Eltel Group: Interim report January–September 2024

July–September 2024

• Net sales EUR 210.3 million (213.4), a decrease of 1.4%. Organic growth1) was 4.0%, and organic growth in segments was 4.0%
• Adjusted EBITDA EUR 19.0 million (13.6)
• Adjusted EBITA2) EUR 8.2 million (5.9) and adjusted EBITA margin 3.9% (2.8)
• Adjusted EBITA2) in segments EUR 9.8 million (6.8) and adjusted EBITA margin in segments 4.9% (3.5)
• Items affecting comparability3) EUR -3.8 million (-0.9)
• Operating result (EBIT) EUR 4.5 million (5.0) and EBIT margin 2.1% (2.3)
• Net result EUR 0.3 million (1.8)
• Earnings per share EUR -0.01 (0.00), basic and diluted
• Cash flow from operating activities EUR -4.4 million (20.2)

January–September 2024

• Net sales EUR 602.6 million (609.9), a decrease of 1.2%. Organic growth1) was 3.3% and organic growth in segments was 2.0%
• Adjusted EBITDA EUR 31.0 million (21.6)
• Adjusted EBITA2) EUR 4.7 million (-1.1) and adjusted EBITA margin 0.8% (-0.2)
• Adjusted EBITA2) in segments EUR 12.5 million (6.8) and adjusted EBITA margin in segments 2.2% (1.2)
• Items affecting comparability3) EUR -26.9 million (-7.1)
• Operating result (EBIT) EUR -22.2 million (-8.2) and EBIT margin -3.7% (-1.3)
• Net result EUR -32.9 million (-17.9)
• Earnings per share EUR -0.23 (-0.13), basic and diluted
• Cash flow from operating activities EUR -11.5 million (-5.7)
• Net debt EUR 144.8 million (133.4)

Significant events during and after the reporting period

• During the third quarter, Eltel signed new contracts with a combined value of about EUR 135.7 million (170.8) and the value of the total orderbook4) decreased to EUR 1.1 billion (1.2). Read more on page 13.
• On 15 August, it was announced that Eltel Finland and Helen Electricity Network Ltd have signed a five-year agreement to construct and maintain Helsinki's electricity distribution network, with an estimated value of EUR 50 million.
• On 16 September, it was announced that Eltel Sweden and the Swedish Armed Forces have signed a framework agreement for the manufacture of masts and towers. The agreement runs for two years with the possibility of extension for another 5 years. The estimated ceiling volume is EUR 35 million for the entire contract period, including options.
• Our financial targets remain the same, i.e. an adjusted EBITA margin of 5%, annual growth of 2-4%, leverage of 1.5-2.5x net debt/adjusted EBITA and a dividend subject to leverage target. However, the previously stated time frame “by the end of 2025” has been removed.

Key figures

EUR million	Jul-Sep 2024	Jul-Sep 2023	Jan-Sep 2024	Jan-Sep 2023	Jan-Dec 2023
Net sales	210.3	213.4	602.6	609.9	850.1
Net sales growth, %	-1.4%	3.1%	-1.2%	1.7%	3.2%
Adjusted EBITDA	19.0	13.6	31.0	21.6	31.8
Adjusted EBITA2)	8.2	5.9	4.7	-1.1	1.7
Adjusted EBITA margin, %	3.9%	2.8%	0.8%	-0.2%	0.2%
Adjusted EBITA2), segments	9.8	6.8	12.5	6.8	11.8
Adjusted EBITA margin, %, segments	4.9%	3.5%	2.2%	1.2%	1.5%
Operating result (EBIT)	4.5	5.0	-22.2	-8.2	-5.3
Return on operative capital employed (ROCE), %	18.7%	-7.1%	18.7%	-7.1%	5.3%
Net working capital	-33.5	-15.5	-33.5	-15.5	-49.8
Net debt	144.8	133.4	144.8	133.4	100.6
Number of employees, average	4,372	5,004	4,658	5,049	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 26–27 for definitions of the key ratios.

3)      See reconciliation of segment results on page 22 for more information.

4)      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

I’m happy to see that Eltel has delivered the best adjusted EBITA ever with its current geographical scope (since 2018), which shows that we have taken another important step towards our financial targets. The organic growth was 4.0%. The adjusted EBITA for the Group improved to 3.9% (2.8) and the adjusted EBITA margin in segments amounted to 4.9% (3.5).

In the quarter we had an increase in both net sales and profitability in Finland and Sweden, and a stable profitability in spite of a decrease in net sales in Denmark. A gross profit improvement of 26% year to date and five consecutive quarters with improved adjusted EBITA show that our strategy is delivering. Other proof points of successful strategy execution are that we have expanded our customer base and increased total contract value from new and adjacent markets.

We see lower investments by the telecom operators, partly being offset by increased activity levels in public infrastructure. All segments experience increased customer demand in power in general and in particular in Solar PV, BESS (Battery Storage Systems) and e-Mobility. Due to the recession as well as to continuous operational challenges, especially in Norway, we see that it will take longer than the end of next year to reach our financial targets. In all segments we are taking measures to further increase efficiency and flexibility in the cost structure.

Finland showed a very strong development with an adjusted EBITA of EUR 7.3 million, an increase of 52%, and a net sales growth of 4.9%, mainly driven by our fiber-to-the-home business. In line with our expectations, our Power business experienced a slight decline. The decline caused by an updated market regulation (effective from 1 January 2024) was partly offset by other Power business and Smart Grids. In spite of the quarter’s good results, we will need to take further measures to improve efficiency in all countries, and Finland is no exception.

Sweden had a significant growth in net sales, 19% in local currency, and an improved adjusted EBITA margin of 4.2% (0.4), due to the finalization of successful projects ahead of schedule. The increased focus on attracting new customers has also paid off, and especially business efforts in the industry sectors, public infra and defense have started to yield a positive development in Communication. Power business is growing as per plan, with a break through deal in Solar and first contracts signed in e-Mobility.

Norway continued to be burdened by lower investments in Communication, impacting the volumes negatively, resulting in a net sales of EUR 27.8 million, -10% in local currency. As a result from the declining volumes and forecasts, a restructuring program affecting at least 200 employees was implemented and will continue until the end of the year. The focus on margins and profitability rather than on volumes is continuously strong. On a positive note, the negative trend for Norway has continued to level off and the activity in new and adjacent business areas is growing.

In Denmark net sales decreased by EUR 2 million, -9%. The adjusted EBITA was 5.2%, on par with the previous year. While the quarter saw a continued decline in Communication, the Power business showed strong growth, both in power distribution and in newer business areas.

In all segments, we are taking measures to further improve the business. These activities, carried out with a growth mindset and confidence boosted by five consecutive quarters of improved adjusted EBITA YoY, make my belief in long term success stronger than ever. There will continue to be bumps in the road but our important role as contributor to the digitalization and electrification of the society, as well as the need for our services, is unquestionable.

Håkan Dahlström, President & CEO

For further information, please contact:

Tarja Leikas, CFO

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

Alexandra Kärnlund, Director, Communications

Phone: +46 70 910 0903, [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 CET on 31 October 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.