Etteplan Oyj

Untitled ETTEPLAN OYJ BUSINESS ID 0545456-2 Consolidated Financial Statements 1 January – 31 December 2023 2 CONTENTS Board of Directors’ Review January 1 – December 31, 2023 ............................................................................................... 5 Consolidated Financial Statements .......................................................................................................................................... 17 Consolidated Statement of Comprehensive Income ...................................................................................................... 17 Consolidated Statement of Financial Position .................................................................................................................. 18 Consolidated Statement of Cash Flows ............................................................................................................................. 19 Consolidated Statement of Changes in Equity ................................................................................................................. 20 Notes to the Consolidated Financial Statements ............................................................................................................. 21 1 General information ......................................................................................................................................................... 21 2 A summary of significant accounting policies ............................................................................................................ 21 3 Critical accounting estimates and management judgment based decisions ...................................................... 29 4 Management of financial risks ....................................................................................................................................... 30 5 Business combinations .................................................................................................................................................... 34 6 Segment reporting ............................................................................................................................................................ 38 Notes to Consolidated Comprehensive Income ........................................................................................................... 39 7 Revenue from contracts with customers .................................................................................................................... 39 8 Other operating income .................................................................................................................................................. 40 9 Non-recurring items ......................................................................................................................................................... 40 10 Materials and Services .................................................................................................................................................. 40 11 Number of personnel and employee benefits expenses ...................................................................................... 40 12 Other operating expenses............................................................................................................................................ 42 13 Audit fees ......................................................................................................................................................................... 43 14 Financial income ............................................................................................................................................................. 43 15 Financial expenses ......................................................................................................................................................... 43 16 Translation differences recognized in income statement .................................................................................... 43 17 Income taxes ................................................................................................................................................................... 44 18 Earnings per share ......................................................................................................................................................... 45 Notes to Consolidated Balance Sheet ............................................................................................................................ 45 19 Goodwill and other intangible assets ........................................................................................................................ 45 20 Tangible assets ............................................................................................................................................................... 46 21 Financial instruments by measurement category .................................................................................................. 48 22 Impairment testing ......................................................................................................................................................... 49 23 Inventory .......................................................................................................................................................................... 51 24 Trade and other receivables ....................................................................................................................................... 51 25 Equity ................................................................................................................................................................................ 51 26 Share-based payments ................................................................................................................................................. 52 27 Interest-bearing liabilities ............................................................................................................................................. 54 3 28 Other non-current liabilities......................................................................................................................................... 55 29 Trade and other payables ............................................................................................................................................ 55 30 Deferred taxes ................................................................................................................................................................ 56 Other notes to the Consolidated Financial Statements .............................................................................................. 57 31 Pledges, mortgages and guarantees .......................................................................................................................... 57 32 Related-party transactions .......................................................................................................................................... 57 33 Events after the balance sheet date .......................................................................................................................... 59 Parent Company’s Financial Statements ................................................................................................................................ 60 Parent Company’s Income Statement ................................................................................................................................ 60 Parent Company’s Balance Sheet ........................................................................................................................................ 61 Parent Company’s Cash Flow Statements ........................................................................................................................ 62 Notes to the Financial Statements of the Parent Company .......................................................................................... 63 Parent company’s accounting policies ........................................................................................................................... 63 Notes to the Income Statement, parent company ....................................................................................................... 64 1 Revenue .............................................................................................................................................................................. 64 2 Other operating income .................................................................................................................................................. 64 3 Number of personnel and staff costs .......................................................................................................................... 64 4 Audit fees............................................................................................................................................................................ 64 5 Other operating expenses .............................................................................................................................................. 65 6 Financial income ............................................................................................................................................................... 65 7 Financial expenses ........................................................................................................................................................... 65 8 Appropriations .................................................................................................................................................................. 65 9 Income taxes...................................................................................................................................................................... 65 Notes to the Balance Sheet, parent company............................................................................................................... 66 10 Intangible assets ............................................................................................................................................................. 66 11 Tangible assets ............................................................................................................................................................... 67 12 Investments ..................................................................................................................................................................... 67 13 Non-current receivables ............................................................................................................................................... 68 14 Current receivables ....................................................................................................................................................... 68 15 Cash and cash equivalents .......................................................................................................................................... 68 16 Equity ................................................................................................................................................................................ 69 17 Accumulated appropriations ....................................................................................................................................... 69 18 Non-current liabilities .................................................................................................................................................... 70 19 Current liabilities ............................................................................................................................................................ 70 20 Pledged, mortgages and guarantees ......................................................................................................................... 70 21 Events after the balance sheet date .......................................................................................................................... 71 Signature of Financial Statements ................................................................................................................................... 72 4 Auditor’s note ....................................................................................................................................................................... 72 Auditor’s Report ................................................................................................................................................................... 73 Independent Auditor’s Reasonable Assurance Report on Etteplan Oyj’s ESEF Financial Statements ............ 78 List of accounting books and types of vouchers .......................................................................................................... 80 This document is an English translation of the Finnish financial statements. Only the Finnish version of the report is legally binding. 5 Board of Directors’ Review January 1 – December 31, 2023 OPERATING ENVIRONMENT The majority of Etteplan’s customers are industrial companies with several global megatrends currently influencing the devel- opment of their operating environment. For example, structural changes in the global economy, urbanization, climate change and sustainability are all influencing companies, national economies and people’s lives. In addition to these megatrends, the engineering industry is influenced primarily by three trends: digitalization, accelerating technological development and the growing need for highly competent employees. In particular, the application of artificial intelligence in various applications is accelerating. These trends are creating a need for intelligent and energy-efficient solutions in all industrial sectors. The trend of centralizing service purchasing continues as customer demand becomes increasingly international, presenting growth opportunities for global engineering companies. The continued trend of service outsourcing has a positive effect on the industry’s development and it supports Etteplan’s growth. The competition for employees has eased slightly in the prevailing market situation, but there is continued competition for specialized experts in certain areas. The most important factor affecting Etteplan’s business is the global development of the machinery and metal industry. In- creased geopolitical tensions are maintaining uncertainty globally. Uncertainty and the rise in interest rates caused by inflation have reduced our customers’ willingness to invest and weakened the demand situation in certain customer industries. Never- theless, investments related to the defense industry, energy efficiency and accelerating the green transition are continuing to grow. There are fluctuations in demand, and the year 2024 begins in an uncertain and slightly weaker demand situation. The markets expect interest rates to fall in 2024, and we believe this will boost investments and improve the demand situation to a good level. DEVELOPMENT OF DEMAND BY CUSTOMER INDUSTRY The elevated geopolitical tensions affect demand in all customer industries. Demand in the Forest, Pulp and Paper industry weakened slightly. Demand in the Energy industry was at a good level, as was demand in the Defense industry. Demand in the Mining industry weakened slightly. Demand in the Lifting and Hoisting industry decreased slightly. Demand in the ICT industry was at a weak level. Demand in the Automotive and Transportation industry was at a good level. Demand in the Chemical in- dustry was at a moderate level. DEVELOPMENT OF DEMAND IN ETTEPLAN’S OPERATING COUNTRIES Growing geopolitical tensions, inflation and rising interest rates have increased uncertainty in all of our operating countries in Europe, and several European countries are in a slight recession, which is reflected in demand. Based on order development in late 2023, it is estimated that the revenue growth of technology industry companies in Finland will stop or even turn to a de- crease. Geopolitical tensions have also increased uncertainty in China, as a result of which Western investments are partly shifting elsewhere, which weakens the demand situation. REVENUE The weakening of demand due to the uncertainty of the market, the challenges of the operating environment and the slowing of customer decision-making affected the revenue accumulation for the entire year. Etteplan’s revenue increased by 2.8 percent and was EUR 360.0 million (1-12/2022: EUR 350.2 million). Revenue increased by 4.7 percent at comparable exchange rates. The organic growth of revenue was 0.5 percent. At comparable exchange rates, organic growth was 2.4 percent. Revenue from key accounts decreased by 1.2 percent. 6 Etteplan’s business is subject to periodic fluctuation due to the number of working days, holiday seasons and the timing of product development and investment projects in customer companies, which mainly take place in the spring and the latter part of the year. The revenue of acquired companies is not included in organic revenue growth for 12 months following their acquisition. LAE Engineering GmbH is included in Etteplan’s figures starting from July 1, 2023, and High Vision Engineering Sweden AB starting from September 1, 2023. RESULT The weakening of demand due to the uncertainty of the market, the challenges of the operating environment and the slowing of customer decision-making affected the result for the entire year. Operating profit (EBITA) decreased by 8.9 percent and was EUR 30.9 (33.9) million, or 8.6 (9.7) percent of revenue. Operating profit (EBIT) decreased by 10.8 percent and was EUR 25.5 (28.6) million, or 7.1 (8.2) percent of revenue. The combined effect of non-recurring items on operating profit (EBITA) and operating profit (EBIT) was EUR -1.7 (-1.0) million. The non-recurring items consisted of expenses related to organizational restructuring and acquisitions. The net amount of financial income and financial expenses came to EUR -4.7 (-6.2) million. The Semcon offer had an effect of EUR -5.1 million on financial expenses in the comparison period. The general increase in interest rates has affected financial costs. Profit before taxes was EUR 20.8 (22.4) million. Taxes in the income statement amounted to 20.0 (18.9) percent of the result before taxes. The amount of taxes was EUR 4.2 (4.2) million. The profit for was EUR 16.6 (18.2) million. Earnings per share were EUR 0.66 (0.73). Equity per share was EUR 4.55 (4.25) at the end of December. Return on capital em- ployed (ROCE) before taxes was 13.3 (15.9) percent. CASH FLOW AND FINANCIAL POSITION Operating cash flow improved and was EUR 35.6 (28.1) million. Cash flow after investments was EUR 28.7 (2.6) million. Operat- ing cash flow accrues unevenly over the four quarters of the year due to periodic fluctuation in business. The Group’s cash and cash equivalents stood at EUR 23.4 (19.6) million at the end of December. The Group’s interest-bearing liabilities amounted to EUR 86.6 (90.6) million at the end of December. The amount of interest- bearing liabilities was affected by acquisitions made by the Group. Lease liabilities represented EUR 21.4 (21.6) million of inter- est-bearing liabilities. The total of unused short-term credit facilities stood at EUR 14.1 (12.6) million. Total assets on December 31, 2023, were EUR 284.6 (281.1) million. Goodwill on the balance sheet was EUR 109.7 (105.4) mil- lion. At the end of December, the equity ratio was 40.9 (38.2) percent. CAPITAL EXPENDITURE The Group’s gross investments were EUR 21.1 (40.9) million. The gross investments mainly consisted of acquisitions, increases in lease liabilities and equipment purchases. PERSONNEL The number of personnel stood at 3,902 (3,929) employees at the end of December 2023. The number of personnel decreased by 0.7 percent compared to the end of 2022. Due to the unpredictable market situation, we have slowed down recruitment and implemented temporary layoffs during the review period. A total of 72 employees in Finland were temporarily laid off at the end of December 2023. 7 The Group employed 3,949 (3,936) people on average in January-December 2023. The number of people employed by the Group outside of Finland increased and stood at 1,965 (1,941) at the end of December, representing 50 (49) percent of the total number of employees. BUSINESS REVIEW The implementation of Etteplan’s strategy, which was published in December 2019 and titled Increasing value for customers, was delayed due to COVID-19. The strategy established for 2020-2022 has, nevertheless, proved its effectiveness, and the targets have steered Etteplan in the right direction. Consequently, the Board of Directors decided on April 5, 2023, to extend the strategy period to 2023-2024. In connection with this decision, the company updated its financial targets for 2023-2024. The targets will be achieved through strong execution of the strategy. Updated financial targets for 2023-2024: • Growth: revenue more than EUR 500 million in 2024 (no change) • International growth: The share of revenue coming from outside Finland is at least 55 percent in 2024 (target % changed, previous target: 50 percent in 2024) • Managed Services: The share of revenue from Managed Services is 75 percent (Managed Services Index, MSI) in 2024 (no change) • Protability: operating prot (EBITA) over 10 percent of revenue (target changed, previous target: 10 percent) Digitalization and the growing need for talented employees are key industry trends that affect the operations of Etteplan and its customers. The importance of sustainability has grown even more, and it has an essential role in the business of Etteplan and its customers. The key objective of Etteplan’s strategy is to create even higher value for customers and to support them in the industrial change and in the development of sustainable business. The three key elements of our strategy are customer value, service solutions and success with people. The most important focus areas of growth are the continuous development of service solutions and increasing technology solutions in the offering, as well as digitalization and international growth. Etteplan’s customers are investing in digitalization and intelligent devices, which presents significant growth opportunities for the company. In recent years, Etteplan has also invested in digitalization and software development with the aim of expanding its service offering and competence capital in order to respond to the digitalization needs of customers. At the same time, we are investing in organic growth as well as the development of our own business and increasing its rate of digitalization. We continue the development of technology solutions as part of our service solutions. We are strengthening our expertise in areas such as additive manufacturing, digital twin solutions, and other digital technologies. The use of artificial intelligence in various applications is accelerating, and we have launched a development program to use artificial intelligence in our business. Etteplan’s target is to achieve revenue of over EUR 500 million in 2024. We seek growth organically and by acquisitions. Etteplan’s goal is to also grow internationally, provide solutions from all of the company’s service areas in all of its market areas and increase the share of revenue accumulated outside Finland to at least 55 percent. Revenue accumulated outside Finland amounted to EUR 177.6 (169.1) million, or 49 (48) percent of the Group’s total revenue. Revenue from key accounts decreased by 1.2 percent. The Chinese market slowed down in the fourth quarter due to geopolitical tensions, and we have had to adapt our business due to the uncertain situation. The number of hours sold in the Chinese market decreased by 11.0 percent. Etteplan’s target is to increase the share of revenue represented by Managed Services to 75 percent. The share of revenue represented by Managed Services stood at 68 (66) percent. The growth in the share of Managed Services enhances Etteplan’s capacity management and improves profitability. Etteplan’s operating profit (EBITA) target is over 10 percent of revenue. ACQUISITIONS In September 2023, Etteplan acquired High Vision Engineering Sweden AB, a company that provides engineering services across various phases of product development for the automotive and manufacturing industry in western Sweden. As a result of the acquisition, 40 High Vision Engineering employees transferred to Etteplan. 8 In July 2023, Etteplan acquired LAE Engineering GmbH, a German engineering company with approximately 70 employees that offers specialized expertise across electrical engineering planning, power generation, building and industrial automation, as well as information management systems, and industrial IT. LAE Engineering is now part of our Engineering Solutions service area. Acquisitions in 2022: • June 2022 - DDCom B.V., the Netherlands, which employs approximately 15 experts in 3D content-based animation and visu- alization services related to technical documentation. • May 2022 - LCA Consulting Oy, a provider of high-quality expert services, founded in 2013 as a spin-off at LUT University. Based in Lappeenranta, Finland, LCA Consulting employs 11 experts focusing on life cycle assessment of companies, products and production, carbon footprinting and expert training. • February 2022 - Syncore Technologies AB, a Sweden-based technology services company focusing on advanced embedded systems, which employs 46 experts in embedded systems. • January 2022 - Cognitas GmbH, a German technical information life cycle management company. Cognitas employs 200 pro- fessionals in consulting and technical information authoring and management. GOVERNANCE GENERAL MEETING Etteplan Oyj’s Annual General Meeting was held on April 5, 2023. The Annual General Meeting approved the financial state- ments and discharged the members of the Board of Directors and the President and CEO from liability for the financial year 2022. The Annual General Meeting resolved, in accordance with the proposal of the Board of Directors, to pay a dividend of EUR 0.36 per share for the financial year 2022 and to leave the remaining funds in unrestricted equity. The dividend decided on by the Annual General Meeting was paid to the shareholders registered on the record date in the shareholders’ register main- tained by Euroclear Finland Ltd. The record date for the dividend payout was April 11, 2023, and the date of dividend payout was April 18, 2023. In accordance with the proposal of Etteplan’s Nomination and Remuneration Committee, the Annual General Meeting resolved that the Board of Directors shall consist of seven members. In accordance with the proposal of the Nomination and Remunera- tion Committee, the Annual General Meeting resolved on the annual remuneration of the members of the Board of Directors, the Chairman of the Board and the members of the Nomination and Remuneration Committee and the Audit Committee. In accordance with the proposal of the Nomination and Remuneration Committee of the Board of Directors, the Annual Gen- eral Meeting re-elected Matti Huttunen, Robert Ingman, Päivi Lindqvist, Leena Saarinen and Mikko Tepponen as members of the Board of Directors. The Annual General Meeting further elected Sonja Sarasvuo and Tomi Ristimäki as new members of the Board of Directors. KPMG Oy Ab, Authorized Public Accountants, with Authorized Public Accountant Kim Järvi as the main re- sponsible auditor, was elected as the company’s auditor. In its organization meeting subsequent to the Annual General Meeting, the Board of Directors of Etteplan Oyj elected Robert Ingman as Chairman of the Board of Directors. Matti Huttunen was elected the Chairman and Robert Ingman and Mikko Teppo- nen as members of the Nomination and Remuneration Committee of Etteplan Oyj. Päivi Lindqvist was elected as the Chairman and Leena Saarinen, Sonja Sarasvuo and Tomi Ristimäki as members of the Audit Committee of Etteplan Oyj. BOARD AUTHORIZATIONS The Annual General Meeting held on April 5, 2023, decided to authorize the Board of Directors to resolve on the repurchase of the company’s own shares in one or more tranches using the company’s unrestricted equity. A maximum of 2,000,000 shares in the company may be repurchased. The company may deviate from the obligation to repurchase shares in proportion to the shareholders’ current holdings, i.e. the Board has the right to decide on a directed repurchase of the company’s own shares. 9 The authorization includes the right for the Board to resolve on the repurchase of the company’s own shares through a tender offer made to all shareholders on equal terms and conditions and at the price determined by the Board, or in public trading organized by the Nasdaq Helsinki Ltd at the market price valid at any given time, so that the company’s total holding of own shares does not exceed ten (10) percent of all the shares in the company. The minimum price for the shares to be repurchased is the lowest market price quoted for the shares in the company in public trading and, correspondingly, the maximum price is the highest market price quoted for the shares in the company in public trading during the validity of the authorization. Should the shares in the company be repurchased in public trading, such shares will not be purchased in proportion to the shareholders’ current holdings. In that case, there must be a weighty financial reason for the company to repurchase its own shares. The shares may be repurchased in order to be used as consideration in potential acquisitions or in other structural arrangements. The shares may also be used for carrying out the company’s incentive schemes for its personnel. The repur- chased shares may be retained by the company, invalidated or transferred further. The repurchase of the company’s own shares will reduce the non-restricted equity of the company. The authorization is valid for 18 months from the date of the resolution of the Annual General Meeting starting on April 5, 2023, and ending on October 4, 2024. The authorization replaces the corresponding previous authorization. The Annual General Meeting held on April 5, 2023, decided to authorize the Board of Directors to resolve on the issuance of a maximum of 2,500,000 shares through issuance of shares, option rights or other special rights entitling to shares under Chap- ter 10, Section 1 of the Finnish Companies Act in one or more issues. The authorization includes the right to decide to issue either new shares or shares held by the company. The authorization includes the right to deviate from the existing shareholders’ pre-emptive subscription right as set forth in Chapter 9, Article 3 of the Companies Act. Therefore, the Board of Directors has the right to direct the share issue, or issuance of the option rights or other special rights conferring entitlement to shares. The authorization also includes the right to decide on all the terms of share issue, option rights or other special rights conferring entitlement to shares. The authorization there- fore includes the right to determine share subscription prices, persons entitled to subscribe the shares and other terms and conditions applicable to the subscription. In order to deviate from the shareholders’ pre-emptive subscription right, the com- pany must have a weighty financial reason such as financing of a company acquisition, other arrangement in connection with the development of the company’s business or equity or an incentive scheme to the personnel. In connection with the share issuance, the Board of Directors is entitled to decide that the shares may be subscribed against contribution in kind or other- wise under special terms and conditions. The authorization includes the right to determine whether the subscription price will be entered into the share capital or into the unrestricted equity fund. The authorization is valid for 18 months from the date of the resolution of the Annual General Meeting starting on April 5, 2023, and ending on October 4, 2024. SHARES Etteplan’s shares are listed in Nasdaq Helsinki Ltd’s Mid Cap market capitalization group in the Industrials sector under the ETTE ticker. The company has one series of shares. All shares confer an equal right to a dividend and the company’s funds. The company’s share capital on December 31, 2023, was EUR 5,000,000.00 and the total number of shares was 25,200,793. TRADING IN SHARES The number of Etteplan Oyj shares traded in January-December was 383,929 (1-12/2022: 517,686), for a total value of EUR 6.08 (8.0) million. The share price low was EUR 12.40, the high EUR 18.65, the average EUR 15.84 and the closing price EUR 13.80. Market capitalization on December 31, 2023, was EUR 346.38 (365.61) million. On December 31, 2023, Etteplan had 3,584 (3,696) shareholders. OWN SHARES On May 11, 2023, Etteplan Oyj’s Board of Directors decided to initiate a share repurchase program of own shares in accord- ance with the authorization given to it by the Annual General Meeting on April 5, 2023, according to which the number of re- purchased shares will not exceed 30,000 shares and the corresponding number of voting rights. On December 20, 2023, Etteplan Oyj announced it had completed the repurchase program of its own shares. The repurchases of shares began on June 2, 2023, and ended on December 19, 2023. During that period, the company acquired a total of 30,000 shares and number of voting rights at an average price of EUR 16.2075 in public trading on Nasdaq Helsinki Ltd for the 10 market price quoted at the time of the repurchase, as provided by the regulations on public trading of shares. The repur- chased shares are used for carrying out the company’s incentive plan for its key personnel, as consideration in potential ac- quisitions or in other structural arrangements. The repurchased shares may be retained by the company, invalidated or trans- ferred further. In 2023, Etteplan repurchased a total of 30,000 of the company’s own shares. The company held 100,921 of its own shares at the end of December 2023 (December 31, 2022: 159,046), corresponding to 0.40 percent of all shares and voting rights. FLAGGINGS Etteplan Oyj received no flagging notices in 2023. ETTEPLAN OYJ’S INCENTIVE PLAN FOR KEY PERSONNEL 2023-2025 The Board of Directors of Etteplan Oyj decided on April 20, 2023, to establish a new share incentive plan for the Group’s key personnel. The aim of the share incentive plan is to combine the objectives of the shareholders and the key personnel in order to increase the value of Etteplan, to commit the key personnel to the company, and to offer them a competitive reward plan based on earning the company shares. The plan includes one earning period which includes the calendar years 2023-2025. The plan is in line with Etteplan’s strategy and supports reaching the company’s financial targets. The earnings criteria are Etteplan Group’s revenue increase and earnings per share development. The potential reward will be paid partly in Etteplan’s shares and partly in cash after the end of the earning period. The cash portion is intended to cover taxes and tax-related costs arising from the reward to the key personnel. Approximately 35 people belong to the plan, including the Management Group of Etteplan. The rewards to be paid on the ba- sis of the plan will correspond to the value of a maximum total of 300,000 Etteplan Oyj shares (including also the portion to be paid in cash). The shares to be paid out as potential rewards will be transferred from the shares held by the company or shares acquired from the market, and therefore the incentive plan will have no diluting effect on the share value. EVENTS AFTER THE REVIEW PERIOD JANUARY 1, 2024: ETTEPLAN ACQ UIRES STRONGIT APS, A DANISH CON SULTANCY COMPANY – A DI- RECT SHARE IS SUE TO T HE OWNERS OF THE ACQUIRED COMPANY AS PART OF THE PURCHAS E PRICE On January 8, 2024, Etteplan issued a stock exchange release announcing the acquisition of STRONGIT ApS. As part of the financing of the transaction, Etteplan Oyj’s Board of Directors, at its meeting held on January 8, 2024, made a conditional deci- sion on a share issue based on the share issue authorization given to the Board of Directors by the Annual General Meeting on April 5, 2023. The directed share issue is related to the acquisition of STRONGIT ApS. In accordance with the terms of the transaction, the purchase price will be paid through a share issue to the sellers and cash. The contract of sale, which was a condition of the decision, was on January 8, 2024, and at the same time the sellers subscribed for 150,000 new Etteplan shares as a part payment for the purchase amount. The subscription price per share paid for the shares was EUR 14.048. ON JANUARY 1 8, 2024, ETTEPLAN ISSUED A PROFIT WARNING: A CCOR DING TO TH E PRELI MINARY RE- SULT , ETTEPLAN’S REVENUE FOR 2023 IS ABOUT EUR 359 MILLION AND THE OPERATING PROFIT (EBIT) IS ABOUT EUR 25 .4 MILLION. In its interim report published on October 31, 2023, Etteplan estimated its revenue for 2023 to be EUR 355-370 (2022: 350.2) million and the operating profit (EBIT) for 2023 to be EUR 26-28.5 (2022: 28.6) million. According to the profit warning issued on January 18, 2023, Etteplan’s revenue in 2023 is in accordance with the guidance and, according to the preliminary results, is approximately EUR 359 million. The operating profit (EBIT) for 2023 falls short of the guidance due to the weaker-than-expected business development in the last quarter of the year and, according to the prelimi- nary result, is approximately EUR 25.4 million. 11 Etteplan’s worse-than-expected profit level was affected by the weakening of the demand situation, the high number of sick leaves at the end of the year and the larger-than-expected number of holidays taken at Christmas time. In addition, the result was weakened by corrections in costs bookings. JANUARY 31, 2024: ETTEPLAN LAUNCHES RENEWED BRAND TO REFLECT ITS ASPIRATIONS AS A LEADING GLOBAL TECH- NOLOGY SERVICE COMPANY Etteplan launches renewed brand and starts the next chapter on its journey. During the 40 years Etteplan has changed from a traditional engineering company to a modern technology service company. At the same time Etteplan has expanded its opera- tions from Finland to global markets and operates now in eight countries with over 80 offices. This renewal goes beyond visual identity, our new logo and updated colors. It’s about our commitment to revised values and a culture of collaborative partnerships and technology leadership, innovation and creativity. At Etteplan, we bring people and technology together to change things for the better. OPERATING RISKS AND UNCERTAINTY FACTORS Etteplan’s financial results are exposed to a number of strategic, operational and financial risks. The uncertainties caused by the general economic development continue to constitute risks for Etteplan’s business. The possibility of changes in custom- ers’ business operations is a significant risk to Etteplan’s operations. The company’s operations are based on skilled staff. The availability of competent professionals is an important factor for ensuring profitable growth and operations. The availability of personnel, particularly in certain expert disciplines, continues to present a business risk. The unstable geopolitical situation makes the future more difficult to predict and continues to create uncertainty in the mar- kets, maintains inflation and has a negative impact on customers’ operations and supply chains. Etteplan assesses business risks annually and actively monitors their development during the year. The focus of the assess- ment is particularly on monitoring changes in already identified risks, identifying new business risks and developing proactive risk management. The results of the assessment are presented in Etteplan’s Corporate Governance Statement. MARKET OUTLOOK 2024 The most important factor affecting Etteplan’s business is the global development of the machinery and metal industry. Con- tinued Russian aggression against Ukraine and the further elevation of geopolitical tensions due to the conflict in the Middle East have increased uncertainty globally. Uncertainty and the rise in interest rates caused by inflation have reduced our cus- tomers’ willingness to invest and weakened the demand situation in certain customer industries. Nevertheless, investments related to the defense industry, energy efficiency and accelerating the green transition are continuing to grow. There are fluc- tuations in demand, and the year 2024 begins in an uncertain and slightly weaker demand situation. The markets expect inter- est rates to fall in 2024, and we believe this will boost investments and improve the demand situation to a good level. FINANCIAL GUIDANCE 2024 Etteplan issues guidance for revenue and operating profit (EBIT) as a numerical range and issues the following estimate: Revenue in 2024 is as estimated to be EUR 375-415 (2023: 360.0) million, and operating profit (EBIT) in 2024 is estimated to be EUR 28-34 (2023: EUR 25.5 million). THE BOARD’S PROPOSAL FOR DISTRIBUTION OF 2023 PROFITS The parent company’s distributable shareholders’ equity according to the balance sheet on December 31, 2023, is EUR 78,343,980.19 The Board of Directors will propose to the Annual General Meeting, which will convene on April 9, 2024, that on the dividend payout date a dividend of EUR 0.30 per share be paid on the company’s externally owned shares, for a total amount of EUR 7,560,237.90 at most, and that the remaining profit be transferred to retained earnings. ANNUAL GENERAL MEETING 2024 12 Etteplan Oyj’s Annual General Meeting will be held on Tuesday, April 9, 2024. The summons to the AGM is published as a sepa- rate release. CORPORATE GOVERNANCE STATEMENT Etteplan publishes the Corporate Governance Statement for 2023 separately from the Board of Directors’ review. The state- ment is available on the Company’s website www.etteplan.com. STATEMENT OF NON-FINANCIAL INFORMATION Etteplan publishes the Statement of non-financial information for 2023 separately from the Board of Directors’ review. The statement is available on the Company’s website www.etteplan.com. 13 KEY FIGURES FOR FINANCIAL TRENDS KEY FIGURES FOR SHARES 14 NON-IFRS KEY FIGURES Etteplan presents non-IFRS key figures to supplement its consolidated financial statements which are prepared in accordance with IFRS. These key figures are designed to measure growth and provide insight into the company’s underlying operational performance. This section describes the most important non-IFRS key figures used by the Group. Formulas for key figures (IFRS and Non-IFRS) are presented at the end of this release. OPERATING PROFIT (EBITA) AND EBITA, % Operating profit (EBITA) is presented, because it reflects the Group’s operational performance better that Operating profit (EBIT). Operating profit (EBITA) does not include amortization of fair value adjustments at acquisitions. EBITA, % presents Oper- ating profit (EBITA) as a percentage share of revenue. The table below shows a reconciliation between Operating profit (EBITA) and Operating profit (EBIT). ORGANIC/UN-ORGANIC GROWTH AND GROWTH IN COMPARABLE CURRENCIES Organic (revenue) growth is presented in addition to total revenue growth, because it improves the comparability of revenue growth between periods by presenting the revenue growth without the effects of the last 12 months' acquisitions. Organic growth is calculated by comparing revenue between comparison periods excluding revenue from acquisitions that have taken place in the past 12 months. The revenue growth created by the last 12 months' acquisitions is presented as un-organic growth. Revenue growth in comparable currencies is presented, because it improves the comparability of revenue growth be- tween periods by presenting the revenue growth with comparable exchange rates. For the calculation of growth in compara- ble currencies, revenue for the current period is calculated by using the comparable period’s exchange rates. The figure is presented for Group revenue and organic growth. THE SHARE OF REVENUE REPRESENTED BY MANAGED SERVICES Etteplan measures the share of revenue represented by Managed Services (MSI Index). Managed Ser-vices are service solu- tions, such as projects and continuous services, where the customer pays for results instead of resources. The share of reve- nue represented by Managed Services is presented, because it describes Etteplan's strategy implementation and explains, in part, the changes in profitability. Etteplan Oyj Board of Directors EUR 1,000 2023 2022 Operating profit (EBIT) 25,540 28,622 Amortization on fair value adjustments at acquisitions 5,344 5,293 Operating profit (EBITA) 30,883 33,915 15 FORMULAS FOR THE KEY FIGURES IFRS KEY FIGURES NON-IFRS KEY FIGURES Basic earnings per share = (Profit for the review period attributable to equity holders of the parent company) x 100 Issue adjusted average number of shares during the review period Diluted earnings per share = (Profit for the review period attributable to equity holders of the parent company adjusted with dilutive effect) x 100 Issue adjusted average number of shares during the review period adjusted with dilutive effect Operating profit (EBITA) = Operating profit (EBIT) + amortization on fair value adjustments in acquisitions Organic growth = (Revenue current year - Revenue comparison year - Revenue from acquirees current year) x 100 Revenue comparison year Revenue growth from key accounts = (Revenue from key accounts current year - Revenue from key accounts comparison year) x 100 Revenue from key accounts comparison year The share of revenue represented by Managed Services = Revenue from Managed Services x 100 Revenue Return on equity (ROE), % = Profit for the financial year x 100 (Equity, total) average Return on capital employed (ROCE), before taxes, % = (Profit before taxes + Financial expenses) x 100 (Total equity and liabilities - non-interest bearing liabilities) average Equity ratio, % = Equity, total x 100 Total equity and liabilities - Advances received Gross investments = Total investments made to non-current assets including acquisitions and capitalized development costs Net gearing, % = (Interest-bearing liabilities - Cash and cash equivalents) x 100 Equity, total Equity per share = Equity, total Adjusted number of shares at the end of the year Market capitalization = Number of outstanding shares at the end of the year x last traded share price of the year Dividend per share = Dividend for the financial year Adjusted number of shares during the financial year Dividend as percentage of earnings = Dividend per share x 100 Earnings per share Effective dividend yield, % = Dividend per share x 100 Adjusted last traded share price Price/earnings ratio (P/E) = Adjusted last traded share price Earnings per share Share price trend For each financial year, the adjusted low and high actual traded prices are given as well as the average price for the financial year adjusted for share issues. Average price = Total turnover of shares in euros Number of shares traded during the financial year Trend in share turnover, in volume and percentage figures The trend in turnover of shares is given as the number of shares traded during the financial year and as the percentage of traded shares relative to issued stock during the year. 16 BREAKDOWN OF SHAREHOLDINGS, DECEMBER 31, 2023 BREAKDOWN OF SHAREHOLDINGS BY SIZE CLASS BREAKDOWN OF SHAREHOLDINGS BY OWNER GROUP MAJOR SHAREHOLDERS Number of shares, pcs Number of shareholders Proportion of shareholders, % Number of shares Proportion of shares and votes, % 1-100 1,812 50.57 63,363 0.25 101-1,000 1,410 39.35 528,038 2.10 1,001-10,000 318 8.88 892,367 3.54 10,001-100,000 30 0.84 809,394 3.21 100,001-1,000,000 11 0.31 3,699,648 14.68 > 1,000,000 2 0.06 19,207,983 76.22 Total 3,583 100.00 25,200,793 100.00 Name of the sector Number of shareholders Number of shares Proportion of shares and votes, % National economy total (domestic sector) Companies 106 17,168,652 68.13 Financial and insurance institutions 22 2,950,970 11.71 Public sector entities 5 1,549,617 6.15 Households 3,414 2,419,034 9.60 Non-profit institutions 14 24,208 0.10 Foreigners 22 35,980 0.14 Nominee-registered shares 1,052,332 4.18 Total 3,583 25,200,793 100.00 Name Number of shares Proportion of shares and votes, % Ingman Group Oy Ab 16,670,000 66.15 Oy Fincorp Ab 2,537,983 10.07 Keskinäinen työeläkevakuutusyhtiö Varma 985,593 3.91 Tuori Klaus Tapani 309,134 1.23 Tuori Aino Mirjami 308,275 1.22 Keskinäinen Eläkevakuutusyhtiö Ilmarinen 298,311 1.18 Keskinäinen Työeläkevakuutusyhtiö Elo 262,000 1.04 VAS Invest Oy 194,035 0.77 Sr Taaleritehdas Mikro Markka 154,048 0.61 OP-Suomi Pienyhtiöt 111,436 0.44 Näkki Juha Antti Ilmari 107,739 0.43 Etteplan Oyj 100,921 0.40 Ingman Robert 60,000 0.24 Kylänpää Osmo Olavi 53,200 0.21 Sr Säästöpankki Pienyhtiöt 49,241 0.20 Kurra Jorma 41,841 0.17 Mäkelä Esa Tapio 40,285 0.16 Fondita Equity Spice Sijoitusrahasto 36,002 0.14 Burmeister Dorrit Elisabeth 32,313 0.13 Hemholmen Oy Ab 31,200 0.12 Other shareholders 1,764,904 7.00 Nominee-registrated shares 1,052,332 4.18 Total 25,200,793 100.00 17 Consolidated Financial Statements Consolidated Statement of Comprehensive Income EUR 1,000, financial period Jan 1-Dec 31 Note 2023 2022 Revenue 7 359,951 350,170 Other operating income 8 1,742 2,826 Materials and services 10 -43,320 -40,395 Employee benefits expenses 11 -233,736 -227,823 Other operating expenses 12 -40,259 -36,140 Depreciation and amortization 19, 20 -18,839 -20,018 Operating profit (EBIT) 25,540 7.1 % 28,622 8.2 % Financial income 14 803 1,044 Financial expenses 15 -5,537 -7,280 Profit before taxes 20,805 22,386 Income taxes 17 -4,158 -4,235 Profit for the financial year 16,647 18,151 Other comprehensive income, that may be reclassified to profit or loss Currency translation differences 787 -4,229 Other comprehensive income, that will not be reclassified to profit or loss Change in fair value of equity investments at fair value through other compre- hensive income -30 -31 Remeasurement of defined benefit plan 11 -157 1,359 Other comprehensive income for the year, net of tax 17 599 -2,900 Total comprehensive income for the year 17,246 15,251 Profit for the financial year attributable to Equity holders of the parent company 16,647 18,151 Total comprehensive income attributable to Equity holders of the parent company 17,246 15,251 Earnings per share calculated from the profit attributable to equity holders of the parent company Basic earnings per share, EUR 18 0.66 0.73 Diluted earnings per share, EUR 18 0.66 0.73 The notes are an integral part of the Financial Statements. 18 Consolidated Statement of Financial Position EUR 1,000, Dec 31 Note 2023 2022 ASSETS Non-current assets Goodwill 22 109,737 105,385 Other intangible assets 19 30,250 32,745 Tangible assets 20 24,038 24,808 Investments at fair value through other comprehensive income 21 2,376 2,414 Other non-current receivables 21 973 1,016 Deferred tax assets 30 250 622 Non-current assets, total 167,624 166,990 Current assets Inventory 23 806 635 Work in progress 7 30,662 30,181 Trade and other receivables 24 61,148 62,405 Current tax assets 933 1,364 Cash and cash equivalents 23,442 19,564 Current assets, total 116,991 114,149 TOTAL ASSETS 284,615 281,138 EQUITY AND LIABILITIES Equity Share capital 25 5,000 5,000 Share premium account 25 6,701 6,701 Unrestricted equity fund 25 23,966 23,966 Own shares 25 -1,719 -1,059 Cumulative translation adjustment 25 -6,915 -7,702 Other reserves 25 73 103 Retained earnings 25 86,984 79,302 Equity, total 114,091 106,311 Non-current liabilities Deferred tax liabilities 30 9,550 9,758 Loans from financial institutions 27 40,167 47,852 Lease liabilities 27 8,560 8,478 Defined benefit pension liability 11 5,069 4,897 Other non-current liabilities 28 526 33 Non-current liabilities, total 63,873 71,018 Current liabilities Loans from financial institutions 27 25,012 21,139 Lease liabilities 27 12,843 13,114 Advances received 7 5,818 2,856 Trade and other payables 29 60,849 63,532 Current income tax liabilities 2,128 3,168 Current liabilities, total 106,651 103,809 Liabilities, total 170,524 174,828 TOTAL EQUITY AND LIABILITIES 284,615 281,138 The notes are an integral part of the Financial Statements. 19 Consolidated Statement of Cash Flows EUR 1,000, financial period Jan 1-Dec 31 Note 2023 2022 OPERATING CASH FLOW Cash receipts from customers 366,970 341,201 Operating expenses paid -322,517 -306,220 Operating cash flow before financial items and taxes 44,454 34,981 Interests and other payments for financial expenses 15 -4,540 -1,721 Interest received 14 496 113 Income taxes paid 17 -4,839 -5,277 Operating cash flow (A) 35,571 28,095 INVESTING CASH FLOW Purchase of tangible and intangible assets 19, 20 -2,067 -1,711 Acquisition of subsidiaries, net of cash acquired 5 -5,496 -20,871 Purchase of investments 21 0 -2,033 Proceeds from sale of tangible and intangible assets 675 52 Loans granted 21 0 -963 Investing cash flow (B) -6,888 -25,526 Cash flow after investments (A+B) 28,683 2,570 FINANCING CASH FLOW Purchase of own shares -486 0 Proceeds from current loans 27 83 13,144 Repayments of current loans 27 -32,297 -32,534 Proceeds from non-current loans 27 28,500 27,999 Repayments of non-current loans 27 -35 -16 Payment of lease liabilities 20 -11,576 -12,657 Dividend paid 25 -9,015 -9,970 Financing cash flow (C) -24,826 -14,034 Variation in cash (A+B+C) increase (+) / decrease (-) 3,857 -11,464 Assets at the beginning of the financial period 19,564 30,356 Exchange gains or losses on cash and cash equivalents 21 672 Assets at the end of the financial period 23,442 19,564 The notes are an integral part of the Financial Statements. 20 Consolidated Statement of Changes in Equity EUR 1,000 Share capital Share premium account Unrestricted equity fund Other reserves Own sha- res Cumulative translation ad- justment Retained earnings Total Equity Jan 1, 2022 5,000 6,701 22,037 133 -1,245 -3,473 69,761 98,914 Comprehensive income for the year Profit for the financial year 0 0 0 0 0 0 18,151 18,151 Other comprehensive income for the year Change in fair value of equity in- vestments at fair value through other comprehensive income 0 0 0 -30 0 0 -1 -31 Cumulative translation adjustment 0 0 0 0 0 -4,229 0 -4,229 Remeasurement of defined benefit plan 0 0 0 0 0 0 1,359 1,359 Other comprehensive income for the year, net of tax 0 0 0 -30 0 -4,229 1,358 -2,900 Total comprehensive income for the year 0 0 0 -30 0 -4 229 19,510 15,251 Transactions with owners Dividends 0 0 0 0 0 0 -9,970 -9,970 Directed share issue 0 0 1,929 0 0 0 0 1,929 Share-based incentive plan 0 0 0 0 186 0 0 186 Transactions with owners, total 0 0 1,929 0 186 0 -9,970 -7,855 Equity Dec 31, 2022 5,000 6,701 23,966 103 -1,059 -7,702 79,302 106,311 EUR 1,000 Share ca- pital Share premium account Unrestricted equity fund Other re- serves Own shares Cumulative translation adjustment Retained earnings Total Equity Jan 1, 2023 5,000 6,701 23,966 103 -1,059 -7,702 79,302 106,311 Comprehensive income for the year Profit for the financial year 0 0 0 0 0 0 16,647 16,647 Other comprehensive income for the year Change in fair value of equity in- vestments at fair value through other comprehensive income 0 0 0 -30 0 0 0 -30 Cumulative translation ad- justment 0 0 0 0 0 787 0 787 Remeasurement of defined bene- fit plan 0 0 0 0 0 0 -157 -157 Other comprehensive income for the year, net of tax 0 0 0 -30 0 787 -157 599 Total comprehensive income for the year 0 0 0 -30 0 787 16,489 17,246 Transactions with owners Dividends 0 0 0 0 0 0 -9,015 -9,015 Purchase of own shares 0 0 0 0 -486 0 0 -486 Share-based incentive plan 0 0 0 0 -173 0 209 35 Transactions with owners, total 0 0 0 0 -659 0 -8,806 -9,466 Equity Dec 31, 2023 5,000 6,701 23,966 73 -1,719 -6,915 86,984 114,091 The notes are an integral part of the Financial Statements. 21 Notes to the Consolidated Financial Statements 1 GENERAL INFORMATION The Parent Company of Etteplan Group is Etteplan Oyj. Etteplan Oyj is a Finnish public limited company established under Finnish law. The Company is domiciled in Espoo, Finland and its registered office is located in Tekniikantie 4, 02150 Espoo, Finland. The company’s principal place of business is also located in Tekniikantie 4, 02150 Espoo. Etteplan’s shares are listed on Nasdaq Helsinki Ltd’s Medium Cap market capitalization group in the Industrials sector under the ETTE ticker. Etteplan provides solutions for software and embedded solutions, industrial equipment and plant engineering and technical communication solutions to the world’s leading companies in the manufacturing industry. Our services are geared to improve the competitiveness of our customers’ products, services and engineering processes throughout the product life cycle. The results of Etteplan’s innovative engineering can be seen in numerous industrial solutions and everyday products. A copy of the Consolidated Financial Statements can be obtained from the Company’s website www.etteplan.com or from the office of the Group’s Parent Company at the address Askonkatu 9 E, 15100 Lahti, Finland. The Etteplan Oyj Board of Directors approved these Financial Statements for publication at its meeting on February 8, 2024. According to the Finnish Limited Liability Companies Act, the shareholders have the opportunity to approve or reject the Fi- nancial Statements at the Annual General Meeting held after the publication. Furthermore, the Annual General Meeting can decide on the modification of the Financial Statements. 2 A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies applied in the preparation of these Consolidated Financial Statements are set out in this sec- tion. These policies have been consistently applied to all the years presented, unless stated otherwise. 2.1 BASIS FOR PREPARATION The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS). They have been prepared in accordance with IAS and IFRS standards and SIC and IFRIC interpretations approved for implementation in EU directive N:o 1606/2002 at December 31, 2022. The notes to the Financial Statements are also prepared in accordance with the Finnish accounting and company regulation, which complements the IFRS requirements. The Consoli- dated Financial Statements have been prepared under the historical cost convention, except for certain financial assets and financial liabilities, which are recognized at fair value. The preparation of the Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consoli- dated financial statements are disclosed in note 3. Figures in the Financial Statements are presented in thousands of euros and are therefore rounded. 2.1.1 CHANGES IN ACCOUNTING POLICY AND DISCLOSURES NEW AND AMENDED STANDARDS ADOPTED BY THE GROUP The new standards, amendments and interpretations effective for the financial year beginning January 1, 2023, did not have a significant effect on the Consolidated Financial Statements of the Group. FORTHCOMING REQUIREMENTS 22 The new standards, amendments and interpretations issued, but effective later than for the financial year beginning January 1, 2024, are not expected to have a significant effect on the Consolidated Financial Statements of the Group. 2.2 CONSOLIDATION Subsidiaries are all such entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisi- tion of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a busi- ness combination are measured initially at their fair values at the acquisition date. The Group applies the measurement period of the acquisition accounting allowed by IFRS 3, during which the acquisition is treated as preliminary. 2.3 SEGMENT REPORTING Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision- maker. The Management Group is identified as the chief operating decision-maker. The chief operating decision-maker as- sesses the financial performance and position of the Group, and makes strategic decisions. The financial information, which the chief operating decision-maker uses as a basis for decision making, does not differ substantially from the information pre- sented in the Consolidated Statement of Comprehensive Income and Statement of Financial Position. 2.4 FOREIGN CURRENCY TRANSLATION Items included in the Financial Statements of each of the Group’s entities are measured using the currency of the primary eco- nomic environment in which the entity operates (“the functional currency”). The functional currency of subsidiaries is the cur- rency of the economic environment in which the subsidiary operates. The Consolidated Financial Statements are presented in euro, which is the Group’s presentation currency. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions, or valuation, where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except when deferred in other comprehensive income as a net investment hedge. Foreign exchange gains and losses that relate to loans and cash and cash equivalents are presented in the income statement within “Financial income” or “Financial expenses.” All other foreign exchange gains and losses are pre- sented in the income statement within “Other operating expenses.” The results and financial position of all the Group entities that have a functional currency different from the presentation cur- rency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet • income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions) and • all resulting exchange differences are recognized in other comprehensive income. Goodwill and fair value adjust- ments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing rate. Exchange differences arising are recognized in equity. 2.5 INTANGIBLE ASSETS Intangible assets acquired in business combinations are recognized at fair value at the acquisition date. Other intangible assets are recorded in the balance sheet at historical cost considering accumulated amortizations. Assets with limited useful lives are amortized on a straight-line basis over their useful lives. The amortization periods of intangible assets are: 23 Intangible rights 3 to 7 years Internally created intangible assets 3 to 5 years Fair value adjustments in acquisitions Customer base 10 years Non-competition agreements 3 years Leased software 3 years The residual value, useful life and amortization method of each asset is examined at the end of each financial year and ad- justed, if necessary, to reflect the changes in expectations of the economic benefits to be gained from the asset. Intangible assets are classified as follows: Intangible rights mainly include software licenses owned by the Group. Internally created intangible assets include activated development costs related to software products created by the Group. Development costs that are directly attributable to the design and testing of identifiable and unique software products con- trolled by the Group are recognized as intangible assets when the following criteria are met: • it is technically feasible to complete the software so that it will be available for use • management intends to complete the software and use or sell it • there is an ability to use or sell the software • it can be demonstrated how the software will generate probable future economic benefits • adequate technical, financial and other resources to complete the development and to use or sell the software are available, and • the expenditure attributable to the software during its development can be reliably measured. Directly attributable costs, which are capitalized as part of the software product include the software development employee costs and such overhead costs that are directly attributable to the development. Other development expenditures that do not meet these criteria are recognized as an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. Computer software development costs recognized as assets are amortized over their useful lives. Significant, unfinished intangible assets are tested for impairment annually. Research costs are recog- nized as an expense as incurred. Fair value adjustments in acquisitions include intangible assets acquired in business combinations; customer base and non- competition agreements. Leased software is activated as described in note 2.14. Goodwill corresponds to that part of the acquisition cost which exceeds the Group’s share of the fair value, on the date of purchase, for the net asset value of the acquired subsidiary. Goodwill is measured at historical cost less impairment. Goodwill is not amortized, but is tested for impairment annually and whenever there is objective evidence of goodwill impairment. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-gen- erating units that are expected to benefit from the business combination in which the goodwill arose, taking into account the current organization structure and level of reporting. 2.6 TANGIBLE ASSETS Tangible assets are stated at historical cost less accumulated depreciation and impairment loss. Historical cost includes ex- penditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of a replaced part is derecognized. All other repairs and maintenance are charged to the income statement during the financial period in which they occur. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows: 24 Buildings 50 years Leased office premises 1.5 to 7 years Computers 3 years Vehicles 4 to 5 years Office furniture 5 to 10 years Renovation of premises 5 to 7 years Land areas are not depreciated. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 2.7). Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in other operating income or expenses in the income statement. Tangible right-of-use assets consist of leased computers and cars as well as leased office premises activated as described in note 2.14. 2.7 IMPAIRMENT OF NON-FINANCIAL ASSETS The Group assesses at the end of each reporting period, whether there are indications of impairment of non-financial assets. Assets that have an indefinite useful life – for example, goodwill or intangible assets not ready to use – are not subject to amor- tization and are tested annually for impairment. Assets that are subject to amortization, as well as assets with unlimited useful life, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized through profit or loss for the amount by which the asset’s carrying amount exceeds its recov- erable amount. The recoverable amount is the higher of an asset’s fair value less costs to dispose and value-in-use. Value-in- use is defined as the discounted estimated future net cash flows generated by the asset or cash-generating unit. For the pur- poses of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. The impairment loss recognized for non-financial assets other than goodwill is reversed, in case there has been a change in the estimates of recoverable amount. The impairment loss is only reversed to the amount of the book value of the asset before impairment. An impairment loss for goodwill is not reversed under any circumstances. The essential assumptions for impairment tests are presented in note 22. 2.8 FINANCIAL INSTRUMENTS Financial instruments and their fair values by measurement category are detailed in note 21. RECOGNITION Regular purchases and sales of financial instruments are recognized on the trade-date – the date on which the Group commits to purchase or sell the instrument. At initial recognition, the Group measures a financial instrument at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial instrument. Transaction costs of financial instruments carried at FVPL are expensed in profit or loss. Financial assets are derecognized 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. Financial liabilities are derecog- nized when the liability has ceased, that is, the obligation specified in the agreement is fulfilled or revoked or its validity has ended. CLASSIFICATION The Group classifies its financial instruments in the following subsequent measurement categories: 25 CATEGORIES OF FINAN CIAL ASS ETS: • measured at amortized cost • measured at fair value through Other Comprehensive Income (FVOCI), and • measured at fair value through profit or loss (FVPL). The classification of financial assets depends on the Group’s business model for managing the financial assets and the con- tractual terms of the cash flows. The classification changes only if the business model changes. CATEGORIES OF FINANCIAL LIABILITIES: • measured at amortized cost, and • measured at fair value through profit or loss (FVPL). SUB SEQUENT MEASUREMENT Gains and losses for assets and liabilities measured at fair value will either be recorded in profit or loss or OCI. The Group measures all its equity investments at FVOCI, because the Group’s management has made an irrevocable election to present fair value gains and losses on equity investments in OCI. There is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of these investments. Only the dividends from these investments are recognized in profit or loss when the Group’s right to receive payments is established. Trade receivables are recognized initially at fair value and are subsequently measured at amortized cost, less provision for impairment. Trade receivables are classified as current assets, if collection is expected in one year or less. Otherwise, they are classified as non-current assets. Expected credit losses are estimated as described in note 4.1.4. Trade receivables trans- ferred to a financial institution in factoring arrangements are not included in the Consolidated Statement of Financial Position, because the Group has transferred substantially all risks and rewards of ownership of the transferred trade receivables. Cash and cash equivalents include cash in hand and deposits held at call with banks. Items included under cash and cash equivalents have maturities of three months or less from the date of acquisition. Cash and cash equivalents are derecognized when the Group’s contractual right to receive cash flows has expired or essentially all of the risks and rewards incident to ownership have been transferred from the Group. Trade payables and other payables are obligations to pay for goods or services that have been acquired from suppliers in the ordinary course of business. They are classified as current liabilities unless payment is not due within one year or less after the reporting period. Loans are recognized initially at fair value, net of transaction costs incurred. Loans are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income state- ment over the period of the borrowings using the effective interest method. IMPAIRMENT The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. See note 4.1.4 for further details. 2.9 INVENTORY Inventory is stated at the lower of cost and net realizable value. Cost is determined using the FIFO method. Cost comprises direct materials, direct labor and an appropriate proportion of variable and fixed overhead expenditure, the latter being allo- cated on the basis of normal operating capacity. Net realizable 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. 2.10 CURRENT AND DEFERRED INCOME TAX The taxes in the consolidated income statement include the current tax for the Group companies, corrections to taxes from previous financial periods, and the change in deferred taxes. Current tax is calculated on taxable income according to the tax rate in force in each country concerned. In the case of items entered directly in shareholders’ equity, the tax effect is recog- nized in equity. 26 Deferred income tax is recognized on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts. The most significant temporary differences arise from the depreciation and amortization of assets and fair value adjustments (customer agreements and non-competition agreements) and the depreciation in excess of plan in Swedish subsidiaries. Deferred taxes are determined by using the tax base in force on the balance sheet date or the enacted tax base at the time of tax base transition. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. It is evaluated at the end of each financial period, whether the conditions for recogniz- ing a deferred tax asset are met. 2.11 EMPLOYEE BENEFITS PEN SION OBLIGATIONS Group companies operate various pension schemes. The schemes are generally funded through payments to insurance com- panies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into an external entity managing pension insurances. The Group has no legal or constructive obligations to pay further contributions. The contributions are rec- ognized as employee benefit expenses when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available. A defined benefit plan is a pension plan that is not a defined contribution plan. Defined benefit plans define an amount of pension benefit that an employee will receive on retirement, de- pendent on one or more factors such as age, years of service and compensation. Under a defined benefit pension plan, the Group’s obligation includes the actuarial and investment risks related to the plan in addition to the payments made under the plan. The pension expenses related to defined benefits are calculated using the Projected Unit Credit Method. Pension ex- penses are recognized as expenses by distributing them over the estimated period of service of the personnel concerned. The amount of the pension obligation is the present value of the estimated future pensions payable (Note 11). In Sweden and the Netherlands, the Group has multi-employer defined benefit plans, of which there is not sufficient infor- mation available to use benefit accounting. These plans are accounted as defined contribution plans. BONUS PLANS The Group recognizes a liability and an expense for bonuses based on a formula that takes into consideration the profit at- tributable to the Company’s shareholders after certain adjustments. The Group recognizes the expense and liability where contractually obliged or where there is a past practice that has created a constructive obligation. SHARE-BASED INCENTIVE PLANS Share-based incentive plans are treated as arrangements that are settled partly as shares and partly as cash. The part of a remuneration earned that the participants receive as Etteplan Oyj shares is treated as an arrangement that is fully settled as shares and recorded in shareholders’ equity, the part of a remuneration earned that is paid in cash to pay off taxes and other levies is recorded in liabilities. The fair value of the employee services received in exchange for the grant of the shares is rec- ognized as an expense. The total amount to be expensed is determined by reference to the fair value of the shares granted taking into account market performance conditions and non-vesting conditions. At the end of each reporting period, the Group revises its estimates of the number of shares that are expected to vest based on the non-market vesting conditions and ser- vice conditions. The Group recognizes the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment in equity. 2.12 REVENUE RECOGNITION Etteplan’s revenue streams consist mainly of the following three service areas: Engineering Solutions refer to the innovation, engineering and calculations of the technical attributes of machinery or equip- ment for the purpose of product development and manufacturing. Assignments are typically product development projects for 27 a new product, plant engineering projects or Engineering-to-Order projects, involving the customization of the product in ac- cordance with end customer requirements and the market area’s legislation. Software and Embedded Solutions refer to product development services and technology solutions that allow the controlling of machines and equipment and enable their digital connectivity as part of the Internet of Things. Technical Communication Solutions refer to the documentation of a product’s technical attributes, such as manuals and ser- vice instructions for the users of a product, as well as related content management and distribution in print or digital form. Revenue includes revenue from contracts with customers adjusted for indirect taxes and discounts. Revenue is recognized following a five-step model, on the basis of which the timing and amount of revenue to be recognized is determined. The model involves identifying the contract with the customer and its performance obligations, determining transaction prices, allocating transaction prices to performance obligations and recognizing revenue. Revenue is recognized when the customer obtains control of the promised service or product; either over time or at a point in time. The Group recognizes revenue in a way that represents the rendering of the promised services or goods to the customer, and to such an amount that represents the com- pensation the Group expects to be entitled to in exchange for the goods and services. Contracts with customers do not in- clude a significant financial component. Etteplan divides its services into the following categories according to the applied method of revenue recognition: • Design and consultancy projects, where either a fixed price or a target price limiting the amount of revenue that can be recognized for the project is set in the agreement with the customer. In this type of projects, revenue is recognized over time based on the percentage of completion method, because the Group’s performance creates an asset that has no alternative use for the Group and the Group has an enforceable right to payment for performance completed to date. The percentage of completion is measured as the costs of the project realized as a proportion to the total expected costs of the project, because it is seen as the most accurate way of measuring the transfer of control to the customer. If the agreement includes separately identifiable performance obligations, revenue for each performance obligation is recognized separately. Dealing with separate performance obligations does not involve significant con- siderations. In the case of contracts whose outcome cannot be assessed reliably, project expenditure is expensed and revenue is recognized to an amount not exceeding the expenditure. The total loss on a contract that will probably result in a loss is expensed immediately. Incentives, additional work and changes related to the project are recog- nized in the revenue and costs of the project to the extent that can be estimated reliably, or that is agreed upon with the customer. The revenue for additional work and changes are recognized separately when they comprise a sepa- rate performance obligation and are priced according to stand-alone transaction prices. • Design and consultancy projects, where all costs incurred can be invoiced to the customer without other limitations than the agreed invoicing price. In this type of projects revenue is recognized over time as the service is being per- formed. The performance obligation in the agreement with the customer is most typically one working hour and it is considered to be fulfilled over time, because the customer simultaneously receives and consumes the benefits pro- vided by the service . • Arrangements, where the customer buys a license to software created by Etteplan and maintenance related to the license. Revenue for the license itself is recognized when the customer obtains access to the license. Revenue for maintenance related to the license is recognized over time as the service is rendered. Transaction prices are based on customer agreements, where separate prices are set for separate performance obligations. Generally, the pricing of separate performance obligations equals their standalone transaction prices. Changes to customer agreements as well as additional work agreed on, are mainly recognized as separate customer agreements. The Group has enforceable right to payment for performance completed to date, in case the project is terminated, in essentially all of its pro- jects. Costs incurred from work performed and transferred to customer, but not yet invoiced, are activated as contract assets and included in the balance sheet line item “Work in progress.” Contract assets are transferred to Trade payables upon invoicing, which is generally done on a monthly basis. Invoices are most typically payable within 30 days. Payments received from cus- tomers in advance of work being transferred are recorded as contract liabilities in the balance sheet line item “Advance pay- ments.” These amounts are recognized as revenue as the work is being transferred to the customer. In applying IFRS 15 the Group uses the practical expedient permitted by the standard and does not disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as at the end of the reporting period or the estimated timing of satisfaction, because the unsatisfied performance obligations are either part of contracts that have an original expected duration of one year or less or the Group has the right to invoice a customer at an amount that corre- sponds directly with its performance to date. 28 2.13 INTEREST AND DIVIDEND INCOME Interest income is recognized using the effective interest method. When a receivable is impaired, the Group reduces the carry- ing amount to its recoverable amount, being the estimated future cash flows discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired receivables is recog- nized using the original effective interest rate. Dividend income is recognized when the shareholder gains the right to receive payment. 2.14 LEASE AGREEMENTS The Group leases various premises, equipment, software and cars. Rental contracts are typically made for fixed periods of 3 to 10 years but may have extension options as described below. At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases are recognized as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is availa- ble for use by the Group. Lease liabilities (note 27) include the net present value of the following lease payments: • fixed payments (including in-substance fixed payments), less any lease incentives receivable • variable lease payments that are based on an index or a rate • amounts expected to be payable by the lessee under residual value guarantees • the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and • payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The lease liability is subsequently measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in‑substance fixed lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right‑of‑use asset. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The interest ex- penses related to leases are presented in note 15. Right-of-use assets (notes 19 and 20) are measured at cost comprising the following: • the amount of the initial measurement of lease liability • any lease payments made at or before the commencement date less any lease incentives received • any initial direct costs, and • restoration costs. After the commencement date the right-of-use asset is measured at amortized cost less impairment. It is adjusted with certain remeasurements of the lease liability. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. The right-of-use asset is tested for impairment, when necessary, and the possible impair- ment is recognized through profit or loss. The Group uses the practical expedient included in IFRS 16 standard and recognizes payments associated with leases of low- value assets on a straight-line basis as an expense in profit or loss. Low-value assets comprise IT equipment and items of of- fice furniture (note 12). Extension options are included in several of the Group’s office premises rental agreements. These terms are used to maximize operational flexibility in terms of managing contracts. The Group’s management uses judgment when determining the extent to which the extension options are used. The extension options are used in such a way that the lease term for lease agreements is at least 18 months also for lease agreements with non-cancelable term of under 18 months, unless the lease agreement in question is canceled or a decision for a specific timing of cancelation has been made. For lease agreements in which the origi- nal non-cancelable term is 18 months or more, extension options are used up to 18 months, when the remaining non-cancela- ble term is under 18 months. The management believes this gives the most accurate view of the Group’s total lease liability. If the extension options were used up to 12 months instead of 18 months, the right-of-use assets and lease liability related to 29 premises would decrease by approximately EUR 2.1 million. If the extension options were used up to 24 months the corre- sponding effect in balance sheet items would be an increase of approximately EUR 2.1 million. 2.15 NON-RECURRING ITEMS Non-recurring items are disclosed separately in the Financial Statements where it is necessary to do so to provide further un- derstanding of the financial performance of the Group. They are material items of income and expense that are shown sepa- rately due to the significance of their nature or amount. Non-recurring items can include, among other things, costs and income related to business combinations as well as certain reorganization costs. 2.16 GOVERNMENT GRANTS Government grants that are intended to compensate costs are recognized as income over the same period as the related costs are recognized. 3 CRITICAL ACCOUNTING ESTIMATES AND MANAGEMENT JUDGMENT BASED DECISIONS When preparing the Consolidated Financial Statements, estimates and assessments must be made con-cerning the future. These may affect assets and liabilities at the time of balance sheet preparation, as well as income and expenses in the report- ing period. Actual figures may differ from those used in the financial statements. The preparation of the Consolidated Financial Statements requires the management in certain respects to make judgements and assessments when choosing and applying the principles for the preparing the financial statements. This particularly concerns the cases when effective IFRSs allow alter- native valuation, recording and presenting manners. Judgments and estimates made in the preparation of the financial statements are based on the management’s best judgment on the closing date. They are based on previous experience and future expectations considered to be most likely on the clos- ing date. These include, in particular, factors related to the Group’s financial operating environment affecting sales and the cost level. The Group monitors the realization of these estimates and assumptions. The effects of any changes in estimates and assumptions are recognized in the period in which they have been detected. The assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. FAIR VALUE MEA SUREMENT IN CONN ECTION WITH ACQUISITIONS In business combinations, tangible assets have been compared with the market prices of equivalent assets, and decline in the value of acquired assets due to various factors has been estimated. The fair value measurement of intangible assets is based on estimates of asset-related cash flows. The management believes that the estimates and assumptions are sufficiently pre- cise for use as the basis for fair value measurement. Any indications of impairment of tangible and intangible assets are re- viewed annually. IMPAIRMENT TESTING The Group tests goodwill and intangible assets with unlimited useful lives for impairment annually. Indications of impairment are evaluated in the manner described in note 2.7. Recoverable amounts for cash-generating units are based on value-in-use calculations. Estimates are required in making these calculations. Values recorded in the balance sheet at the end of the finan- cial year were EUR 109,737 thousand (2022: EUR 105,385 thousand). Additional information on the sensitivity of the recovera- ble amounts to changes in assumptions used is disclosed in Note 22 Impairment testing. 30 CONTINGENT CONSIDERATIONS The amount of a contingent consideration in a business combination is often dependent on the future economic development of the business acquired. The actual outcome may deviate from the assumptions made at initial recognition, which can lead to revaluation of the previously recognized contingent consideration. REVEN UE RECO GNITION Revenue recognized over time is based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. The percentage of completion is measured as the costs of the project realized as a proportion to the total expected costs of the project. Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change, and at each reporting date. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that trigger the revision become known by management. 4 MANAGEMENT OF FINANCIAL RISKS This note explains the Group’s exposure to financial risks and how these risks could affect the Group’s future financial perfor- mance. 4.1 FINANCIAL RISK FACTORS In its business operations, the Group is exposed to several types of financial risks: foreign-currency, interest, financing and liquidity, counterparty and credit risks. The objective of financial risk management is to protect the Group from unfavorable changes in the financial market and thus contribute as much as possible to guaranteeing the Group’s profitability and equity, and to guarantee sufficient liquidity in a cost-efficient manner. Management of financial risks has been centralized with the Group’s financial department, which is responsible for identification and evaluation of, and protection against, the Group’s financial risks. Furthermore, the financial department is responsible, in a centralized fashion, for funding of the Group, and it provides the management with information about the financial situation of the Group and the business units. 4.1.1 FOREIGN-CURRENCY RISK Foreign currency risk related to different currencies comes about as a result of foreign currency-denominated commercial transactions and from translation of foreign-currency-denominated balance sheet items into the reporting currency. Transaction risk The majority of the Group’s business operations are handled in the currency of the project country of the respective Group company. This means that both sales and costs are in the same currency. Translation risk The Group is exposed to a translation risk caused by fluctuations in foreign currency exchange rates, when it translates bal- ance sheet items of subsidiaries based outside the euro area into its reporting currency. The main risk is with goodwill booked in Swedish Krona (SEK). The goodwill booked in SEK at the end of the financial year was EUR 31,366 thousand (2022: EUR 30,088 thousand). A sensitivity analysis of the effect of reasonable potential changes in exchange rates on the Group’s profit for the financial year, equity and goodwill at balance sheet date is presented in the table below. In the analysis, the change in exchange rates has been estimated to be +/-10 percent from reporting date, and other factors are estimated to remain unchanged. 31 2023 Effect on profit for the EUR 1,000 financial year Effect on other equity items Effect on goodwill EUR/SEK 10% increase -392 -1,060 -2,851 EUR/SEK 10% decrease 479 1,295 3,485 EUR/PLN 10% increase -160 -600 -400 EUR/PLN 10% decrease 196 733 489 EUR/CNY 10% increase 7 -317 -170 EUR/CNY 10% decrease -9 388 207 EUR/DKK 10% increase -9 -150 -283 EUR/DKK 10% decrease 11 183 346 2022 Effect on profit for the 1 000 EUR financial year Effect on other equity items Effect on goodwill EUR/SEK 10% increase -414 -1,110 -2,735 EUR/SEK 10% decrease 506 1,356 3,343 EUR/PLN 10% increase -131 -401 -371 EUR/PLN 10% decrease 160 490 453 EUR/CNY 10% increase -67 -346 -181 EUR/CNY 10% decrease 82 423 221 EUR/DKK 10% increase -75 -165 -284 EUR/DKK 10% decrease 91 202 347 4.1.2 INTEREST RISK The Group is exposed to interest risk in two ways: because of changes in value for balance sheet items (i.e. price risk) and cash flow risk caused by changes in market interest rates. On the balance sheet date, the total amount of interest-bearing debt excluding lease liabilities was EUR 65,180 thousand (2022: EUR 68,991 thousand) covered with contracts in which the interest range is between 4.17 and 5.39 percent (2022: between 0.55 and 3.21 percent). In addition Group has an undrawn loan of EUR 9,000 thousand on the balance sheet date. All of the Group’s loans have variable interest rates. The Group monitors the interest risk by calculating the effect of one percentage point change in interest rates on the Group’s next twelve months’ interest expenses. The sensitivity of the interest position to changes in interest rates is determined by calculating how much an equal one percentage point change in interest rates throughout the Group’s interest rate range would change yearly interest expenses. Only interest bearing loans from financial institutions are included in the calculation. Lease liabilities are not included in the calculation. At the balance sheet date, the Group’s sensitivity to an increase in interest rates of one percentage point was approximately EUR 550 thousand (2022: EUR 549 thousand). 4.1.3 FINANCING AND LIQUIDITY RISK The Group aims to guarantee solid liquidity in all market conditions through efficient cash management. Credit limits tied to cash pool arrangements are used for short-term financing. On the balance sheet date, the Group had EUR 14,055 thousand (2022: EUR 14,238 thousand) of available credit limits, of which none (2022: 1,632) was in use. Refinancing risk is attempted to be minimized by applying a balanced maturity schedule to the loan portfolio, ensuring sufficient maturity of loans, and using several banks as sources of financing. The level of financing is increased through additional loans when necessary. The Group has financial covenants, which are tied to the equity ratio of the Group and to the debt/EBITDA ratio of the Group, and these mainly apply to all the group loans. In case the Group’s equity ratio at the time of the Financial Statement is below 25 percent or the debt/EBITDA ratio is higher than 3.5, the financer has the right to demand immediate payment of all the Group’s loans. According to the Consolidated Financial Statements in 2023, the terms of these covenants were not breached. To balance the cash effect of the long payment terms typical to design business, the Group sells a part of its key customer receivables to a finance institution. There is no credit risk related to the sold receivables and these receivables are not in- cluded in the Consolidated Statement of Financial Position. 32 MATURITY ANALYSIS OF FINANCIAL LIABILITIES 2023 EUR 1,000 Less than 1 year 1-5 years Borrowings 25,012 40,167 Lease liabilities 12,843 8,560 Interest payments 2,871 2,069 Liabilities from acquisitions 100 500 Trade and other payables 13,576 526 Total 54,403 51,823 2022 EUR 1,000 Less than 1 year 1-5 years Borrowings 21,139 47,852 Lease liabilities 13,114 8,478 Interest payments 841 981 Liabilities from acquisitions 52 0 Trade and other payables 14,209 26 Total 49,354 57,337 Liabilities from acquisitions in December 31, 2023 consist of LAE Engineering GmbH earn out liability EUR 100 thousand and purchase price EUR 500 thousand which will be paid on 4th of September, 2025. NO N-MONETARY CHANGES I N INTEREST-BEARI NG LIABI LITIES EUR 1,000 EUR 2023 2022 Interest-bearing liabilities Jan 1 90,583 78,474 Financing cash flow -15,325 830 Non-monetary changes Changes in lease agreements 10,206 10,344 Loans and lease liabilities assumed in business combinations 772 1,295 Translation differences and other changes 348 -360 Non-monetary changes, total 11,325 11,279 Interest-bearing liabilities Dec 31 86,583 90,583 4.1.4 COUNTERPARTY AND CREDIT RISK Financing contracts have the associated risk of the counterparty being unable to fulfill its obligations under the contract. To minimize the counterparty risk financing contracts are concluded with leading Nordic banks that have a good credit rating. Credit risk related to business operations arises out of a customer’s inability to perform its contractual obligations. A consid- erable proportion of the Group’s business operations focus on large, financially solid companies that operate internationally. Credit risk is also reduced by the customer companies being divided among several different sectors of operation. The Group aims to ensure that services are sold only to such customers that have an appropriate credit rating. Credit risk is controlled systematically, and overdue sales receivables are assessed on a weekly basis. The Company strives to control the effects of increased financial uncertainty by actively monitoring its receivables and by an efficient debt collection process. The maximum customer credit risk exposure at the end of the financial year is the book value of accounts receivable. EXPECTED CREDIT LOSS ALLOWANCE To measure expected credit losses the Group applies the IFRS 9 simplified approach which uses a lifetime expected loss al- lowance for all trade receivables and contract assets (“Work in progress”) including amounts not due. 33 As described in the table below, trade receivables and contract assets are grouped based on shared credit risk characteristics and the days past due. The measurement of the expected credit losses includes forward-looking information in the form of the estimated growth of the EU gross domestic product. In addition to the lifetime expected credit loss allowance, the Group’s management estimates expected credit losses case-by-case , generally the Group recognizes a 50 percent provision for im- pairment for receivables that are more than 60 days past due and a 100 percent provision for receivables that are more than 90 days past due. 2023 Past due EUR 1,000 Not due 1-30 d 31-60 d 61-90 d > 90 d Total Expected loss rate 0.1% 0.1% 1.3% 4.4% 6.9% Trade receivables 47,618 5,361 1,120 79 937 55,115 Work in progress 30,662 0 0 0 0 30,662 Lifetime expected credit loss allowance 57 5 15 4 65 145 Case-by-case credit loss allowance -59 -59 Expected credit loss allowance 85 2022 Past due EUR 1,000 Not due 1-30 d 31-60 d 61-90 d > 90 d Total Expected loss rate 0.0% 0.1% 1.9% 5.2% 6.3% Trade receivables 48,641 5,097 629 56 746 55,169 Work in progress 30,181 0 0 0 0 30,181 Lifetime expected credit loss allowance 7 5 12 3 47 74 Case-by-case credit loss allowance 320 320 Expected credit loss allowance 394 MOVEMENTS OF THE ALLOWANCE FOR IMPAIRMENT EUR 1,000 2023 2022 Expected credit loss allowance Jan 1 -394 -359 Net reduction (+) / (-) increase in credit loss allowance 308 -35 Expected credit loss allowance Dec 31 -85 -394 Trade receivables and contract assets are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group. 4.2 CAPITAL RISK MANAGEMENT The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets. Consistent with other companies in the industry, the Group monitors capital on the basis of the net gearing ratio. This ratio is calculated as net debt divided by equity. Net debt is calculated as total gross interest-bearing debt less cash and cash equiva- lents. To ensure sufficient flexibility, the goal is to keep the net gearing ratio within 30-100 percent. The following table sets out the Group’s net gearing ratio: 34 EUR 1,000 2023 2022 Gross interest-bearing debt 86,582 90,583 Less: Cash and cash equivalents -23,442 -19,564 Net debt 63,140 71,019 Total equity 114,091 106,311 Net gearing ratio 55.3% 66.8% 5 BUSINESS COMBINATIONS BUSIN ESS COMBINATIONS IN FINANCIAL Y EAR 2023 LAE EN GINEERIN G GMB H (100%) Etteplan acquired the German LAE Engineering GmbH, an engineering company with approximately 70 employees that offers specialized expertise across electrical engineering planning, power generation, building and industrial automation, as well as information management systems, and industrial IT. The provisional goodwill of EUR 2,887 thousand arising from the acquisi- tion is attributable to the technical know-how of the acquiree's personnel, and the expected synergies arising from the acquisi- tion. None of the goodwill recognized is expected to be deductible for income tax purposes. HIGH VISION ENGINEERI NG SWED EN AB (100%) Etteplan strengthened its position in Sweden and on September 4, 2023 acquired High Vision Engineering AB. High Vision Engi- neering is an advanced engineering service company that provides services across various phases of product development for the Swedish automotive and manufacturing industry. As a result of the deal, 40 High Vision employees transferred to Etteplan. The provisional goodwill of EUR 1,126 thousand arising from the acquisition is attributable to the technical know-how of the acquiree's personnel, and the expected synergies arising from the acquisition. None of the goodwill recognized is expected to be deductible for income tax purposes. ACQUI SITIONS IN TOTA L The following table summarizes the provisional values of acquisition considerations, assets acquired and liabilities assumed for the acquisitions in total. 35 Consideration transferred: EUR 1,000 Cash payment 7,954 Contingent consideration 100 Total consideration transferred 8,054 Assets and liabilities Tangible assets 1,014 Intangible assets 80 Customer relationships (intangible assets) 2,167 Non-competition agreements (intangible assets) 160 Trade and other receivables 4,850 Cash and cash equivalents 1,951 Total assets 10,222 Non-current pension liabilities 154 Other non-current liabilities 310 Other current liabilities 5,030 Deferred tax liability 686 Total liabilities 6,181 Total identifiable net assets 4,041 Formation of Goodwill: Consideration transferred 8,054 Total identifiable net assets -4,041 Goodwill 4,013 Costs related to the acquisitions, EUR 104 thousand, are included in other operating expenses in the consolidated statement of comprehensive income. The revenue included in the income statement contributed by the acquired companies was EUR 6,608 thousand profit for the financial year EUR 644 thousand. Had all the companies been consolidated from January 1, 2023, the income statement would show revenue of EUR 367,833 thousand and profit for the financial year of EUR 15,252 thousand. CHANGES IN CONTINGENT CONSIDERATI ONS IN FINANCIAL YEAR 2023 A loss of EUR 197 thousand in total was recognized in the income statement from premeasurements of contingent considera- tions related to previous acquisitions. BUSIN ESS COMBINATIONS IN FINANCIAL Y EAR 2022 COGNI TAS GMBH (100%) Etteplan acquired Cognitas GmbH, a German technical information lifecycle management company from Canon Deutschland GmbH on January 13, 2022. The acquisition strengthens Etteplan´s position in Germany and continues our strategic invest- ments in Central Europe. Cognitas is a leading German consulting and services company with 200 professionals in consulting and technical information authoring and management. The goodwill of EUR 8,446 thousand arising from the acquisition is at- tributable to the technical know-how of the acquiree's personnel, and the expected synergies arising from the acquisition. None of the goodwill recognized is expected to be deductible for income tax purposes. SYNCORE TECHNOLOGIES AB (100% ) Etteplan strengthened its position in Sweden and on February 2, 2022 acquired Syncore Technologies AB, a technology ser- vices company focusing on embedded systems. Founded in 2000, Syncore is specialized in advanced embedded systems 36 projects such as design, hardware and software development, and product lifecycle services, especially for customers in the industrial systems, aerospace and defense industries. Syncore employs 46 embedded systems experts in Linköping, Sweden. The goodwill of EUR 5,880 thousand arising from the acquisition is attributable to the technical know-how of the acquiree's personnel, and the expected synergies arising from the acquisition. None of the goodwill recognized is expected to be deducti- ble for income tax purposes. LCA CONSULTING OY (100%) Etteplan strengthened its position as an expert in sustainable development and acquired LCA Consulting Oy, a provider of high-quality expert services, on April 29, 2022. Founded in 2013 as a spin-off at LUT University, LCA Consulting focuses on life cycle assessment of companies, products and production, carbon footprinting and expert training. LCA Consulting, based in Lappeenranta, Finland, employs 11 experts and its customer base consists especially of customers in industrial production and manufacturing, construction industry and public sector. The goodwill of EUR 521 thousand arising from the acquisition is attributable to the technical know-how of the acquiree's per- sonnel, and the expected synergies arising from the acquisition. None of the goodwill recognized is expected to be deductible for income tax purposes. DDCOM B.V. (100%) Etteplan continued to expand its operations in the Netherlands through the acquisition of DDCom B.V. (Van Dulmen CAD-Illus- traties B.V.) on May 30,2022. The acquisition strengthens Etteplan’s capabilities in 3D content-based animation and visualiza- tion services related to technical documentation. The company is located in the Eindhoven area and employs some 15 special- ist. DDCom B.V.’s customers operate in automotive, high tech, med tech and product manufacturing industries and include high profile companies such as DAF Trucks, ASML, VDL, Philips & Shimano. The goodwill of EUR 723 thousand arising from the acquisition is attributable to the technical know-how of the acquiree's per- sonnel, and the expected synergies arising from the acquisition. None of the goodwill recognized is expected to be deductible for income tax purposes. ACQUI SITIONS IN TOTA L The following table summarizes the values of acquisition considerations, assets acquired and liabilities assumed for the acqui- sitions in total. 37 Consideration transferred: EUR 1,000 Cash payment 24,357 Directed share issue 1,929 Contingent consideration 19 Total consideration transferred 26,305 Assets and liabilities Tangible assets 1,609 Intangible assets 129 Customer relationships (intangible assets) 10,618 Non-competition agreements (intangible assets) 327 Trade and other receivables 14,333 Cash and cash equivalents 3,506 Total assets 30,521 Non-current pension liabilities 6,902 Other non-current liabilities 482 Current dividend liabilities 6,500 Other current liabilities 3,112 Deferred tax liability 2,791 Total liabilities 19,787 Total identifiable net assets 10,734 Formation of Goodwill: Consideration transferred 26,305 Total identifiable net assets -10,734 Goodwill 15,571 Costs related to the acquisitions, EUR 297 thousand, are included in other operating expenses in the consolidated statement of comprehensive income. The revenue included in the income statement contributed by the acquired companies was EUR 20,130 thousand profit for the financial year EUR 688 thousand. Had all the companies been consolidated from January 1, 2022, the income statement would show revenue of EUR 351,393 thousand and profit for the financial year of EUR 18,198 thousand. CHANGES IN CONTINGENT CONSIDERATI ONS IN FINANCIAL YEAR 202 2 A profit of EUR 767 thousand in total was recognized in the income statement from premeasurements of contingent considera- tions related to previous acquisitions. 38 6 SEGMENT REPORTING The Group has three reportable segments, the revenue of which consist mainly of rendering of services Engineering Solutions refer to the innovation, engineering and calculations of the technical attributes of machinery or equip- ment for the purpose of product development and manufacturing. Assignments are typically product development projects for a new product, plant engineering projects or Engineering-to-Order projects, involving the customization of the product in ac- cordance with end customer requirements and the market area’s legislation. Software and Embedded Solutions refer to product development services and technology solutions that allow the controlling of machines and equipment and enable their digital connectivity as part of the Internet of Things. Technical Communication Solutions refer to the documentation of a product’s technical attributes, such as manuals and ser- vice instructions for the users of a product, as well as related content management and distribution in print or digital form. Technical Software and Commu-Engineering So-Embedded So-nication Reportable seg-Eliminations EUR 1,000 lutions lutions Solutions ments total and other Total 2023 External revenue 202,441 86,886 69,965 359,292 659 359,951 Operating profit (EBITA) 19,940 6,924 4,946 31,810 -926 30,883 Personnel at end of the pe-riod 2,190 704 842 3,736 166 3,902 Technical Software and Commu-Engineering So-Embedded So-nication Reportable Eliminations and EUR 1,000 lutions lutions Solutions segments total other Total 2022 External revenue 183,693 95,934 69,808 349,436 734 350,170 Operating profit (EBITA) 19,388 9,193 6,060 34,641 -726 33,915 Personnel at end of the pe-riod 2,092 793 886 3,771 158 3,929 No customer represents 10% or more of the external revenue. RECONCILIATION OF OPERATING PROFIT (E BITA) AND PROFIT BEFORE TAXES EUR 1,000 2023 2022 Operating profit (EBITA) 30,883 33,915 Amortization on fair value adjustments at acquisitions -5,344 -5,293 Operating profit (EBIT) 25,540 28,622 Financial income 803 1,044 Financial expenses -5,537 -7,280 Profit before taxes 20,805 22,386 SEGMENTS' NON -CURRENT ASSETS Segments' non-current assets exclude financial instruments and deferred tax assets. Non-current assets are presented ac- cording to the location of the asset, because the Group’s chief operating decision-maker follows asset items at country level. EUR 1,000 2023 2022 Finland 68,017 61,329 Scandinavia 42,248 45,017 China 1,930 2,805 Central Europe 52,804 54,802 Total 164,998 163,953 Disaggregation of revenue by geographical area is presented in note 7. 39 NOTES TO CONSOLIDATED COMPREHENSIVE INCOME 7 REVENUE FROM CONTRACTS WITH CUSTOMERS DISAGGREGATION OF R EVENUE The table below presents the disaggregation of revenue by geographical area and timing of revenue recognition. The ex- ternal revenue of each geographical area is presented according to the location of the seller. The Group's operations in China sell their services both locally and through other Group companies, thus this revenue is partly included in the reve- nue from other areas. Revenue by service area is presented in note 6. EUR 1,000 2023 2022 Primary geographical location Finland 182,320 181,114 Scandinavia 87,306 88,346 Central Europe 80,222 68,242 China 10,104 12,468 Total 359,951 350,170 Timing of revenue recognition Transferred at a point in time 4,604 2,288 Transferred over time 355,347 347,882 Total 359,951 350,170 ASSE TS AND LIABILITI ES RELAT ED TO CONTRACTS WITH CUSTOM ERS The Group recognized the following contract assets and liabilities related to contracts with customers. For details on impair- ment loss allowance, please see note 4.1.4. Trade receivables are specified in note 24. EUR 1,000 2023 2022 Contract assets (Work in progress) Work in progress Jan 1 30,181 26,810 Business combinations 2,255 785 Additions 338,158 304,791 Invoicing -344,044 -301,957 Netting work in progress and advances received 4,139 -134 Other changes -28 -114 Contract assets Dec 31 30,661 30,181 Contract liabilities (Advances received) Advances received Jan 1 2 856 3,891 Business combinations 1,306 0 Additions 54,837 45,904 Revenue recognized that was included in the contract liability at the beginning of the period -57,411 -46,831 Netting work in progress and advances received 4,139 -134 Other changes 91 26 Contract liabilities Dec 31 5,818 2,856 40 8 OTHER OPERATING INCOME EUR 1,000 2023 2022 Premeasurement of contingent considerations in business combinations 0 767 Covid compensations received 0 249 Rental income 124 376 Gain on disposal of tangible assets 150 3 Other operating income 1,467 1,430 Total 1,742 2,826 9 NON-RECURRING ITEMS Items that are material either because of their size or their nature, and that are non-recurring are considered as non-recurring items. These items are presented within the line items to which they best relate, and are not deducted from other items in the income statement. The amount of non-recurring items and the line items in which they are included are specified in the table below as additional information. Non-recurring items relate to acquisitions and restructuring. EUR 1,000 2023 2022 Other operating income 0 767 Employee benefits expenses and other operating expenses -1,717 -1,807 Operating profit (EBIT) -1,717 -1,040 Financial income and expenses 0 -5,133 Profit for the financial year -1,717 -6,173 10 MATERIALS AND SERVICES EUR 1,000 2023 2022 Materials 11,924 9,010 Services from others 31,396 31,384 Total 43,320 40,395 11 NUMBER OF PERSONNEL AND EMPLOYEE BENEFITS EXPENSES 2023 2022 Personnel Personnel at year-end 3,902 3,929 Personnel, average 3,949 3,936 Personnel by category Design personnel 3,690 3,710 Administrative personnel 212 219 Total 3,902 3,929 41 Specification of employee benefits expenses EUR 1,000 2023 2022 Wages and salaries 189,820 184,926 Pension costs - defined contribution plans 20,949 21,318 Pension costs - defined benefit plans 244 212 Other indirect employee benefits expenses 22,682 21,366 Total 233,696 227,823 Compensation of the Board of Directors and top management are disclosed in note 32 Related party transactions. DEFINED EMPLOYEE B ENEFIT S In Sweden and the Netherlands, a part of the pension arrangements are multi-employer defined benefit plans, which are se- cured through an insurance. The plans pool the assets contributed by various entities that are not under common control. The assets provide benefits to employees of more than one entity. Sufficient information for the calculation of obligations and as- set by employer is not available from the insurers. Therefore, these plans are treated in accounting as defined contribution plans. Etteplan's share of the total premiums paid to the arrangement and the share of employees participating in the arrange- ments is minor. Total amount paid to the insurer in 2023 in Sweden was EUR 1,083 thousand (2022: EUR 1,248 thousand) and in the Netherlands EUR 961 thousand (2022: EUR 779 thousand). The payment level is not expected to change materially in the next financial period compared to the period under review. Cognitas GmbH, acquired in 2022, has a defined benefit pension plan. Cognitas GmbH merged to Etteplan Germany GmbH and defined benefit plan also transferred to Etteplan Germany GmbH. The expenses related to the plan are recognized as de- scribed in note 2.11. The defined benefit pension plan is unfunded. The average duration of arrangement is approximately 15 years. The payments were in financial year 2023 EUR 0.3 million. The payments to be made under the plan in the financial year 2024 are expected to be approximately EUR 0.3 million. NET DEFINED BENEFIT LIABILITY EUR 1,000 2023 2022 Present value of unfunded obligations 5,069 4,897 Fair value of plan assets 0 0 Deficit/surplus 0 0 Net liability (+) / net asset (-) 5,069 4,897 CHANGE IN DEFI NED BENEFIT OBLI GATIO N AND PLAN ASSETS Present value of EUR 1,000 funded obligation Jan 1, 2023 4,897 Current service cost 14 Interest cost or income 176 Actuarial gains (-) and losses (+) arising from changes in fi-nancial assumptions 214 Experience profits (-) or losses (+) 12 Contributions from plan participants 0 Benefits paid -244 Dec 31, 2023 5,069 42 Present value of EUR 1,000 funded obligation Jan 1, 2022 0 Acquisition of Cognitas GmbH Jan 13, 2022 6,902 Current service cost 26 Interest cost or income 76 Actuarial gains (-) and losses (+) arising from changes in fi-nancial assumptions -1,701 Experience profits (-) or losses (+) -168 Contributions from plan participants 0 Benefits paid -238 Dec 31, 2022 4,897 SIGNIFICANT ACTUARI AL ASS UMPTIONS DEC 31 2023 2022 Discount rate, % 3.3 3.7 Salary increases, % 2.0 2.0 Pension increases, % 2.0 2.0 The table below presents a sensitivity analysis of the most significant actuarial assumptions. The effect of change in each as- sumption is calculated expecting the other assumptions to remain unchanged. In reality, the changes in assumptions may cor- relate with each other. SENSITIVITY OF THE D EFINED BENEFIT OBLIG ATION TO CHANGES I N THE MOST SI GNIFIC ANT AS- SUMPTIONS Effect on obligation Change in assumption 2023 2022 Decrease of discount rate by 0.5 percentage points increase of 5.74 per cent increase of 5.74 per cent Increase of discount rate by 0.5 percentage points decrease of 5.23 per cent decrease of 5.27 per cent Increase in salaries by 0.5 percentage points n.a n.a Increase in benefits by 0.5 percentage points increase of 4.28 per cent increase of 4.21 per cent 12 OTHER OPERATING EXPENSES EUR 1,000 2023 2022 Software and telecommunication expenses 13,177 10,952 Travel expenses 6,519 5,245 Premises expenses 2,128 1,314 Epenses related to leases of low-value assets 1,575 1,181 Other personnel expenses 6,601 6,699 Change in credit loss allowance 232 86 Loss on disposals of fixed assets 20 0 Insurances 652 548 Costs related to acquisitions 104 297 Earn-out payments 197 0 Legal services 285 582 Other expenses 8,767 9,235 Total 40,259 36,140 43 13 AUDIT FEES EUR 1,000 2023 2022 Auditing, KPMG-network 148 124 Auditor's statements based on laws and regulations, KPMG Oy Ab 7 5 Other services (tax services), KPMG Oy Ab 43 55 Other services (other services), KPMG-network 9 13 Total 205 199 14 FINANCIAL INCOME EUR 1,000 2023 2022 Dividend income from investments 11 13 Interest income from investments 46 0 Interest income from loans and other receivables 487 100 Foreign exchange gain 259 931 Total 803 1,044 15 FINANCIAL EXPENSES EUR 1,000 2023 2022 Interest on borrowings 3,860 1,150 Leasing interest expenses 695 407 Losses on foreign currency derivatives 0 4,878 Other foreign exchange loss 777 267 Other financial expenses 205 578 Total 5,537 7,280 In financial year of 2022, in connection with the Semcon public offer, the group took a currency hedge for hedging purposes to protect the possible purchase price from exchange rate fluctuations. The derivative was valued at its fair value before realiza- tion. However, the Semcon public offer were not fulfilled due to a competing purchase offer, and the currency hedge contract was already realized in the financial year, so at the time of the financial year end date, the group has no derivative contracts in effect. Therefore, IFRS 9 standard on hedge accounting has not been applied. 16 TRANSLATION DIFFERENCES RECOGNIZED IN INCOME STATEMENT EUR 1,000 2023 2022 Foreign exchange gain included in financial income 259 931 Foreign exchange loss included in financial expenses -777 -5,146 Total -518 -4,215 44 17 INCOME TAXES EUR 1,000 2023 2022 Tax on income from operations -4,581 -4,978 Taxes for prior years 21 -1 Change in deferred tax asset -467 -69 Change in deferred tax liability 868 812 Total -4,158 -4,235 RECONCILIATION BET WEEN INCOME TAX ES IN THE INCOME S TATEMENT AND THE THEORETICAL AMOUN T OF TAX THAT WOULD ARISE USING THE GROUP'S DOMESTIC T AX RATE ( 202 3: 20.0 %, 2022: 20.0 %) EUR 1,000 2023 2022 Accounting profit before tax 20,805 22,386 Theoretical amount of tax that would arise using the Group's domestic tax rate -4,161 -4,477 Effect of different tax rates in Group companies -168 616 Effect of change in tax rate on deferred taxes 0 -9 Calculated tax based on non-deductible items on unit's tax rate -458 -526 Calculated tax based on non-taxable items on unit's tax rate 926 342 Taxes for prior years 21 -1 Use of previously unrecognized tax on confirmed losses 122 3 Use of recognized tax on confirmed losses 0 -36 Unrecognized tax on loss for the period -439 -326 Other tax difference 0 179 Income tax expense -4,158 -4,235 TAX CHARGE (-) / CREDIT (+) RELATING TO COMPON ENTS OF OTH ER CO MPREHENSIVE INCOME Tax charge / 2023 Before tax credit After tax Change in fair value of equity investments at fair value through other comprehensive income 7 -1 5 Currency translation differences -772 0 -772 Deferred tax on actuarial gains or losses on defined benefit 67 -67 0 Other comprehensive income for the year, net of tax -698 -69 -767 Tax charge / 2022 Before tax credit After tax Change in fair value of equity investments at fair value through other comprehensive income -37 7 -30 Currency translation differences -4,229 0 -4,229 Deferred tax on actuarial gains or losses on defined benefit 1,942 -583 1,359 Other comprehensive income for the year, net of tax -2,342 -575 -2,899 45 18 EARNINGS PER SHARE Basic earnings per share is calculated by dividing the profit for the financial year attributable to equity holders of the parent company by the weighted average number of externally owned shares during the financial year. The shares to be paid out as rewards of the share-based incentive plan will be transferred from the shares held by the Company or shares acquired from the market, and therefore the incentive plan will have no diluting effect on the share value. 2023 2022 Profit attributable to equity holders of the parent company (EUR 1,000) 16,647 18,151 Issue adjusted weighted average number of shares (1,000 pcs) Jan 1 25,032 24,904 Effect of acquired own shares -30 0 Effect of granted own shares 88 0 Effect of shares issued 0 128 Issue adjusted weighted average number of shares (1,000 pcs) Dec 31 25,090 25,032 Basic earnings per share (EUR/share) 0.66 0.73 Diluted earnings per share (EUR/share) 0.66 0.73 NOTES TO CONSOLIDATED BALANCE SHEET 19 GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill EUR 1,000 2023 2022 Acquisition cost Jan 1 105,385 92,380 Translation difference 297 -2,466 Acquisition of subsidiaries (note 5) 4,056 15,470 Book value Dec 31 109,737 105,385 OTHER INTANGIBLE ASSETS Internally created in-Fair value ad-2023 Intangible tangible as-justments in Leased soft-Advance EUR 1,000 rights sets acquisitions ware payments Total Acquisition cost Jan 1 13,175 3,060 56,374 7,698 89 80,396 Translation difference -94 0 247 1 0 154 Acquisition of subsidiaries 80 0 2,332 0 0 2,412 Additions 703 11 0 530 266 1,510 Disposals -9 0 0 0 -45 -53 Reclassifications 96 45 0 0 -45 96 Acquisition cost Dec 31 13,951 3,116 58,953 8,229 266 84,515 Cumulative amortization Jan 1 -12,004 -2,868 -25,753 -7,027 0 -47,652 Translation difference 95 0 -68 -2 0 24 Amortization for the financial year -693 -86 -5,344 -515 0 -6,637 Cumulative amortization Dec 31 -12,603 -2,954 -31,165 -7,544 0 -54,264 Book value Dec 31 1,349 162 27,788 686 266 30,250 46 Internally created in-Fair value ad-2022 Intangible tangible as-justments in Leased soft-Advance EUR 1,000 rights sets acquisitions ware payments Total Acquisition cost Jan 1 12,674 2,965 46,056 7,547 273 69,516 Translation difference -59 0 -572 -35 -1 -667 Acquisition of subsidiaries 154 0 10,890 0 0 11,044 Additions 206 9 0 186 9 411 Disposals 0 0 0 0 0 0 Reclassifications 200 86 0 0 -193 93 Acquisition cost Dec 31 13,175 3,060 56,374 7,698 89 80,396 Cumulative amortization Jan 1 -11,278 -2,690 -20,679 -6,060 0 -40,709 Translation difference 58 0 220 30 0 308 Acquisition of subsidiaries -24 0 0 0 0 -24 Disposals 0 0 0 0 0 0 Amortization for the financial year -761 -178 -5,293 -996 0 -7,227 Cumulative amortization Dec 31 -12,004 -2,868 -25,753 -7,027 0 -47,652 Book value Dec 31 1,171 192 30,621 672 89 32,745 Valuations of the fair value adjustments in acquisitions EUR 27,788 consist of acquired customer bases of EUR 27,478 thou- sand (EUR 30,182 thousand) and non-competition agreements of EUR 309 thousand (EUR 439 thousand). 20 TANGIBLE ASSETS Right-of-use assets Machinery Other Machinery 2023 Land and and equip-tangible and equip-EUR 1,000 water Buildings ment assets ment Premises Total Acquisition cost Jan 1 19 495 17,417 1,834 26,011 45,059 90,836 Translation difference 0 0 -46 -4 25 0 -25 Acquisition of subsidiaries 0 0 249 0 230 542 1,021 Additions 0 0 900 149 3,663 7,367 12,079 Disposals 0 -495 -33 -4 -123 -1,043 -1,697 Reclassifications 0 0 -4 0 0 0 -5 Acquisition cost Dec 31 19 0 18,484 1,974 29,807 51,925 102,209 Cumulative depreciation Jan 1 0 -25 -14,303 -1,491 -20,690 -29,519 -66,029 Translation difference 0 0 53 2 -20 0 35 Disposals 0 40 0 0 0 0 40 Depreciation for the financial year 0 -16 -1,221 -116 -3,626 -7,240 -12,218 Cumulative depreciation Dec 31 0 0 -15,471 -1,604 -24,337 -36,759 -78,171 Book value Dec 31 19 0 3,013 370 5,470 15,166 24,038 47 Right-of-use assets Machinery Other Machinery 2022 Land and and equip-tangible and equip-EUR 1,000 water Buildings ment assets ment Premises Total Acquisition cost Jan 1 19 495 15,860 1,597 22,061 37,832 77,864 Translation difference 0 0 -113 -1 -215 0 -330 Acquisition of subsidiaries 0 0 509 0 118 1,177 1,804 Additions 0 0 1,185 239 4,157 6,779 12,360 Disposals 0 0 -24 0 -109 -729 -861 Reclassifications 0 0 0 0 0 0 0 Acquisition cost Dec 31 19 495 17,417 1,834 26,011 45,059 90,837 Cumulative depreciation Jan 1 0 -22 -13,111 -1,204 -17,408 -21,360 -53,105 Translation difference 0 0 62 1 161 0 225 Disposals 0 0 4 0 0 0 3 Depreciation for the financial year 0 -3 -1,133 -289 -3,443 -8,160 -13,028 Cumulative depreciation Dec 31 0 -25 -14,303 -1,491 -20,690 -29,519 -66,030 Book value Dec 31 19 471 3,114 343 5,321 15,539 24,808 TANGIBLE AND INTANGIBLE RIGHT-OF-USE ASSETS IN TOTAL EUR 1,000 2023 2022 Book value Jan 1 21,532 22,611 Translation difference 4 -60 Acquisition of subsidiaries 772 1,295 Additions 11,560 11,123 Disposals and reclassifications -1,165 -838 Depreciation for the financial year -11,381 -12,599 Book value Dec 31 21,322 21,532 The total cash outflow for leases in financial year 2023 was EUR 13,351 thousand (2022: EUR 13,986 thousand). Additional in- formation on right-of-use assets and lease liabilities in note 2.14. 48 21 FINANCIAL INSTRUMENTS BY MEASUREMENT CATEGORY Financial assets 2023 EUR Fair value 1,000 Note Amortized cost through OCI Book value total Quoted and unquoted shares 21 2,376 2,376 Trade and other receivables 24 56,500 56,500 Cash and cash equivalents 23,442 23,442 Financial assets Dec 31 79,942 2,376 82,318 Fair value Financial liabilities 2023 through profit EUR 1,000 Note Amortized cost and loss Book value total Loans from financial institutions 27 65,180 65,180 Lease liabilities 27 21,404 21,404 Liabilities from acquisitions 5,28 600 600 Trade and other payables 29 13,602 13,602 Financial liabilities Dec 31 100,186 600 100,786 Financial assets 2022 Fair value through EUR 1,000 Note Amortized cost OCI Book value total Quoted and unquoted shares 21 2,414 2,414 Trade and other receivables 24 57,994 57,994 Cash and cash equivalents 19,564 19,564 Financial assets Dec 31 77,558 2,414 79,972 Financial liabilities 2022 Fair value through EUR 1,000 Note Amortized cost profit and loss Book value total Loans from financial institutions 27 68,991 68,991 Lease liabilities 27 21,592 21,592 Liabilities from acquisitions 5,28 52 52 Trade and other payables 29 14,235 14,235 Financial liabilities Dec 31 104,818 52 104,870 The fair values of financial instruments materially correspond to their book values. Fair value hierarchy The tables below analyze financial instruments carried at fair value, by valuation method. The different levels are defined as follows: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly as prices or indirectly, derived from prices. Level 3: Unobservable inputs that are not based on observable market data. 49 FINANCIAL ASSETS RECOGNIZED AT FAIR VALUE THROUGH OCI Unquoted shares and 2023 Quoted shares (Level Premises sha-loan receivables (Level EUR 1,000 1) res (Level 2) 3) Total Opening balance at Jan 1 237 120 3,019 3,376 Gain/loss recognized in other com-prehensive income -38 0 0 -38 Closing balance Dec 31 199 120 3,019 3,339 Unquoted shares and 2022 Quoted shares (Level Premises sha-loan receivables (Level EUR 1,000 1) res (Level 2) 3) Total Opening balance at Jan 1 275 120 24 418 Ekkono AB investment 0 0 2,034 2,034 Loan given to Ekkono AB 0 0 963 963 Gain/loss recognized in other com-prehensive income -37 0 0 -37 Disposals 0 0 -1 -1 Closing balance Dec 31 237 120 3,019 3,376 Financial assets recognized at fair value through OCI (level 3) consists of an investment in Ekkono Solutions AB in the 2022 financial year, which is a Swedish start-up company developing machine learning and artificial intelligence technology. The investment supports Etteplan strategy and goal of bringing modern technology into Etteplan’s service solutions. The valuation method for shares and loan receivables is based on completed transactions or the present value of discounted cash flows. FINANCIAL LIABILITIES RECOGNIZED AT FAIR VALUE THROUGH PROFIT OR LOSS Contingent liability in acquisitions (Level 3) EUR 1,000 2023 2022 Opening balance at Jan 1 33 800 Additions 100 0 Revaluation 197 -767 Payment -230 0 Closing balance Dec 31 100 33 Additional information regarding contingent liabilities in acquisitions is provided in note 5 Business combinations. 22 IMPAIRMENT TESTING Goodwill is allocated to cash-generating units (CGUs) for determination of impairment. In impairment testing, the recoverable amount is defined as value-in-use. Value-in-use is defined as the discounted estimated future net cash flows generated by the asset or cash-generating unit. The Group's management has defined the CGUs to be the three service areas in which the Group's operations are organized. The impairment test is done in the fourth quarter after budgets for the next year were done and it is based on goodwill as per September 30. Cash flows after tax are based on budget figures for year one and financials approved by management for the next five-year period. The management makes estimations on the market demand and market environment, which are checked against external information sources. When defining the cash flow, attention is paid to anticipated price and margin develop- ment as well as costs, net working capital and investment needs. The management determines these based on past perfor- mance and expectations for market development. The discount rate applied to cash flow projections is determined based on the post-tax weighted average cost of capital 50 (WACC) that depicts the overall costs of shareholders’ equity and liabilities. The discount rate is based on the weighted aver- age of 30-year government bond rates in the countries where the CGUs operate. The bond rates are adjusted for the general market risk and the business risk of the CGUs. The recoverable amount is compared with the book value of the cash-generating unit. An impairment loss is booked as cost in the income statement, if the recoverable amount is lower than the book value. No impairment loss has been booked during the financial year or the comparison year. No impairment losses have been recorded during the financial period or the comparison period. GOOD WILL 30.9. MEUR 2023 2022 Engineering Solutions 56.3 55.3 Software and Embedded Solutions 36.8 35.8 Technical Communication Solutions 15.3 15.4 108.5 106.5 TotalKey assumptions used for value-in-use calculations 2023 2022 Aggregate growth percentage year 2-5 1.0% 1.0% Growth rate after 5 years 2.0% 1.0% Discount rate before tax Engineering Solutions 11.6% 11.5% Software and Embedded Solutions 12.6% 11.7% Technical Communication Solutions 11.8% 10.9% Discount rate after tax Engineering Solutions 9.4% 9.1% Software and Embedded Solutions 10.4% 9.5% Technical Communication Solutions 9.5% 8.7% The recoverable amount exceeds the book value as follows: MEUR 2023 2022 Engineering Solutions 127.1 122.6 Software and Embedded Solutions 55.6 63.5 Technical Communication Solutions 48.4 57.3 231.1 243.4 Total SENSITIVITY ANALYSIS In connection with impairment testing, sensitivity analyses were performed using the following variables: • Zero growth in net sales • Decrease of profitability (EBIT) by 4 percentage points • Increase of discount rate by 4 percentage points According to the management's understanding, realization of the variables used in the sensitivity analysis would not lead to impairment losses in cash-generating units. 51 23 INVENTORY EUR 1,000 2023 2022 Inventory at the beginning of the financial year 635 376 Additions/Deductions 172 258 Total 806 635 24 TRADE AND OTHER RECEIVABLES EUR 1,000 2023 2022 Trade receivables 55,115 55,169 Credit loss allowance -85 -394 Other receivables 498 2,203 Prepayments and accrued income 5,620 5,428 Total 61,148 62,405 Main items included in prepayments and accrued income 0 Interest receivables 46 Accruals of employee benefits expenses 116 53 Prepaid rents 713 497 Other prepayments and accrued income on expenses 4,745 4,877 Total 5,620 5,428 Analysis of receivables by currency EUR 41,832 41,028 SEK 14,052 14,286 CNY 2,288 3,321 PLN 514 1,094 DKK 1,775 2,504 Other currencies 688 171 Total 61,148 62,405 25 EQUITY SHAREHOLDER’S EQUITY Shareholders' equity consists of share capital, share premium account, unrestricted equity fund, own shares, cumulative trans- lation adjustment, other reserves and retained earnings. Share premium account contains the emission gain from the original stock listing as well as funds raised in bonus issues. Unrestricted equity fund includes funds raised in share issues and decided to be recorded in the Unrestricted equity fund. Translation differences contain translation differences arising from the conversion of financial statements of foreign units and the foreign subsidiary net investment hedge. The aggregate amount of the net investment hedge (EUR 149 thousand) related to the Swedish unit is recorded in the profit and loss statement upon disposal of the unit. Other reserves include the fair value reserve, which consists of fair value adjustments of investments at fair value through other comprehensive income amounting to EUR 73 thousand (2022: EUR 103 thousand). The aggregate amount of fair value adjustments are recorded in Retained earnings upon disposal of the investments. 52 SHARE AND SHARE CAP ITAL Etteplan Oyj has one series of shares. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. The fully paid and registered share capital of the Company at the end of the financial year was EUR 5,000,000 and the number of shares was 25,200,793 (2022: 25,200,793). No changes in share capital occurred during the financial year. The Company has one series of shares. Each share entitles its holder to one vote in the shareholders' meeting and gives an equal right to divi- dends. Shares are listed on Nasdaq Helsinki Ltd under the ETTE ticker. The share has no nominal value and there is no maximum num- ber of shares. All issued shares are fully paid. Where any Group company purchases the Company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company’s equity holders until the shares are canceled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributa- ble to the equity holders of the Parent Company. The number of company-held shares at the end of the financial year was 100,921 (2022: 159,046). The Board of Directors' au- thorization to acquire and dispose own shares and to increase the share capital through a rights issue is disclosed in the Board of directors' review. A liability is recognized for the amount of any dividend declared, being appropriately authorized and no longer at the discre- tion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. The Board of Directors has proposed to the Annual General Meeting a dividend of EUR 0.30 to be paid per share for the finan- cial year 2023. For the financial year 2022 dividend of EUR 0.36 was paid. 26 SHARE-BASED PAYMENTS PERFORMANCE SH ARE P LAN 2020-2022 The Board of Directors of Etteplan Oyj resolved on February 5, 2020 to establish a new share-based incentive plan for the Group key personnel. The aim of the plan is to combine the objectives of the shareholders and the key personnel in order to increase the value of the Company, to commit the key personnel to the Company, and to offer them a competitive reward plan based on holding the Company shares. The plan included one earning period which included the calendar years 2020–2022. The earning period covered the same years as Etteplan’s strategy update published in December 2019. The plan is in line with Etteplan’s strategy and supports the achievement of the Company’s financial targets. The earnings criteria were the Group's revenue increase and the development of Total Shareholder Return (TSR). The plan vested and the rewards were paid in April 2023. PERFORMANCE SH ARE P LAN 2023-2025 The Board of Directors of Etteplan Oyj resolved on April 19, 2023 to establish a new share-based incentive plan for the Group key personnel. The aim of the plan is to combine the objectives of the shareholders and the key personnel in order to increase the value of the Company, to commit the key personnel to the Company, and to offer them a competitive reward plan based on holding the Company shares. The plan includes one earning period which includes the calendar years 2023–2025. Approxi- mately 37 people belong to the plan, including the Management Group of Etteplan. The reward is settled in shares, in addition to which Etteplan pays the taxes and tax-related fees related to the reward. The cash proportion of the payable reward corre- sponds to the value of the Shares, in the maximum. The reward corresponds to a maximum total of 300,000 shares including also the cash portion. The earnings criteria are the Group's revenue increase and the earnings per share development. The potential reward will be paid after the earning period depending on the achievement of the earning criteria and service 53 condition. The shares to be paid out as potential rewards will be transferred from the shares held by the company or shares acquired from the market, and therefore the incentive plan will have no diluting effect on the share value. Performance Share Plan Performance Share Plan 2020-2022 Plan 2023-2025 Total Performance Share Plan Performance Share Instrument 2020-2022 Plan 2023-2025 Tot/Wa Initial amount, pcs 195,000 150,000 345,000 Initial allocation date 5.2.2020 16.5.2023 Vesting date 28.4.2023 30.4.2026 Maximum contractual life, yrs 2.4 3 2.7 Remaining contractual life, yrs 0 2.3 1.2 Number of persons at the end of reporting year 0 37 Payment method Equity and cash Equity and cash The amounts are presented in net amount of shares. In addition Etteplan pays the taxes and tax-relates fees related to the potential reward. The cash proportion of the payable reward corresponds to the value of the Shares, in the maximum. Performance Share Plan 2020-Performance Share Changes during the period 2023 2022 Plan 2023-2025 Total 1.1.2023 Outstanding in the period 85,131 0 88,131 Changes during period Granted 2,994 140,500 143,494 Forfeited 0 0 Exercised 88,125 0 88,125 31.12.2023 Outstanding in the period 0 140,500 140,500 The amounts are presented in net amount of shares. In addition Etteplan pays the taxes and tax-relates fees related to the potential reward. The cash proportion of the payable reward corresponds to the value of the Shares, in the maximum. FAIR VALUE D ETERMINATION The fair value of share based incentives have been determined at grant date and the fair value is expensed until the end of the performance period. The pricing of the share based incentives granted during the period was determined by the following in- puts and had the following effect: 54 Valuation parameters for instruments granted during period 2023 Performance Share Plan 2023-Instrument 2025 Share price at grant, € 16.45 Share price at reporting period end, € 13.80 Maturity, years 3 Risk-free rate, % 2.57 Expected dividends, € 1.47 Fair value per share, € 15.05 Effect of Share-based Incentives on the result and financial position during period EUR 1,000 2023 Expenses for the financial year, share-based payments 2,819 Expenses for the financial year, share-based payments, equity-settled 1,040 Liabilities arising from share-based payments 31.12.2023 0 Estimated amount of cash to be paid for the tax withholding within the ongoing plans 0 Effect of Share-based Incentives on the result and financial position during period EUR 1,000 2022 Expenses for the financial year, share-based payments 0 Expenses for the financial year, share-based payments, equity-settled 0 Liabilities arising from share-based payments 31.12.2022 2,383 Estimated amount of cash to be paid for the tax withholding within the ongoing plans 1,257 27 INTEREST-BEARING LIABILITIES LO ANS FROM FINANCI AL INSTIT UTIONS ANALYSIS BY CURRENC Y EUR 1,000 2023 2022 Non-current loans from financial institutions EUR 40,167 47,852 Total 40,167 47,852 Current loans from financial institutions EUR 24,720 19,720 CNY 293 1,419 Total 25,012 21,139 In addition Group has an undrawn loan of MEUR 9,0 on the balance sheet date. 55 LE ASE LIABILITIES ANALYSIS BY CURRENC Y EUR 1,000 2023 2022 Non-current lease liabilities EUR 5,481 6,355 SEK 2,427 1,766 CNY 183 357 PLN 429 0 DKK 41 0 Total 8,560 8,478 Current lease liabilities EUR 10,609 10,836 SEK 1,599 1,984 CNY 260 293 PLN 300 0 DKK 75 0 Total 12,843 13,114 28 OTHER NON-CURRENT LIABILITIES EUR 1,000 2023 2022 Liability from acquisitions 500 0 Other non-current liabilities 26 33 Total 526 33 29 TRADE AND OTHER PAYABLES EUR 1,000 2023 2022 Trade payables 13,576 14,209 Accrued liabilities 32,053 33,713 Tax payables 15,112 15,532 Liability from acquisitions 100 52 Other payables 8 2 Total 60,849 63,508 Main items included in accrued expenses and income Interest liabilities 573 307 Accrued employee benefits expenses 28,435 30,132 Other accrued expenses and income 3,045 3,274 Total 32,053 33,713 56 Analysis by currency EUR 45,668 46,266 SEK 12,282 12,942 CNY 853 1,913 PLN 1,510 1,344 DKK 474 954 Other 60 89 Total 60,849 63,508 30 DEFERRED TAXES DEFERRED TAX ASSETS 2023 Deferred tax assets Translation In income sta-EUR 1,000 Jan 1, 2023 difference tement In equity Acquisitions Dec 31, 2023 Confirmed loss 101 4 2 0 0 107 Leases Lease liabilities 787 0 -160 0 771 Right-of-use assets -7750 200 0 -775Leases total 120 40 0 17Share-based incentive plan 3760 -3760 0 0Other timing differences 13490 -970 0 126Total 622 95 -4670 0 250 Deferred tax liabilities Translation In income EUR 1,000 Jan 1, 2023 difference statement In equity Acquisitions Dec 31, 2023 Discretionary provisions 1,656 13 257 0 0 1,926 Fair value adjustments in ac-quisitions 6,935 37 -1,2190 686 6,438 Other timing differences 1,167 0 94 ,75 0 1,186 Total 9,758 50 -869-75686 9,550 57 DEFERRED TAXES 2022 Deferred tax assets Translation dif-In income sta-EUR 1,000 Jan 1, 2022 ference tement In equity Acquisitions Dec 31, 2022 Confirmed loss 134 0 -34 0 0 101 Leases 12 0 0 0 0 12 Share-based incentive plan 345 0 31 0 0 376 Other timing differences 240 -40 -67 0 0 173 Total 731 -40 -69 0 0 622 Deferred tax liabilities Translation dif-In income sta-EUR 1,000 Jan 1, 2022 ference tement In equity Acquisitions Dec 31, 2022 Discretionary provisions 1,282 -121 325 0 169 1,656 Fair value adjustments in ac-quisitions 5,596 -84 -1,199 0 2,622 6,935 Other timing differences 531 0 62 575 0 1,167 Total 7,409 -204 -812 575 2,791 9,758 At the end of the financial year the Group had gross losses carried forward of EUR 3,989 thousand (2022: EUR 2,705 thousand) of which a deferred tax asset has not been recognized. These losses are usable to offset future taxable gains a minimum of five years. OTHER NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31 PLEDGES, MORTGAGES AND GUARANTEES EUR 1,000 2023 2022 320 Business mortgages 320 120 Pledged shares 120 599 Other contingencies 363 1,039 Total 803 32 RELATED-PARTY TRANSACTIONS The Group's related party includes such persons that have control, joint control or significant influence over the Group. Also, the Group's key management personnel is included in the related party. Key management personnel refers to persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group. Spouses, wards and companies in control or joint control of the before mentioned persons are considered as other related parties. The ultimate controlling party, Ingman Group Oy Ab, and its group companies are also included in related parties. Related party transactions are priced according to Group's normal pricing basis and purchase conditions, which are equivalent to those that prevail in arm’s length transactions. 58 GRO UP COMP ANIES DEC 31, 2023 Group's / Parent company's Company Domicile holding Parent company Etteplan Oyj Espoo, Finland Etteplan Germany GmbH Leverkusen, Germany 100% / 100% Etteplan Deutschland GmbH Neukirchen-Vlyun, Germany 100% / 0% Etteplan Defense GmbH¹⁾ Koblenz, Germany 100% / 0% LAE Engineering GmbH Wiesloch, Germany 100% / 0% LAE Anlagenbau GmbH Cuxhaven, Germany 100% / 0% Etteplan Finland Oy Lahti, Finland 100% / 100% Etteplan Poland sp.z.o.o. Wroclaw, Poland 100% / 0% Etteplan Sweden AB Västerås, Sweden 100% / 100% Etteplan Technology Center Ltd. Kunshan, China 100% / 0% Etteplan Consulting (Shanghai) Co., Ltd. Shanghai, China 100% / 100% Etteplan B.V. Eindhoven, the Netherlands 100% / 100% Etteplan Netherlands B.V. Eindhoven, the Netherlands 100% / 0% Etteplan USA Inc. Austin (TX), USA 100% / 0% Syncore technologies AB Linköping, Sweden 100% / 100% Etteplan Denmark A/S Herlev, Denmark 100% / 100% High Vision Solutions AB Göteborg, Sweden 100% / 100% THE FOLLOWING GROUP COMPANIES H AVE BEEN MER GED IN 202 3: Company Domicile Merged to Etteplan Tech Poland S.A. Katowice, Poland Etteplan Poland sp.z.o.o. Cognitas GmbH Ottobrunn, Germany Etteplan Germany GmbH Etteplan Engineering Solutions Nether-lands B.V. Eindhoven, the Netherlands Etteplan Netherlands B.V. MA3 solutions B.V. Eindhoven, the Netherlands Etteplan Netherlands B.V. LCA Consulting Oy Lappeenranta, Finland Etteplan Finland Oy ¹⁾Company´s name changed 13th of January 2023 from F.I.T. Fahrzeug Ingenieurtechnik GmbH to Etteplan Defense GmbH. THE FOLLOWING TRANSACTIONS WERE CARRIE D OUT WITH RELATED P ARTIES 2023 2022 EUR 1,000 Sales and purchases of services and related receivables and payables Sales of services to other related parties 42 30 Purchases of services from other related parties 37 36 KEY MANAGEME NT COMPENSATION Key management of Etteplan Oyj includes the Board of Directors, CEO and Management Group. 59 SALARIES, F EES AND FRINGE B ENEFITS PAID TO KEY MANAG EMENT EUR 1,000 2023 2022 Members of the Board Robert Ingman, Chairman of the Board 85 83 Matti Huttunen 45 44 Päivi Lindqvist 47 45 Leena Saarinen 46 46 Mikko Tepponen 43 43 Sonja Sarasvuo 32 0 Tomi Ristimäki 32 0 CEO and other members of the Management Group Juha Näkki, salaries and fees paid 1,567 749 Juha Näkki, statutory pension costs 112 124 Other members of the Management Group, salaries and fees paid 3,591 2,324 Other members of the Management Group, statutory pension costs 419 434 ) Management compensation total 6,019 3,892 ) Fees paid to management in 2023 include nonrecurring payments of rewards of share-based incentive plans accumulated over years 2020-2023, of which EUR 1,175 thousand were share-based payments. The Annual General Meeting annually resolves the remuneration for the members of the Board of Directors. 33 EVENTS AFTER THE BALANCE SHEET DATE Etteplan, strengthened its market position in Denmark by acquiring STRONGIT on January 8, 2024, which focuses on product development solutions. The successful acquisition marks a continuation in Etteplan’s strategic growth journey as it complements our expertise and further expands our international operations. STRONGIT employs a team of 13 highly qualified engineering professionals and a vast network of about 70 freelancers working across Copenhagen, Århus and Gråsten. In 2023, STRONGIT’s revenue was approximately 13 million euros. The initial accounting for this business combination is incomplete and therefore the other disclosures required by IFRS 3 stand- ard cannot yet be made. 60 Parent Company’s Financial Statements PARENT COMPANY’S INCOME STATEMENT EUR, financial period Jan 1 - Dec 31 (FAS) Note 2023 2022 Revenue 1 18,863,945.10 17,992,393.03 Other operating income 2 31,237.59 144,871.78 Staff costs 3 -5,800,734.65 -6,163,925.54 Depreciation and amortization 10, 11 -379,920.41 -451,578.11 Other operating expenses 5 -10,034,910.33 -13,557,723.87 Operating profit/loss 2,679,617.30 -2,035,962.71 Financial income and expenses 6, 7 12,580,472.23 -1,354,725.10 Profit/loss before appropriations and taxes 15,260,089.53 -3,390,687.81 Appropriations 8 15,129,171.74 14,922,315.44 Income taxes 9 -2,660,574.27 -2,158,396.50 Profit for the financial year 27,728,687.00 9,373,231.13 61 PARENT COMPANY’S BALANCE SHEET EUR, Dec 31 (FAS) Note 2023 2022 ASSETS Non-current assets Intangible assets 10 595,985.09 913,174.75 Tangible assets 11 159,891.69 180,319.30 Shares in group companies 12 158,690,119.73 156,916,843.53 Other investments 12 2,052,397.84 2,052,397.84 Non-current receivables 13 14,815,837.87 7,667,757.27 Non-current assets, total 176,314,232.22 167,730,492.69 Current assets Current receivables 14 21,610,629.06 21,286,525.70 Cash and cash equivalents 15 14,893,172.87 11,241,985.24 Current assets, total 36,503,801.93 32,528,510.94 TOTAL ASSETS 212,818,034.15 200,259,003.63 EQUITY AND LIABILITIES Equity Share capital 16 5,000,000.00 5,000,000.00 Share premium account 16 6,701,187.41 6,701,187.41 Unrestricted equity fund 16 24,079,413.43 24,079,413.43 Own Shares 16 -1,718,906.02 -2,064,007.96 Retained earnings 16 28,254,785.78 27,688,036.68 Profit for the financial year 16 27,728,687.00 9,373,231.13 Equity, total 90,045,167.60 70,777,860.69 APPROPRIATIONS 17 230,097.14 359,268.88 Liabilities Non-current liabilities 18 39,850,000.00 47,500,000.00 Current liabilities 19 82,692,769.41 81,621,874.06 Liabilities, total 122,542,769.41 129,121,874.06 TOTAL EQUITY AND LIABILITIES 212,818,034.15 200,259,003.63 62 PARENT COMPANY’S CASH FLOW STATEMENTS In the fiscal year of 2022, the item also includes a realized currency hedging loss of EUR 4.9 million. EUR, financial period Jan 1 - Dec 31 (FAS) 2023 2022 OPERATING CASH FLOW Cash receipts from Group companies 18,350,710.68 18,155,530.23 Operating expenses paid -17,960,437.50 -16,470,022.95 Operating cash flow before financial items and taxes 390,273.18 1,685,507.28 Interest and payment paid for financial expenses -3,519,476.10 -987,642.08 Dividends and interest received 16,296,386.74 4,253,993.05 Income taxes paid -2,156,377.20 -2,790,188.81 Operating cash flow (A) 11,010,806.62 2,161,669.44 INVESTING CASH FLOW Purchase of tangible and intangible assets -75,121.14 -167,759.07 Acquisition of subsidiaries -1,773,276.20 -22,951,411.44 Sale of subsidiaries 0.00 4,117,079.00 Purchase of investments 0.00 -2,032,813.73 Loans granted to Group companies -7,800,000.00 -2,250,000.00 Loans granted to others 0.00 -962,757.27 Repayment of loans granted to Group companies 635,000.00 0.00 Change of internal bank account receivables 0.00 2,777,444.46 Investing cash flow (B) -9,013,397.34 -21,470,217.99 FINANCING CASH FLOW Purchase of own shares -486,226.17 0.00 Issue of new current loans 0.00 12,587,886.33 Repayments of current loans* -31,131,563.44 -31,833,642.74 Change of internal bank account liabilities -1,124,657.45 -5,361,566.04 Issue of new non-current loans 28,500,000.00 28,000,000.00 Dividend paid -9,015,028.92 -9,969,704.80 Group contribution 15,000,000.00 13,000,000.00 Financing cash flow (C) 1,742,524.02 6,422,972.75 Variation in cash (A+B+C) increase (+) / decrease (-) 3,739,933.30 -12,885,575.80 Assets at the beginning of the period 11,241,985.24 23,717,649.78 Exchange gains or losses on cash and cash equivalents -88,745.67 409,846.80 Assets at the end of the period 14,893,172.87 11,241,920.78 63 Notes to the Financial Statements of the Parent Company PARENT COMPANY’S ACCOUNTING POLICIES The financial statements of the parent company, Etteplan Oyj, are prepared in accordance with Finnish accounting and com- pany legislation (FAS). Etteplan Oyj’s revenue consists of software and management fees from Group companies. ACTIVATED DEVELOPMENT COSTS Development costs that are directly attributable to the design and testing of identifiable and unique software products con- trolled by the Company are recognized as intangible assets when the following criteria are met: • it is technically feasible to complete the software product so that it will be available for use • management intends to complete the software product and use or sell it • there is an ability to use or sell the software product • it can be demonstrated how the software product will generate probable future economic benefits • adequate technical, financial and other resources to complete the development and to use or sell the software prod- uct are available, and • the expenditure attributable to the software product during its development can be reliably measured. Directly attributable costs, which are capitalized as part of the software product, include the software development employee costs and an appropriate portion of relevant overheads. Other development expenditures, that do not meet these criteria, are recognized as an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. Computer software development costs recognized as assets are amortized over their estimated useful lives. MEA SUREMENT OF NON -CUR RENT ASSETS Non-current assets are capitalized in the balance sheet at historical cost less depreciation according to plan and possible im- pairment loss. Depreciation according to plan is based on the estimated useful life of the asset. Land areas are considered to have an unlimited useful life. The useful lives of other non-current assets are: software 5 years computers 3 years office furniture 5 to 10 years renovation of premises 5 years goodwill 5 to 10 years internally created software 3 to 5 years Maintenance and repair costs are expensed. Major basic improvement investments are capitalized and depreciated over their useful life. Capital gains and losses arising on the retirement and sale of non-current assets are included either in other operat- ing income or under other operating expenses. Income taxes Taxes in the income statement include taxes based on taxable earnings for the financial period as well as corrections to taxes for previous periods. Taxes based on taxable earnings are calculated using the tax rate in force at the time of the financial statement. PEN SION AGREEMENTS Pension security for the employees of the parent company is arranged with external pension insurance companies. Pension expenses are recorded as expenses in the year in which they are incurred. LEASE AGRE EMENTS Contractual lease payments are expensed over the lease period. 64 NOTES TO THE INCOME STATEMENT, PARENT COMPANY 1 REVENUE Revenue consists of software and management fees from Etteplan Group companies. 2 OTHER OPERATING INCOME 3 NUMBER OF PERSONNEL AND STAFF COSTS Employee benefits of the Board of Directors and top management are disclosed in point 32 "Related party transactions" of the notes to the consolidated financial statements. 4 AUDIT FEES EUR 2023 2022 Finland 18,863,945.10 17,992,393.03 EUR 2023 2022 Other operating income 31,237.59 144,871.78 Total 31,237.59 144,871.78 2023 2022 Personnel Personnel at year-end 71 69 Personnel, average 69 69 Personnel by category Administration personnel 71 69 Total 71 69 EUR 2023 2022 Staff costs Wages and salaries 4,791,127.73 5,231,046.50 Pension costs - defined contribution plans 858,100.18 789,778.56 Other indirect employee costs 151,506.74 143,100.48 Total 5,800,734.65 6,163,925.54 EUR 2023 2022 Auditing, KPMG Oy Ab 57,077.19 49,865.00 Auditor's statements based on laws and regulations, KPMG Oy Ab 5,177.72 7,220.00 Other services (tax services), KPMG Oy Ab 43,110.97 54,531.00 Other services (other services), KPMG Oy Ab 8,606.25 0.00 Total 113,972.13 111,616.00 65 5 OTHER OPERATING EXPENSES During the fiscal year of 2022, the company has sold the shares of Etteplan Tech Poland s.a. to the subsidiary Etteplan Finland Oy. The sale of the shares resulted in a sales loss of EUR 3,184 thousand. 6 FINANCIAL INCOME 7 FINANCIAL EXPENSES The realized currency hedging loss related to the preparation of the Semcon deal, EUR 4.9 million, had a significant negative impact on financing items in the fiscal year of 2022. 8 APPROPRIATIONS 9 INCOME TAXES EUR 2023 2022 Leasing and rents 1,618,145.34 1,897,367.41 IT costs 5,366,373.02 4,557,941.41 Services from Group companies 774,501.08 941,097.84 Loss on disposal of subsidiary shares 0.00 3,183,643.80 Other operating expenses 2,275,890.89 2,977,673.41 Total 10,034,910.33 13,557,723.87 EUR 2023 2022 Intra-Group dividend income 15,773,375.58 4,205,452.42 Dividend and interest income from others 474,262.26 47,070.63 Interest and other financial income, Intra-Group 210,545.29 48,428.95 Foreign exchange changes -52,227.00 428,618.28 Total 16,405,956.13 4,729,570.28 EUR 2023 2022 Intra-Group interest expense 932,433.24 140,342.02 Interest expense on borrowings from others 2,826,417.06 1,026,939.49 Foreign exchange loss 66,633.60 4,917,013.87 Total 3,825,483.90 6,084,295.38 EUR 2023 2022 Group contributions received 15,000,000.00 15,000,000.00 Increase (-) / decrease (+) in depreciation in excess of plan 129,171.74 -77,684.56 Total 15,129,171.74 14,922,315.44 EUR 2023 2022 Tax on income from operations 2,663,187.33 2,158,982.85 Tax corrections for previous accounting periods -2,613.06 -586.35 Total 2,660,574.27 2,158,396.50 66 NOTES TO THE BALANCE SHEET, PARENT COMPANY 10 INTANGIBLE ASSETS 2023 EUR Intangible rights Other intangible assets Advance payments Goodwill Total Acquisition cost Jan 1 5,821,961.67 153,010.00 0.00 2,499,728.53 8,474,700.20 Additions 12,912.62 0.00 0.00 0.00 12,912.62 Reclassifications between items 0.00 0.00 0.00 0.00 0.00 Acquisition cost Dec 31 5,834,874.29 153,010.00 0.00 2,499,728.53 8,487,612.82 Cumulative amortization Jan 1 -5,457,821.64 -153,010.00 0.00 -1,950,693.81 -7,561,525.45 Cumulative amortization on disposals 0.00 0.00 0.00 0.00 0.00 Amortization for the financial year -118,021.23 0.00 0.00 -212,081.05 -330,102.28 Cumulative amortization Dec 31 -5,575,842.87 -153,010.00 0.00 -2,162,774.86 -7,891,627.73 Book value Dec 31 259,031.42 0.00 0.00 336,953.67 595,985.09 2022 EUR Intangible rights Other intangible assets Advance payments Goodwill Total Acquisition cost Jan 1 5,630,786.76 153,010.00 76,550.00 2,499,728.53 8,360,075.29 Additions 114,624.91 0.00 0.00 0.00 114,624.91 Reclassifications between items 76,550.00 0.00 -76,550.00 0.00 0.00 Acquisition cost Dec 31 5,821,961.67 153,010.00 0.00 2,499,728.53 8,474,700.20 Cumulative amortization Jan 1 -5,259,653.13 -153,010.00 0.00 -1,738,612.75 -7,151,275.88 Amortization for the financial year -198,168.51 0.00 0.00 -212,081.06 -410,249.57 Cumulative amortization Dec 31 -5,457,821.64 -153,010.00 0.00 -1,950,693.81 -7,561,525.45 Book value Dec 31 364,140.03 0.00 0.00 549,034.72 913,174.75 67 11 TANGIBLE ASSETS 12 INVESTMENTS The parent company's direct holdings in Group companies are listed in point 32 "Related-party transactions" of the notes to the consolidated financial statements. 2023 EUR Machinery and equipment Other tangible assets Total Acquisition cost Jan 1 1,402,643.25 64,986.64 1,467,629.89 Additions 28,272.98 1,117.54 29,390.52 Acquisition cost Dec 31 1,430,916.23 66,104.18 1,497,020.41 Cumulative depreciation Jan 1 -1,229,024.95 -58,285.64 -1,287,310.59 Depreciation for the financial year -47,834.45 -1,983.68 -49,818.13 Cumulative depreciation Dec 31 -1,276,859.40 -60,269.32 -1,337,128.72 Book value Dec 31 154,056.83 5,834.86 159,891.69 2022 EUR Machinery and equipment Other tangible assets Total Acquisition cost Jan 1 1,350,058.59 64,437.14 1,414,495.73 Additions 52,584.66 549.50 53,134.16 Acquisition cost Dec 31 1,402,643.25 64,986.64 1,467,629.89 Cumulative depreciation Jan 1 -1,189,597.08 -56,384.97 -1,245,982.05 Depreciation for the financial year -39,427.87 -1,900.67 -41,328.54 Cumulative depreciation Dec 31 -1,229,024.95 -58,285.64 -1,287,310.59 Book value Dec 31 173,618.30 6,701.00 180,319.30 2023 EUR Shares in Group companies Other investments Total Acquisition cost Jan 1 156,916,843.53 2,052,397.84 158,969,241.37 Increases 1,773,276.20 0.00 1,773,276.20 Acquisition cost Dec 31 158,690,119.73 2,052,397.84 160,742,517.57 Book value Dec 31 158,690,119.73 2,052,397.84 160,742,517.57 2022 EUR Shares in Group companies Other investments Total Acquisition cost Jan 1 140,104,233.19 19,584.11 140,123,817.30 Increases 24,880,515.14 2,032,813.73 26,913,328.87 Decreases -8,067,904.80 0.00 -8,067,904.80 Acquisition cost Dec 31 156,916,843.53 2,052,397.84 158,969,241.37 Book value Dec 31 156,916,843.53 2,052,397.84 158,969,241.37 68 13 NON-CURRENT RECEIVABLES 14 CURRENT RECEIVABLES 15 CASH AND CASH EQUIVALENTS Cash and cash equivalents in the balance sheet correspond with the financial assets in the cash flow statement. EUR 2023 2022 Non-current receivables Loan receivables from Group companies 13,870,000.00 6,705,000.00 Loan receivables from Others 945,837.87 962,757.27 Non-current receivables, total 14,815,837.87 7,667,757.27 EUR 2023 2022 Current receivables from Group companies Trade receivables 2,691,972.66 2,192,259.74 Group contribution receivables 15,000,000.00 15,000,000.00 Other receivables 1,648,724.78 1,493,228.78 Current receivables from others Current prepayments and accrued income 2,017,219.81 1,845,011.90 Tax receivables 251,811.81 756,008.88 Other short-term receivables 900.00 16.40 Current receivables, total 21,610,629.06 21,286,525.70 Main items included in prepayments and accrued income Prepayments of IT costs 1,803,945.61 1,699,619.55 Other prepayments and accrued income on expenses 213,274.20 145,392.35 Total 2,017,219.81 1,845,011.90 EUR 2023 2022 Bank accounts and cash 14,893,172.87 11,241,985.24 Total 14,893,172.87 11,241,985.24 69 16 EQUITY Additional information regarding the shares is presented in point 25 "Shares and share capital" of the notes to the consolidated financial statements. 17 ACCUMULATED APPROPRIATIONS EUR 2023 2022 Restricted equity Share capital Jan 1 5,000,000.00 5,000,000.00 Share capital Dec 31 5,000,000.00 5,000,000.00 Share premium account Jan 1 6,701,187.41 6,701,187.41 Share premium account Dec 31 6,701,187.41 6,701,187.41 Restricted equity, total 11,701,187.41 11,701,187.41 Unrestricted equity Unrestricted equity fund Jan 1 24,079,413.43 22,150,309.73 Share issue 0.00 1,929,103.70 Unrestricted equity fund Dec 31 24,079,413.43 24,079,413.43 Treasury shares Jan 1 -2,064,007.96 -2,064,007.96 Additions -486,226.17 0.00 Share-based incentive plan 831,328.11 0.00 Treasury shares Dec 31 -1,718,906.02 -2,064,007.96 Retained earnings Jan 1 37,061,267.81 37,657,741.48 Dividends paid -9,015,028.92 -9,969,704.80 Share-based incentive plan 208,546.89 0.00 Retained earnings Dec 31 28,254,785.78 27,688,036.68 Profit for the financial year 27,728,687.00 9,373,231.13 Unrestricted equity total 78,343,980.19 59,076,673.28 Shareholders' equity, total 90,045,167.60 70,777,860.69 Distributable funds Dec 31 Retained earnings 28,254,785.78 27,688,036.68 Treasury shares -1,718,906.02 -2,064,007.96 Unrestricted equity fund 24,079,413.43 24,079,413.43 Profit for the financial year 27,728,687.00 9,373,231.13 Distributable funds Dec 31 78,343,980.19 59,076,673.28 Number of shares Jan 1 25,200,793 25,200,793 Number of shares Dec 31 25,200,793 25,200,793 EUR 2023 2022 Depreciation in excess of plan 230,097.14 359,268.88 Total 230,097.14 359,268.88 70 18 NON-CURRENT LIABILITIES 19 CURRENT LIABILITIES 20 PLEDGED, MORTGAGES AND GUARANTEES LOAN GUARANTEES ON BEHALF OF SUBSIDIARIES Etteplan Oyj has given a Parent Company guarantee totalling EUR 152 thousand for loans, of which EUR 0 is in use, for Etteplan Poland sp.z.o.o. EUR 2023 2022 Loans from financial institutions 39,850,000.00 47,500,000.00 Total 39,850,000.00 47,500,000.00 EUR 2023 2022 Current liabilities to group companies Trade payables 150,486.60 112,095.42 Other payables 320.00 0.00 Internal bank account liabilities 54,215,022.60 55,339,680.05 Current liabilities to others Trade payables 913,752.82 1,693,188.72 Other liabilities 522,012.27 375,163.44 Accrued expenses 2,240,202.68 4,436,392.55 Income tax liability 0.00 0.00 Accrued liability on acquisitions 0.00 32,818.00 Loans from financial institutions 24,650,972.44 19,632,535.88 Current liabilities total 82,692,769.41 81,621,874.06 Main items included in accrued expenses Interest liabilities 492,367.33 239,665.22 Accrued employee expenses 1,156,933.35 3,628,902.15 Other accrued expenses 590,902.00 567,825.18 Total 2,240,202.68 4,436,392.55 EUR 2023 2022 Guarantees given Other contingencies 319,557.04 319,557.04 Guarantees for Group companies 193,635.82 186,074.65 Finance Lease liabilities For payment in next financial year 2,513,389.19 2,500,609.19 For payment later 2,315,734.58 2,284,554.58 Operating Lease liabilities For payment in next financial year 442,520.00 596,800.00 For payment later 1,103,690.00 173,165.00 Credit limits Total credit limit available 8,253,064.17 6,615,668.18 Pledges, mortgages and guarantees total 15,141,590.80 12,676,428.64 71 21 EVENTS AFTER THE BALANCE SHEET DATE Etteplan, strengthened its market position in Denmark by acquiring STRONGIT on January 8, 2024, which focuses on product development solutions. The successful acquisition marks a continuation in Etteplan’s strategic growth journey as it complements our expertise and further expands our international operations. STRONGIT employs a team of 13 highly qualified engineering professionals and a vast network of about 70 freelancers working across Copenhagen, Århus and Gråsten. In 2023, STRONGIT’s revenue was approximately 13 million euros. The initial accounting for this business combination is incomplete and therefore the other disclosures required by IFRS 3 standard cannot yet be made. 72 SIGNATURE OF FINANCIAL STATEMENTS On December 31, 2023, the parent company’s distributable shareholders’ equity amounted to EUR 78.3 million, of which the net profit for the financial year was EUR 27.7 million. The Board of Directors proposes that from the distributable funds at the disposal of the Annual General Meeting, a dividend of EUR 0.30 per share be paid on the Company’s externally owned shares, for a maximum amount of EUR 7.6 million. Dividend will not be paid out to shares that are company-held on the record date of dividend payout, April 11, 2024. No substantial changes have occurred in the financial position of the Company since the end of the financial year. The Com- pany’s liquidity is good and the Board of Directors judges that the proposed distribution of dividend will not endanger the Company’s solvency. It is proposed that the dividend be paid on April 18, 2024. Espoo, February 8, 2024 Robert Ingman Matti Huttunen Päivi Lindqvist Chairman of the Board Member of the Board Member of the Board Leena Saarinen Mikko Tepponen Sonja Sarasvuo Member of the Board Member of the Board Member of the Board Tomi Ristimäki Member of the Board Juha Näkki CEO AUDITOR’S NOTE A report on the audit performed has been issued today. Helsinki, February 28, 2024 KPMG Oy Ab Kim Järvi Authorised Public Accountant, KHT 73 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 Etteplan Oyj Report on the Audit of the Financial Statements OPINION We have audited the financial statements of Etteplan Oyj (business identity code 0545456-2) for the year ended December 31, 2023. The financial statements comprise the consolidated statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including material accounting policy information, as well as the parent company’s balance sheet, income statement, statement of cash flows 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 Board of Directors. 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 13 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. 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 magni- tude of misstatements that, individually or in aggregate, could reasonably be expected to have influence on the economic deci- sions 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. 74 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. THE KEY AUDIT MATTER HOW THE MATTER WAS ADDRESSED IN THE AUDIT Valuation of goodwill – Accounting Policies and Note 22 to the Consolidated Financial Statements — Goodwill, totaling EUR 109.7 million, has in- creased by EUR 4.4 million during the financial period as a result of acquisitions, and is a signifi- cant individual item in the consolidated balance sheet. — Goodwill is tested for impairment when indica- tors of impairment exist, or at least annually. Goodwill impairment testing is conducted by comparing the carrying value with the recovera- ble amount using a discounted cash flow model. Estimating future cash flows underlying the im- pairment tests involves a significant element of management judgment, particularly in respect of growth in net sales, profitability and discount rates. — Valuation of goodwill is considered a key audit matter due to the significant carrying value and high level of management judgement involved. — We critically analyzed the management's as- sumptions that form the basis on which the cash flow projections for future years are prepared. — We assessed the appropriateness of the discount rate used and the technical integrity of calcula- tions as well as for comparison of the assump- tions used to the market and industry-specific data. — In addition, we assessed the adequacy of the sen- sitivity analyses and the appropriate presentation of notes related to impairment tests in the con- solidated financial statements. 75 Revenue Recognition – Accounting Policies and Note 7 to the Consolidated Financial Statements — Revenue recognition consists mainly of revenue from rendering of services. Total revenue amounted to EUR 360.0 million. — Revenue recognition is a key audit matter due to the significance of revenue when assessing the size of business, growth and profitability of Etteplan. Revenue recognition involves a risk of revenue being recognized in the incorrect period and at inaccurate amount due to related manage- ment estimates and large volumes of transaction data. — For projects, where either a fixed price or a tar- get price has been determined, revenue is recog- nized over time based on the percentage of com- pletion method. The percentage of completion is determined as the proportion of actual costs to the total estimated project costs. Inaccurate cost estimates lead to erroneous revenue recognition. — We evaluated the company’s revenue recogni- tion and accounting policies by reference to the principles of revenue recognition determined un- der IFRS. — We tested the effectiveness of key internal con- trols in place over the completeness and accu- racy of revenue. We also assessed the operative effectiveness of relevant IT systems for financial reporting purposes. — We compared total revenue estimates to cus- tomer contracts for projects where revenue is recognized over time based on the project’s per- centage of completion. In addition, we analyzed working hours recorded for work in progress projects in comparison to total hours estimated by the management. We also considered the ap- propriateness of the process for updating esti- mated project costs and percentages of comple- tion. — In addition, we performed substantive audit pro- cedures to evaluate the completeness and accu- racy of revenue recorded and assessed the ef- fect of other events which require management judgment. RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THE MANAGING DIREC- TOR FOR THE FINANCIAL STATEMENTS The Board of Directors and the Managing Director 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 Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstate- ment, whether due to fraud or error. In preparing the financial statements, the Board of Directors and the Managing Director 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 ac- counting 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. 76 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, indi- vidually 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 Managing Director’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 condi- tions 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 disclo- sures 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 signifi- cance 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 conse- quences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 77 OTHER REPORTING REQUIREMENTS INFORMATION ON OUR AUDIT ENGAGEMENT KPMG Oy Ab was first appointed as auditors by the Annual General Meeting on April 4, 2017, and our appointment represents a total period of uninterrupted engagement of 7 years. OTHER INFORMATION The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors and the information included in the Annual Report, but does not include the financial state- ments or our auditor’s report thereon. We have 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. 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 other information that we obtained prior to the date of this auditor’s report, 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. Helsinki, 28 February 2024 KPMG OY AB KIM JÄRVI Authorized Public Accountant, KHT 78 INDEPENDENT AUDITOR’S REASONABLE ASSURANCE REPORT ON ETTEPLAN OYJ’S ESEF FINANCIAL STATEMENTS To the Board of Directors of Etteplan Oyj We have undertaken a reasonable assurance engagement in respect of whether the consolidated financial statements for the year ended 31 December, 2023 included in the digital financial statements 7437006I5533R06JU690-2023-12-31-en.zip of Etteplan Oyj (Business ID 0545456-2) have been marked up with iXBRL markups in accordance with the requirements of Article 4 of EU Delegated Regulation 2018/815 (ESEF RTS). The Responsibility of the Board of Directors and Managing Director The Board of Directors and Managing Director are responsible for preparing the report of the Board of Directors and financial statements (ESEF financial statements) that comply with the requirements of ESEF RTS. This responsibility includes: — preparation of ESEF financial statements in XHTML format in accordance with Article 3 of the ESEF RTS — marking up the primary statements and the notes to the consolidated financial statements, and the company identification data included in the ESEF financial statements with iXBRL tags in accordance with Article 4 of the ESEF RTS; and — ensuring consistency between ESEF financial statements and audited financial statements. The Board of Directors and the Managing Director are also responsible for such internal control as they deem necessary to prepare the ESEF financial statements in accordance with the requirements of the ESEF RTS. Auditor’s Independence and Quality Management We are independent of the company in accordance with the ethical requirements applicable in Finland, which apply to the en- gagement we have performed, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The auditor applies International Standard on Quality Management ISQM 1, which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulations requirements. Auditor’s Responsibility In accordance with the Engagement Letter our responsibility is to express an opinion on whether the marking up of the consoli- dated financial statements included in the ESEF financial statements comply in all material respects with the Article 4 of the ESEF RTS. We conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements 3000. The engagement involves procedures to obtain evidence whether; — the primary statements of the consolidated financial statements included in the ESEF financial statements are, in all mate- rial respects, marked up with iXBRL tags in accordance with Article 4 of the ESEF RTS, and; — whether the notes to the consolidated financial statements and the company identification data included in the ESEF finan- cial statements data, have been marked up, in all material respects, with iXBRL tags in accordance with Article 4 of the ESEF RTS; and — whether the ESEF financial statements and the audited financial statements are consistent with each other. The nature, timing and the extent of procedures selected depend on practitioner’s judgement. This includes the assessment of the risks of material departures from the requirements set out in the ESEF RTS, whether due to fraud or error. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opinion In our opinion, the primary statements of the consolidated financial statements, the notes to the consolidated financial state- ments and the company identification data included in the ESEF financial statements of Etteplan Oyj identified as 7437006I5533R06JU690-2023-12-31-en.zip for the year ended 31 December, 2023 are, in all material respects, marked up in compliance with the ESEF Regulatory Technical Standard. 79 Our audit opinion on the audit of the consolidated financial statements of Etteplan Oyj for the year ended 31 December, 2023 is set out in our Auditor’s Report dated 28 February, 2024. In this report, we do not express any audit opinion or other assur- ance conclusion on the consolidated financial statements. Helsinki, 15 March 2024 KPMG OY AB Kim Järvi Authorised Public Accountant, KHT 80 LIST OF ACCOUNTING BOOKS AND TYPES OF VOUCHERS ACCOUNTING BOOKS Journal electronically General Ledger electronically Invoice journal, purchase ledger electronically Payment journal, purchase ledger electronically Invoice journal, accounts receivable ledger electronically Payment journal, accounts receivable ledger electronically Financial Statements and Board of Directors’ review electronically VOUCHERS Voucher type Storage Asset electronically Customer Payment electronically Vendor Invoice electronically Expense electronically General electronically Intercompany Vendor Invoice electronically Invoice electronically Manual electronically Mileage electronically Project Journal electronically Project Reallocation electronically Project Revenue Recognition electronically Tax Settlement electronically Time electronically Vendor Payment electronically Notes Vouchers electronically 7437006I5533R06JU6902023-01-012023-12-317437006I5533R06JU6902022-01-012022-12-317437006I5533R06JU6902023-12-317437006I5533R06JU6902022-12-317437006I5533R06JU6902021-12-317437006I5533R06JU6902021-12-31ifrs-full:IssuedCapitalMember7437006I5533R06JU6902022-01-012022-12-31ifrs-full:IssuedCapitalMember7437006I5533R06JU6902022-12-31ifrs-full:IssuedCapitalMember7437006I5533R06JU6902021-12-31ifrs-full:SharePremiumMember7437006I5533R06JU6902022-01-012022-12-31ifrs-full:SharePremiumMember7437006I5533R06JU6902022-12-31ifrs-full:SharePremiumMember7437006I5533R06JU6902021-12-31ETT:ReserveForInvestedUnrestrictedEquityMember7437006I5533R06JU6902022-01-012022-12-31ETT:ReserveForInvestedUnrestrictedEquityMember7437006I5533R06JU6902022-12-31ETT:ReserveForInvestedUnrestrictedEquityMember7437006I5533R06JU6902021-12-31ifrs-full:OtherReservesMember7437006I5533R06JU6902022-01-012022-12-31ifrs-full:OtherReservesMember7437006I5533R06JU6902022-12-31ifrs-full:OtherReservesMember7437006I5533R06JU6902021-12-31ifrs-full:TreasurySharesMember7437006I5533R06JU6902022-01-012022-12-31ifrs-full:TreasurySharesMember7437006I5533R06JU6902022-12-31ifrs-full:TreasurySharesMember7437006I5533R06JU6902021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember7437006I5533R06JU6902022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember7437006I5533R06JU6902022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember7437006I5533R06JU6902021-12-31ifrs-full:RetainedEarningsMember7437006I5533R06JU6902022-01-012022-12-31ifrs-full:RetainedEarningsMember7437006I5533R06JU6902022-12-31ifrs-full:RetainedEarningsMember7437006I5533R06JU6902023-01-012023-12-31ifrs-full:IssuedCapitalMember7437006I5533R06JU6902023-12-31ifrs-full:IssuedCapitalMember7437006I5533R06JU6902023-01-012023-12-31ifrs-full:SharePremiumMember7437006I5533R06JU6902023-12-31ifrs-full:SharePremiumMember7437006I5533R06JU6902023-01-012023-12-31ETT:ReserveForInvestedUnrestrictedEquityMember7437006I5533R06JU6902023-12-31ETT:ReserveForInvestedUnrestrictedEquityMember7437006I5533R06JU6902023-01-012023-12-31ifrs-full:OtherReservesMember7437006I5533R06JU6902023-12-31ifrs-full:OtherReservesMember7437006I5533R06JU6902023-01-012023-12-31ifrs-full:TreasurySharesMember7437006I5533R06JU6902023-12-31ifrs-full:TreasurySharesMember7437006I5533R06JU6902023-01-012023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember7437006I5533R06JU6902023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember7437006I5533R06JU6902023-01-012023-12-31ifrs-full:RetainedEarningsMember7437006I5533R06JU6902023-12-31ifrs-full:RetainedEarningsMemberiso4217:EURiso4217:EURxbrli:shares

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