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NCN: 2009 I HALF YEAR CONSOLIDATED INTERIM REPORT (UNAUDITED)

Spekuliantai.lt | 2009-08-11 | NASDAQ OMX biržų naujienos | perskaitė: 1709
Raktiniai žodžiai: Nordecon International AS, NCN
NCN: 2009 I HALF YEAR CONSOLIDATED INTERIM REPORT (UNAUDITED)

Nordecon International Half Year financial report 11.08.2009

2009 I HALF YEAR CONSOLIDATED INTERIM REPORT (UNAUDITED)

DIRECTORS' REPORT

Financial review

Margins
Nordecon International Group ended the first half of 2009 with a gross profit of
84.4 million kroons (5.4 million euros), 65% down from the 238.7 million kroons
(15.3 million euros) earned in the first half of 2008. The decrease
results largely from a decline in the profitability of construction contracts
across all segments. In ordinary circumstances, lower than average
profitability in the first quarter results from seasonal factors that impact
mainly the road construction business and are counteracted in the second
quarter. This year, however, they have been accompanied by exceptionally weak
demand in the buildings construction sector, which has triggered fierce
competition and, accordingly, a steep decrease in relevant margins.

Management set the Group the objective of ending the first half-year with an
operating profit following the first quarter, which had ended with an operating
loss mainly because of non-recurring restructuring and down-sizing expenses.
Consolidated operating profit for the first half-year was 5.2 million kroons
(0.3 million euros). The positive operating result is attributable, among other
factors, to the reduction of administrative expenses. At period-end, the ratio
of administrative expenses to revenue stood at 5.3% (I half 2008: 5.0%);
considering one-off costs from the name change, the figure tallies with
management's 5% target. The Group remains committed to its stated aim of
reducing the cost base during 2009-2010 by up to 30% compared with 2007-2008 and
is prepared to act resolutely to achieve this.

In the first half-year, the Group earned a net profit of 5.2 million kroons (0.3
million euros), a substantial decrease compared with the 110.8 million
kroons (7.1 million euros) generated in the first half of 2008.
Consolidated net profit was significantly influenced by income tax expense of
5.9 million kroons (0.4 million euros) recognised in the second quarter (mostly
dividend tax).

The key profitability ratios monitored by the Group's management are following
the same trends that emerged in the last quarter of 2008 as a result of adverse
changes in the operating environment. The Group's margins have dropped (in all
markets) year-over-year primarily on account of a steep decline in demand. The
main sector-specific trend has been the increasing excess of construction
capacities over the number of projects on offer. Low demand that is insufficient
for meeting the business needs of all market players has heightened pressure for
lowering the prices. To remain competitive, the Group was forced to lower the
half-year's gross margin to 6.9%, a notable decrease from the 12.8% posted for
the first half of 2008. In the light of the trends prevailing in the
construction market, the Group will focus on redesigning its internal processes
(improving the efficiency of purchase of services, cost cutting, etc) so as to
maintain its gross margin at a level that would ensure that the year will end
in an operating profit.

Cash flows
The Group's net operating cash flow was negative at 57.1 million kroons (3.6
million euros), reflecting developments in the markets where the Group
operates. Contractual settlement terms have lengthened (particularly as regards
the public sector projects) and the overall economic situation is
causing difficulties that cause settlement delays. Receipts from customers
exceed disbursements to suppliers but not enough to render the net operating
cash flow positive. The ability and speed of achieving a positive net operating
cash flow depend on how quickly and effectively the Group will adjust to
the new economic environment (settlement dates with subcontractors) and the
extent to which operating costs can be cut.

Investing activities of the first half of 2009 resulted in a net outflow of 41.1
million kroons (2.6 million euros) compared with an outflow of 130.2 million
kroons (8.3 million euros) for the first half of 2008. Acquisitions of
investments in subsidiaries, associates and joint ventures (including disposals)
generated a net outflow of 30.2 million kroons (1.9 million euros) and lending
activities (including interest received) resulted in a net outflow 7.0 million
kroons (0.4 million euros). Corresponding figures for the first half of 2008
were an outflow of 168.9 million kroons (10.8 million euros) for acquisitions
and an inflow of 38.4 million kroons (2.5 million euros) for lending.

Financing activities generated a net outflow of 39.9 million kroons (2.5 million
euros). The corresponding figure for the first half of 2008 was an inflow of
109.0 million kroons (7.0 million euros). The result of financing cash flows has
changed because the Group has reduced borrowing but is continuing the servicing
of existing debt. In the first half of 2009, net outflow from interest-bearing
loans and borrowings was negative at 6.8 million kroons (0.4 million euros)
against an inflow of 212.8 million kroons (13.6 million euros) in the first half
of 2008. The remainder of financing cash flows is made up of a dividend
distribution of 31.9 million kroons (2.0 million euros) compared with 103.8
million kroons (6.6 million euros) a year ago.

Key financial figures and ratios
--------------------------------------------------------------------------------
| Figure / ratio | 1st half | 1st half | 1st half | 2008 |
| | 2009 | 2008 | 2007 | |
--------------------------------------------------------------------------------
| Weighted average number of | 30,756,7 | 30,756,7 | 30,756,72 | 30,756,728 |
| shares * | 28 | 28 | 8 | |
--------------------------------------------------------------------------------
| Earnings per share (in | 0.69 | 3.39 | 4.03 | 4.73 |
| kroons) | | | | |
--------------------------------------------------------------------------------
| Earnings per share (in | 0.04 | 0.22 | 0.26 | 0.30 |
| euros) | | | | |
--------------------------------------------------------------------------------
| Revenue growth | -34.5% | 23.1% | 64.0% | 3.1% |
--------------------------------------------------------------------------------
| Average number of employees | 1,174 | 1209 | 1113 | 1,232 |
--------------------------------------------------------------------------------
| Revenue per employee (in | 1,044 | 1,547 | 1,365 | 3,140 |
| thousands of kroons) | | | | |
--------------------------------------------------------------------------------
| Revenue per employee (in | 67 | 98 | 87 | 201 |
| thousands of euros) | | | | |
--------------------------------------------------------------------------------
| Personnel expenses to | 15.4% | 12.4% | 11.6% | 12.7% |
| revenue, % | | | | |
--------------------------------------------------------------------------------
| Administrative expenses to | 5.3% | 5.0% | 4.6% | 4.7% |
| revenue, % | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EBITDA (in thousands of | 41,125 | 179,579 | 176,310 | 281,161 |
| kroons) | | | | |
--------------------------------------------------------------------------------
| EBITDA (in thousands of | 2,628 | 11,477 | 11,268 | 17,969 |
| euros) | | | | |
--------------------------------------------------------------------------------
| EBITDA margin, % | 3.4% | 9.6% | 11.6% | 7.3% |
--------------------------------------------------------------------------------
| Gross margin, % | 6.9% | 12.8% | 14.2% | 9.3% |
--------------------------------------------------------------------------------
| Operating margin, % | 0.4% | 7.8% | 9.6% | 5.4% |
--------------------------------------------------------------------------------
| Operating margin excluding | 0.3% | 7.6% | 9.2% | 5.3% |
| gains on asset sales, % | | | | |
--------------------------------------------------------------------------------
| Net margin, % | 0.4% | 5.9% | 8.6% | 4.4% |
--------------------------------------------------------------------------------
| Return on invested capital, | 1.9% | 11.7% | 17.8% | 19.1% |
| % | | | | |
--------------------------------------------------------------------------------
| Return on assets, % | 0.2% | 6.3% | 9.3% | 9.1% |
--------------------------------------------------------------------------------
| Return on equity, % | 0.6% | 13.7% | 23.9% | 20.5% |
--------------------------------------------------------------------------------
| Equity ratio, % | 35.8% | 33.0% | 33.7% | 36.5% |
--------------------------------------------------------------------------------
| Gearing, % | 31.7% | 27.4% | 32.5% | 18.2% |
--------------------------------------------------------------------------------
| Current ratio | 1.36 | 1.45 | 1.45 | 1.33 |
--------------------------------------------------------------------------------
| | 30 June | 30 June | 30 June | 31 December |
| | 2009 | 2008 | 2007 | 2008 |
--------------------------------------------------------------------------------
| Order book (in thousands of | 1,568,00 | 3,196,93 | 2,730,813 | 2,220,748 |
| kroons) | 4 | 7 | | |
--------------------------------------------------------------------------------
| Order book (in thousands of | 100,214 | 204,322 | 174,531 | 141,932 |
| euros) | | | | |
--------------------------------------------------------------------------------
* For comparability, the weighted average number of shares is the number of
shares after the bonus issues.

--------------------------------------------------------------------------------
| 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 | Return on assets = operating profit / |
| amortisation | the period's average total assets |
| EBITDA margin = EBITDA / revenue | Return on equity = net profit for the |
| Gross margin = gross profit / | period /the period's average total |
| revenue | equity |
| Operating margin = operating profit | Equity ratio = total equity / total |
| / revenue | equity and liabilities |
| | Gearing = (interest-bearing |
| | liabilities - cash and cash |
| | equivalents) / (interest bearing |
| | liabilities + equity) |
| | Current ratio = total current assets |
| | / total current liabilities |
--------------------------------------------------------------------------------


Performance by geographical market
In the first half of 2009, revenue earned outside Estonia accounted for
approximately 16% of consolidated revenue against approximately 20% a year ago.
The Group has expanded operations in Latvia - in the first six months of 2009,
Latvian revenues accounted for around 13% of the total while in 2008 (full year)
the proportion was 6%.

At the same time, the contribution of Ukrainian revenues dropped to 2%. The
downturn is attributable to the completion of major projects started in the
previous period and the complexity of entering into new contracts during the
steep recession. Lithuanian revenues decreased in line with the decisions made
by the Group regarding the Lithuanian market (see Changes in the Group's
management structure and operations in 2009 in Directors' report).
Further information on developments in the Group's chosen markets can be found
in Outlooks of the Group's geographical markets.
--------------------------------------------------------------------------------
| | 1st half | 1st half | 1st half | 2008 |
| | 2009 | 2008 | 2007 | |
--------------------------------------------------------------------------------
| Estonia | 83.9% | 80.1% | 90.0% | 80.3% |
--------------------------------------------------------------------------------
| Ukraine | 2.3% | 14.9% | 10.0% | 11.4% |
--------------------------------------------------------------------------------

| Lithuania | 0.9% | 2.2% | 0% | 2.4% |
--------------------------------------------------------------------------------
| Latvia | 12.9% | 2.8% | 0% | 5.9% |
--------------------------------------------------------------------------------
Revenue distribution across different geographical areas is a consistently
deployed strategy aimed at mitigating the risks arising from undue reliance on a
single market. In addition, increasing the proportion of revenue earned outside
Estonia remains one of the Group's strategic objectives - in 2013 the Group
expects to earn half of its revenue outside Estonia.


Performance by business line
The core business of Nordecon International Group is general contracting and
project management in buildings and infrastructure construction. In addition,
the Group is involved in road construction and maintenance, environmental
engineering, concrete works and real estate development.

Consolidated revenue for the first half of 2009 was 1,225.1 million kroons (78.3
million euros), a 34.5% decrease from the 1,870.6 million kroons (119.6 million
euros) generated in the first half of 2008. Revenue has decreased mainly on
account of shrinkage in demand in all of the Group's markets. In addition, the
absolute revenue figure has been impacted by stiff competition that has lowered
the construction prices (see further commentary in Outlooks of the Group's
geographical markets).

The Group aims to maintain the revenues generated by its main segments
(Buildings and Infrastructure) in balance as this helps disperse risks and
provides a more solid foundation under stressed circumstances when one segment
experiences shrinkage in operating volumes. In view of estimates of demand for
apartments, the proportion of housing construction revenue from apartment
buildings will remain within the strategically defined 20%.
Segment revenue

In contrast to previous years, in the first half of 2009 the revenue generated
by the Infrastructure segment surpassed that of Buildings. This results mainly
from the situation in the construction market (particularly in Estonia) that has
caused the order book of the Infrastructure segment to develop more favourably
already since the second half of 2008.

In the first half of 2009, the Buildings and Infrastructure segments generated
revenue of 600.8 million kroons (38.4 million euros) and 616.4 million kroons
(39.4 million euros) respectively. The corresponding figures for the first half
of 2008 were 1,332.0 million kroons (85.1 million euros) and 534.2 million
kroons (34.1 million euros) respectively. In response to market developments,
the revenue of the Buildings segment has declined and that of Infrastructure has
grown. However, the approximately 80-million kroon (5.1-million euro) growth in
the Infrastructure segment is not wholly organic but includes also Latvian
revenues which in the first half of 2008 were not yet consolidated.

Revenue distribution between segments*
--------------------------------------------------------------------------------
| Business segments | 1st half | 1st half | 1st half | 2008 |
| | 2009 | 2008 | 2007 | |
--------------------------------------------------------------------------------
| Buildings | 49% | 72% | 54% | 63% |
--------------------------------------------------------------------------------
| Infrastructure | 51% | 28% | 46% | 37% |
--------------------------------------------------------------------------------
* In connection with the entry into force of IFRS 8 Operating Segments during
the reporting period, the Group has changed segment reporting in its financial
statements. In the Directors' report the Ukrainian and EU Buildings segments
which are disclosed separately in the financial statements are presented as a
single segment. In addition, the segment information presented in the Directors'
report does not include the disclosures on “other segments” that are presented
in the financial statements.

Management believes that because of the market situation the proportion of
revenue generated by the Infrastructure segment will continue increasing
compared with 2008. The assessment is supported by the Group's order book as at
30 June 2009 where the contracts of the Infrastructure segment surpass those of
the Buildings segment (see Order book in Director's report).
Revenue distribution within segments

The distribution of the Group's buildings construction revenue has remained
stable, with commercial buildings accounting for over 50% of the total. As
anticipated, revenues from the construction of industrial and warehouse
facilities and apartment buildings have decreased. On the other hand, the
downturn in construction prices has triggered growth in the construction of
public buildings thanks to municipal investments in schools, nurseries and other
public buildings. However, despite attractive construction prices, further
growth in local government projects may be undermined by financing
difficulties.
--------------------------------------------------------------------------------
| Revenue distribution in the | 1st half | 1st half | 1st half | 2008 |
| Buildings segment | 2009 | 2008 | 2007 | |
--------------------------------------------------------------------------------
| Commercial buildings | 71% | 59% | 53% | 59% |
--------------------------------------------------------------------------------
| Industrial and warehouse | 11% | 20% | 10% | 16% |
| facilities | | | | |
--------------------------------------------------------------------------------
| Public buildings | 16% | 13% | 20% | 14% |
--------------------------------------------------------------------------------
| Apartment buildings | 1% | 8% | 17% | 11% |
--------------------------------------------------------------------------------

Changes in the structure of the Group's infrastructure revenues are attributable
to the acquisition of subsidiaries (the subgroup of the Latvian subsidiary SIA
Nordecon Infra). The contribution of other engineering projects has increased,
year-over-year, largely on account of growth in pipeline and outdoor network
construction, while environmental engineering revenues have expanded thanks to a
decline in construction prices that has increased investment by state and local
government.
--------------------------------------------------------------------------------
| Revenue distribution in the | 1st half | 1st half | 1st half | 2008 |
| Infrastructure segment | 2009 | 2008 | 2007 | |
--------------------------------------------------------------------------------
| Road construction and | 32% | 51% | 30% | 45% |
| maintenance | | | | |
--------------------------------------------------------------------------------
| Port construction | 17% | 26% | 28% | 24% |
--------------------------------------------------------------------------------
| Other engineering | 38% | 19% | 17% | 6% |
--------------------------------------------------------------------------------
| Environmental engineering | 14% | 4% | 25% | 25% |
--------------------------------------------------------------------------------

Order book
At 30 June 2009, the Group's order book was 1,560 million kroons (100 million
euros), 50% down from the 3,197 million kroons (204 million euros) posted a year
ago.
--------------------------------------------------------------------------------
| | 30 June | 30 June | 30 June | 31 Dec |
| | 2009 | 2008 | 2007 | 2008 |
--------------------------------------------------------------------------------
| Order book, in thousands of | 1,568,00 | 3,196,937 | 2,730,813 | 2,220,748 |
| kroons | 4 | | | |
--------------------------------------------------------------------------------
| Order book, in thousands of | 100,214 | 204,322 | 174,531 | 141,932 |
| euros | | | | |
--------------------------------------------------------------------------------

In the Infrastructure segment, the order book has been growing year-over-year.
At 30 June 2009 it accounted for 68% of the Group's total order book portfolio
(30 June 2008: 53%), reflecting the situation in the construction market where
shrinkage in the Buildings segment is outpacing growth in the Infrastructure
segment. In absolute terms, the order book figures have been severely weakened
by tumbling construction prices.
Between the reporting date (30 June 2009) and the date of release of this
report, Group companies have been awarded additional construction contracts of
approximately 380 million kroons (24,3 million euros).


People and personnel expenses
In the first half of 2009 the Group (including the parent and the subsidiaries)
employed, on average, 1,187 people including around 500 engineers and technical
personnel. The proportion of engineers and technical personnel (ETP) has been
expanding over the years due to business growth. In 2009, the acquisition of the
Latvian company SIA LCB increased the number of staff by more than 100. However,
since the end of 2008 personnel growth has been replaced by a decline because of
downsizing triggered by a significant decrease in the Group's operations.
Average number of the Group's employees (including the parent and its
subsidiaries):
--------------------------------------------------------------------------------
| Period | ETP | Workers | Total average |
--------------------------------------------------------------------------------
| 1st half 2009 | 480 | 707 | 1,187 |
--------------------------------------------------------------------------------
| 1st half 2008 | 493 | 716 | 1,209 |
--------------------------------------------------------------------------------
| 1st half 2007 | 412 | 701 | 1,113 |
--------------------------------------------------------------------------------
| 2008 | 511 | 721 | 1,232 |
--------------------------------------------------------------------------------
The Group's personnel expenses for the first half of 2009, including associated
taxes, totalled 188.4 million kroons (12.0 million euros), a 19% decrease
compared with the 232.9 million kroons (14.9 million euros) incurred in the same
period in 2008.

The Group has been able to reduce personnel expenses in a situation where the
number of staff has remained more or less stable by cutting the basic pay.
Employee salaries have been lowered at all Group entities; the average pay-cut
for engineers and technical personnel was 15%. The performance pay of project
staff that is linked the projects' profit margins has also declined.
Owing to the overall economic situation and the slump in the construction
market, in the first half of 2009 Group entities were forced to terminate
employment relations with approximately 450 people. This however does not
influence directly the total average number of employees of the period, taken
also into account the additions.

In the first half of 2009, the remuneration of the members of the council of
Nordecon International AS including associated taxes amounted to 718 thousand
kroons (46 thousand euros). The corresponding figure for the first half of 2008
was 725 thousand kroons (46 thousand euros). The remuneration and benefits of
the members of the board of Nordecon International AS including associated taxes
totalled 1,674 thousand kroons (107 thousand euros) compared with 8,257 thousand
kroons (528 thousand euros) a year ago. The differences in the remuneration of
the board stem from the fact that since 5 January 2009 the board has had three
members while in 2008 the number was five (see Changes in the Group's management
structure and operations in 2009). In addition, the figure has been impacted by
a 15% reduction in board member remuneration across the Group.


Share and shareholders
Share information
ISIN code EE3100039496
Short name of the security NCN1T (until 3 April 2009 EEH1T)
Nominal value 10.00 kroons / 0.64 euros
Total number of securities issued 30,756,728
Number of listed securities 30,756,728
Listing date 18 May 2006

The share capital of Nordecon International AS consists of 30,756,728 ordinary
shares with a par value of 10 Estonian kroons each. Owners of ordinary shares
are entitled to dividends as distributed from time to time. Each share carries
one vote at general meetings of Nordecon International AS.

Summarised trading results
Share trading history (EEK)
--------------------------------------------------------------------------------
| Price | 1st half | 1st half 2008 | 1st half 2007 |
| | 2009 | | |
--------------------------------------------------------------------------------
| Open | 16.43 | 76.51 | 166.64 |
--------------------------------------------------------------------------------
| High | 20.34 | 76.51 | 224.53 |
--------------------------------------------------------------------------------
| Low | 8.61 | 50.85 | 96.54 |
--------------------------------------------------------------------------------
| Last closing price | 13.61 | 53.98 | 93.88 |
--------------------------------------------------------------------------------
| Traded volume | 1,875,140 | 4,112,826 | 2,480,799 |
--------------------------------------------------------------------------------
| Turnover, millions | 22.2 | 229.8 | 425.8 |
--------------------------------------------------------------------------------
| Listed volume (30 June), | 30,757 | 30,757 | 15,378 |
| thousands | | | |
--------------------------------------------------------------------------------
| Market capitalisation (30 | 418.60 | 1,650.44 | 1,443.69 |
| June), millions | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Share trading history (EUR)
--------------------------------------------------------------------------------
| Price | 1st half | 1st half 2008 | 1st half 2007 |
| | 2009 | | |
--------------------------------------------------------------------------------
| Open | 1.05 | 4.89 | 10.65 |
--------------------------------------------------------------------------------
| High | 1.30 | 4.89 | 14.35 |
--------------------------------------------------------------------------------
| Low | 0.55 | 3.25 | 6.17 |
--------------------------------------------------------------------------------
| Last closing price | 0.87 | 3.45 | 6.00 |
--------------------------------------------------------------------------------
| Traded volume | 881,595 | 759,958 | 1,745,628 |
--------------------------------------------------------------------------------
| Turnover, millions | 1.42 | 14.69 | 27.21 |
--------------------------------------------------------------------------------
| Listed volume (30 June), | 30 757 | 30 757 | 15 378 |
| thousands | | | |
--------------------------------------------------------------------------------
| Market capitalisation (30 | 26.75 | 105.48 | 92.27 |
| June), millions | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

Shareholder structure
The largest shareholders of Nordecon International AS at 30 June 2009
--------------------------------------------------------------------------------
| Shareholder | Number of shares | Ownership |
| | | interest |
--------------------------------------------------------------------------------
| AS Nordic Contractors | 18,807,464 | 61.15% |
--------------------------------------------------------------------------------
| ING Luxembourg S.A. | 1,111,853 | 3.61% |
--------------------------------------------------------------------------------
| Ain Tromp | 678,960 | 2.21% |
--------------------------------------------------------------------------------
| ASM Investments OÜ | 519,600 | 1.69% |
--------------------------------------------------------------------------------
| Skandinaviska Enskilda Banken Ab Clients | 456,758 | 1.49% |
--------------------------------------------------------------------------------
| State Street Bank & Trust Co. | 355,199 | 1.15% |
--------------------------------------------------------------------------------
| The Bank of New York Mellon | 353,323 | 1.15% |
--------------------------------------------------------------------------------
| Aivo Kont | 339,480 | 1.10% |
--------------------------------------------------------------------------------
| SEB Pank AS | 322,200 | 1.05% |
--------------------------------------------------------------------------------
| Raul Rebane | 316,104 | 1.03% |
--------------------------------------------------------------------------------

Shareholder structure at 30 June 2009
--------------------------------------------------------------------------------
| | Number of | Ownership |
| | shareholders | interest |
--------------------------------------------------------------------------------
| Shareholders with interest exceeding 5% | 1 | 61.15% |
--------------------------------------------------------------------------------
| Shareholders with interest between 1% | 9 | 14.48% |
| and 5% | | |
--------------------------------------------------------------------------------
| Shareholders with interest below 1% | 1,741 | 24.37% |
--------------------------------------------------------------------------------
| Total | 1,751 | 100.00% |
--------------------------------------------------------------------------------

Shares controlled by members of the council of Nordecon International AS at 30
June 2009
--------------------------------------------------------------------------------
| Council |   | Number of | Ownership |
| | | shares | interest |
--------------------------------------------------------------------------------
| Toomas Luman (AS Nordic | Chairman of | 19,059,144 | 61.97% |
| Contractors, OÜ Luman ja | the Council | | |
| Pojad)* | | | |
--------------------------------------------------------------------------------
| Ain Tromp | Member of the | 678,960 | 2.21% |
| | Council | | |
--------------------------------------------------------------------------------
| Alar Kroodo (ASM Investments | Member of the | 519,600 | 1.69% |
| OÜ)* | Council | | |
--------------------------------------------------------------------------------
| Andri Hõbemägi | Member of the | 40,000 | 0.13% |
| | Council | | |
--------------------------------------------------------------------------------
| Tiina Mõis | Member of the | 0 | 0.00% |
| | Council | | |
--------------------------------------------------------------------------------
| Meelis Milder | Member of the | 0 | 0.00% |
| | Council | | |
--------------------------------------------------------------------------------
* Companies controlled by the individual


Shares controlled by members of the board of Nordecon International AS at 30
June 2009
--------------------------------------------------------------------------------
| Board |   | Number of | Ownership |
| | | shares | interest |
--------------------------------------------------------------------------------
| Jaano Vink | Chairman of | 34,000 | 0.11% |
| | the Board | | |
--------------------------------------------------------------------------------
| Sulev Luiga | Member of the | 1,000 | 0.00% |
| | Board | | |
--------------------------------------------------------------------------------
| Priit Tiru | Member of the | 0 | 0.00% |
| | Board | | |
--------------------------------------------------------------------------------

Members of the board and council of Nordecon International AS and companies
controlled by them have not been granted any share options under which they
could acquire shares in Nordecon International AS in subsequent periods.


Information on significant transactions with related parties
On 26 March 2009 Nordecon Ehitus AS, a wholly-owned subsidiary of Nordecon
International AS, acquired a 50% stake in OÜ Unigate from AS Arealis, a
subsidiary of the Group's controlling shareholder Nordic Contractors AS.
OÜ Unigate is a housing developer incorporated in Estonia that has been
developing properties belonging to it in Paekalda street in Tallinn. The
investment was made in line with the Group's strategy according to which in
2009-2010 the Group is to prepare for a potential rise of the Estonian real
estate market that may take place after 2010. For this, the Group's subsidiaries
will acquire property portfolios that will allow launching housing construction
projects as soon as the market situation changes.
In accordance with the terms of the transaction, AS Arealis was paid 20.0
million kroons (1.3 million euros) including 1.5 million kroons (0.1 million
euros) for an interest in the entity's share capital and 18.5 million kroons
(1.2 million euros) for AS Arealis' loan receivables from OÜ Unigate. Depending
on the success of the development operations, AS Arealis will also be paid a
variable price component that will be calculated at 450 kroons (28.8 euros) per
square metre sold. In February 2009 the market value of the properties belonging
to OÜ Unigate (the proportion acquired by Nordecon Ehitus AS) was approximately
47.5 million kroons (3.0 million euros).


Outlooks of the Group's geographical markets
Estonia
According to management's assessment, in 2009-2010 the Estonian construction
market will be characterised by the following features:
- Total demand in the construction market will depend heavily on public
procurement tenders and the number and pricing of infrastructure, environmental
and other projects launched with the support of the European Union funds (the
latter will be critically influenced by the administrative capabilities of the
central and local governments). However, the more moderate decline in the
infrastructure sector will not be able to compensate for the steep contraction
of the buildings construction market that has currently been abandoned by most
private sector corporates and individuals. The Group's management estimates that
by 2010 the total volumes of the construction market will have decreased 50%
compared with 2008.

- The number of development and buildings construction companies will decrease
(market consolidation). Companies focused on residential construction which in
2008 began seeking opportunities to penetrate other market segments such as
infrastructure will continue to do so, heightening competition in the segments
involved. The continuing slump will lead to mergers, takeovers and bankruptcies.

- Owing to the global financial crisis, the amount of money circulating in the
economy has decreased considerably. As a result, more and more private sector
companies will have difficulty in raising debt to finance new construction
projects. The steep decrease in demand 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 that significantly increased their output
during the growth phase of the market will be faced by shrinking demand and,
consequently, greater strain in meeting the obligations taken for increasing
capacities.

- Real estate development companies' ability to service and repay existing
loans
will weaken and their creditworthiness will decrease. For companies involved in
general 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 as well as the availability of relevant resources.

- The deteriorating economic climate and fierce competition in the construction
market along with falling demand will cause continuing unemployment for
construction workers. The ensuing increase in the availability of labour will
lower construction companies' personnel expenses although in the short term the
decrease will be lessened by the disbursement of redundancy benefits.

- The change in construction projects' financing schemes (customers' settlement
terms will extend significantly) in combination with additional requirements to
the financing provided by general contractors during the construction period
will put pressure on contractors' liquidity.

Nordecon International Group operates in accordance with its long-term
objectives that are adjusted for changes in the external environment. Relevant
strategic management is the responsibility of the Group's board (see The Group's
strategy and objectives for 2009-2013).

The Group has prepared for changes in the economic environment by:
- Setting the objective of reducing the cost base by 30% (by cutting personnel
expenses by downsizing and lowering salaries, reducing the costs of goods and
services purchased, etc)

- Restructuring the Group for better management of the business lines
(buildings
and infrastructure construction) and maintaining the competitive advantages

- Performing a more thorough preliminary analysis of the customers' solvency
and
creditworthiness and dealing proactively with the collection of overdue
receivables

- Dispersing risks through portfolio design

- Dispersing activities across geographical areas and business segments

Latvia and Lithuania
Despite the difficulties of the Latvian political and monetary systems, the
volumes of various infrastructure projects financed by the state and local
government with the support of EU funding will remain stable or, hopefully, will
even increase (such as projects for the rehabilitation of the water supply and
central heating systems). Construction activities will be mainly affected by the
situation of financing institutions, a significant decrease in private sector
demand, still high inflation and heightening competition. The ability of the
Latvian central and local governments to provide self-financing for projects
financed with the support of the EU and, accordingly, their ability to pay to
contractors, has also become dependent on whether Latvia will receive the loan
agreed with IMF.

Recent economic developments in Lithuania have been similar to the ones in the
other Baltic countries. Slowdown in investment both in the public and private
sectors and similar factors directly influence the construction market. The
commercial and residential construction (the Group as a general contractor not a
developer) markets have contracted visibly and the situation remains strained.
Other relevant risks include the stability of banks, increasing competition and
the impact of inflation on the construction prices.

The Group's management has suspended major decisions and remains alert to
developments in Latvia and Lithuania because similarly to Estonia, their whole
economy is in difficulty and this can also be felt in the construction sector.
Management is analysing the Group's operation in the Latvian and Lithuanian
markets in the light of developments in the external environment and is prepared
to revise current plans swiftly and decisively.

The business operations of the Lithuanian-based UAB Nordecon Statyba (formerly
UAB Eurocon LT) have been practically suspended and the Group is monitoring the
market situation. The short-term decision will not change the Group's strategic
objectives in the Lithuanian construction market and does not imply the sale or
liquidation of the company.

The Group designs its activities in the Latvian and Lithuanian construction
markets in accordance with its international expansion strategy (see The Group's
strategy and objectives for 2009-2013) and believes that in the long term the
two markets will have a logical place in the Group's internationalisation.

Ukraine
In Ukraine, the Group will continue as a general contractor and project manager
in the construction of commercial buildings and production facilities.
Activities on development projects that require major investment (currently two)
have been suspended to minimise the risks until the situation in the Ukrainian
and global financial markets has eased up.

The main risks in the Ukrainian market are connected with the low administrative
efficiency of the central and local governments and the judicial system,
inflation, and the availability of quality construction inputs. Demand is mainly
undermined by the lack of financing. Since October 2008 the Ukrainian monetary
and banking systems have been under severe pressure. The Ukrainian national
currency hryvna (UAH) has weakened significantly against both the US dollar and
the euro, which is causing substantial foreign exchange losses for foreign
companies operating in Ukraine that have not hedged their currency risk
exposures. To date, the weakening of the currency has stopped and the Group's
exposure to market-based currency risk has decreased considerably.

Nevertheless, the Group believes that the construction market of a country with
a population of 46 million will offer business opportunities also in the future.
The Group's main success factor is negligible competition in the project
management sector (the Group offers flexible construction management along with
European practices and competencies). The Group's management is confident that
the current crisis in the Ukrainian construction market and economy as a whole
will transform the local understanding and expectations of general contracting
and project management in the construction business, which will improve the
Group's position in the long-term perspective.

Description of the main risks
Business risks
To mitigate the risks arising from the seasonal nature of the construction
business (primarily the weather conditions during the winter months), the Group
has acquired road maintenance contracts that generate year-round business. In
addition, Group companies are constantly seeking new technical solutions that
would allow working more efficiently under changeable weather conditions.
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 a Group
company. To remedy builder-caused deficiencies which may be detected during the
warranty period, all Group companies create warranties provisions. At 30 June
2009 the provisions (including current and non-current ones) totalled 15.1
million kroons (1.0 million euros). The corresponding figure at 30 June 2008 was
7.8 million kroons (0.5 million euros).

Credit risks
For credit risk management, a potential customer's settlement behaviour and
creditworthiness are analysed already in the tendering stage. Subsequent to the
signature of a contract, the customer's 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.
However, the customers' settlement behaviour has changed. The proportion of
overdue receivables has increased somewhat, increasing the probability of credit
losses in subsequent periods. 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 half of 2009, net loss on doubtful receivables amounted to 9.2
million kroons (0.6 million euros). In the first half of 2008, losses from the
write-down of receivables totalled 7.1 million kroons (0.5 million euros).

Liquidity risks
Free funds are placed in overnight or fixed-interest term deposits with the
largest banks of the markets where the Group operates. 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 1.36-fold (30 June 2008: 1.45-fold) and available cash funds
totalled 158.1 million kroons (10.1 million euros) (30 June 2008: 321.8 million
kroons / 20.6 million euros), providing a sufficient liquidity buffer for
operating in an economic environment that is more uncertain than in the previous
year.

Interest rate risks
The loans taken by Group companies 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. By 30 June 2009, the Group's
interest-bearing loans and borrowings had decreased by 127.1 million kroons (8.1
million euros) year-over-year to 619.7 million kroons (39.6 million euros).
Interest expense for the first half of 2009 amounted to 15.7 million kroons (1.0
million euros). Compared with the first half of 2008, interest expense has
contracted by 2.7 million kroons (0.2 million euros) thanks to a decline in the
EURIBOR base rate and a decrease in loans and borrowings.

Currency risks
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 hryvnas (UAH). A significant proportion of
services purchased from other countries are priced in euros, which does not
constitute a currency risk for the Group's Estonian, Latvian and Lithuanian
entities.

In the last quarter of 2008, the Ukrainian economy and its national currency
(the Ukrainian hryvna / UAH) were seriously hit by the global financial crisis.
The exchange rate of the local currency that was not officially pegged to any
international currency was deeply impacted by a slump in exports and foreign
investment and concerns about the general reliability of the Ukrainian banking
system. Despite counter-measures, the local central bank was unable to maintain
a stable exchange rate for the Ukrainian hryvna and in 2008 the latter weakened
against the US dollar and the euro by more than 30% year-over-year.
In 2009 the weakening of the Ukrainian hryvna against the euro has stopped and
in the first half of 2009 the Group's exchange losses (including the ones
recognised in finance expenses and other operating expenses) totalled 0.3
million kroons (0.02 million euros). The net effect of exchange differences
(including exchange gains) on the Group's net profit was gain of 1.1 million
kroons (0.07 million euros).


Condensed consolidated interim statement of financial position
--------------------------------------------------------------------------------
| EEK ‘000 | 30 June 2009 | 31 December 2008 |
--------------------------------------------------------------------------------
| ASSETS | | |
--------------------------------------------------------------------------------
| Current assets | | |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 158,089 | 296,184 |
--------------------------------------------------------------------------------
| Trade receivables | 526,234 | 473,935 |
--------------------------------------------------------------------------------
| Other receivables and prepayments | 357,663 | 408,541 |
--------------------------------------------------------------------------------
| Deferred tax assets | 776 | 776 |
--------------------------------------------------------------------------------

Taip pat skaitykite

DPK: Decisions of the regular meeting of shareholders dated 27.05.2013

VLN: NEW MUTUAL FUND TO THE BALTIC FUND CENTER

VLN: The results of the primary placement auction of Lithuanian Government securities

VLN: VVP pirminio platinimo aukciono rezultatai

2013-05-27 | NASDAQ OMX biržų naujienos 2013-05-27 | NASDAQ OMX biržų naujienos 2013-05-27 | NASDAQ OMX biržų naujienos 2013-05-27 | NASDAQ OMX biržų naujienos

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