Financial Statements 2023

Lehto Group Plc

Financial Statements (audited)
Consolidated statement of comprehensive income, IFRS…	1
Consolidated balance sheet, IFRS…	2
Consolidated cash flow statement, IFRS…	3
Consolidated statement of changes in equity, IFRS…	4
Accounting policies and Notes to the consolidated financial statements…	5
Income statement for the parent company, FAS…	36
Balance sheet for the parent company, FAS… 37
Cash flow statement for the parent company, FAS…	38
Notes to the financial statements for the parent company…	39
Board proposal for the use of the result shown on the balance sheet…	44
Signatures to the annual report and financial statements… 44
Auditor's Note…	44
Group key figures…	45
Shares and shareholders…	47
Auditor's Report

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME, IFRS			1 000 EUR
			1 Jan - 31 Dec 1 Jan - 31 Dec
Continuing operations	Note	2023	2022
Net sales	3	171 821	344 791
Other operating income	4	2 961	1 110
Changes in inventories of finished goods and work in progress		-78 130	-5 846
Material and services		-116 254	-312 078
Employee benefit expenses	5	-24 019	-48 773
Depreciation and impairments	6	-7 168	-5 885
Impairment loss from goodwill	11	-4 624	0
Other operating expenses	7	-17 435	-15 511
Operating result		-72 848	-42 192
Financial income	8	76	41
Financial expenses	8	-6 054	-3 362
Result before taxes		-78 827	-45 513
Income taxes	9, 18	-129	-13 285
Result for the financial year from continuing operations		-78 955	-58 797
Result for the financial year from discontinued operations	2	-93	32 146
Result for the financial year		-79 049	-26 651
Result attributable to
Equity holders of the parent company		-79 049	-26 652
Non-controlling interest		1	1
		-79 049	-26 651
Components of other comprehensive income
Items that may be reclassified subsequently to profit or loss
Translation difference	23	119	25
		119	25
Comprehensive result attributable to
Equity holders of the parent company		-78 931	-26 627
Non-controlling interest		1	1
		-78 930	-26 626

Earnings per share calculated from the result attributable to
equity holders of the parent company, EUR per share	10
Issue-adjusted average number of outstanding shares during the period, basic		87 257 649	87 276 343
Issue-adjusted average number of outstanding shares during the period, diluted		87 332 931	87 433 988
Earnings per share, basic, EUR/share		-0,91	-0,31
Earnings per share, diluted, EUR/share		-0,91	-0,31

Earnings per share, continuing operations, basic, EUR/share		-0,90	-0,67
Earnings per share, continuing operations, diluted, EUR/share		-0,90	-0,67
Earnings per share, discontinued operations, basic, EUR/share		-0,00	0,37
Earnings per share, discontinued operations, diluted, EUR/share		-0,00	0,37

CONSOLIDATED BALANCE SHEET, IFRS			1 000 EUR
	Note	31 Dec 2023	31 Dec 2022
ASSETS
Non-current assets
Goodwill	11	0	4 624
Other intangible assets	12	423	1 427
Property, plant and equipment	13	6 603	13 571
Investment properties	14	660	676
Investments in associated companies	15	780	0
Other financial assets	16	971	971
Receivables	17	2 463	6 461
Deferred tax assets	18	0	0
Non-current assets, total		11 900	27 730
Current assets
Inventories	19	73 591	172 060
Trade and other receivables	20	12 107	50 389
Current tax assets	19	0	0
Financial assets at fair value through profit or loss	21	328	314
Cash and cash equivalents	22	5 802	12 922
Current assets, total		91 828	235 684
Non-current assets held for sale	2	0	3 824
TOTAL ASSETS		103 729	267 238
EQUITY AND LIABILITIES
Equity
Share capital		100	100
SVOP - Reserve for invested unrestricted equity		88 695	88 695
Translation difference		-110	-229
Retained earnings		-101 076	-22 003
Capital attributable to equity holders of the parent company		-12 391	66 563
Non-controlling interest		9	9
Equity, total	23	-12 382	66 571
Non-current liabilities
Deferred tax liabilities	18	0	0
Provisions	24	7 745	5 928
Financial liabilities	25,27	0	11 670
Lease liabilities	25,27,28	53 585	68 405
Other non-current liabilities	26	110	206
Non-current liabilities, total		61 441	86 209
Current liabilities
Provisions	24	2 931	7 590
Liabilities to customers for constructing contracts (advances received)	26	1 657	20 591
Trade and other payables	26	23 922	54 639
Current income tax liabilities	26	0	0
Financial liabilities	25,27	20 621	22 195
Lease liabilities	25,27,28	5 538	9 442
Current liabilities, total		54 670	114 457
Liabilities, total		116 110	200 667
TOTAL EQUITY AND LIABILITIES		103 729	267 238

CONSOLIDATED CASH FLOW STATEMENT, IFRS 1 000 EUR

	Note	31 Dec 2023	31 Dec 2022
Cash flow from operating activities
Result for the financial year		-79 049	-26 651
Adjustments:
Non-cash items		-2 880	-8 282
Depreciation and impairment		11 792	5 885
Financial income and expenses		5 898	3 319
Capital gains		-376	-31 611
Income taxes		129	13 704
Changes in working capital:
Change in trade and other receivables		42 250	25 607
Change in inventories		83 608	8 868
Change in trade and other payables		-57 511	-18 975
Interest paid and other financial expenses		-6 732	-5 392
Financial income received		74	135
Income taxes paid		-129	-299
Net cash from operating activities		-2 925	-33 693
Cash flow from investments
Investments in property, plant and equipment		-41	-433
Investments in intangible assets		-15	-400
Proceeds from sale of property, plant and equipment and intangible assets		4 776	109
Sale of discontinued operations (less cash at the time of sale)		0	28 722
Financial assets at fair value through profit or loss		14	-200
Repayments of loan receivables		37	43
Acquisition of associated companies		-780	0
Dividends received		0	0
Net cash from investments		4 770	27 840
Cash flow from financing
Loans drawn	25	3 447	28 000
Loans repaid	25	-10 182	-38 313
Lease liabilities paid	25,28	-1 408	-2 193
Loan arrangement fees		0	-1 116
Costs related to repurchasing own shares		-28	0
Net cash used in financing activities		-8 143	-13 621
Change in cash and cash equivalents (+/-)		-6 298	-19 474
Effects of exchange rate change		1	-59
Cash and cash equivalents at the beginning of the financial year		13 236	32 769
Cash and cash equivalents at the end of the financial year	21, 22	6 938	13 236

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY, IFRS 1 000 EUR

Capital attributable to equity holders of the parent company
	capital Share	unrestricted Reserve for invested SVOP - equity	Translation difference	Retained earnings	attributable holders of to equity Capital	controlling the parent interest Non-	Equity, total
Equity on 1 January 2022	100	88 695	-254	2 389	90 930	8	90 938
Comprehensive income
Result for the financial period Other comprehensive income items				-26 652	-26 652	1	-26 651
Translation difference			25		25		25
Total comprehensive income			25	-26 652	-26 627	1	-26 626
Transactions with equity holders The equity component separated from the convertible bond Share-based compensation				2 231 28	2 231 28		2 231 28
Transactions with equity holders, total				2 260	2 260		2 260
Equity on 31 December 2022	100	88 695	-229	-22 003	66 563	9	66 571
Equity on 1 January 2023	100	88 695	-229	-22 003	66 563	9	66 571
Comprehensive income
Result for the financial period Other comprehensive income items				-79 049	-79 049	1	-79 049
Translation difference			119		119		119
Total comprehensive income			119	-79 049	-78 931	1	-78 930
Transactions with equity holders Repurchasing own shares				-28	-28		-28
Share-based compensation				5	5		5
Transactions with equity holders, total				-23	-23		-23
Equity on 31 December 2023	100	88 695		-110 -101 076	-12 391	9	-12 382

ACCOUNTING PRINCIPLES FOR THE CONSOLIDATED FINANCIAL STATEMENTS

GROUP BASIC INFORMATION

Lehto Group is a construction and real estate group. The parent company is Lehto Group Plc and its business operations are organised for its subsidiaries. The parent company is domiciled in Kempele. The address is Voimatie 6, 90440 Kempele, Finland.

Lehto Group Plc's Board of Directors approved the financial statements on 29 April 2024. Pursuant to the Finnish Companies Act, shareholders have a possibility to approve or reject the financial statements in a general meeting of shareholders to be held after the publication. The general meeting of shareholders also has a possibility to make a decision on amending the financial statements. Copies of the consolidated financial statements are available from the parent company headquarters at the address Voimatie 6 B, 90440 Kempele, Finland.

CONTINUITY OF OPERATIONS

These financial statements have not been prepared in accordance with the continuity of operations principle. After the end of the financial period on February 8, 2024, Lehto Group Plc's operational subsidiaries Lehto Asunnot Oy, Lehto Tilat Oy and Lehto Korjausrakentaminen Oy were declared bankrupt, which is also taken into account in the valuation of the balance sheet items in the financial statement information. Lehto Asunnot Oy, Lehto Tilat Oy, and Lehto Korjausrakentaminen Oy cover practically Lehto's whole housing construction and business premises construction businesses and thus they make up most of the net sales of Lehto Group. In addition, on February 16, 2024, Lehto Group Plc was ruled to corporate restructuring by the District Court's decision. As part of the corporate restructuring proceedings Lehto plans to divest its whole construction business and any holdings related thereto and reviews options to expand to new business areas and acquire new business.

The covenant terms of the company's key RCF financing agreement were not met on the closing date. The responsibilities and obligations related to this financing agreement are taken into account in the Company's restructuring programme. The Company has also issued convertible bonds of EUR 15.0 million, which are convertible into new and/or existing shares in Lehto. The Company has not been able to comply with all of the terms and conditions of the convertible bond, which is why the convertible bond is classified as current liabilities. Any changes to the convertible bonds will be dealt with as part of the Company's restructuring proceedings.

The continuity of the Company's operations involves significant uncertainties. The Company will not be able to continue to operate unless it sells assets or acquires new financing and starts new cash-flow generating business. Due to these factors, there are significant grounds for doubting that the Company will be able to continue to operate and make payments over the next 12 months. The future development of the company's cash assets will be influenced particularly by asset sales income, cash income and expenses related to new business and the schedule for the start-up of operations, financing acquired for new business and effects of the decisions made in the corporate restructuring proceedings of the parent company.

ACCOUNTING PRINCIPLES FOR THE FINANCIAL STATEMENTS

Accounting principles requiring management judgement and the main factors of uncertainty affecting the estimates

The preparation of financial statements in accordance with IFRS standards requires the management to make futureoriented accounting estimates and assumptions and exercise judgement in the application of the accounting policies. These estimates and decisions have an effect on the amounts of assets, liabilities, income and expenses and contingent liabilities recorded for the reporting period.

When preparing the financial statements for year 2023, the management's judgment has been particularly related to the assessment of the basis of the continuity of operations and the valuation of assets. Lehto's construction businesses, which have made up most of the net sales, have been declared bankrupt on February 8, 2024, and the parent company has been ruled to corporate restructuring by the District Court's decision on February 16, 2024. The bankrupt subsidiaries have been consolidated to the 2023 financial statements. After the end of the financial year, Lehto has lost control over the bankrupt companies. There is significant uncertainty regarding the group's ability to continue its operations, which is why the financial statement information have not been prepared based on the assumption of continuity of operations. The assets of bankrupt companies have been valued at a maximum of the total amount of their companies' debts, taking into account also the effects of impairment due to the loss of receivables realized in bankruptcy and the goodwill of the group, which in its entirety is directed to the bankrupt businesses written off the balance sheet.

The valuation of assets remaining in the group is based on an estimate of the amounts of money that can be collected in situations where they fall below the accounting value formed on the basis of the continuity principle. The parent company's corporate restructuring proceedings and its contents, which will be specified later, may affect the valuation of the company's assets and liabilities.

Below are presented the most significant items of the financial statements where management judgement and estimates were required.

Stage of completion revenue recognition

In construction contracts recognised using the stage of completion method revenue is based generally on the contract and revenue projections for the projects are estimated on a regular basis. Project total costs are based on the management's best estimate of the trend in total cost of project completion. The actual income and costs incurred, and the estimated result are monitored regularly on a monthly basis. Lehto's construction businesses, which have made up most of the net sales, have been declared bankrupt on February 8, 2024. At the end of the financial year, the bankrupt companies had 5 unfinished projects in progress, two of which were completed and handed over before the bankruptcy. As a result of the bankruptcy, the construction sites of the bankrupt companies are no longer under the control of the Group, but the assets and liabilities of the subsidiaries in question are under the control of the bankruptcy estates.

Inventories

The Group assess the valuing of inventory and possible decrease in value on its best estimate on a regular basis. The value of finished unsold sites included in inventories is the lower of their acquisition cost and the probable selling price. When estimating the probable selling price, the management takes into account the market situation and possible demand for the site. In the financial statements, the majority of inventories consist of the assets of companies that went bankrupt after the end of the financial year. The value of the inventory is based on the estimated net realizable value, taking into account the basis for valuing the total assets of bankrupt companies, according to which the assets are valued no more than the amount of the companies' total liabilities.

Provisions

Provisions mainly consist of guarantee provisions typical for the industry. The amount is estimated on the basis of experience of the materialisation of such guarantee expenses.

Goodwill impairment testing

The Group's total goodwill, EUR 4.3 million, was entirely aimed at the business carried out by the construction business subsidiaries that were placed in bankruptcy. Goodwill has been written off the balance sheet in the financial statements as an impairment loss.

Deferred tax assets

The company does not present deferred tax assets and liabilities in the balance sheet, but in the note "Deferred taxes" it is shown the amounts that have been recorded before deducting them from each other based on the group's right to net them against each other. The netted deferred tax assets and liabilities are related to lease agreements. Deferred tax assets recognized for losses relate to continuing operations and have only been recognized to the extent that it is probable that taxable income will be generated in the future against which the temporary difference can be utilized.

Basis of preparation

The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) by applying IAS and IFRS standards and their SIC and IFRIC interpretations, which were in force as at 31 December 2023. International Financial Reporting Standards refer to the standards, their interpretations, approved for application in the EU in accordance with the procedures in the EU regulation (EC) No. 1606/2002 and embodied in Finnish accounting legislation and the statutes enacted under it. The notes to the consolidated financial statements also comply with the Finnish accounting and corporate legislation, complementing the IFRS regulations.

The consolidated financial statements are prepared on historical cost basis except for financial assets at fair value through profit or loss. The financial information is presented in thousands of euros.

Principles of consolidation

The consolidated financial statements include the parent company Lehto Group Plc and all subsidiaries in which the parent company at the time of financial statements directly or indirectly holds more than 50% of the voting rights or in which the Group otherwise has control. The criteria for control are fulfilled when the Group is exposed, or has rights, to variable returns from its involvement with an entity and has the ability to affect those returns through its power over the entity. Subsidiaries acquired are consolidated from the date when the Group obtains control. Mutual holdings are eliminated

using the acquisition method. All intra-Group transactions and internal profits, receivables and liabilities are eliminated in the consolidated financial statements. The number of shareholders' equity attributable to non-controlling shareholders is shown as a separate item under shareholders' equity.

The financial statements include the income statement and balance sheet items of the bankrupt subsidiaries. Income statement items are presented as continuing operations and assets are valued at a maximum of the total liabilities of the respective companies, also taking into account the effects of impairment due to the loss of receivables realized in bankruptcy.

Non-current assets held for sale and discontinued operations

Non-current assets and assets and liabilities related to discontinued operations are classified as held for sale if their carrying amounts are expected to be recovered principally through a sale transaction rather than through continuing use. Classification as held for sale presupposes that the sale is highly probable, the asset in its current condition is immediately available for sale on normal terms, management is committed to the sale of the asset and the sale is expected to take place within one year of the classification. Before an asset or a disposal group is classified as held for sale, its carrying amounts are determined in accordance with the applicable IFRS standards. From the date of classification, non-current assets held for sale shall be measured at the lower of carrying amount and fair value less costs to sell. Depreciation is no longer recognized for property, plant and equipment and intangible assets held for sale. Assets held for sale, disposal groups, items recognized in other comprehensive income related to assets held for sale and liabilities included in disposal groups are presented in the balance sheet separately from other items.

A discontinued operation is a part of the Group that has been disposed of or classified as held for sale and that meets the criteria for classification as a discontinued operation in accordance with IFRS 5. The result of discontinued operations is presented as a separate item in the consolidated income statement and the figures for the comparison period have been adjusted accordingly.

The pipeline renovations operations sold during the previous year, as well as Swedish operations discontinued earlier, have been presented as discontinued operations in these financial statements. Continuing and discontinued operations are presented separately in the consolidated income statement. Discontinued operations are presented as a separate item and internal transactions between discontinued operations have been eliminated from the figures.

The discontinued operations and assets held for sale are described in the note "Discontinued operations and Non-current assets held for sale".

For the sake of clarity, let it be stated that the assets of the bankrupt companies are not classified as discontinued operations on 31 December 2023, but are presented as continuing operations.

Property, plant and equipment

Property, plant and equipment are measured at the original acquisition price less accumulated depreciation and impairments. They are depreciated during their estimated useful lives. The Group's property, plant and equipment include machinery and equipment, factory property in own use as well as other tangible assets, which mainly consist of capitalised renovation expenses for rental apartments. The residual value, useful lives and method of depreciation of property, plant and equipment are reassessed at the end of each financial year and, as necessary, adjusted to reflect the changes in the expected economic benefit.

The amortisation period for machinery and equipment is 3–5 years.

Goodwill

Goodwill arising in business combinations is measured as the excess of the total of the consideration transferred, the noncontrolling interest in the acquiree and the previously held interest over the fair value of the acquired net assets. Goodwill is tested for impairment annually and whenever there is any indication that an asset may be impaired. For this purpose, goodwill is allocated to cash-generating units. Goodwill is recognised at cost less accumulated impairment losses.

Other intangible assets

An intangible asset is recognised in the balance sheet at the original acquisition cost if its acquisition cost can be determined reliably and it is likely that an expected economic benefit will flow to the Group from it.

Intangible rights are mostly software and licenses. The group's intangible assets have finite useful lives, and they are amortised in straight-line instalments during their estimated useful lives.

Research costs are recognised as expenses in the income statement. Development expenses is capitalised in the balance sheet once development phase expenses can be reliably estimated, and it can be demonstrated that the development target will probably generate future economic benefit. Development expenses recognised in the balance sheet includes material and labour costs as well as any capitalised borrowing costs directly attributable to bringing the asset to working condition for its intended use. Prior development expenses recognised as expenses is not capitalised later.

The amortisation period for intangible rights and other intangible assets is 3–5 years. The residual value, useful lives and method of amortisation are reassessed at the end of each financial year and as necessary, adjusted to reflect the changes in the expected economic benefit.

Investment properties

Investment properties are properties which the Group holds in order to obtain rental income or appreciation in value or both. At inception investment properties are recognised at acquisition cost, which includes transaction costs. Investment properties are subsequently valued at the original acquisition price less accumulated depreciation and impairments. Investment properties are depreciated in straight-line instalments during their estimated useful lives. Land areas are not depreciated. Investment properties are business and residential properties and the estimated useful life of buildings and structures on these properties is 20 years. The residual value, useful lives and method of depreciation of investment properties are reassessed at the end of each financial year and, as necessary, adjusted to reflect the changes in the expected economic benefit.

The fair values of investment properties are disclosed in the notes to the financial statements. Rental income obtained from investment properties is recorded on a straight-line basis over the period of the lease.

Impairment of intangible assets and property, plant and equipment

At the end of each reporting period the Group assesses whether there is any indication that an asset may be impaired. If any such indication exists, the recoverable amount from the asset item is estimated. Goodwill's recoverable amount is estimated annually regardless of whether there is any indication of impairment. Goodwill is also tested for impairment whenever there is any indication that the value of a unit may be impaired. Goodwill is tested for impairment at the level of individual cash-generating units, which is the lowest unit level mainly independent of other units and the cash flows of which are separable and mainly independent of cash flows of other corresponding units. A cash-generating unit is the lowest level within the Group at which goodwill is monitored for the purposes of internal management.

Recoverable amount is the higher of a unit's fair value less costs of disposal and its value in use. Value in use is the estimated discounted future net cash flows expected to be derived from the cash-generating unit. The discount rates used are pre-tax and reflect current market assessments of the time value of money and specific risks relating to the relevant asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is recognised as an expense. An impairment loss on a cash-generating unit is first allocated to reduce the carrying amount of any goodwill allocated to the cash-generating unit and then to reduce the carrying amounts of the other assets of the unit pro rata. At recognition of the impairment loss, the useful life of the depreciated assets is reassessed. Impairment loss of other assets than goodwill is reversed in the case that a change has occurred in the estimates used in measuring the recoverable amount of the asset. A reversal of an impairment loss shall not exceed the carrying amount that would have been determined had no impairment loss been recognised in prior years. Impairment losses on goodwill are never reversed.

Associated companies

Associated companies are companies over which the Group has significant influence. Significant influence exists when the Group owns more than 20% of the company's voting power or when it otherwise has significant influence but not control. Associated companies have been consolidated using the equity method of accounting.

Inventories

Inventories are valued at the lower of acquisition cost and expected net realisable value. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

Inventories are comprised of sites under construction, completed sites intended for sale and raw materials and supplies used in the operations. The acquisition cost of these comprises the value of the plot and other raw materials, borrowing costs, planning costs, direct costs of labour and other direct and indirect costs relating to the construction projects.

In the financial statements, the majority of inventories consist of the assets of companies that went bankrupt after the end of the financial year. The value of the inventory at a maximum of the total liabilities is based on the estimated net realizable value, taking into account the basis for valuing the total assets of bankrupt companies, according to which the assets are valued at a maximum of the companies' total liabilities.

Financial assets and liabilities

Financial assets

Based on the Group's business model for the administration of financial assets and their contractual cash flow characteristics, financial assets are classified as those recognised at amortised cost and those at fair value through profit or loss.

Transaction costs are included in the original carrying amount of financial assets in the case of items that are not measured at fair value through profit or loss. Financial assets measured at fair value through profit or loss are recognised at fair value in the balance sheet at the time of original recognition and transaction costs are recognised through profit or loss.

All purchases and sales of financial assets are recognised on the transaction date when the Group commits to the purchase or sale of the financial instrument. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

Cash and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value. Items included in cash and cash equivalents have original maturities of three months or less.

Financial assets recognised at amortised cost

Financial assets recognised at amortised cost include financial assets under the held-to-collect business model, which are held until the due date in order to collect contractual cash flows. The cash flows of these items consist solely of principal and interest on the principal outstanding.

After initial measurement, the value of these financial assets is measured at amortised cost using the effective interest method, deducting any impairment. The Group recognises a deduction for expected credit losses from an asset item recognised at amortised cost in financial assets. Expected credit losses and impairment losses are disclosed in other operating expenses in the income statement.

The Group's financial assets recognised at amortised cost include trade and other receivables that are non-derivative financial assets. The carrying amount of short-term trade and other receivables is deemed to correspond to their fair value. Trade and other receivables are presented in the balance sheet as current assets if they are expected to be realised within 12 months of the end of the reporting period.

Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include held-at-call fund units, which are short-term and highly liquid investments. However, investments are subject to a greater risk of change in value than cash and cash equivalents. Financial assets at fair value through profit or loss are initially recognized at fair value and subsequently re-measured at fair value. Changes in fair value are recognized in financial items through profit or loss.

Financial liabilities

Financial liabilities are recognised initially at fair value. Transaction costs are included in the original carrying amount of financial liabilities at periodised acquisition cost. Financial liabilities are subsequently carried at amortised cost using the effective interest method. Financial liabilities are classified as non-current or current. The latter Group comprises all those financial liabilities for which the Group does not have an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period.

Convertible bonds are classified as composite instruments, and their components are defined as liabilities or equity based on the content of the arrangement. The liability component is initially recognised at the fair value of an equivalent nonconvertible liability. The equity component is initially entered as the difference between the fair value of the entire instrument and the fair value of the liability component. Transaction costs are allocated to the liability and equity components in proportion to their initial book values. The value of the conversion right is included in the fair value. The liability component is then recognised at amortized cost using the effective interest method. The equity component is reclassified between equity items when bonds are either exchanged for shares or expire.

Capitalisation of borrowing costs

Borrowing costs directly arising as a result of the acquisition, construction or manufacturing of a qualifying asset are capitalised as part of the acquisition cost of the asset in question. A qualifying asset is one that takes a substantial period of time to complete for its intended purpose. Capitalisation commences when the company first incurs expenditures for a qualifying asset giving rise to borrowing costs, and when it undertakes activities that are necessary for preparation of the asset for its intended use or for sale. Capitalisation ceases when all activities necessary to complete the asset for its intended use or sale have been carried out. In developer contracting housing projects, borrowing costs are capitalised in construction stage and recorded above operating profit as project cost upon delivery.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. The Group's provisions are guarantee provisions based on estimated supplementary work expenses of completed contracts. The amount of a guarantee provision is estimated on the basis of experience of the materialisation of such guarantee expenses. If guarantee provisions materialise in an amount greater than estimated, the portion in excess is recorded as expense at the same time. If the provision is deemed excessive after the end of the guarantee period, the provision is released through profit or loss.

10-year liabilities in own building developments are presented as provisions to the extent their realisation is deemed probable and the amount of liability arising from them can be estimated reliably.

If the contractual costs required to fulfil contractual obligations exceed the benefits of the contract, any impairment losses on assets pertaining to that contract should first be recognised. If the expected costs still exceed the benefits of the contract, a provision should be made for the loss-making contract.

Leases

Group as lessee

The Group has long-term of land leases related to developer-contracted construction, which often have a lease period of up to 50-70 years. Land leases related to inventories are in the possession of the company during the project design and construction phase, that is, only a few years, but under IFRS 16 they must be classified as right-of-use assets and liabilities. Right-of-use inventories are presented in the balance sheet in inventories in the same way as inventories held by the Group. At the time of handing over the developer-contracted project, the management and ownership of the land lease will also be transferred to the customer, and the company will currently derecognise the fixed assets from inventories and lease liabilities without income statement entries.

Right-of-use in machinery and equipment are mostly leases for office premises and small machinery and equipment.

When measuring a lease liability, the present value of future payments takes into account any incentives, variable rents (indexes or based on price or other variable), residual value of the asset item, the realisation price of any purchase options or sanctions imposed due to termination of the lease. In fixed-term agreements, the lease period is the non-cancellable lease period and the probability of exercising an extension. The discount rate of a lease is the interest rate implicit in the lease or, if said rate cannot be readily determined, the incremental borrowing rate. Interest expenses on leases are presented in financial expenses. Leases are also recognised as assets and depreciated on a straight-line basis over the

lease period. Leases with a lease period of less than one year or value of less than EUR 5,000 are expensed during the lease period.

Of the right-of-use assets and lease liabilities included in the financial statements, a significant portion is related to contracts entered into by companies that went bankrupt after the end of the financial year, and at the time the financial statements are completed, they are no longer under the control of the group, but the assets and liabilities of the subsidiaries in question are under the control of the bankruptcy estates.

Group as lessor

The Group is the lessor of one investment property and individual inventory shares. Rental income from them is presented in net sales. In addition, the company has rented out one business premise during the financial year. Its rental income is presented in other operating income. The Group is not a lessor in any other leases.

Sale and leaseback

In sale and leaseback situations, it should be determined whether the transfer of an asset meets the IFRS 15 requirements for treating it as a sale. If the transfer is a sale, the value of the right-of-use asset should be recognised as the proportion of the asset's original book value that corresponds to the value of the right-of-use that remains with the company. Only the proportion of capital gains or losses that corresponds to the rights transferred to the buyer is shown as capital gains or losses. If either the compensation received from the sale of an asset or the terms of the lease do not correspond to the fair values, revenue from the sale should be adjusted accordingly. If the terms of the sale are worse than market terms, they should be entered as advance payments. If they are better than market terms, they should be entered as financial liabilities. If the IFRS 15 criteria for a sale are not met, the transferred asset should still be reported in the balance sheet with the transfer price presented as a financial liability.

Revenue recognition principles

Sales revenue is recognised separately for each performance obligation in accordance with how control of the goods or service is transferred to the customer. If control of the goods or service is transferred to the customer over time, and the performance obligation is therefore fulfilled, sales revenue should be recognised over time. If the performance obligation is not fulfilled over time, the sale should be recognised at a point in time.

Performance obligations

At the time when a customer contract is signed, it should be assessed whether the goods or services promised in the customer contract contain any distinct performance obligations. Any performance obligations that are identified should be recognised as income separately in accordance with the standard.

As a rule, construction projects will involve one performance obligation for the company, that is, a completed construction project. Any additional work or modifications are generally treated as part of the original contract, as they are usually not separable products and/or services. If the company commits to warranty periods that are longer than prescribed in law or general terms and conditions, these warranties may be considered to be an additional service for the customer. Such warranties will then be treated as identified performance obligations, and part of the transaction price for the contract should be allocated to this performance obligation. A warranty that is classified as an additional service will also be recognised as income separately, as a performance obligation that is not part of the construction project.

Transaction price

The transaction price primarily consists of a fixed price and, when necessary, a variable component. The variable component of the transaction price will most commonly be a penalty for delay related to the date of completion. The variable sum should be estimated using the expected value method. When estimating the variable sum, the company should also take into account all information that is reasonably available. The variable sum should be included in the transaction price only in the amount for which it is highly probable that there will be no significant reversal in recognised sales revenue once the uncertainties relating to the variable amount are subsequently resolved. The variable sum included in the transaction price should be reassessed at the end of every reporting period. Adjustments to the transaction price resulting from these re-estimates should be made in accordance with the IAS 8 standard. Sales incentives granted for housing projects should be equated to price reductions and should be entered as adjustments to the sale price.

If customer contracts contain a significant financing component, the transaction price should be adjusted accordingly. If the financing period is less than a year, the company will apply the IFRS 15 exemption and not make any adjustments for the significant financing component when determining the transaction price.

Revenue recognition principles related to construction projects

If control of a project is transferred to the customer over time, and the performance obligation is therefore fulfilled over time, the construction project should be recognised as income over time according to the degree of completion. If the performance obligation is not fulfilled over time, the sale should be recognised at a point in time.

Net sales are recognised at the amount of consideration to which the entity will be entitled in exchange for transferring the promised goods or properties to a customer, with the exception of amounts collected on behalf of third parties. If the agreement includes variable consideration, the variability is taken into account based on probability. The transaction price may be priced on a yield basis, whereby the final purchase price will not be finalized until the construction is completed. In determining the transaction price, the company adjusts the promised amount of consideration with a financing component if the payment schedule agreed by the parties provide the customer or the entity with a significant financing component in relation to the transfer of goods or services to the customer and if the duration is longer than one year.

Sales recognised as revenue over time

Construction projects are recognised as revenue over time according to progress if the customer controls the asset as the asset is created or enhanced and the company has an enforceable right to payment for performance completed to date. Revenue from a performance obligation satisfied over time is recognised over time by measuring the progress towards complete satisfaction of the performance obligation in question. Satisfaction of the performance obligation is determined mainly based on costs incurred compared to estimated total costs if it does not materially differ from the satisfaction of the performance obligation determined otherwise.

A single method of measuring progress is applied for each performance obligation satisfied over time, and this method is consistently applied to similar performance obligations in similar circumstances. If the company is not able to reasonably measure the outcome of a performance obligation but expects to recover the costs incurred in satisfying the performance obligation, the company recognises revenue only to the extent of the costs incurred until the outcome of the performance obligation can reasonably be measured. If it is likely that the total costs of project completion exceed the total income from the project, the expected loss is entirely expensed.

Sales recognised as revenue upon delivery

If a project does not fulfil the criteria for revenue recognised over time, it is recognised at a point in time. The sale of property construction projects and land areas are recognised at the moment when control of the property is transferred to the buyer. For apartments sold in the construction phase, control is deemed to have transferred upon completion, and for completed apartments, upon sale.

The Group has been able to take out so-called RS loans for developer contracting projects. RS loans are provided by credit institutions under certain terms and condition for designated housing construction sites. RS loans are constructiontime loans for housing company shares for sale, and in such projects the total purchase prices obtained from the sale of housing units, i.ee transaction prices, include both the purchase prices paid by customers and the RS loan shares for apartments. The RS loan shares for the apartments are transferred from the company to the buyer in connection with the sale of the apartment share, and they are taken into account in revenue recognition as part of the transaction price. RS loans raised for developer contracting projects in progress are presented in the balance sheet as interest-bearing liabilities for unsold apartments (in the breakdown "Debts on shares in unsold housing and real estate company shares in progress " in the note "Financial liabilities") and for sold apartments in current non-interest-bearing liabilities (note "Trade payables and other non-interest-bearing liabilities", in the breakdown "Liabilities to customers for constructing contracts (advances received), Debts on shares in unsold housing and real estate company shares in progress). Liabilities to customers for constructing contracts also show the purchase prices paid by customers. Liabilities to customers for constructing contracts upon completion of the project are recognized as income in revenue. Net sales from developer contracting housing projects is recognized as income upon delivery when the control of housing share is transferred to the customer.

Revenue recognition principles related to other incomes

Sales recognised as rental income

Rental income shown in net sales relates to items that form the company's actual business. Rental income relates to items that the company has itself built. Rental income shown in other operating income relates to items that doesn't arise from the company's actual business.

Recognition of interest and dividend income

Interest income is recognised using the effective interest method. Dividends are recorded when the right to receive payment is established.

Operating result

IAS 1 Presentation of Financial Statements does not define the concept of operating result or profit. The Group has defined it as follows: operating result is the net sum which is formed by adding other operating income to net sales and then deducting changes in the inventory of finished goods and work in progress, material and services, cost of employee benefits, depreciation, amortisation and possible impairment losses and other operating expenses. All other items of income statement are presented below operating result.

Employee benefits

Pension obligations

Group companies have pension plans. The plans are classified as either defined benefit plans or defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all the pension benefits. All arrangements that do not meet these criteria are defined benefit plans. Payments made to the defined contribution plans are recognised in the income statement in the period in which they were incurred. All of the Group's pension plans are defined contribution plans.

Share-based payments

The company has two share-based incentive plans in place. Rewards are paid under the incentive plan partly in the form of shares and partly in the form of cash. The granted benefits are measured at fair value at the time of granting and are recognised as expenses in the income statement and equity evenly over the vesting period of the rights. The expense recognised for the incentive plan is based on the Group's estimate on the number of shares that eventually vest at the end of the vesting period.

Related party transactions

The Group's related parties include Group companies, members of the Board of Directors and the Group's top managements as well as entities on which related parties, or their family have influence through ownership or management. Related parties also include associated companies and joint ventures. Transactions with related parties are disclosed in Note "Related party transactions".

Income taxes

Tax expenses on the consolidated income statement include taxes of the Group companies based on taxable profit for the period, together with tax adjustments for previous periods and the change in deferred tax liabilities and assets. Tax consequences relating to items recognised directly in equity are similarly recognised as equity.

Changes in deferred taxes are calculated on temporary differences between the carrying amount and taxable value on the basis of the tax rate in force at the balance sheet date or confirmed tax rates entering into force subsequently. Deferred tax assets have been recognised to the extent that it is probable that taxable income against which the temporary difference can be applied will materialise in the future. The most significant temporary differences arise from difference between book value and tax value in unused taxable losses, revenue recognised for construction contracts by stage of completion and capitalisation of and financial expenses.

Tax-deductible losses have been taken into account as deferred tax assets to the extent that it is probable that the company can use them in the near future. No deferred taxes are calculated on goodwill that is not deductible in taxation.

New and revised standards and interpretations

The following new and amended standards relating to preparing consolidated financial statements must be applied in financial periods starting on 1 January 2023 or thereafter.

Amendments to IAS 1 Presentation of Financial Statements – Classification of Liabilities as Current or Non-current

Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements – Disclosure of Accounting Policies

Amendments to IAS 8 Accounting Policies – Definition of Accounting Estimates

Amendments to IAS 12 Income Taxes – Deferred Tax related to Assets and Liabilities arising from a Single Transaction Amendments to IFRS 16 Leases – Lease Liability in a Sale and Leaseback

The following new and amended standards for the preparation of consolidated financial statements are effective for financial periods starting on or after 1 January 2024:

Amendments to IAS 1 Presentation of Financial Statements – Classification of Liabilities as Current or Non-current Date; Classification of Liabilities as Current or Non-current – Deferral of Effective Date; Non-current Liabilities with Covenants

Standards stated above or other new or amended standards and interpretations have no significant impact on the consolidated financial statements or they have an effect on the disclosure requirements in the notes.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 000 EUR

1. OPERATING SEGMENTS

At the end of financial year, the Group had one operating segment, Building Services. The company operates geographically only in Finland. The Group Management Team is the chief operating decision-making body responsible for estimating the profitability of the operating segment and for resourcing decisions. Group management reporting is based on financial statements prepared in accordance with the IFRS standards.

After the review period, on February 8, 2024 the operative subsidiaries of Lehto Group Plc, Lehto Asunnot Oy, Lehto Tilat Oy and Lehto Korjausrakentaminen Oy, have been declared bankrupt. Those companies cover practically Lehto's whole housing construction and business premises construction businesses and thus they make up most of the net sales of Lehto Group. Also, On February 16, 2024 the District Court has ruled Lehto Group Plc to corporate restructuring. As part of the corporate restructuring proceedings Lehto plans to divest its whole construction business and any holdings related thereto and reviews options to expand to new business areas and acquire new business. These events after the financial year are described in more detailed in the note "32. Events after the financial year".

Result	2023	2022
Net sales	171 821	344 791
Other operating income	2 961	1 110
Operating expenses	-235 837	-382 208
Depreciation and impairments	-11 792	-5 885
Operating result	-72 848	-42 192
Financial income	76	41
Financial expenses	-6 054	-3 362
Segment's result before income taxes	-78 827	-45 513
Assets
Segment's assets	103 729	267 238
Investments	57	834
Liabilities
Segment's liabilities	116 110	200 667

Main customers

Revenue of the Building Services segment from the three largest customers was a total of EUR 41.4 million in 2023 (EUR 67.4 million in 2022), corresponding to approx. 24% (20%) of the segment's net sales. In 2023, the share of net sales of the largest individual customer was 11.5% (10.9% in 2022).

Order backlog	31 Dec 2023	31 Dec 2022
Order backlog	0	205 937
of which is likely to generate income within a year		169 307
of which is likely to generate income after one year		36 629

The company no longer has an order backlog because the operative companies engaged in construction business have been declared bankrupt on February 8, 2024.

2. DISCONTINUED OPERATIONS AND NON-CURRENT ASSTES HELD FOR SALE

Discontinued operations

Pipeline renovation business sold in previous year, as well as earlier discontinued Swedish operations, are presented as discontinued operations. Notes to income statement are presented only from continuing operations.

Result for the financial year from discontinued operations	2023	2022
Net sales		17 441
Other operating income		99
Expenses	-60	-15 834
Operating result	-60	1 705
Financial items	-33	2
Taxes		-419
Result for the financial year	-93	1 288
Gain on sale of discontinued operations		31 502
Costs related to sale of discontinued operations		-644
Result for the financial year from discontinued operations	-93	32 146
Earnings per share, discontinued operations, basic, EUR/share	0,00	0,37
Earnings per share, discontinued operations, diluted, EUR/share	0,00	0,37
Effect of disposal of financial position of the Group		2022
Non-current assets		-38
Inventories		-69
Trade and other receivables		-3 873
Cash and cash equivalents		-2 817
Current liabilities		6 760
Net assets and liabilities		-37
Consideration received from sale of discontinued operations		31 539
Cash and cash equivalents disposed of		-2 817
Net cash flow		28 722
Cash flow from discontinued operations		2022
Net cash from operating activities		2 798
Net cash from investments		28 741
Net cash used in financing activities		0
Total		31 539

Non-current assets held for sale

Lehto Group Plc's subsidiary Lehto Components Oy sold its factory building and related warehouse buildings to City of Oulainen in March 2023. The size of the factory building was approximately 10 000 square meters. The factory building and related warehouse buildings were presented as non-current assets held for sale on balance sheet on 31 December, 2022. The acquisition cost of factory in balance sheet was then EUR 3.8 million and the sales price approximately EUR 4.7 million.

3. NET SALES

	2023	2022
Revenue recognised over time	112 372	269 968
Revenue recognised upon delivery	59 198	74 558
Rental income	250	265
Total	171 821	344 791

Rental income shown in net sales relates to items that form the company's actual business. Rental income relates to items that the company has itself built.

Revenue recognised that was included in the contract liability balance (liabilities to customers for constructing contracts) at the beginning of the year was EUR 18.9 (18.8) million.

4. OTHER OPERATING INCOME

	2023	2022
Rental income	18	27
Grants	227	193
Damages	1 521	510
Capital gains	968	87
Other income	228	294
Total	2 961	1 110

Rental income shown in other operating income relates to items that doesn't arise from the company's actual business. Capital gains consist of the gain on sales of equipment.

5. EMPLOYEE BENEFIT EXPENSES

	2023	2022
Salaries and wages	19 940	40 294
Share-based incentives, to be paid out in shares	27	98
Pension costs– defined contribution plans	3 333	6 984
Other personnel costs	719	1 397
Total	24 019	48 773

More detailed description of share-based incentive plans is in note "Equity".

Number of personnel in average during the year, Group	2023	2022
Salaried employees	287	474
Workers	196	386
Total	483	860

Number of personnel at the end of the financial year, Group	2023	2022
Salaried employees	238	386
Workers	146	278
Total	384	664

6. DEPRECIATION AND IMPAIRMENTS

Depreciation of property, plant and equipment	2023	2022
Machinery and equipment
Machinery and equipment	938	1 095
Machinery and equipment, right-of-use asset	58	58
Properties
Properties in own use	426	743
Business premises, right-of-use asset	678	1 230
Inventories, right-of-use asset	1 266	1 664
Other tangible assets	111	115
Total	3 477	4 906
Depreciation of intangible assets	2023	2022
Customer relationships
Other intangible assets	818	962
Total	818	962
Depreciation of investment properties	2023	2022
Buildings and structures	16	17
Total	16	17
Impairments	2023	2022
Goodwill	4 624
Intangible assets	202
Property, plant and equipment: Properties in own use	1 860
Machinery and equipment and other tangible assets	796
Total	7 481	0
Depreciation and impairments, total	11 792	5 885

7. OTHER OPERATING EXPENSES

	2023	2022
Voluntary personnel expenses	355	1 152
Costs related to construction site and office space	2 346	3 385
IT and equipment expenses	2 195	3 107
Travel expenses	725	2 026
Product development expenses	125	774
Marketing expenses	456	1 645
Administrative services	4 549	2 038
Reduction from expected credit loss	-34	19
Other operating expenses	6 717	1 364
Total	17 435	15 511

Fees paid to auditor:	2023	2022
Audit fees	195	245
Certificates and statements	1	6
Tax services	0	1
Other services	21	5
Total	217	256

8. FINANCIAL INCOME AND EXPENSES

Financial income	2023	2022
Dividend income	0	0
Other financial income	76	41
Total	76	41
Financial expenses	2023	2022
Interest expenses	1 479	1 165
Interest expenses from lease liabilities	2 026
Capitalised interest expenses	-2 112	-2 600
Other financial expenses	4 662	2 643
Total	6 054	3 362
Financial income and expenses, total	-5 979	-3 321

9. INCOME TAXES

	2023	2022
Current income tax	129	299
Change deferred tax assets	0	12 831
Change deferred tax liabilities	0	154
Total	129	13 285

Reconciliation of the tax expense in the income statement and taxes

calculated at the tax rate of Group domicile country	2023	2022
Tax rate	20,0 %	20,0 %
Result from continuing operations before taxes	-78 827	-45 513
Taxes calculated at the tax rate of the domicile country	-15 765	-9 103
Tax-exempt income	30	-273
Non-deductible expenses	1 617	507
Temporary differences from stage-of-completion revenue recognition and depreciation and amortisation	-985	-773
Taxes from previous years	28
Write-off of previously recorded deferred taxes		13 285
Unrecognized deferred tax asset from losses	15 203	9 642
Total	129	13 285

10. SHARE-BASED KEY FIGURES

	2023	2022
Result for the financial year attributable to equity holders of the parent company	-79 049	-26 652
Issue-adjusted average number of outstanding shares during the period, basic	87 257 649	87 276 343
Issue-adjusted average number of outstanding shares during the period, diluted	87 332 931	87 433 988
Earnings per share, basic, EUR/share Earnings per share, diluted, EUR/share 1)	-0,91 -0,91	-0,31 -0,31
Earnings per share, continuing operations, basic, EUR/share Earnings per share, continuing operations, diluted, EUR/share 1)	-0,90 -0,90	-0,67 -0,67
Earnings per share, discontinued operations, basic, EUR/share Earnings per share, discontinued operations, diluted, EUR/share 1)	0,00 0,00	0,37 0,37

1) The calculation of diluted earnings per share does not take into account potential ordinary shares whose conversion to ordinary shares would increase earnings per share or decrease loss per share.

Issue-adjusted number of outstanding shares at the end of the year	87 135 986	87 311 287
Equity / share	-0,14	0,76
Dividend per share paid in fiscal year	-	-
Dividend proposal per share from fiscal year	-

11. GOODWILL

Cash-generating unit: Building Services	2023	2022
Goodwill at 1 Jan.	4 624	4 624
Impairment	-4 624	0
Goodwill at 31 Dec.	0	4 624

For the purposes of goodwill impairment testing, recoverable cash flows have been determined based on value-in-use calculations. A cash generating unit is the acquired business entity to which goodwill relates. The cash flows of cash generating units for the next five years have been discounted to their present value and the discount rate used is the weighted average cost of capital (WACC) determined for Lehto. Cash flows after five years – the residual value – have not been taken into consideration in the calculations.

The pre-tax weighted average cost of capital (WACC) has been remeasured every year. Remeasuring is based on the weighting of the indicators of an industrial comparison group with the average capital structure in the sector. This measurement takes into account indicators such as sector-specific beta value, country risk, market risk premium, interest on borrowing in the sector, risk-free interest rate, and the risk premium related to the company's size class.

Goodwill impairment testing is performed as necessary, but at least once a year. The last time impairment testing was performed was on 31 December 2022. No material changes with an impact on expected cash flow from operations has occurred in the business environment compared with the previous financial year. Potential material changes in the business environment that affect business cash flow expectations, as well as a weakening market, are taken into account in the impairment testing.

12. OTHER INTANGIBLE ASSETS

Other intangible assets 2023	Total
Acquisition cost at 1 Jan. 2023	9 226
Increases	15
Acquisition cost at 31 Dec. 2023	9 242
Accumulated depreciation and amortisation at 1 Jan. 2023	-7 799
Depreciation	-818
Impairments	-202
Accumulated depreciation and amortisation at 31 Dec. 2023	-8 818
Carrying amount at 1 Jan. 2023	1 427
Carrying amount at 31 Dec. 2023	423
Other intangible assets 2022	Total
Acquisition cost at 1 Jan. 2022	8 826
Increases	400
Acquisition cost at 31 Dec. 2022	9 226
Accumulated depreciation and amortisation at 1 Jan. 2022	-6 837
Depreciation	-962
Accumulated depreciation and amortisation at 31 Dec. 2022	-7 799
Carrying amount at 1 Jan. 2022	1 989
Carrying amount at 31 Dec. 2022	1 427

13. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment 2023	Right-of use asset	Properties in own use	Machinery and equipment and other tangible assets	Total
Acquisition cost at 1 Jan. 2023	10 010	10 436	16 705	37 151
Increases	162	138	9	308
Decreases	-1 728	-185	-496	-2 409
Acquisition cost at 31 Dec. 2023	8 444	10 389	16 218	35 051
Accumulated depreciation and amortisation at 1 Jan. 2023	-6 517	-4 095	-12 968	-23 581
Depreciation	-736	-426	-1 049	-2 212
Impairments		-1 860	-796	-2 655
Accumulated depreciation and amortisation at 31 Dec. 2023	-7 254	-6 380	-14 813	-28 447
Carrying amount at 1 Jan. 2023	3 492	6 341	3 737	13 571
Carrying amount at 31 Dec. 2023	1 190	4 009	1 405	6 603

Property, plant and equipment 2022	Right of-use asset	Properties in own use	Machinery and equipment and other tangible assets	Total
Acquisition cost at 1 Jan. 2022	8 961	14 184	16 348	39 493
Increases	1 512	25	408	1 946
Decreases	-464			-464
Transfer to non-current assets held for sale		-3 773	-51	-3 824
Acquisition cost at 31 Dec. 2022	10 010	10 436	16 705	37 151
Accumulated depreciation and amortisation at 1 Jan. 2022	-5 229	-3 352	-11 758	-20 339
Depreciation	-1 288	-743	-1 210	-3 242
Accumulated depreciation and amortisation at 31 Dec. 2022	-6 517	-4 095		-12 968 -23 581
Carrying amount at 1 Jan. 2022	3 732	10 832	4 590	19 154
Carrying amount at 31 Dec. 2022	3 492	6 341	3 737	13 571

14. INVESTMENT PROPERTIES

Investment properties 2023	Undeveloped land	Properties	Total
Acquisition cost at 1 Jan. 2023	202	809	1 011
Acquisition cost at 31 Dec. 2023	202	809	1 011
Accumulated depreciation and amortisation at 1 Jan. 2023		-335	-335
Depreciation		-16	-16
Accumulated depreciation and amortisation at 31 Dec. 2023		-352	-352
Carrying amount at 1 Jan. 2023 Carrying amount at 31 Dec. 2023	202 202	474 458	676 660

Investment properties 2022	Undeveloped land	Properties	Total
Acquisition cost at 1 Jan. 2022	202	809	1 011
Acquisition cost at 31 Dec. 2022	202	809	1 011
Accumulated depreciation and amortisation at 1 Jan. 2022		-318	-318
Depreciation		-17	-17
Accumulated depreciation and amortisation at 31 Dec. 2022		-335	-335
Carrying amount at 1 Jan. 2022	202	491	693
Carrying amount at 31 Dec. 2022	202	474	676
Net rental income	2023		2022
Rental income from investment properties	62		78
Direct maintenance costs for investment properties	32		36
Net rental income, total	30		42

Fair values of investment properties

The Group's investment properties are properties available for rent. Investment properties are recognised using the acquisition cost method and they are not valued at fair value through profit and loss.

Balance sheet values and fair values of investment properties	Valuation method	Level	Fair value 2023	Fair value 2022
Business property	Acquisition cost	3	453	558
Land area	Acquisition cost	3	202	202
			655	760

The fair values of investment properties are determined by the company itself using the cash flow method. Fair values of level 3 asset items are based on input data concerning the asset item, which are not based on verifiable market information but are based substantially on management estimates and their use in generally accepted valuation models.

14. INVESTMENTS IN ASSOCIATED COMPANIES

	2023	2022
Investments in associated companies at 1 Jan.	0
Increases	780
Share of profit or loss for the financial year	0
Investments in associated companies at 31 Dec.	780	0

During the financial year, the Group has acquired a small business-related property management associate company.

16. OTHER FINANCIAL ASSETS

Financial assets recognised through profit and loss	2023	2022
Financial assets recognised through profit and loss at 1 Jan.	971	771
Increases		200
Financial assets recognised through profit and loss 31 Dec.	971	971

Financial assets recognised through profit and loss are unlisted share investments. The shares are recognised at acquisition cost because there is no quoted price for fully similar instruments in active market. Financial assets recognised through profit and loss are classified at level 3 in the hierarchy.

17. NON-CURRENT RECEIVABLES

Non-current receivables include items from companies that went bankrupt after the end of the financial year. The specifications of these are presented in the note "32. Events after the financial year".

	2023	2022
Non-current project related bank deposits	2 364	6 313
Non-current loan receivables	44	92
Other non-current receivables	56	56
Total	2 463	6 461

18. DEFERRED TAX ASSETS AND LIABILITIES

	Recognised
Deferred tax assets 2023	1 Jan 2023	in income statement	31 Dec 2023
Confirmed losses	932	-297	635
Lease liabilities	15 569	-3 745	11 825
Other temporary differences		-5
Netting deferred tax assets and liabilities	-16 502	4 047	-12 460
Total	0	0	0

Deferred tax liabilities 2023	1 Jan 2023	Recognised in income statement	31 Dec 2023
Temporary differences from capitalisation of financial expenses	32	-32
Temporary differences from stage-of-completion revenue recognition and depreciation and amortisation	4	-4
Right-of-use assets	14 036	-3 029	11 006
Depreciation difference with taxation	171	-171
Convertible bonds	668	-83	585
Other temporary differences	58	-83	18
Netting deferred tax assets and liabilities	-14 968		-11 609
Total	0	0	0

Confirmed losses for which no deferred tax receivables have been recognized were EUR 224.6 (148.2) million, of which EUR 167.9 million are confirmed losses by subsidiaries that have been, after the review period, declared to bankruptcy. Of total losses EUR 224.6 million, EUR 208.9 (132.2) million are allocated to Finland and EUR 15.7 (15.9) million to Sweden. The change in Sweden is mainly due to the change in the exchange rate. These losses will expire from 2030 onwards.

Deferred tax assets and liabilities recorded in the balance sheet have been netted because they are related to taxes collected by the same taxpayer and they can be set off against each other based on a legally enforceable right.

Deferred tax assets 2022	1 Jan 2022	Recognised in income statement	31 Dec 2022
Fixed assets internal margin	37	-37
Tax losses carried forward	9 587	-8 654	932
Temporary differences from stage-of-completion revenue recognition and depreciation and amortisation	4 138	-4 138
Lease liabilities	18 089		15 569
Other temporary differences	35	-35
Adjustment from discontinued operations		33
Netting deferred tax assets and liabilities		2 520	-16 502
Total	31 886	-12 831

On Dec 31, 2022 the Group wrote down deferred tax assets because the Group considers it possible that it will not have taxable income before the losses expire.

Deferred tax liabilities 2022	1 Jan 2022	Booked to equity	Recognised in income statement	31 Dec 2022
Temporary differences from capitalisation of	7		25	32
financial expenses Temporary differences from stage-of-completion
revenue recognition and depreciation and amortisation			4	4
Right-of-use assets	17 957
Depreciation difference with taxation	214		-43	171
Convertible bonds		558	110	668
Other temporary differences			58	58
Netting deferred tax assets and liabilities				-14 968
Total	18 177	558	154	0

19. INVENTORIES

Inventories include items from companies that went bankrupt after the end of the financial year. The specifications of these is presented in the note "32. Events after the financial year".

	2023	2022
Materials and supplies	1 048	2 472
Work in progress	4 808	75 731
Right-of-use asset	55 031	70 178
Completed products	11 975	21 036
Inventory shares	29	49
Other inventories	701	2 593
Total	73 591	172 060

Right-of-use asset in inventories is long-term land leases related to construction projects that are under the control of the company during the design and construction period, i.e. often only a few years, but need to be classified as fixed assets and liabilities in accordance with IFRS 16. The liability corresponding to the right-of-use assets is presented in the notes under "Financial liabilities".

20. TRADE AND OTHER RECEIVABLES

Trade and other receivables include items from companies that went bankrupt after the end of the financial year. The specifications of these are presented in the note "32. Events after the financial year".

	2023	2022
Trade receivables	5 108	21 810
Loan receivables	535	571
Security deposits	38	2 239
Other receivables	864	366
Receivables from customers for constructing contracts	4 996	24 371
Adjusting entries for assets	566	1 032
Total	12 107	50 389

Ageing analysis of trade receivables and receivables from customers for constructing contracts	2023	2022
Not yet due
Trade receivables	1 475	18 894
Receivables from customers for constructing contracts	4 996	24 371
Reduction from expected credit loss	-81	-114
Due for
less than 30 days	1 742	1 621
30–60 days	7	27
61–90 days	780	14
more than 90 days	1 184	1 368
Total	10 104	46 181

The carrying amount of receivables corresponds to their fair value.

21. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

	2023	2022
Financial assets at fair value through profit or loss	328	314
Total	328	314

Financial assets at fair value through profit or loss include held-at-call fund units, which are short-term and highly liquid investments. The fair value of the investment is level 1 and it is determined using the buying rate of the counterparty at the end of the reporting period.

22. CASH AND CASH EQUIVALENTS

	2023	2022
Cash in hand and at banks	5 802	12 922
Total	5 802	12 922

23. EQUITY

	Number of shares	Share capital	SVOP - Reserve for invested unrestricted equity	Total
31 December 2021	87 339 410	100	88 695	88 795
of which company holds	179 965
Outstanding shares on 31 December 2021	87 159 445
31 December 2022	87 339 410	100	88 695	88 795
of which company holds	28 123
Outstanding shares on 31 December 2022	87 311 287
31 December 2023	87 339 410	100	88 695	88 795
of which company holds	203 424
Outstanding shares on 31 December 2023	87 135 986

Shares and share capital

At balance sheet date, the number of shares totalled 87,339,410, of which the company holds 203,424 shares. The share capital is EUR 100,000. The company has one series of shares, and all shares are of the same class. Each share entitles its holder to one vote in the General Meeting of Shareholders and to an equal amount of dividend.

Transfer of own shares

In March 2023, with the authorization given by the Annual General Meeting held on May 2, 2022, the company carried out a directed share issue without consideration, 103,782 shares, to implement the share-based incentive plan.

Invested non-restricted equity reserve

The invested non-restricted equity reserve contains equity investments and that part of the share subscription price that has not specifically been allocated to share capital. The funds received from the IPO, less total fees and expenses for the IPO, have been recorded to invested non-restricted equity reserve.

Share-based compensations

On 20 December 2016, The Board of Directors of Lehto Group Plc has resolved to launch two new share-based incentive plans for the Group key employees. The aim of the plans is to combine the objectives of the shareholders and the key employees in order to increase the value of the Company in the long-term, to commit the key employees to the Company, and to offer them competitive reward plans based on earning the Company's shares.

The potential reward from the long-term incentive plan will be paid to the key employees after a two-year restriction period partly in the Company's shares and partly in cash. The cash proportion is meant for covering taxes and tax-related costs arising from the reward to the key employee.

After the earning period, the gross performance bonus entered for the participant in the performance bonus plan will be converted into shares. When converting the performance bonus into shares, the trade volume weighted average quotation on Nasdaq Helsinki Oy (conversion rate) will be the weighted trading rate of the 20 trading days following the date of release of the company's financial statement bulletin. In spring 2023 company decided on a directed share issue free of consideration related to the reward payment for the performance period 2020. In the share issue 103,782 Lehto Group Plc's shares owned by the company were issued free of consideration to group key employees in accordance with the terms and conditions of the plan. The Issue Shares corresponded to approximately 0.12 per cent of Lehto's shares and votes prior to the share issue. For the earning period 2021 the performance bonus for members of the share plan was EUR 15,000, converted to shares 52,000.

In 2022-2023 The Board of Directors did not decide on a new share-based incentive plans program and thus no performance bonuses will be paid as shares from year 2022 and 2023. Incentive plans program from year 2021 details are presented below:

	Earning period
Arrangement	2021
Nature of arrangement	Shares
Date of issue	18 Feb 2021
Number of instruments issued (issued-adjusted)	52,000
Share price on grant date (issued-adjusted)	1.59
Period of validity	3 years
Expected performance, %	100 %
Carried out	As shares
Terms and conditions of conferral of right	Variable terms based on the fulfilment of non-market, performance-based terms

For the 2021 earnings period, the earnings-based terms have been met in full. The number of shares issued on the balance sheet date is based on an estimate.

The fair value of the shares is based on the quoted share price. The amount recognised as an expense is presented under "Employee benefit expenses" in the Notes.

In addition to long-term incentive plan, the Company has restricted share plan. The reward from the restricted share plan is based on a key employee's valid and continuing employment or service during the restriction period. The reward will be paid after a restriction period lasting for one to three years, partly in the Company's shares and partly in cash. The cash proportion is meant for covering taxes and tax-related costs arising from the reward to the key employee.

The restricted share plan is directed to selected key employees only. The rewards to be paid on the basis of the restricted share plan correspond to the value of an approximate maximum total of 50,000 Lehto Group Plc shares including also the proportion to be paid in cash. No key personnel were covered by the restricted share plan in 2023.

24. PROVISIONS

Provisions include items from companies that went bankrupt after the end of the financial year. The specifications of these are presented in the note "32. Events after the financial year".

Provisions 2023	Guarantee provisions	Onerous projects	Restructuring provision	Total
1 Jan. 2023	11 072	2 317	128	13 518
Increases	4 213			4 213
Decreases	-4 622	-2 304		-6 926
Decreases, discontinued operations			-128	-128
31 Dec. 2023	10 663	13		10 676
of which non-current	7 745			7 745
of which current	2 918	13		2 931

Provisions 2022	Guarantee provisions	Onerous projects	Restructuring provision	Total
1 Jan. 2022	10 307	11 083	638	22 028
Increases	4 515	1 951		6 466
Decreases	-3 600			-14 316
Decreases, discontinued operations	-150		-510	-660
31 Dec. 2022	11 072	2 317	128	13 518
of which non-current	5 928			5 928
of which current	5 144	2 317	128	7 590

Guarantee provisions include estimated supplementary work expenses for construction projects completed during the financial year and actual supplementary work expenses incurred for construction projects completed during the previous financial year as a decrease. The guarantee period for a construction contract is 2 years and 10 years for developer contracting projects. The provision recorded is based on experience from previous years. Provisions are recorded as an expense in the item in which they are expected to materialise. Onerous projects include the estimated amount of expenditure that exceeds the benefits that may be derived from it. Restructuring provision includes after-costs of the discontinued Swedish operations.

25. FINANCIAL LIABILITIES

Financial liabilities include items from companies that went bankrupt after the end of the financial year. The specifications of these are presented in the note "32. Events after the financial year".

	2023	2022
Non-current loans from financial institutions	0	9
Convertible bonds		11 661
Non-current lease liabilities	53 585
Total	53 585	80 075
	2023	2022
Current loans from financial institutions	3 427	13 033
Convertible bonds	12 074
VAT loan arrangement with the Tax Administration	2 880	0
Debts on shares in unsold housing and real estate company shares in progress		3 979
Debts on shares in unsold housing and real estate company shares completed	2 241	5 184
Current lease liabilities	5 538
Total	26 159	31 637
Financial liabilities, total	79 745	111 712

Financial liabilities are mainly market loans with a floating rate and their carrying amounts correspond to their fair values.

Financial liabilities 2023	Non-current financial liabilities	Current financial liabilities	Total
1 Jan. 2023	80 075	31 637	111 712
Changes during the period:
Cash flows	-14 059	5 915	-8 143
Non-cash flows	-12 431	-4 471	-16 902
Unsold housing and real estate company shares completed		-6 922	-6 922
31 Dec. 2023	53 585	26 159	79 745
Financial liabilities 2022	Non-current financial liabilities	Current financial liabilities	Total
1 Jan. 2022	91 302	44 976	136 278
Changes during the period:
Cash flows			-12 505
	7 553	-20 058
Non-cash flows	-18 779	4 928	-13 851
Unsold housing and real estate company shares completed		1 791	1 791

Non-cash flow items are mainly related to lease liabilities.

Convertible bonds

In June 2022 Lehto Group Plc announced the launch of an offering of unsecured convertible bonds due June 2027 convertible into new and/or existing ordinary shares of Lehto to institutional and other qualified investors. The convertible bonds were issued in an aggregate initial principal amount of EUR 15 million between June and September 2022. The contemplated transaction aimed to improve the financing position of the Company and to facilitate the Company's bank financing arrangement, and the proceeds from the Convertible Bonds will be used for general corporate purposes.

Terms of convertible bonds

The convertible bonds will be issued at 100% of their principal amount of EUR 20,000 per bond, and unless previously converted, repurchased or redeemed, it will be redeemed at par at maturity with accrued interest. PIK interest of 4% will be added to the interest payable at maturity in accordance with the terms and conditions of the convertible bonds. The convertible bonds carry a coupon of 6% per annum payable semi-annually, with the first interest payment date being December 31, 2022. In accordance with the terms of the convertible bond, PIK interest, which is 4 percent per year for the loan period, will be paid on the loan maturity date for the loan portion not exchanged on the maturity date. The initial conversion price was EUR 0.40 per share, which corresponds the closing price of the company's share on the stock exchange of Nasdaq Helsinki Ltd. on June 28, 2022. The conversion price will be subject to adjustments for any dividends in cash or in kind, as well as customary anti-dilution adjustments, pursuant to the terms and conditions of convertible bonds. The terms and conditions of the convertible bonds are available in full on the company's website in English.

The Company has not been able to comply with all of the terms and conditions of the convertible bond, which is why the convertible bond is classified as current liabilities.

Proceeds from issue of convertible bonds	15 000
Transaction costs	-708
Net proceeds	14 292
The equity component separated from the convertible bond before taxes	-2 789
Accreted interest	158
Convertible bonds on 31 Dec.2022	11 661
Accreted interest, fiscal year	413
Convertible bonds on 31 Dec.2023	12 074
Interest liabilities in adjusting entries for liabilities include cumulative accreted PIK interest 31Dec 2023	900

26. TRADE PAYABLES AND OTHER NON-INTEREST-BEARING LIABILITIES

Trade and other non-interest-bearing liabilities include items from companies that went bankrupt after the end of the financial year. The specifications of these is presented in the note "32. Events after the financial year".

Non-current non-interest-bearing liabilities	2023	2022
Non-current non-interest-bearing liabilities	110	206
Total	110	206
Current non-interest-bearing liabilities	2023	2022
Liabilities to customers for constructing contracts (advances received)
From projects where revenue recognised over time	1 489	12 165
From projects where revenue recognised upon delivery
Payments received from customers in sold		3 530
housing and real estate shares in progress
Debts on shares in sold housing and real estate shares in progress		4 039
Other liabilities to customers for constructing contracts	168	858
Trade payables	10 472	24 820
Other liabilities
Liabilities paid to the Tax Administration	2 733	10 638
Other liabilities	2 417	4 714
Adjusting entries for liabilities
Accrued liabilities due to employee benefits	3 704	6 855
Income tax debt		0
Interest liabilities
Other adjusting entries for liabilities	3 196	7 171
Total	25 580	75 230

27. FINANCIAL RISK MANAGEMENT

The Group's main sources of funding consist of cash flow from normal business operations and project-based debt financing. In addition, the Company has some revolving credit limits. At the end of 2023, the cash and cash equivalents amounted to EUR 5.8 million (EUR 12.9 million 31 December 2022) and financial assets at fair value through profit or loss EUR 0.3 (0.3) million. The amount of credit limits at the end of 2023 was EUR 340 million, which all was in use.

The Group has taken out so-called RS loans for its developer contracting projects. RS loans are provided by credit institutions under certain terms and condition for designated housing construction sites.

Revolving Credit Facility

Lehto has a Revolving Credit Facility (RCF) agreement with OP Corporate Bank plc and Nordea Bank Plc, which was signed on 30 June 2022. The RCF amounts to EUR 13 million and is valid until 31 March 2024. At the end of the review period, EUR 3.4 million of the RCF was in use. Some of the assets pledged as collateral for the RCF belong to the bankrupt subsidiaries, and some to the continuing Lehto Group.

At the end of the review period, not all of the covenant or other terms of the RCF were met and the contract is about to expire on 31 March 2024. Debt collection and repayment will occur as part of the Company's restructuring proceedings.

Net liabilities	2023	2022
Interest-bearing liabilities	20 621	33 865
Cash and cash equivalents and interest-bearing receivables	-6 130	-13 236
Net liabilities without IFRS lease liabilities	14 491	20 630
Lease liabilities	59 123	77 847
Net liabilities	73 614	98 477
Equity, total, EUR 1,000	-12 382	66 571
Net gearing ratio	-594,5 %	147,9 %

Loan facility with the Tax Administration

During the financial year, Lehto made a payment arrangement with the Tax Administration for VAT liabilities amounting to around EUR 3.5 million. The repayment period under the payment arrangement was 12 months and the first instalment was paid in November 2023. The interest rate on the payment arrangement was 3.4%.

Foreign exchange risk

The Group's functional currency is euro. At the balance sheet date the Group had no significant liabilities or receivables denominated in foreign currency. The Group's foreign exchange risk is currently somewhat low because income and expenses are denominated mainly in euros. If an order is agreed on in a foreign currency, the method of hedging the exchange rate risk and the hedge ratio is determined separately in each case. Foreign exchange differences arising from hedging is recorded in the income statement under financial income and expenses. During the financial period and at balance sheet date the Group had no open currency hedges.

Interest rate risk

Interest rate risk arises mainly from loans with variable interest rates. Due to the low amount of long-term liabilities with variable interest rates, the interest rate risk related to these balance sheet items is not very significant for the Group. As far as possible, the Group can change the interest rate fixation period of the loan portfolio by arranging the loan portfolio, using interest rate swaps or other derivatives. The degree of protection can vary between 0 and 100 percent. The company monitors the interest rate risk of the loan portfolio and can change its fixed interest period if necessary.

Sensitivity analysis for loans with

floating rates	2023		2022
Change, %	+1 %	-1 %	+1 %	-1 %
Impact on profit/loss after taxes

Credit risk

The most significant credit risk for the Group consists of trade receivables and receivables from customers based on customer agreements. However, these do not involve significant credit risk accumulations. Apartments are not handed over to the customer until all trade receivables have been paid. However, credit losses totalling EUR 1.4 million have been recorded in the accounting period. The ageing analysis of accounts receivable and the solvency of the most significant customers are monitored at Group level and in group companies. Credit risk is also managed by granting customers only standard payment terms and customer-specific consideration, using preferential payment terms typical for the industry and reselling the credit risk to financial institutions. The payment terms used in the Group currently vary from 7 to 45 days, of which the most typical payment term is 30 days. In addition, for individual projects, a longer payment term can be agreed upon, where the payment will be made in one instalment upon handover of the project. Furthermore, for individual projects a longer payment term can be agreed on, where the payment is made as a one-off payment at the end of the project.

Liquidity risk

Analysis of debt maturity

For the sake of clarity, in the table for 2023 below, the debt maturity analysis is presented separately for companies that went bankrupt after the financial year and for other companies.

31 Dec 2023	Less than 1 year	1–5 years	More than 5 years	Total
Financial liabilities	8 711			8 711
of which the companies that went bankrupt after the financial year	5 220			5 220
of which other companies	3 490			3 490
Convertible bonds	21 600			21 600
of which other companies	21 600			21 600
Lease liabilities	7 314	9 263		92 984 109 562
of which the companies that went bankrupt after the financial year	6 803	8 721	92 829	108 353
of which other companies	512	542	155	1 209
Trade payables and other non-interest-bearing liabilities	15 621	110		15 731
of which the companies that went bankrupt after the financial year	4 903	110		5 013
of which other companies	10 719			10 719
Total	53 246	9 373	92 984	155 604
of which the companies that went bankrupt after the financial year	16 925	8 831	92 829	118 585
of which other companies	36 321	542	155	37 018

31 Dec 2022	Less than 1 year	1–5 years	More than 5 years	Total
Financial liabilities	22 376	9		22 384
Convertible bonds	900	21 150		22 050
Lease liabilities	8 380	14 303		115 995 138 678
Trade payables and other non-interest-bearing liabilities	40 172	206		40 378
Total	71 828	35 668	115 995	223 491

The majority of Lehto's lease liabilities at the end of the financial period were related to leases of plots for developercontracted housing projects under construction. These obligations have been removed from Lehto's consolidated balance sheet due to the bankruptcies of subsidiaries after the end of the financial period. The IFRS 16 liabilities taken off the balance sheet due to the bankruptcies total EUR 58 million.

Leases include items from companies that went bankrupt after the end of the financial year. The specifications of these are presented in the note "32. Events after the financial year".

Group as lessee

The currently valid lease agreements of the company related to tangible assets are primarily leases of business premises and minor leases for small machinery and equipment. In addition, the company has land lease agreements which are related to inventories.

Right-of-use assets and lease liabilities 2023	Inventories	Property, plant and equipment	Lease liabilities
1 Jan. 2023	70 897	3 492	77 847
Increases	455	162	207
Decreases	-13 927	-1 728	-17 523
Depreciation / instalments	-1 266	-736	-1 408
31 Dec. 2023	56 159	1 190	59 123

Right-of-use assets and lease liabilities 2022	Inventories	Property, plant and equipment	Lease liabilities
1 Jan. 2022	86 620	3 732	90 445
Increases	35 952	1 512	40 087
Decreases	-50 012	-464	-50 493
Depreciation / instalments	-1 664	-1 288	-2 193
31 Dec. 2022	70 897	3 492	77 847

Interest expenses related to lease liabilities in 2023 amounted to EUR 2,026 thousand (EUR 2,154 thousand in 2022). Interest expenses on lease liabilities are presented in financial expenses in the notes under "Financial income and expenses".

EUR 576 (1,102) thousand was recognised as expenses from low-value and short leases during the financial year. In addition to low-value IT machinery and equipment rents, these include short-term (maximum 12 months) rents for tool, machine and site facilities related to the construction industry. The total cash flow leases amounted to EUR 2,657 (2,467) thousand and from land leases to EUR 3,755 (3,957) thousand.

The Company has no expenses related to variable rents that are not included in lease liabilities. The company also has no sublease of right-of-use assets.

29. LIABILITIES AND GUARANTEES

Loans covered by pledges on assets	2023	2022
Loans from financial institutions	3 427	13 042
Debts on shares in unsold housing company shares	2 241	9 162
Total	5 667	22 204
Guarantees	2023	2022
Company mortgages	135 200	135 200
Real-estate mortgages	102 760	213 540
Pledges	3 742	13 285
Absolute guarantees		214
Total	241 702	362 239
Contract guarantees	2023	2022
Production guarantees	2 957	27 223
Warranty guarantees	13 695	15 588
RS guarantees	14 030	23 122
RS guarantees	6	2 360
Rent guarantees	150
Total	30 838	68 293
Liability to adjust value added tax (VAT) on property investments	2023	2022
Liability to adjust VAT	862	1 540

The pledges are inventory items and other financing assets pledged as collateral for financial institution loans and loans for housing companies under construction. Pledges are presented at carrying amount.

The liabilities of bankrupt subsidiaries from contract guarantees amount to EUR 27.7 million, for which the parent company Lehto Group Plc has given a counter guarantee. It is possible that, as a result of the subsidiaries' bankruptcies, claims will be made against the Lehto Group that the group will not be able to meet.

30. DISCLOSURE OF INTERESTS IN OTHER ENTITIES

Group parent/subsidiary relationships on 31 Dec.2023

Company	Country of domicile		Share of Holding, % votes, %
Parent company Lehto Group Plc	Finland
Lehto Tilat Oy	Finland	100 %	100 %
Lehto Asunnot Oy	Finland	100 %	100 %
Lehto Puu Oy	Finland	100 %	100 %
Lehto Components Oy	Finland	100 %	100 %
Insinööritoimisto Mäkeläinen Oy	Finland	100 %	100 %
Lehto Korjausrakentaminen Oy	Finland	100 %	100 %
Katajanokka Holding Oy	Finland	100 %	100 %
Kiinteistö Oy Ylivieskan Arvokiinteistö	Finland	80 %	80 %
Kiinteistö Oy Oulun Eteläkeskus	Finland	100 %	100 %
Lehto Sverige Ab	Sweden	100 %	100 %

A summary of financial information on subsidiaries with a substantial non-controlling interest

The Group has no subsidiaries with a substantial non-controlling interest.

31. RELATED PARTY TRANSACTIONS

The Group's related parties include Group companies, members of the Board of Director and the Group's top management as well as their families and entities on which related parties, or their family members, have influence through ownership or management. Related parties also include associated companies and joint ventures. The Group didn't have any transactions with associated companies and joint ventures.

Transactions with related parties

	Sales	Sales	Purchases	Purchases
	2023	2022	2023	2022
Key personnel and their controlled entities	438	5 151	3 682	9 067
Total	438	5 151	3 682	9 067

	Receivables 31 Dec. 2023	Receivables 31 Dec. 2022	Liabilities 31 Dec. 2023	Liabilities 31 Dec. 2022
Key personnel and their controlled entities	624	730	292	154
Total	624	730	292	154

A major part of related party transactions is connected with purchase of apartments and other premises from the company. The transactions are valued at the debt-free selling price of the completed site. Purchases are mainly equipment rents and other service purchases.

Purchases from related parties mainly consist of the rental of work machines and equipment from Lehto Invest Oy, a company controlled by the member of the Board Hannu Lehto. These purchases amounted to EUR 2.0 million in 2023. In addition, Lehto purchases building technology design and maintenance services from Elvak Oy, which is a company controlled by the member of the Board Hannu Lehto's son. The amount of these purchases was EUR 1.6 million in 2023.

Management salaries and remuneration	2023	2022
Chief Executive Officer, CEO
Juuso Hietanen	398	398
Other management team	1 070	997
Share incentives	2
Post-employment benefits, statutory pension contribution paid by the employer	260	290
Total	1 731	1 928
Members of the Board of Directors	2023	2022
Eero Sihvonen, chairman (as member May 2 - Dec 5, 2022, as chairman since Dec 5, 2022)	102	37
Hannu Lehto, (as chairman until Dec 5, 2022, as member since Dec 5, 2022)	43	91
Jani Nokkanen	48	46
Anne Korkiakoski (until July 11, 2023)	26	48
Helena Säteri (until March 30, 2023)	10	46
Raimo Lehtiö (until May 2, 2022)		12
Seppo Laine (until May 2, 2022)		13
Total	229	294

32. EVENTS AFTER THE FINANCIAL YEAR

After the review period, on February 8, 2024 the operative subsidiaries of Lehto Group Plc, Lehto Asunnot Oy, Lehto Tilat Oy and Lehto Korjausrakentaminen Oy, have been declared bankrupt. Those companies cover practically Lehto's whole housing construction and business premises construction businesses and thus they make up most of the net sales of Lehto Group. Also, On February 16, 2024 Lehto Group Plc has been ordered to corporate restructuring. As part of the corporate restructuring proceedings Lehto plans to divest its whole construction business and any holdings related thereto and reviews options to expand to new business areas and acquire new business.

Effect of subsidiaries declared to bankrupt on the		The impact of subsidiaries declared to	Group without the subsidiaries declared to
Group financial position Dec 31, 2023	Group 7 686	bankrupt 10	bankrupt 7 676
Intangible and tangible assets
Investments in associated companies	780		780
Other financial assets	971	14	957
Receivables	2 463	2 385	78
Inventories	73 591	71 858	1 734
Trade and other receivables	12 107	11 059	1 048
Cash and cash equivalents	6 130	15	6 116
Assets, total	103 729	85 340	18 388
Non-current provisions	7 745	7 735	10
Non-current lease liabilities	53 585	52 905	681
Other non-current liabilities	110	110
Current provisions	2 931	2 558	373
Current financial liabilities	20 621	5 121	15 501
Current lease liabilities	5 538	5 043	494
Liabilities to customers for constructing contracts (advances received)	1 657	1 496	161
Trade and other payables	23 922	19 627	4 295
Liabilities, total	116 110	94 595	21 515
Net assets and liabilities	-12 382	-9 255	-3 127
Impact of group eliminations		9 255	-9 255
Groups' net assets and liabilities at the end of financial year			-12 382

Also, On February 16, 2024 Lehto Group Plc has been ordered to corporate restructuring. As part of the corporate restructuring proceedings Lehto plans to divest its whole construction business and any holdings related thereto and reviews options to expand to new business areas and acquire new business.

After the review period, on 19 March 2023, Lehto sold the entire share capital of its subsidiary Insinööritoimisto Mäkeläinen Oy. Insinööritoimisto Mäkeläinen Oy was a 100% owned subsidiary of Lehto, which is focused on structural design and employs around 40 employees in Kajaani, Kempele and Vantaa. The buyers are the management of Insinööritoimisto Mäkeläinen Oy, Elvak Oy and Lehto Invest Oy. Lehto considers that this is a related party transaction, because Lehto's board member Hannu Lehto has control over Lehto Invest Oy and Elvak Oy is a company managed and partly owned by Hannu Lehto's son. An external Appraiser has estimated that the purchase price corresponds to the fair value of the target. The enterprise value (EV) defined in the transaction is approximately EUR 0.5 million, to which the assets transferred in the Transaction are added (EUR 0.1 million), and from which the liabilities transferred in the transaction (EUR 0.6 million) are subtracted. The transaction has no significant impact on Lehto Group's turnover, operating profit or financial position.

INCOME STATEMENT FOR PARENT COMPANY, FAS 1 000 EUR

	2023	1 Jan - 31 Dec 1 Jan - 31 Dec 2022
Net sales	6 305	8 580
Other operating income	255	235
Personnel expenses
Salaries and fees	-2 492	-3 468
Personnel expenses
Pension costs	-394	-541
Indirect employee costs	-68	-91
Depreciation according to plan	-399	-803
Other operating expenses	-7 118	-5 445
Operating result	-3 910	-1 533
Financial income and expenses
Income from holdings in Group companies	10 010	4 690
Interest and other financial income
From Group companies	1 173	1 123
From others	19	3
Amortisation from other investments held as non-current assets	-67 674	-21 040
Interest and other financial expenses
To Group companies	-77	-3
To others	-2 894	-2 787
Financial income and expenses, total	-59 442	-18 014
Result before appropriations and taxes	-63 352	-19 547
Result before taxes	-63 352	-19 547
Result for the financial year	-63 352	-19 547

BALANCE SHEET FOR PARENT COMPANY, FAS		1 000 EUR
	31 Dec 2023	31 Dec 2022
ASSETS
Non-current assets
Intangible assets	414	811
Machinery and equipment	2	3
Holdings in Group companies	102	48 263
Investments in associated companies	780
Other shares and investments	957	957
Non-current assets, total	2 255	50 033
Current assets
Inventories	83	83
Non-current receivables
Receivables from Group companies	389	3 100
Loan receivables	56	56
Other receivables	2
Current receivables
Trade receivables	8
Receivables from Group companies	13 549	44 777
Other receivables	216	2 227
Adjusting entries for assets	370	394
Financial securities	328	314
Cash and cash equivalents	5 582	11 993
Current assets, total	20 584	62 944
ASSETS TOTAL	22 839	112 977
EQUITY AND LIABILITIES
Equity
Share capital	100	100
SVOP - Reserve for invested unrestricted equity	91 655	91 655
Retained earnings	-43 981	-24 406
Result for the financial year	-63 352	-19 547
Equity, total	-15 578	47 803
Liabilities
Non-current liabilities
Convertible bonds		15 000
Non-current liabilities, total		15 000
Current liabilities
Loans from financial institutions	3 420	13 000
Convertible bonds	15 000
Trade payables	454	285
Liabilities to Group companies	17 558	35 746
Other liabilities	113	285
Adjusting entries for liabilities	1 871	859
Current liabilities, total	38 417	50 174
Liabilities, total	38 417	65 174
EQUITY AND LIABILITIES TOTAL	22 839	112 977

CASH FLOW STATEMENT FOR THE PARENT COMPANY, FAS		1 000 EUR
	31 Dec 2023	31 Dec 2022
Cash flow from operating activities
Result for the financial year	-63 352	-19 547
Adjustments:
Depreciation according to plan and impairment	399	803
Gain on sale of non-current assets	408	1 148
Non-cash items		19 838
Financial income and expenses	59 442	-3 026
Change in trade and other receivables	1 928	-2 367
Change in trade and other payables	64	-162
Interest paid and other financial expenses	-1 944	-2 520
Interests received from operations	1 190	1 185
Dividends received from operations		4 677
Net cash from operating activities	-1 867	29
Cash flow from investments
Investments in intangible and tangible assets	0	-97
Proceeds from sale of intangible and tangible assets	-408	54
Investments in other investments	-34 300	-200
Proceeds from sale of investments	107	31 539
Repayment of loan receivables		381
Loans granted	-404	-3 000
Purchases of associated companies	-780
Net cash from investments	-35 786	28 676
Cash flow from financing
Loans drawn	3 680	28 000
Loans repaid	-11 580	-25 220
Change in Group financing	39 185	-49 500
Repurchase of own shares	-28
Net cash used in financing activities	31 256	-46 720
Change in cash and cash equivalents (+/-)	-6 396	-18 015
Cash and cash equivalents at the beginning of the financial year	12 306	30 321
Cash and cash equivalents at the end of the financial year	5 910	12 306

NOTES TO THE FINANCIAL STATEMENTS OFR THE PARENT COMPANY

Continuity of operations

Measurement and timing principles

Inventories are measured at variable cost by applying the FIFO principle and the lowest value principle pursuant to Chapter 5, Section 6(1) of the Finnish Accounting Act.

Depreciable fixed assets are measured at variable cost and depreciated according to plan.

Investments in non-current assets are valued at the purchase price or the lower income likely to accrue in the future. A write-down of 60.6 million was recorded in subsidiary shares during the accounting period which is mainly due the fact that after the review period, on February 8, 2024 the operative subsidiaries of Lehto Group Plc, Lehto Asunnot Oy, Lehto Tilat Oy and Lehto Korjausrakentaminen Oy, have been declared bankrupt. The valuation of the remaining subsidiary shares' financial statements on 31 December 2022 is based on long-term forecasts and calculations prepared at the group level.

The valuation of receivables from the group company is based on an estimate of the amount of money that can be collected from the subsidiary.

The parent company's corporate restructuring proceedings and restructuring program may have a negative effect on the subsequent valuation of the assets shown in the parent company's balance sheet.

Bases of depreciation

Machinery and equipment	3 - 5 years straight-line depreciation
Intangible rights	3 - 5 years straight-line depreciation
Other long-term expenditure	3 years straight-line depreciation
No changes in the bases of depreciation.

Net sales by business area	2023	2022
Group internal service charges	6 228	8 405
Other net sales, internal	55	1
Other net sales, external	21	174
Total	6 305	8 580

Fees paid to auditor:	2023	2022
Statutory auditing	80	95
Certificates and statements	15	1
Tax services	0	1
Other services	11	0
Total	105	100
Financial income and expenses	2023	2022
Dividend income from Group companies	10 010	4 690
Interest income from Group companies	1 173	1 123
Interest income from others	19	3
Amortisation from other investments held as non-current assets	-67 674	-21 040
Interest costs on intra-Group liabilities	-77	-3
Interest costs to others	-2 387	-1 406
Other financial expenses	-507	-1 380
Total	-59 442	-18 014

Taxes	2023	2022
Current taxes	0	0
Total	0	0
Intangible rights	2023	2022
Acquisition cost at 1 Jan.	1 272	1 265
Increases	0	7
Acquisition cost at 31 Dec.	1 272	1 272
Accumulated depreciation at 1 Jan.	-1 263	-1 204
Depreciation and amortisation	-6	-58
Accumulated depreciation at 31 Dec.	-1 269	-1 263
Book value at 1 Jan.	10	61
Book value at 31 Dec.	4	10
Other long-term expenditure	2023	2022
Acquisition cost at 1 Jan.	3 438	3 223
Increases	107	215
Acquisition cost at 31 Dec.	3 545	3 438
Accumulated depreciation at 1 Jan.	-2 743	-2 005

Depreciation and amortisation	-391	-738
Accumulated depreciation at 31 Dec.	-3 134	-2 743
Book value at 1 Jan.	695	1 218
Book value at 31 Dec.	411	695
Advanced payments for intangible assets	2023	2022
Acquisition cost at 1 Jan.	107	0
Increases	0	231
Decreases	-107	-124
Acquisition cost at 31 Dec.	0	107
Book value at 1 Jan.	107	231
Book value at 31 Dec.	0	107

Machinery and equipment	2023	2022
Acquisition cost at 1 Jan.	1 265	1 265
Acquisition cost at 31 Dec.	1 265	1 265
Accumulated depreciation at 1 Jan.	-1 263	-1 256
Depreciation and amortisation	-2	-7
Accumulated depreciation at 31 Dec.	-1 265	-1 263
Book value at 1 Jan.	2	9
Book value at 31 Dec.	0	2
Other tangible assets	2023	2022
Acquisition cost at 1 Jan.	1	1
Acquisition cost at 31 Dec.	1	1
Accumulated amortisation at 31 Dec.	0	0
Book value at 1 Jan.	1	1
Book value at 31 Dec.	1	1
Investments	2023	2022
Acquisition cost at 1 Jan.	86 498	84 501
Increases	18 071	34 738
Decreases	-878	-32 741
Acquisition cost at 31 Dec.	103 692	86 498
Accumulated amortisation at 1 Jan.	-37 279	-17 441
Amortisation	-64 574	-19 838
Accumulated amortisation at 31 Dec.	-101 853	-37 279
Book value at 1 Jan.	49 219	67 060
Book value at 31 Dec.	1 839	49 219

Non-current receivables from Group companies	2023	2022
Loan receivables	389	3 100
Total	389	3 100
Current receivables from Group companies	2023	2022
Trade receivables	107	8
Loan receivables	39	24
Other receivables	407	397
Group limit	12 996	44 348
Total	13 549	44 777
Essential items included in adjusting entries for assets	2023	2022
Other adjusting entries for assets	0	0
Other adjusting entries for assets	370	394
Total	370	394

	2023	2022
Share capital on 1 Jan.	100	100
Share capital on 31 Dec.	100	100
SVOP - Reserve for invested unrestricted equity	91 655	91 655
Invested non-restricted equity reserve at 31 Dec.	91 655	91 655
Retained earnings at 1 Jan.	-43 953	-24 406
Purchases of own shares	-28	0
Retained earnings from previous year	-63 352	-19 547
Retained earnings at 31 Dec.	-107 333	-43 953
Result for the financial year	-63 352	-19 547
Equity, total	-15 578	47 803
Statement of distributable funds	2023	2022
Invested non-restricted equity reserve	91 655	91 655
Retained earnings	-43 981	-24 406
Result for the financial year	-63 352	-19 547
Total	-15 678	47 703

The parent company's equity has become negative for which the corresponding notice is filed to the Trade Register.

Liabilities to Group companies	2023	2022
Trade payables	189	119
Other payables	8 210	34 300
Group limit	9 159	1 327
Total	17 558	35 746
Essential items included in adjusting entries for liabilities	2023	2022
Holiday pay debt with related costs	357	337
Non-wage labour cost debt	130	163
Tax debt	0	0
Interest debt	1 385	358
Total	1 871	859
Guarantees and contingent liabilities

Loans covered by pledges on assets	2023	2022
Loans from financial institutions	3 420	13 000
Total	3 420	13 000

Guarantees	2023	2022
Corporate mortgages	33 800	33 800
Real-estate mortgages	33 800	33 800
Pledges	102	46 816
Production guarantees	150	374
Absolute guarantees	0	214
Total	67 852	115 005
Amount of credit limits
Credit limits available	3 421	13 001
Credit limits in use	3 421	13 001
Credit limits outstanding	0	0
Guarantee limits available	87 179	88 166
Guarantee limits in use	31 613	63 224
Guarantee limits outstanding	55 567	24 942
Guarantees given on behalf of other Group companies
Pledges	0	451
Guarantees given and other commitments	33 150	83 756
Total	33 150	84 207
Leasing agreements not included in balance sheet
Expiring in 12 months	34	38
Expiring in more than 12 months	51	42
Total	85	80
Lease liabilities
Construction leases, expiring in 12 months	696	751
Construction leases, expiring in more than 12 months	1 665	2 287
Total	2 362	3 037

Other liabilities

After the review period, on February 8, 2024 the operative subsidiaries of Lehto Group Plc, Lehto Asunnot Oy, Lehto Tilat Oy and Lehto Korjausrakentaminen Oy, have been declared bankrupt. It is possible that as a result of subsidiaries' bankruptcies, claims are made against the parent company that the parent company is unable to meet.

Average number of company personnel at the end of the
financial year	2023	2022
Salaried employees	35	45
Total	35	45

Remuneration of the CEO and members of the Board of Directors are specified in note "Related party transactions" to the consolidated financial statements.

Board proposal for the use of the result shown on the balance sheet

The parent company doesn't have distributable funds because its equity is EUR -15 577 786, of which the result for the financial year is EUR -63,352,210.

The Board of Directors will propose to the Annual General Meeting that no dividends be paid for the 1 January–31 December 2023 financial year.

Signatures to the Annual Report and Financial Statements

Vantaa, 29 April 2024

Eero Sihvonen, Chairman of the Board of Directors Hannu Lehto, Member of the Board of Directors Jani Nokkanen, Member of the Board of Directors Juuso Hietanen, CEO

The Auditor's Note

A report on the audit performed has been issued today.

Oulu, 29 April 2024

KPMG Oy Ab Audit firm

GROUP KEY FIGURES	2023	2022	20211)	20202)	2019 3)
Net sales, EUR million	171,8	344,8	404,1	544,7	667,7
Net sales, change from the previous year %	-50,2 %	-14,7 %	-21,8 %	-18,2 %	-7,5 %
Operating result, EUR million	-72,8	-42,2	-28,3	0,1	-41,8
Operating result, as % of net sales	-42,4 %	-12,2 %	-7,0 %	0,0 %	-6,3 %
Result for the financial year from continuing operations, EUR million	-79,0	-58,8	-29,9	-5,1	-35,7
Result for the financial year from discontinued operations, EUR million	-0,1	32,1	-2,7	-3,1	-
Result for the financial year, EUR million	-79,0	-26,7	-32,6	-8,2	-35,7
Result for the financial year, as % of net sales	-46,0 %	-7,7 %	-8,1 %	-1,5 %	-5,4 %
Return on equity (ROE), %	-291,7 %	-33,8 %	-30,4 %	-7,0 %	-26,0 %
Return on investments (ROI), %	-59,2 %	-20,8 %	-12,1 %	0,1 %	-14,3 %
Equity ratio, %	-12,1 %	27,0 %	27,2 %	38,7 %	29,6 %
Net gearing ratio, %	-594,5 %	147,9 %	113,8 %	7,0 %	115,9 %
Order backlog, EUR million	0,0	205,9	444,2	426,3	481,8
Gross expenditure on assets, EUR million	0,1	0,8	1,2	2,0	7,7
Personnel during the year, average	483	860	1 043	1 115	1 454
Personnel at Dec 31	384	664	1 042	1 034	1 274
Equity / share	-0,14	0,76	1,04	1,42	1,59
Earnings per share, issued-adjusted, EUR, basic	-0,91	-0,31	-0,37	-0,12	-0,51
Earnings per share, issued-adjusted, EUR, diluted	-0,91	-0,31	-0,37	-0,12	-0,51
Average number of shares during the year, issued-adjusted, basic	87 257 649	87 276 343	87 142 297	71 012 014	70 597 352
Average number of shares during the year, issued-adjusted, diluted	87 332 931	87 433 988	87 447 100	71 330 955	70 752 453
Number of shares, issue-adjusted, at the end of the year	87 135 986	87 311 287	87 159 445	87 089 901	70 612 735
Market value of share at Dec 31, EUR million	1,6	15,0	75,0	117,6	137,0
Share turnover, issue-adjusted, shares	61 872 140	45 210 912	68 750 986	45 969 542	54 836 449
Share turnover out of average number of shares, %	70,9 %	51,8 %	78,9 %	64,7 %	77,7 %
Share prices, issued-adjusted, EUR
Highest price, EUR	0,33	0,94	2,31	2,17	4,40
Lowest price, EUR	0,01	0,17	0,72	0,98	1,22
Average price, EUR	0,09	0,51	1,35	1,37	2,20
Price at Dec 31, EUR	0,02	0,17	0,86	1,35	1,94
Dividend / share, issue-adjusted, EUR 2)	-	-	-	-	-
Issue-adjusted dividend payout ratio, % 2)	-	-	-	-	-
Effective dividend yield % 2)	-	-	-	-	-
Price / Earnings	-0,02	-0,56	-2,30	-11,70	-3,83

1) Share-based key figures are issue-adjusted due share issue in 2020

2) Year 2023 dividend proposal

DEFINITIONS OF KEY FIGURES

Result for the financial year
Issue-adjusted average number of outstanding shares during the period
Equity
Issue-adjusted number of outstanding shares at the end of period
Dividend
Issue-adjusted number of outstanding shares on Dec 31
Alternative performance measures by ESMA The company has taken into consideration new guidelines of the European Securities and Markets Authority (ESMA) regarding Alternative Performance Measures that were entered into force on July 3, 2016. Key figures used by the company are well-known figures, which are mainly derived from the result and balance sheet. Alternative performance measures may not be considered as a substitute for measures of performance in accordance with the IFRS. Result before financial items and taxes Result for the financial year 100 x Equity (average)

Return on investments (ROI), % 100 x Result before taxes + Interest and other financial expenses Balance sheet total - Non-interest-bearing liabilities (average) Equity

Equity ratio, %		Equity
	100 x	Balance sheet total - Liabilities to customers for constructing
		contracts (advances received)
Equity ratio without IFRS 16, %		Equity without IFRS 16 effect
	100 x	Balance sheet total - Lease liabilities - Liabilities to customers for
		constructing contracts (advances received)

Net gearing ratio, %		Interest-bearing liabilities - Lease liabilities - Cash and cash
	100 x	equivalents and financial securities
		Equity
		Interest-bearing liabilities - Cash and cash equivalents and
Net gearing ratio without IFRS 16, %	100 x	financial securities
		Equity without IFRS 16 effect

Interest-bearing liabilities		Non-current and current financial liabilities (including lease liabilities)
		Deferred tax liabilities + Provisions + Other non-current liabilities +
Non-interest-bearing liabilities		Liabilities to customers for constructing contracts (advances received) +
		Trade and other payables + Current income tax liabilities

Dividend payout ratio, %		Dividend per share
		Earnings per share
Effective dividend yield %		Dividend per share
		Share price on Dec 31

Price / Earnings (P/E)		Issue-adjusted share price on Dec 31

Earnings per share

SHARES AND SHAREHOLDERS

At balance sheet date, the number of shares is 87,339,410. Outstanding number of shares is 87,135,986 and the company held 203,424 treasury shares. The share capital is EUR 100,000. The company has one share class and all shares are of the same class. The company's shares have no par value, and the Articles of Association do not specify the minimum or maximum value of shares or share capital. Each share entitles its holder to one vote and to an equal amount of dividend.

SHAREHOLDERS 31 DECEMBER 2023	Number of shares	%
Lehto Invest Oy	33,914,760	38.83%
J & K Hämäläinen Oy	1,997,909	2.29%
Kinnunen Mikko	1,326,454	1.52%
Mevita Invest Oy	1,286,867	1.47%
Nordea Henkivakuutus Suomi Oy	962,368	1.10%
Proup Oy	850,000	0.97%
OP-Henkivakuutus Oy	660,463	0.76%
Simula Aarne	607,793	0.70%
Lindsay von Julin & Co Ab	600,000	0.69%
Wetterström Carl	600,000	0.69%
10 LARGEST SHAREHOLDERS	42,806,614	49.01%
Nominee-registered	1,972,103	2.2%
Other shareholders	42,560,693	48.73%
TOTAL	87,339,410	100.00%

SHAREHOLDING BREAKDOWN	Number of shares	%	Number of shareholders	%
1 - 100	167,297	0.2%	3,743	26.8%
101 – 1,000	2,647,693	3.0%	6,101	43.7%
1,001 – 10,000	11,730,688	13.4%	3,393	24.3%
10,001 – 100,000	18,819,634	21.6%	654	4.7%
100,001 – 1,000,000	15,448,108	17.7%	54	0.4%
over 1,000000	38,525,990	44.1%	4	0.0%
TOTAL	87,339,410	100.0%	13,949	100.0%
where of Nominee-registered	1,972,103	2.3%	10	7.0%

SHAREHOLDINGS BY SECTOR	Number		Number
	of shares	%	of shareholders	%
Companies	44,960,024	51.5%	474	3.4%
Financial and insurance institutions	2,106,752	2.4%	12	0.1%
Public sector organizations	27,410	0.0%	2	0.0%
Households	38,241,457	43.8%	13,409	96.1%
Non-profit organizations	25,650	0.0%	11	0.1%
Foreign countries	1,978,117	2.3%	31	0.2%
TOTAL	87,339,410	100.0%	13,949	100.0%
where of Nominee-registered	1,972,103	2.3%	10	0.1%

KPMG Oy Ab Kauppurienkatu 10 B 90100 OULU

This document is an English translation of the Finnish auditor's report. Only the Finnish version of the report is legally binding.

Auditor's Report

To the Annual General Meeting of Lehto Group Plc

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Lehto Group Plc (business identity code 2235443-2) for the year ended 31 December 2023. The financial statements comprise the consolidated balance sheet, statement of comprehensive income, statement of changes in equity, cash flow statement and notes, including a summary of material accounting policies, as well as the parent company's balance sheet, income statement, cash flow statement and notes.

In our opinion

the consolidated financial statements give a true and fair view of the group's financial position, financial performance and cash flows in accordance with IFRS Accounting Standards as adopted by the EU
the financial statements give a true and fair view of the parent company's financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements.

Our opinion is consistent with the additional report submitted to the Audit Committee.

Basis for Opinion

We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.

We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical

responsibilities in accordance with these requirements.

In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in note 7 to the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Emphasis of matter – preparation of financial statements on a non-going concern basis

We draw attention to the accounting policies that describe the preparation of the consolidated and parent company financial statements on a non-going concern basis. After the end of the financial year on 8 February 2024, Lehto Group Plc's operational subsidiaries Lehto Asunnot Oy, Lehto Tilat Oy ja Lehto Korjausrakentaminen Oy were declared bankrupt. The bankrupt companies cover practically all of Lehto's housing and business premises construction businesses and thus account for the majority of the Lehto Group's net sales. The corporate restructuring proceedings of Lehto Group Plc were initiated based on the decision of the District Court on February 2024.

The covenant terms of the company's key RCF financing agreement were not met on the balance sheet date. The liabilities and obligations related to this financing agreement will be taken into account in the company's restructuring programme. In addition, the company has not been able to comply with all of the terms and conditions set out in the convertible bond. Any amendments to the convertible bond will also be dealt with as part of the company's restructuring proceedings.

The company will not be able to continue operations without the sale of assets, new financing or new cash-generating business. These factors cast significant doubt on the company's ability to continue as a going concern and to meet its payments over the next 12 months. The adequacy of cash resources will be affected, in particular, by the proceeds from the sale of assets, the cash receipts and payments associated with new business and the timetable for starting up the business, the financing to be obtained for the new business and the impact of the decisions taken in the parent company's restructuring proceedings.

The parent company's equity has turned negative and the corresponding notice to the Trade Register has been filed on 15 March 2024, which has been registered on 19 April 2024.

The audit opinion has not been qualified due to aforementioned issues.

Materiality

The scope of our audit was influenced by our application of materiality. The materiality is determined based on our professional judgement and is used to determine the nature, timing and extent of our audit procedures and to evaluate the effect of identified misstatements on the financial statements as a whole. The level of materiality we set is based on our assessment of the magnitude of misstatements that, individually or in aggregate, could reasonably be expected to have influence on the economic decisions of the users of the financial statements. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for qualitative reasons for the users of the financial statements.

Key Audit Matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. The significant risks of material misstatement referred to in the EU Regulation No 537/2014 point (c) of Article 10(2) are included in the description of key audit matters below.

We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud.

Presentation in the consolidated financial statements of the subsidiaries declared bankrupt after the end of the financial year and measurement of these assets

(Refer to Accounting principles for the consolidated financial statements and note 32 to the consolidated financial statements)

The Group's operational subsidiaries Lehto Asunnot Oy, Lehto Tilat Oy ja Lehto Korjausrakentaminen Oy were declared bankrupt after the end of the financial year on 8 February 2024.
The income statement and balance sheet items of the bankrupt subsidiaries have been incorporated into the consolidated financial statements at 31 December 2023. As a result of the bankruptcy, the Group lost control over the companies..
The assets of the bankrupt companies are measured at no more than the total liabilities of the companies, considering also the impacts of the impairment due to the loss of receivables realisable by the Group in bankruptcy. Group goodwill (EUR 4.6 million) was fully allocated to the business of the bankrupt companies and has therefore been fully written down as an impairment loss.

The key audit matter How the matter was addressed in the audit

We assessed the presentation of bankrupt companies in the consolidated financial statements against the standards for the preparation of financial statements.
We considered the measurement of the assets of the companies in bankruptcy and the appropriateness of the impairment losses.

Subsidiary shares and receivables from group companies in the parent company's balance sheet

(Refer to parent company balance sheet, accounting principles for the financial statements and notes)

The cost of the subsidiary shares on the parent company's balance sheet (EUR 64.5 million) and the receivables from the bankrupt companies have been fully expensed.
The receivables from the non-bankrupt subsidiaries amount to EUR 13.9 million.
The parent company's corporate restructuring proceedings and the restructuring programme may have a negative impact on the subsequent measurement of the assets shown in the parent company's balance sheet.
The key audit matter How the matter was addressed in the audit
- We assessed the measurement bases for the parent company's investments in subsidiaries and the receivables from group companies, the impairment losses recognised, and their presentation in the financial statements.

Responsibilities of the Board of Directors and the CEO for the Financial Statements

The Board of Directors and the CEO are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the CEO are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Board of Directors and the CEO are responsible for assessing the parent company's and the group's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so.

Auditor's Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

— Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud

is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company's or the group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of the Board of Directors' and the CEO's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company's or the group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Other Reporting Requirements

Information on our audit engagement

We were first appointed as auditors by the Annual General Meeting for the financial year ended 31 December 2013 and our appointment represents a total period of uninterrupted engagement of 11 years. Lehto Group Plc became a public interest entity on 28 April 2016.

Other Information

The Board of Directors and the CEO are responsible for the other information. The other information comprises information included in the report of the Board of Directors and in the Annual Report, but does not include the financial statements and our auditor's report thereon. We obtained the report of the Board of Directors prior to the date of this auditor's report, and the Annual Report is expected to be made available to us after that date. Our opinion on the financial statements does not cover the other information.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.

Lehto Group Plc Auditor's Report for the financial year 1.1.–31.12.2023

In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations.

If, based on the work we have performed on the report of the Board of Directors, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Oulu, 29 April 2024

KPMG Oy Ab

PEKKA ALATALO Authorised Public Accountant, KHT

AI Terminal

Lehto Group Oyj

3325_10-k-afs_2024-04-30_ef63b2fb-a190-402d-b509-c8edf82bec6f.pdf

Financial Statements 2023

Contents

CONSOLIDATED CASH FLOW STATEMENT, IFRS 1 000 EUR

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY, IFRS 1 000 EUR

ACCOUNTING PRINCIPLES FOR THE CONSOLIDATED FINANCIAL STATEMENTS

GROUP BASIC INFORMATION

CONTINUITY OF OPERATIONS

ACCOUNTING PRINCIPLES FOR THE FINANCIAL STATEMENTS

Accounting principles requiring management judgement and the main factors of uncertainty affecting the estimates

Stage of completion revenue recognition

Inventories

Provisions

Goodwill impairment testing

Deferred tax assets

Basis of preparation

Principles of consolidation

Non-current assets held for sale and discontinued operations

Property, plant and equipment

Goodwill

Other intangible assets

Other intangible assets

Investment properties

Impairment of intangible assets and property, plant and equipment

Associated companies

Inventories

Financial assets and liabilities

Financial assets

Financial assets recognised at amortised cost

Financial assets at fair value through profit or loss

Financial liabilities

Capitalisation of borrowing costs

Provisions

Leases

Group as lessee

Group as lessor

Sale and leaseback

Revenue recognition principles

Performance obligations

Transaction price

Revenue recognition principles related to construction projects

Sales recognised as revenue over time

Sales recognised as revenue upon delivery

Revenue recognition principles related to other incomes

Sales recognised as rental income

Recognition of interest and dividend income

Operating result

Employee benefits

Pension obligations

Share-based payments

Related party transactions

Income taxes

New and revised standards and interpretations

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1 000 EUR

1. OPERATING SEGMENTS

Main customers

2. DISCONTINUED OPERATIONS AND NON-CURRENT ASSTES HELD FOR SALE

Discontinued operations

Non-current assets held for sale

3. NET SALES

4. OTHER OPERATING INCOME

5. EMPLOYEE BENEFIT EXPENSES

6. DEPRECIATION AND IMPAIRMENTS

7. OTHER OPERATING EXPENSES

8. FINANCIAL INCOME AND EXPENSES

9. INCOME TAXES

Reconciliation of the tax expense in the income statement and taxes

10. SHARE-BASED KEY FIGURES

11. GOODWILL

12. OTHER INTANGIBLE ASSETS

13. PROPERTY, PLANT AND EQUIPMENT

14. INVESTMENT PROPERTIES

Fair values of investment properties

14. INVESTMENTS IN ASSOCIATED COMPANIES

16. OTHER FINANCIAL ASSETS

17. NON-CURRENT RECEIVABLES

18. DEFERRED TAX ASSETS AND LIABILITIES

19. INVENTORIES