Compared to the same period last year, the 9 month results of the Group in 2020 are characterised by an increase in sales revenue and operating profit, which was achieved in the context of a slight decline in gross profitability through a reduction in operating costs and an increase in overall efficiency. Despite the global COVID-19 pandemic and the resulting economic downturn, the impact on the results of the Group in the 9 months of 2020 is limited. Continuously, the weakening of Ukranian hryvnia and the resulting exchange rate loss affects the net result. The order book has increased year on year as compared to the same period of 2019 from
The COVID-19 pandemic has an increasing impact on the construction market and companies operating in the construction sector. The volume of new private orders has fallen considerably in the second and third quarters of 2020 and the start of construction of many objects in the tender phase has been delayed in the future. The pressure on the main contracting companies by demand side has increased as the market volume declines, but the expected decrease in the input prices offered by subcontractors has not occurred significantly. The situation has put the profit margin under pressure and brought into focus the reduction of the Group's costs and the need to contribute more resources to automated digital solutions.
Condensed consolidated interim statement of financial position
EUR ‘000 | ||
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 7,640 | 7,032 |
Trade and other receivables | 61,532 | 37,563 |
Prepayments | 4,208 | 1,813 |
Inventories | 24,080 | 21,142 |
Total current assets | 97,460 | 67,550 |
Non-current assets | ||
Investments in equity-accounted investees | 1,802 | 2,369 |
Other investments | 26 | 26 |
Trade and other receivables | 8,615 | 8,435 |
Investment property | 6,301 | 5,530 |
Property, plant and equipment | 18,451 | 19,002 |
Intangible assets | 14,924 | 14,736 |
Total non-current assets | 50,119 | 50,098 |
TOTAL ASSETS | 147,579 | 117,648 |
LIABILITIES | ||
Current liabilities | ||
Borrowings | 19,196 | 11,058 |
Trade payables | 60,286 | 40,730 |
Other payables | 9,440 | 7,954 |
Deferred income | 7,550 | 6,391 |
Provisions | 1,156 | 716 |
Total current liabilities | 97,628 | 66,849 |
Non-current liabilities | ||
Borrowings | 8,187 | 16,326 |
Trade payables | 98 | 98 |
Other payables | 2,283 | 177 |
Provisions | 1,339 | 1,425 |
Total non-current liabilities | 11,907 | 18,026 |
TOTAL LIABILITIES | 109,535 | 84,875 |
EQUITY | ||
Share capital | 14,379 | 14,379 |
Own (treasury) shares | -660 | -660 |
Share premium | 635 | 635 |
Statutory capital reserve | 2,554 | 2,554 |
Translation reserve | 2,544 | 1,169 |
Retained earnings | 14,919 | 12,383 |
Total equity attributable to owners of the parent | 34,371 | 30,460 |
Non-controlling interests | 3,673 | 2,313 |
TOTAL EQUITY | 38,044 | 32,773 |
TOTAL LIABILITIES AND EQUITY | 147,579 | 117,648 |
Condensed consolidated interim statement of comprehensive income
EUR ‘000 | 9M 2020 | Q3 2020 | 9M 2019 | Q3 2019 | 2019 | ||
Revenue | 217,664 | 80,866 | 172,237 | 71,796 | 234,071 | ||
Cost of sales | -208,149 | -77,358 | -164,516 | -67,369 | -222,302 | ||
Gross profit | 9,515 | 3,508 | 7,721 | 4,427 | 11,769 | ||
Marketing and distribution expenses | -386 | -184 | -635 | -137 | -784 | ||
Administrative expenses | -5,312 | -1,452 | -4,668 | -1,620 | -6,837 | ||
Other operating income | 273 | 95 | 128 | 61 | 315 | ||
Other operating expenses | -138 | -28 | -48 | -28 | -193 | ||
Operating profit | 3,952 | 1,939 | 2,498 | 2,703 | 4,270 | ||
Finance income | 270 | 21 | 1,215 | 720 | 1,277 | ||
Finance costs | -2,102 | -861 | -1,006 | -343 | -1,219 | ||
Net finance costs/income | -1,832 | -840 | 209 | 377 | -58 | ||
Share of profit of equity-accounted investees | 966 | 487 | 622 | 370 | 585 | ||
Profit before income tax | 3,086 | 1,586 | 3,329 | 3,450 | 4,913 | ||
Income tax expense | -82 | 0 | -453 | 0 | -764 | ||
Profit for the period | 3,004 | 1,586 | 2,876 | 3,450 | 4,149 | ||
Other comprehensive income: Items that may be reclassified subsequently to profit or loss | |||||||
Exchange differences on translating foreign operations | 1,375 | 557 | -777 | -514 | -823 | ||
Total other comprehensive income/expense | 1,375 | 557 | -777 | -514 | -823 | ||
TOTAL COMPREHENSIVE INCOME | 4,379 | 2,143 | 2,099 | 2,936 | 3,326 | ||
Profit attributable to: | |||||||
- Owners of the parent | 1,040 | 1,197 | 2,532 | 3,325 | 3,378 | ||
- Non-controlling interests | 1,964 | 389 | 344 | 125 | 771 | ||
Profit for the period | 3,004 | 1,586 | 2,876 | 3,450 | 4,149 | ||
Total comprehensive income attributable to: | |||||||
- Owners of the parent | 2,415 | 1,754 | 1,755 | 2,811 | 2,555 | ||
- Non-controlling interests | 1,964 | 389 | 344 | 125 | 771 | ||
Total comprehensive income for the period | 4,379 | 2,143 | 2,099 | 2,936 | 3,326 | ||
Earnings per share attributable to owners of the parent: | |||||||
Basic earnings per share (EUR) | 0.03 | 0.04 | 0.08 | 0.10 | 0.11 | ||
Diluted earnings per share (EUR) | 0.03 | 0.04 | 0.08 | 0.10 | 0.11 |
Condensed consolidated interim statement of cash flows
EUR ‘000 | 9M 2020 | 9M 2019 |
Cash flows from operating activities | ||
Cash receipts from customers | 267,488 | 193,567 |
Cash paid to suppliers | -238,592 | -165,291 |
VAT paid | -8,245 | -4,606 |
Cash paid to and for employees | -20,849 | -17,332 |
Income tax paid | -81 | -149 |
Net cash used in/from operating activities | -279 | 6,189 |
Cash flows from investing activities | ||
Paid on acquisition of property, plant and equipment | -184 | -216 |
Proceeds from sale of property, plant and equipment | 246 | 215 |
Acquisition of intangible assets | -2 | 0 |
Acquisition of a subsidiary | -2 | 0 |
Cash received on acquisition of a subsidiary | 3,605 | 0 |
Loans provided | -17 | -14 |
Repayment of loans provided | 43 | 9 |
Dividends received | 251 | 489 |
Interest received | 8 | 6 |
Net cash from investing activities | 3,948 | 489 |
Cash flows from financing activities | ||
Proceeds from loans received | 2,333 | 3,036 |
Repayment of loans received | -1,949 | -3,245 |
Lease payments made | -2,167 | -2,400 |
Interest paid | -790 | -744 |
Dividends paid | -472 | -2,360 |
Net cash used in financing activities | -3,045 | -5,713 |
Net cash flow | 624 | 965 |
Cash and cash equivalents at beginning of period | 7,032 | 7,678 |
Effect of movements in foreign exchange rates | -16 | -13 |
Increase in cash and cash equivalents | 624 | 965 |
Cash and cash equivalents at end of period | 7,640 | 8,630 |
Financial review
Financial performance
Nordecon ended the first nine months of 2020 with a gross profit of
The Group’s administrative expenses for the first nine months of 2020 totalled
The Group’s operating profit for the first nine months of 2020 was
Finance income and costs of the period continued to be influenced by exchange rate fluctuations in the Group’s foreign markets, particularly the movements in the exchange rate of the Ukrainian hryvnia, which weakened against the euro by approximately 20%. In contrast to the first nine months of 2019 when the Group earned a foreign exchange gain, in the reporting period the translation of loans provided to the Ukrainian subsidiaries in euros resulted in a foreign exchange loss of
The Group’s net profit amounted to
Cash flows
In the first nine months of 2020, operating activities produced a net cash outflow of
Investing activities resulted in a net cash inflow of
Financing activities generated a net cash outflow of
The Group’s cash and cash equivalents totalled
Key financial figures and ratios
Figure/ratio | 9M 2020 | 9M 2019 | 9M 2018 | 2019 | |
Revenue (EUR ‘000) | 217,664 | 172,237 | 167,588 | 234,071 | |
Revenue change | 26.4% | 2.8% | -4.2% | 4.7% | |
Net profit (EUR ‘000) | 3,004 | 2,876 | 2,154 | 4,149 | |
Net profit attributable to owners of the parent (EUR ‘000) | 1,040 | 2,532 | 1,972 | 3,378 | |
Weighted average number of shares | 31,528,585 | 31,528,585 | 30,986,585 | 31,528,585 | |
Earnings per share (EUR) | 0.03 | 0.08 | 0.06 | 0.11 | |
Administrative expenses to revenue | 2.4% | 2.7% | 3.0% | 2.9% | |
Administrative expenses to revenue (rolling) | 2.7% | 2.8% | 2.9% | 2.9% | |
EBITDA (EUR ‘000) | 6,512 | 4,732 | 3,879 | 7,311 | |
EBITDA margin | 3.0% | 2.7% | 2.3% | 3.1% | |
Gross margin | 4.4% | 4.5% | 4.0% | 5.0% | |
Operating margin | 1.8% | 1.5% | 1.4% | 1.8% | |
Operating margin excluding gain on asset sales | 1.8% | 1.4% | 0.8% | 1.7% | |
Net margin | 1.4% | 1.7% | 1.3% | 1.8% | |
Return on invested capital | 6.2% | 5.8% | 5.4% | 10.0% | |
Return on equity | 8.5% | 8.8% | 6.4% | 12.5% | |
Equity ratio | 25.8% | 25.9% | 28.6% | 27.9% | |
Return on assets | 2.3% | 2.5% | 1.9% | 3.7% | |
Gearing | 30.2% | 30.0% | 29.1% | 33.8% | |
Current ratio | 1.00 | 0.93 | 0.96 | 1.01 | |
As at | |||||
Order book (EUR ‘000) | 215,494 | 196,493 | 131,953 | 227,545 | |
Performance by geographical market
The revenue contribution of the Groups foreign markets increased year on year, rising to approximately 12% of the Group’s total revenue for the first nine months of 2020.
9M 2020 | 9M 2019 | 9M 2018 | 2019 | |
88% | 91% | 94% | 89% | |
6% | 3% | 2% | 5% | |
5% | 4% | 1% | 4% | |
1% | 2% | 3% | 2% |
The revenue contribution of the Swedish market grew significantly year on year. During the period, we provided services under three building construction contracts secured as a general contractor and one concrete works subcontract. Finnish revenues grew somewhat, underpinned by concrete works subcontracts signed in the building construction segment and two general contractor’s contracts signed in the agriculture sector. Revenue generated in the Ukrainian market and its proportionate share in the Group’s total revenue decreased.
Geographical diversification of the revenue base is a consciously deployed strategy by which we mitigate the risks resulting from excessive reliance on one market. However, conditions in some of our chosen foreign markets are also volatile and have a strong effect on our current results. Increasing the contribution of foreign markets is one of Nordecon’s strategic targets.
Performance by business line
Segment revenues
The Group ended the first nine months of 2020 with revenue of
The limited volume of infrastructure construction projects, which continues to affect the entire Estonian construction market, is also reflected in our revenue structure. In in the first nine months of 2020, our Buildings and Infrastructure segments generated revenue of
Operating segments | 9M 2020 | 9M 2019 | 9M 2018 | 2019 |
Buildings | 75% | 70% | 71% | 70% |
Infrastructure | 25% | 30% | 29% | 30% |
Subsegment revenues
In the Buildings segment, all subsegments delivered lesser or greater year-on-year revenue growth. The fastest-growing subsegment was public buildings, which increased its revenue by 78%. It was also the largest revenue contributor, generating approximately a third of total segment revenue. During the period, we completed and delivered on time the
The largest projects of the commercial buildings subsegment that generated revenue in the reporting period are in
A significant share of our Estonian apartment building projects is located in
We continue to build our own housing development projects in
Although the amount and share of revenue generated by the industrial and warehouse facilities subsegment remained modest compared to other subsegments, its revenue grew more than two times compared to the same period in 2019. Still, the values of projects in progress are small, amounting to
Revenue breakdown in the Buildings segment | 9M 2020 | 9M 2019 | 9M 2018 | 2019 |
Public buildings | 36% | 28% | 27% | 29% |
Apartment buildings | 28% | 30% | 22% | 27% |
Commercial buildings | 25% | 35% | 36% | 36% |
Industrial and warehouse facilities | 11% | 7% | 15% | 8% |
Although the largest revenue contributor in the Infrastructure segment is still road construction and maintenance, both the proportion and amount of its revenue have decreased year-on-year. A significant share of its revenue results from road rehabilitation contracts of 2 to
The revenue of the other engineering subsegment is strongly influenced by the construction of foundations for 73 wind turbines in the Nysäter wind farm, which is being built in northern
During the period, work continued on the construction of a 640-metre waterfront promenade at Sillamäe, which accounts for a significant share of the revenue of the specialist engineering subsegment.
Revenue breakdown in the Infrastructure segment | 9M 2020 | 9M 2019 | 9M 2018 | 2019 |
Road construction and maintenance | 77% | 81% | 91% | 78% |
Other engineering | 18% | 16% | 6% | 18% |
Specialist engineering | 4% | 0% | 0% | 1% |
Environmental engineering | 1% | 3% | 3% | 3% |
Order book
The Group’s order book (backlog of contracts signed but not yet performed) stood at
As at | ||||
Order book (EUR ‘000) | 215,494 | 196,493 | 131,953 | 227,545 |
The breakdown of the order book between the two segments has not changed significantly: the volume of contracts secured by the Buildings segment is still substantially larger, accounting for 79% of the Group’s total order book while contracts secured by the Infrastructure segment account for 21% (
The order book of the public buildings subsegment accounts for roughly a half of the order book of the Buildings segment. Its growth is mainly attributable to a contract signed at the beginning of the third quarter for the construction of phase III of the Maarjamõisa Medical Campus of the
Contracts secured by the road construction and maintenance subsegment account for 74% of the order book of the Infrastructure segment. The size of the order book is strongly influenced by a contract secured in the second quarter for the construction of the Väo junction on the eastern border of Tallinn. Nordecon Group continues to provide road maintenance services in three road maintenance areas: Järva, Hiiu and Kose. We have signed a new five-year contract for maintaining national roads in the Järva maintenance area. The contract involves year-round maintenance of around 950 km of national roads in Järva county. Based on the rates for 2020, the total cost of the contract is approximately
A large part of the contracts signed in the third quarter came from the public sector. The volume of work secured from the private sector has decreased sharply and the commencement of many projects that have been announced has been postponed. Customers are increasingly expecting that general contractors should lower their prices but the input prices charged by subcontractors have not decreased as anticipated. This has put profit margins under strong pressure. In an environment of stiff competition, we have avoided taking unjustified risks whose realisation in the contract performance phase would have an adverse impact on the Group’s results. Our main focus is on cost control and pre-construction and design activities in order to harness our professional competitive advantages.
Between the reporting date (
People
Employees and personnel expenses
In the first nine months of 2020, the Group (the parent and the subsidiaries) employed, on average, 703 people, including 422 engineers and technical personnel (ETP). Headcount increased by around 2% compared with the same period in 2019. The number of engineers and technical personnel grew due to a change in the Group’s structure: Embach Ehitus OÜ became a subsidiary, which increased the group’s workforce by 40 employees.
Average number of employees at Group entities (including the parent and the subsidiaries):
9M 2020 | 9M 2019 | 9M 2018 | 2019 | |
ETP | 422 | 413 | 425 | 414 |
Workers | 261 | 276 | 272 | 273 |
Total average | 703 | 689 | 697 | 687 |
The Group’s personnel expenses for the first nine months of 2020 including all taxes, totalled
The service fees of the members of the council of
The service fees of the members of the board of
We measure the efficiency of our operating activities using the following productivity and efficiency indicators, which are based on the number of employees and personnel expenses incurred:
9M 2020 | 9M 2019 | 9M 2018 | 2019 | |
Nominal labour productivity (rolling), (EUR ‘000) | 400.4 | 335.0 | 318.6 | 340.6 |
Change against the comparative period, % | 19.5% | 5.1% | 3.4% | 4.7% |
Nominal labour cost efficiency (rolling), (EUR) | 10.3 | 9.5 | 9.6 | 9.2 |
Change against the comparative period, % | 8.4% | -0.6% | -6.7% | -5.0% |
The Group’s nominal labour productivity and nominal labour cost efficiency have improved year on year, primarily through revenue growth.
Nordecon (www.nordecon.com) is a group of construction companies whose core business is construction project management and general contracting in the buildings and infrastructures segment. Geographically the Group operates in
Andri Hõbemägi
Head of Investor Relations
Tel: +372 6272 022
Email: andri.hobemagi@nordecon.com
www.nordecon.com
Attachments
- Nordecon_Interim_report_Q3_2020
- NCN investor presentation Q3_2020
© OMX, source