MANAGEMENT REPORT
General information
At a joint meeting held at 14 March 2008, the Management Board and the
Supervisory Board of AS Järvevana adopted a resolution to restructure the
Company and separate operating activities from the criminal proceedings
related to the land swap. The Company's management estimates that the
restructuring of the Company is the best way to ensure its sustainable
development and protect the interests of shareholders and employees in
the long-lasting criminal proceedings related to the land swap.
On 15 April 2008, the management of AS Järvevana presented the Company's
restructuring plan (http://www.baltic.omxgroup.com/market/?pg=details&
instrument=EE3100003559&list=2&tab=news&news_id=222602), according to
which AS Merko Ehitus was split up/demerged so that AS Merko Ehitus, e.g.
assets (other than liquid assets in the amount of 250 million kroons),
liabilities and contracts as well as the business name was separated and
transferred to the new company being set up.
Pursuant to the division plan (http://www.merko.ee/upload/File/Restruktu
reerimise%20dokumendid/AS%20Merko%20Ehitus%20jagunemiskava%20ENG.pdf), upon
the division, AS Järvevana transferred to AS Merko Ehitus the entire set of
assets related to the economic activities of the building company, including
all concluded building, subcontracting and supply contracts; the equipment,
machinery and employees; all professional know-how and cash-flows without
interrupting the continuing economic activities and finding a way for a rapid
acquittal in the criminal case no 05913000055 that would consider the
interests of the shareholders remained as the sole activity of the company
(http://www.baltic.omxnordicexchange.com/market/?pg=news&news_id=226059).
On 3 June 2008 the Annual General Meeting (http://www.baltic.omxnordic
exchange.com/market/?pg=news&news_id=226094) approved the division of the
company to into the limited companies new Merko Ehitus (registry code
11520257) and Järvevana (registry code 10068022).
On 1 August 2008, the registration department of Harju County Court made an
entry in the Commercial Register registering the division of AS Merko Ehitus
(registry code 10068022, with the new business name ‘Aktsiaselts Järvevana')
into the limited companies Merko Ehitus (registry code 11520257) and
Järvevana (registry code 10068022).
Business operations
The company was formed after the division of AS Järvevana which resulted in
the assigning and surrendering of the entire set of assets connected to the
business activities of the construction company including the concluded
construction contracts, subcontracts and supply contracts, machines,
equipment and employees, all the professional knowhow and cash flows from
the uninterrupted and continuing business activities to AS Merko Ehitus,
except the liabilities arising from the criminal case no 05913000055,
including the payable compensations for damages, fines and other claims,
legal costs and the cover funds for the potential liabilities arising from
the criminal case in the amount of 250 million Estonian kroons of liquid
assets.
The company is not currently active. The only real revenue of the company
is the financial profit received from the allocation of the company's liquid
assets. During 01.08.2008-30.09.2008, AS Järvevana's financial profit was
1 421 433 million kroons. As at 30.09.2008, the company had one employee -
the CEO Toomas Annus. The company's financial results for 2008 the 9 months
include also the financial figures of the company for the 7 months preceding
the division of AS Järvevana.
On 24 October 2008, after looking through the documents concerning the
suspicions, the representative of AS Järvevana submitted a number of
applications to the Public Prosecutor's Office including the application
requesting the termination of the criminal case since adequate proof for
the carrying out of incriminating actions and the execution of multiple
breaches of substantive and procedural laws during the execution of the
procedural acts could not be found in the documents presented. By the
submission date of the report the Public Prosecutor's Office had not
resolved the application of AS Järvevana.
INCOME STATEMENT 9M 2008
consolidated, in thousand EEK and EUR
EEK EUR
9M 2008 9M 2007 9M 2008 9M 2007
Revenue 2 798 466 3 863 605 178 855 246 929
Cost of goods sold (2 273 798) (3 388 412) (145 322) (216 559)
GROSS PROFIT 524 668 475 193 33 533 30 370
Marketing expenses (21 143) (20 244) (1 351) (1 294)
Administrative and gen. expenses (122 199) (124 180) (7 810) (7 937)
Other operating income 6 781 5 345 433 342
Other operating expenses (7 773) (4 338) (497) (277)
OPERATING PROFIT 380 334 331 776 24 308 21 204
Financial income and expenses
from stocks of associate
companies and joint ventures 1 282 61 486 82 3 930
Interest expense (8 734) (14 355) (558) (917)
Foreign exchange gain (5 875) (3 179) (375) (203)
Other financial income 14 325 9 295 916 594
Other financial expenses (1 308) (70) (84) (4)
Total financial income and expenses (310) 53 177 (19) 3 400
PROFIT BEFORE TAX 380 024 384 953 24 289 24 604
Corporate income tax expense (41 100) (18 346) (2 627) (1 173)
NET PROFIT FOR FINANCIAL YEAR 338 924 366 607 21 662 23 431
incl. net profit attributable to equity holders
of the parent company 334 709 358 024 21 392 22 882
minority interest 4 215 8 583 270 549
Earnings per share for profit attributable
to the equity holders of the parent company
(basic and diluted, in EEK and EUR) 18,91 20,23 1,21 1,29
INCOME STATEMENT III quarter 2008
consolidated, unaudited in thousand EEK and EUR
EEK EUR
IIIq 2008 IIIq 2007 IIIq 2008 IIIq 2007
Revenue 426 162 1 367 855 27 237 87 422
Cost of goods sold (360 550) (1 198 290) (23 043) (76 585)
GROSS PROFIT 65 612 169 565 4 194 10 837
Marketing expenses (3 652) (7 788) (233) (498)
Administrative and general expenses(21 180) (42 725) (1 354) (2 731)
Other operating income 852 2 856 54 183
Other operating expenses (173) (1 393) (11) (89)
OPERATING PROFIT 41 459 120 515 2 650 7 702
Financial income and expenses
from stocks of associate
companies and joint ventures 80 8 711 5 557
Interest expense (1 055) (7 827) (67) (500)
Foreign exchange gain (5) (3 317) (0) (212)
Other financial income 5 801 4 225 370 270
Other financial expenses (10) (68) (1) (4)
Total financial income and expenses 4 811 1 724 307 111
PROFIT BEFORE TAX 46 270 122 239 2 957 7 813
Corporate income tax expense (477) (3 267) (30) (209)
NET PROFIT FOR FINANCIAL YEAR 45 793 118 972 2 927 7 604
incl. net profit attributable to equity holders
of the parent company 44 531 116 023 2 846 7 416
minority interest 1 262 2 949 81 188
Earnings per share for profit attributable
to the equity holders of the parent company
(basic and diluted, in EEK and EUR) 2,52 6,55 0,16 0,42
BALANCE SHEET AS OF 30.09.2008
consolidated, in thousand EEK and EUR
EEK EUR
30.09.2008 31.12.2007 30.09.2008 31.12.2007
ASSETS
Current assets
Cash and cash equivalents 25 611 205 564 1 637 13 138
Trade and other receivables 225 672 1 201 942 14 423 76 818
Inventories - 2 025 426 - 129 448
Total current assets 251 283 3 432 932 16 060 219 404
Non-current assets
Long-term financial investments - 290 852 - 18 589
Investment property - 7 361 - 470
Property, plant and equipment - 172 912 - 11 051
Intangible assets - 12 574 - 804
Total non-current assets - 483 699 - 30 914
TOTAL ASSETS 251 283 3 916 631 16 060 250 318
LIABILITIES AND OWNERS' EQUITY
Current liabilities
Borrowings - 304 879 - 19 485
Trade and other payables 149 1 032 210 9 65 970
Government grants - 1 498 - 96
Short-term provisions 17 500 73 212 1 119 4 680
Total current liabilities 17 649 1 411 799 1 128 90 231
Non-current liabilities
Long-term borrowings - 397 713 - 25 418
Long-term payables to suppliers - 11 091 - 709
Long-term suppliers advance payments - 46 332 - 2 961
Total non-current liabilities - 455 136 - 29 088
Total liabilities 17 649 1 866 935 1 128 119 319
Equity
Minority interest - 33 939 - 2 169
Equity attributable to equity holders of the parent company
Share capital 177 000 177 000 11 312 11 312
Statutory reserve capital 17 700 17 700 1 131 1 131
Currency translation adjustment - (5 085) - (325)
Retained earnings 38 934 1 826 142 2 489 116 712
Total equity attributable to equity
holders of the parent company 233 634 2 015 757 14 932 128 830
Total equity 233 634 2 049 696 14 932 130 999
TOTAL LIABILITIES AND EQUITY 251 283 3 916 631 16 060 250 318
Toomas Annus
Member of Board
+372 6 805 220
merko@merko.ee
