Eltel Group: Interim report January–March 2024

January–March 2024

• Net sales EUR 176.3 million (188.4). Total growth -6.4% and organic growth1) in segments -4.0%
• Adjusted EBITDA EUR 3.6 million (2.4)
• Adjusted EBITA2) EUR -4.0 million (-5.5) and adjusted EBITA margin -2.3% (-2.9)
• Adjusted EBITA2) in segments EUR -0.8 million (-2.1) and adjusted EBITA margin in segments -0.5% (-1.2)
• Items affecting comparability EUR -23.2 million (-6.1)
• Operating result (EBIT) EUR -27.2 million (-11.6) and EBIT margin -15.4% (-6.2)
• Net result EUR -30.5 million (-15.1)
• Earnings per share EUR -0.20 (-0.10), basic and diluted
• Cash flow from operating activities EUR -4.9 million (-23.7)
• Net debt EUR 114.9 million (158.4)

Significant events during and after the reporting period

• During the first quarter, Eltel signed new contracts with a combined value of about EUR 112.5 million (244) and increased the value of the total orderbook³⁾ to EUR 1.2 billion. Read more on page 13.
• On 22 January, it was announced that Eltel Denmark and TDC Net have extended their frame agreement by two years. The estimated order value is about DKK 170 million, about EUR 23 million.
• On 7 February, it was announced that Eltel Finland has signed a renewal of an existing frame agreement with the Finnish telecommunications provider DNA. The one-year agreement is worth about EUR 12.5 million.
• On 26 February, it was announced that Alexandra Kärnlund was appointed as the new Director of Communications at Eltel and member of the Group Management Team. Alexandra replaces Elin Otter, who has decided to leave Eltel for a position outside the company. Alexandra Kärnlund assumes her role in April 2024.
• On 10 April, Eltel signed an agreement to divest its High Voltage business in Poland to Mutares SE & Co. KGaA, a listed private equity investor headquartered in Munich, Germany. The transaction is expected to close during Q2 2024 and is subject to customary regulatory approval.

Key figures

EUR million	Jan-Mar 2024	Jan-Mar 2023	Jan-Dec 2023
Net sales	176.3	188.4	850.1
Net sales growth, %	-6.4%	2.4%	3.2%
Adjusted EBITDA	3.6	2.4	31.8
Adjusted EBITA2)	-4.0	-5.5	1.7
Adjusted EBITA margin, %	-2.3%	-2.9%	0.2%
Adjusted EBITA2), segments	-0.8	-2.1	11.8
Adjusted EBITA margin, %, segments	-0.5%	-1.2%	1.5%
Operating result (EBIT)	-27.2	-11.6	-5.3
Return on operative capital employed (ROCE), %	9.7%	-7.9%	5.3%
Net working capital	-59.0	-5.4	-49.8
Net debt	114.9	158.4	100.6
Number of employees, average	4,885	5,103	5,024

1) Organic growth is adjusted for currency effects.

2) Eltel follows the profitability of segments with adjusted EBITA, which does not include restructuring costs and other items affecting comparability. Please see pages 25–26 for definitions of the key ratios.

3) Total orderbook includes the committed order backlog and the best estimate for uncommitted remaining parts of frame agreements until the end of the agreement.

Comments by the CEO

The year has started much as predicted. Coming off a year of strong growth, we now see net sales stabilizing, although a harsh winter affected the volumes. Organic growth in the segments was -4.0% and -5.9% for the Group. Nevertheless, we managed to improve our adjusted EBITA by EUR 1.4 million, strengthened our financial position and improved liquidity. Year-on-year, we have cut net working capital by more than EUR 40 million and improved our operating cash flow by almost EUR 19 million.

Throughout the quarter, we signed new contracts valued at about EUR 112.5 million and increased our total orderbook to EUR 1.2 billion, which shows we are continuously securing new business. We are active in the new business areas, primarily e-Mobility and solar PV. Of all contracts signed in the first quarter, about 6% of the value relates to new business offerings.

In Communication, we observe traditional customers reducing their investment levels and volumes, while new telecom customers are entering the space and partly compensating for the reduction.

In Power, we see an underlying increase in demand with one exception in the Finnish distribution network, due to an updated regulation.

In Finland, this regulation has led us to revise our forecasted volumes in Power Distribution. We have taken precautionary measures to mitigate the effects on us. The four-week long strike also impacted negatively. Having said that, the market demand in Finland remained strong in both Power and Communication and I am happy to see that the Finnish business is moving in the right direction. The two challenging frame agreements in Power Services have stabilized, albeit still negatively impacting the margin.

In Sweden the growth trend from last year continued, although it has somewhat slowed down. Growth came from Power, mainly Smart Grids, while volumes decreased in Communication. The margin was in line with the previous year, thanks to a strong performance in Smart Grids.

In Norway, we continue to have problems with getting net sales from existing frame agreements. Reduced customer investments, postponements of 5G volumes and harsh winter conditions contributed to the decline in net sales. We continue to adjust the organization to the lower market demand while working to broaden the customer base and develop our offers.

The business in Denmark is stable, and we remain confident in our ability to grow as the year progresses. The renewed confidence from TDC Net shows that we are on the right track, although two other contracts have ended.

After the reporting date, on 10 April, we signed an agreement to divest our Polish High Voltage business to Mutares, a listed private equity investor. The transaction creates value for us and our shareholders by minimizing complexity and risks associated with the project business in Poland. High Voltage Poland has represented less than 5% of our total net sales and been a loss-making unit for Eltel over the past years. The divestment is expected to positively impact the future overall profitability and release more than 25% of Eltel’s financial guarantees.

Going forward, we will continue to execute on our strategy, develop new service offerings and broaden our customer base in our core markets. Improved productivity and profitability are key elements for Eltel to reach our goal of an EBITA-margin of 5% with a stable cash flow and a healthy balance sheet.

Håkan Dahlström, President & CEO

For further information, please contact:

Tarja Leikas, CFO

Phone: +358 40 730 77 62, [email protected]

Elin Otter, Director, Communications and Investor Relations

Phone: +46 72 595 46 92, [email protected]

This information is information that Eltel AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 08:00 CEST on 26 April 2024.

About Eltel

Eltel is the leading service provider for critical infrastructure that enables renewable energy and high-performing communication networks. Eltel designs, plans, builds and secures the operation of networks for a more sustainable and connected world today and for future generations. In total, we have about 5,000 employees and in 2023 the annual sales was EUR 850.1 million. The head office is located in Sweden and Eltel's shares have been listed on Nasdaq Stockholm since 2015. Read more at www.eltelnetworks.com.