------------------------------------------
| Long-term investments | 9,203 | 3,862 | 7,138 |
--------------------------------------------------------------------------------
| Investment property | 8,474 | 1,646 | 8,563 |
--------------------------------------------------------------------------------
| Property, plant and equipment | 17,864 | 17,064 | 14,172 |
--------------------------------------------------------------------------------
| Intangible assets | 19,514 | 10,704 | 17,462 |
--------------------------------------------------------------------------------
| Total non-current assets | 55,055 | 33,277 | 47,336 |
--------------------------------------------------------------------------------
| TOTAL ASSETS | 158,421 | 129,756 | 140,089 |
--------------------------------------------------------------------------------
| LIABILITIES | | | |
--------------------------------------------------------------------------------
| Current liabilities | | | |
--------------------------------------------------------------------------------
| Interest-bearing loans and | 10,196 | 8,353 | 8,683 |
| borrowings | | | |
--------------------------------------------------------------------------------
| Trade payables | 28,275 | 27,557 | 21,459 |
--------------------------------------------------------------------------------
| Other tax liabilities | 3,243 | 2,258 | 3,437 |
--------------------------------------------------------------------------------
| Income tax liability | 38 | 23 | 64 |
--------------------------------------------------------------------------------
| Other payables and advances received | 30,860 | 31,015 | 36,731 |
--------------------------------------------------------------------------------
| Provisions | 405 | 680 | 796 |
--------------------------------------------------------------------------------
| Total current liabilities | 73,016 | 69,887 | 71,170 |
--------------------------------------------------------------------------------
| Non-current liabilities | | | |
--------------------------------------------------------------------------------
| Interest-bearing loans and | 28,937 | 17,375 | 16,855 |
| borrowings | | | |
--------------------------------------------------------------------------------
| Other liabilities | 49 | 31 | 46 |
--------------------------------------------------------------------------------
| Deferred income tax liability | 4 | 0 | 0 |
--------------------------------------------------------------------------------
| Provisions | 252 | 108 | 277 |
--------------------------------------------------------------------------------
| Total non-current liabilities | 29,241 | 17,515 | 17,177 |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES | 102,257 | 87,402 | 88,347 |
--------------------------------------------------------------------------------
| EQUITY | | | |
--------------------------------------------------------------------------------
| Minority interest | 6,486 | 3,302 | 5,758 |
--------------------------------------------------------------------------------
| Share capital | 19,657 | 19,657 | 19,657 |
--------------------------------------------------------------------------------
| Share premium | 33 | 0 | 0 |
--------------------------------------------------------------------------------
| Statutory capital reserve | 2,224 | 746 | 752 |
--------------------------------------------------------------------------------
| Translation reserve | -125 | 222 | 150 |
--------------------------------------------------------------------------------
| Retained earnings | 27,889 | 18,427 | 25,425 |
--------------------------------------------------------------------------------
| Total equity attributable to equity | 49,678 | 39,052 | 45,984 |
| holders of the parent | | | |
--------------------------------------------------------------------------------
| TOTAL EQUITY | 56,163 | 42,354 | 51,742 |
--------------------------------------------------------------------------------
| TOTAL LIABILITIES AND EQUITY | 158,421 | 129,756 | 140,089 |
--------------------------------------------------------------------------------
Consolidated interim income statement
--------------------------------------------------------------------------------
| | Q3 | Q3 2007 | 9 months | 9 months | 2007 |
| Unaudited | 2008 | | to 30 | to 30 | |
| EEK '000 | | | Sept | Sept | |
| | | | 2008 | 2007 | |
--------------------------------------------------------------------------------
| Revenue | 1,051, | 1,139,8 | 2,921,69 | 2,659,41 | 3,752,02 |
| | 062 | 33 | 7 | 5 | 8 |
--------------------------------------------------------------------------------
| Cost of sales | 977,79 | 1,009,1 | 2,609,68 | 2,312,49 | 3,252,05 |
| | 1 | 63 | 9 | 3 | 1 |
--------------------------------------------------------------------------------
| Gross profit | 73,271 | 130,670 | 312,008 | 346,922 | 499,977 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Marketing expenses | 2,810 | 1,871 | 6,212 | 3,840 | 2,395 |
--------------------------------------------------------------------------------
| Administrative expenses | 44,266 | 45,767 | 137,354 | 116,276 | 176,273 |
--------------------------------------------------------------------------------
| Other operating income | 105 | 2,085 | 18,525 | 8,624 | 16,411 |
--------------------------------------------------------------------------------
| Other operating expenses | -7,622 | 249 | 8,068 | 4,427 | 30,256 |
--------------------------------------------------------------------------------
| Operating profit | 33,922 | 84,868 | 178,899 | 231,003 | 307,464 |
--------------------------------------------------------------------------------
| Financial income | 53,760 | 3,155 | 77,187 | 16,364 | 31,486 |
--------------------------------------------------------------------------------
| Financial expenses | 4,751 | 10,457 | 29,886 | 22,458 | 30,028 |
--------------------------------------------------------------------------------
| Net financial items | 49,009 | -7,302 | 47,301 | -6,094 | 1,458 |
--------------------------------------------------------------------------------
| Share of profit of | 2,198 | 599 | 2,198 | 1,593 | 856 |
| equity accounted | | | | | |
| investees | | | | | |
--------------------------------------------------------------------------------
| Share of loss of equity | 746 | -685 | 1,093 | 241 | 4,031 |
| accounted investees | | | | | |
--------------------------------------------------------------------------------
| Net share of profit and | 1,452 | 1,284 | 1,105 | 1,352 | -3,175 |
| loss of equity accounted | | | | | |
| investees | | | | | |
--------------------------------------------------------------------------------
| Profit before income tax | 84,383 | 78,850 | 227,306 | 226,261 | 305,747 |
--------------------------------------------------------------------------------
| Income tax expense | 11,622 | -41 | 43,772 | 17,426 | 15,976 |
--------------------------------------------------------------------------------
| Profit for the period | 72,761 | 78,891 | 183,534 | 208,835 | 289,771 |
--------------------------------------------------------------------------------
| Attributable to: | | | | | |
--------------------------------------------------------------------------------
| Equity holders of the | 51,204 | 72,432 | 155,476 | 196,310 | 267,482 |
| parent | | | | | |
--------------------------------------------------------------------------------
| Minority interest | 21,557 | 6,459 | 28,058 | 12,525 | 22,289 |
--------------------------------------------------------------------------------
| Basic earnings per share | 1.66 | 2.35 | 5.06 | 6.38 | 8.70 |
| (in kroons)* | | | | | |
--------------------------------------------------------------------------------
| Diluted earnings per | 1.66 | 2.35 | 5.06 | 6.38 | 8.70 |
| share (in kroons)* | | | | | |
--------------------------------------------------------------------------------
* For comparability, the weighted average number of shares used is the number of
shares after the bonus issues, i.e. 30,756,728 shares.
Consolidated interim income statement
--------------------------------------------------------------------------------
| | Q3 2008 | Q3 2007 | 9 | 9 months | 2007 |
| Unaudited | | | months | to 30 | |
| EUR '000 | | | to 30 | Sept | |
| | | | Sept | 2007 | |
| | | | 2008 | | |
--------------------------------------------------------------------------------
| Revenue | 67,175 | 72,849 | 186,730 | 169,968 | 239,798 |
--------------------------------------------------------------------------------
| Cost of sales | 62,492 | 64,497 | 166,790 | 147,795 | 207,844 |
--------------------------------------------------------------------------------
| Gross profit | 4,683 | 8,351 | 19,941 | 22,172 | 31,954 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Marketing expenses | 180 | 120 | 397 | 245 | 153 |
--------------------------------------------------------------------------------
| Administrative expenses | 2,829 | 2,925 | 8,779 | 7,431 | 11,266 |
--------------------------------------------------------------------------------
| Other operating income | 7 | 133 | 1,184 | 551 | 1,049 |
--------------------------------------------------------------------------------
| Other operating expenses | -487 | 16 | 516 | 283 | 1,934 |
--------------------------------------------------------------------------------
| Operating profit | 2,168 | 5,424 | 11,434 | 14,764 | 19,651 |
--------------------------------------------------------------------------------
| Financial income | 3,436 | 202 | 4,933 | 1,046 | 2,012 |
--------------------------------------------------------------------------------
| Financial expenses | 304 | 668 | 1,910 | 1,435 | 1,919 |
--------------------------------------------------------------------------------
| Net financial items | 3,132 | -467 | 3,023 | -389 | 93 |
--------------------------------------------------------------------------------
| Share of profit of | 140 | 38 | 140 | 102 | 55 |
| equity accounted | | | | | |
| investees | | | | | |
--------------------------------------------------------------------------------
| Share of loss of equity | 48 | -44 | 70 | 15 | 258 |
| accounted investees | | | | | |
--------------------------------------------------------------------------------
| Net share of profit and | 93 | 82 | 71 | 86 | -203 |
| loss of equity accounted | | | | | |
| investees | | | | | |
--------------------------------------------------------------------------------
| Profit before income tax | 5,393 | 5,039 | 14,528 | 14,461 | 19,541 |
--------------------------------------------------------------------------------
| Income tax expense | 743 | -3 | 2,798 | 1,114 | 1,021 |
--------------------------------------------------------------------------------
| Profit for the period | 4,650 | 5,042 | 11,730 | 13,347 | 18,520 |
--------------------------------------------------------------------------------
| Attributable to: | | | | | |
--------------------------------------------------------------------------------
| Equity holders of the | 3,273 | 4,629 | 9,937 | 12,546 | 17,095 |
| parent | | | | | |
--------------------------------------------------------------------------------
| Minority interest | 1,378 | 413 | 1,793 | 800 | 1,425 |
--------------------------------------------------------------------------------
| Basic earnings per share | 0.11 | 0.15 | 0.32 | 0.41 | 0.56 |
| (in euros)* | | | | | |
--------------------------------------------------------------------------------
| Diluted earnings per | 0.11 | 0.15 | 0.32 | 0.41 | 0.56 |
| share (in euros)* | | | | | |
--------------------------------------------------------------------------------
* For comparability, the weighted average number of shares used is the number of
shares after the bonus issues, i.e. 30,756,728 shares.
Consolidated interim statement of cash flows
--------------------------------------------------------------------------------
| | EEK '000 | EUR '000 |
--------------------------------------------------------------------------------
| | 9 months | 9 months | 9 months | 9 months |
| | to 30 | to 30 | to 30 | to 30 |
| | Sept 2008 | Sept 2007 | Sept | Sept 2007 |
| | | | 2008 | |
--------------------------------------------------------------------------------
| Cash flows from operating | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
| Cash receipts from customers | 3,521,815 | 2,917,838 | 225,085 | 186,484 |
--------------------------------------------------------------------------------
| Cash paid to suppliers | -2,912,26 | -2,556,01 | -186,128 | -163,359 |
| | 6 | 6 | | |
--------------------------------------------------------------------------------
| Cash paid to and for | -430,106 | -315,072 | -27,489 | -20,137 |
| employees | | | | |
--------------------------------------------------------------------------------
| Income taxes paid | -36,959 | -18,028 | -2,362 | -1,152 |
--------------------------------------------------------------------------------
| Net cash from operating | 142,484 | 28,722 | 9,106 | 1,836 |
| activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flows from investing | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
| Acquisition of property, | -9,845 | -26,147 | -629 | -1671 |
| plant and equipment | | | | |
--------------------------------------------------------------------------------
| Acquisition of intangible | -929 | -4,254 | -59 | -272 |
| assets | | | | |
--------------------------------------------------------------------------------
| Proceeds from sale of | 10,753 | 15,500 | 687 | 991 |
| property, plant and equipment | | | | |
--------------------------------------------------------------------------------
| Acquisition of subsidiaries | -206,856 | -30,219 | -13,221 | -1,931 |
--------------------------------------------------------------------------------
| Cash acquired on acquisition | 4,056 | 0 | 259 | 0 |
| of subsidiaries | | | | |
--------------------------------------------------------------------------------
| Proceeds from sale of | 2,063 | 656 | 132 | 42 |
| subsidiaries | | | | |
--------------------------------------------------------------------------------
| Acquisition of associates | -10,842 | 0 | -693 | 0 |
--------------------------------------------------------------------------------
| Proceeds from sale of | 102,927 | 10,499 | 6,578 | 671 |
| associates | | | | |
--------------------------------------------------------------------------------
| Acquisition of other | 0 | -3,670 | 0 | -235 |
| investments | | | | |
--------------------------------------------------------------------------------
| Loans granted | -118,454 | -17,304 | -7,571 | -1,106 |
--------------------------------------------------------------------------------
| Repayment of loans granted | 56,562 | 53,027 | 3,615 | 3,389 |
--------------------------------------------------------------------------------
| Dividends received | 122 | 0 | 8 | 0 |
--------------------------------------------------------------------------------
| Interest received | 11,794 | 10,819 | 754 | 691 |
--------------------------------------------------------------------------------
| Net cash used in / from | -158,649 | 8,907 | -10,140 | 569 |
| investing activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flows from financing | | | | |
| activities | | | | |
--------------------------------------------------------------------------------
| Proceeds from loans received | 405,466 | 135,553 | 25,914 | 8,663 |
--------------------------------------------------------------------------------
| Repayment of loans received | -265,443 | -66,437 | -16,965 | -4,246 |
--------------------------------------------------------------------------------
| Payment of finance lease | -42,387 | -47,942 | -2,709 | -3,064 |
| liabilities | | | | |
--------------------------------------------------------------------------------
| Dividends paid | -104,130 | -52,135 | -6,655 | -3,332 |
--------------------------------------------------------------------------------
| Interest paid | -29,053 | -17,898 | -1,857 | -1,144 |
--------------------------------------------------------------------------------
| Other settlements | -301 | 10,916 | -19 | 698 |
--------------------------------------------------------------------------------
| Net cash used in financing | -35,848 | -37,943 | -2,291 | -2,425 |
| activities | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash flow | -52,013 | -314 | -3,324 | -20 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash and cash equivalents at | 236,112 | 155,980 | 15,090 | 9,969 |
| beginning of period | | | | |
--------------------------------------------------------------------------------
| Effect of exchange rate | -15 | -20 | -1 | -1 |
| fluctuations | | | | |
--------------------------------------------------------------------------------
| Decrease in cash and cash | -52,013 | -314 | -3,324 | -20 |
| equivalents | | | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents at | 184,084 | 155,646 | 11,765 | 9,948 |
| end of period | | | | |
--------------------------------------------------------------------------------
Eesti Ehitus is a group of construction companies whose core business is general
contracting and construction management in the construction of buildings and
infrastructures in Estonia, Latvia, Lithuania and Ukraine. In addition, in
Estonia our companies act as independent contractors in road construction and
maintenance, environmental engineering, the assembly of reinforced concrete
elements, and the performance of cast-on-site concrete works. The parent of the
Group is AS Eesti Ehitus, a company registered and located in Tallinn, Estonia.
In addition to the parent company, there are more than 20 subsidiaries in the
Group. The consolidated revenue of the Group in 2007 was 3.8 billion kroons (240
million euros) and the consolidated net profit was 290 million kroons (19
million euros). AS Eesti Ehitus Group employs more than 1200 people. Since 18
May 2006, the company's shares have been quoted in the main list of the NASDAQ
OMX Tallinn Stock Exchange.
1 EUR = 15.6466 EEK
Raimo Talviste
AS Eesti Ehitus
Head of Investor Relations
Tel: +372 615 4403
Email: raimo.talviste@eestiehitus.ee
www.eestiehitus.ee
