City Service SE

Annual Report (ESEF) • May 1, 2024

25940046BHY41BKNKJ922023-01-012023-12-3125940046BHY41BKNKJ922023-12-31iso4217:EUR25940046BHY41BKNKJ922022-12-3125940046BHY41BKNKJ922022-01-012022-12-31iso4217:EURxbrli:shares25940046BHY41BKNKJ922021-12-31ifrs-full:IssuedCapitalMember25940046BHY41BKNKJ922021-12-31ifrs-full:SharePremiumMember25940046BHY41BKNKJ922021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember25940046BHY41BKNKJ922021-12-31ifrs-full:OtherReservesMember25940046BHY41BKNKJ922021-12-31ifrs-full:RetainedEarningsMember25940046BHY41BKNKJ922021-12-31ifrs-full:OtherEquityInterestMember25940046BHY41BKNKJ922021-12-31ifrs-full:EquityAttributableToOwnersOfParentMember25940046BHY41BKNKJ922021-12-31ifrs-full:NoncontrollingInterestsMember25940046BHY41BKNKJ922021-12-3125940046BHY41BKNKJ922022-01-012022-12-31ifrs-full:IssuedCapitalMember25940046BHY41BKNKJ922022-01-012022-12-31ifrs-full:SharePremiumMember25940046BHY41BKNKJ922022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember25940046BHY41BKNKJ922022-01-012022-12-31ifrs-full:OtherReservesMember25940046BHY41BKNKJ922022-01-012022-12-31ifrs-full:RetainedEarningsMember25940046BHY41BKNKJ922022-01-012022-12-31ifrs-full:OtherEquityInterestMember25940046BHY41BKNKJ922022-01-012022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember25940046BHY41BKNKJ922022-01-012022-12-31ifrs-full:NoncontrollingInterestsMember25940046BHY41BKNKJ922022-12-31ifrs-full:IssuedCapitalMember25940046BHY41BKNKJ922022-12-31ifrs-full:SharePremiumMember25940046BHY41BKNKJ922022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember25940046BHY41BKNKJ922022-12-31ifrs-full:OtherReservesMember25940046BHY41BKNKJ922022-12-31ifrs-full:RetainedEarningsMember25940046BHY41BKNKJ922022-12-31ifrs-full:OtherEquityInterestMember25940046BHY41BKNKJ922022-12-31ifrs-full:EquityAttributableToOwnersOfParentMember25940046BHY41BKNKJ922022-12-31ifrs-full:NoncontrollingInterestsMember25940046BHY41BKNKJ922023-01-012023-12-31ifrs-full:IssuedCapitalMember25940046BHY41BKNKJ922023-01-012023-12-31ifrs-full:SharePremiumMember25940046BHY41BKNKJ922023-01-012023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember25940046BHY41BKNKJ922023-01-012023-12-31ifrs-full:OtherReservesMember25940046BHY41BKNKJ922023-01-012023-12-31ifrs-full:RetainedEarningsMember25940046BHY41BKNKJ922023-01-012023-12-31ifrs-full:OtherEquityInterestMember25940046BHY41BKNKJ922023-01-012023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember25940046BHY41BKNKJ922023-01-012023-12-31ifrs-full:NoncontrollingInterestsMember25940046BHY41BKNKJ922023-12-31ifrs-full:IssuedCapitalMember25940046BHY41BKNKJ922023-12-31ifrs-full:SharePremiumMember25940046BHY41BKNKJ922023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember25940046BHY41BKNKJ922023-12-31ifrs-full:OtherReservesMember25940046BHY41BKNKJ922023-12-31ifrs-full:RetainedEarningsMember25940046BHY41BKNKJ922023-12-31ifrs-full:OtherEquityInterestMember25940046BHY41BKNKJ922023-12-31ifrs-full:EquityAttributableToOwnersOfParentMember25940046BHY41BKNKJ922023-12-31ifrs-full:NoncontrollingInterestsMember 23 20 CONSOLIDATED ANNUAL REPORT Beginning of the reporting period End of the reporting period Business name Registration number Legal address Telephone Fax E-mail Website Auditor CONSOLIDATED ANNUAL REPORT FOR 2023 1 January 2023 31 December 2023 City Service SE 12827710 Narva mnt. 5, 10117 Tallinn, the Republic of Estonia +370 5 239 49 00 +370 5 239 48 48 info@cityservice.eu http://www.cityservice.eu Ernst & Young Baltic AS 6 6 7 7 8 9 10 10 10 14 16 17 18 19 22 23 25 26 26 27 27 30 32 32 32 33 35 37 38 38 39 40 42 43 44 CONTENT 1. Corporate profile 1.1. City Service Group 1.2. Strategy and objectives 1.3. Mission and vision 1.4. Structure of the Group 1.5. Employees 2. Management and Corporate Governance report 2.1. Main areas of activity 2.1.1. Administration of apartment buildings 2.1.2. Management of commercial building facilities 2.1.3. Maintenance and cleaning of territories 2.1.4. Other activities 2.2. Performance improvement 2.3. Significant events 2.4. Key risk activity types and uncertainties 2.5. The main financial ratios concerning the financial year 2.6. The structure of the Company’s share capital 2.7. The shareholders of the Company 2.8. Restrictions on the transfer of securities and restrictions on voting rights 2.9. Company’s supervisory board and management board 2.9.1. Company’s supervisory board 2.9.2. Company’s management board 2.10. Dividend policy 2.11. Procedure of amendment of the Statutes of the Company 2.12. Material agreements concluded by the Company which may be important after change of control of the Company 2.13. Auditing system and description of the main features of internal audit and risk management systems in connection with the process of the preparation of the annual accounts 2.14. Information on compliance with the corporate governance code 2.15. Remuneration report 3. Social responsibility report 3.1. Overview 3.2. Market 3.3. Relations with employees 3.4. Social initiatives for communities 3.5. Environmental issues / Energy saving 3.6. Taxonomy overview 4. Consolidated financial statements Consolidated statement of financial position Consolidated statement of comprehensive income Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the financial statements Note 1 General information Note 2 Material accounting policies Note 3 Use of judgements and estimates in preparation of financial statements Note 4 Segment information Note 5 Goodwill Note 6 Other intangible assets Note 7 Property, plant and equipment Note 8 Discontinued operations and assets held for sale Note 9 Inventories Note 10 Prepayments Note 11 Other receivables Note 12 Trade receivables Note 13 Cash Note 14 Reserves and share premium Note 15 Borrowings Note 16 Provisions Note 17 Lease Note 18 Provision for employee benefits Note 19 Trade payables and payables to related parties Note 20 Contract liabilities - advances received Note 21 Other liabilities Note 22 Cost of sales Note 23 General and administrative expenses Note 24 Income tax Note 25 Basic and diluted earnings per share (EUR) Note 26 Dividends per share Note 27 Financial assets and liabilities and risk management Note 28 Commitments and contingencies Note 29 Related party transactions Note 30 Capital management Note 31 Subsequent events Note 32 Parent company’s unconsolidated financial statements 46 48 49 50 52 52 64 76 78 80 88 89 91 94 94 94 95 96 96 97 98 99 100 100 101 101 101 102 103 106 106 107 110 111 113 114 115 According to Management Board Regulations of City Service SE, Chairman of the Management Board hereby declares and confirms that according to his best knowledge, the financial state- ments, prepared according to the accounting standards in force, present a correct and fair view of the assets, liabilities, financial situation and loss or profit of the issuer and the undertakings involved in the consolidation as a whole, and the management report gives a correct and fair view of the development and results of the business activities and financial status of the issuer and the undertakings involved in the consolidation as a whole and contains a description of the main risks and doubts. Chairman of the Management Board Artūras Gudelis DECLARATION OF THE MANAGEMENT 30 April 2024 6 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 1.1. CITY SERVICE GROUP City Service SE is a holding company managing a group of facility maintenance and integrated service companies in Baltics. The Group’s companies are involved in the administration of the building management process, maintenance, and re- pair of engineering systems, energy management, renovation, technical and energy audits of buildings, site management and cleaning of premises, petrol station maintenance, and debt management. The Group’s companies operate in an environmentally sustainable manner. Administration of apartment buildings Commercial facility management Teritory cleaning and maintenance Other activities Main business areas of the Group: CORPORATE PROFILE 7 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 1.3. MISSION AND VISION 1.2. STRATEGY AND OBJECTIVES By combining City Service expertise with a deep understanding of local specifics, we provide our customers with modern and convenient services. Our long-term objective is very linked with our mission – growth of commercial, public and private property manage- ment, development of integrated utility services. 15.8 millions m 2 Today, the Group’s companies operate in Lithuania and Latvia. The total area of buildings managed in these regions amounts to OUR VISION is to be a leader in value creation of residential property. OUR MISSION is to represent the interests of customers by increasing the value of their property and improving their living environment. 8 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report LITHUANIA LATVIA 76% UAB Alytaus namų valda 100% UAB City Service Engineering 100% UAB Mano Būstas Alytus 100% UAB Mano Būstas Sostinė 100% UAB Pastatų priežiūra 100% SIA BILANCE 100% SIA Manas MĀJAS 100% UAB Baltijos NT valdymas 100% UAB CSG IT 100% UAB Mano Būstas Aukštaitija 100% UAB Mano Būstas Šiauliai 100% UAB Pastatų valdymas 100% SIA BonoDomo 100% SIA Manas MĀJAS 2 100% UAB Baltijos transporto valdymas 100% UAB Energijos taupymo paslaugos 100% UAB Mano Būstas Baltija 100% UAB Mano Būstas Ukmergė 100% UAB Rinkų vystymas 100% SIA City Service 100% SIA Manas Majas Salnas 21 57.71% UAB Biržų butų ūkis 100% UAB Energetinių projektų valdymas 100% UAB Mano Būstas Dainava 99.97% UAB Mano Būstas Vakarai 100% UAB Skolos LT 100% SIA City Service Engineering 100% SIA Manas MĀJAS 3 100% UAB BonoDomo 100% UAB EPC projektai 100% UAB Mano Būstas Neris 100% UAB Mano Būstas Vilnius 100% UAB Šiaulių NT valdymas 100% SIA Ēku pārvaldīšanas serviss 100% SIA Ventspils nami 100% UAB BonoDomo Pay 100% UAB Exergio 100% UAB Mano Būstas NPC 100% UAB Mano Būsto klientų patirčių centras 100% UAB Unitechna 100% SIA MultiHouse SPAIN 100% UAB Butų ūkio valdos 100% UAB Mano aplinka 100% UAB Mano Būstas Kaunas 100% UAB Mano Būsto priežiūra 100% SIA Latvijas Namsaim - nieks 100% Concentra Servicios y Mantenimiento, S.A. 100% UAB Būsto aplinka 100% UAB Mano bendrabutis 100% UAB Mano Būstas Klaipėda 100% UAB Merlangas 100% SIA Livonijas Nami 100% Vetell dos iberica, S.L. 100% UAB City Service Cleaning 100% UAB Mano Būstas 100% UAB Mano Būstas Radviliškis 100% UAB Nacionalinis renovacijos fondas 100% SIA Namu serviss APSE 1.4. STRUCTURE OF THE GROUP * The Group ceased to consolidate Concentra Servicios y Mantenimiento, S.A. (including sub-consolidated subsidiary Vetell dos iberica, S.L.) in its Financial statements after bankruptcy administrator was appointed on 10 May 2017, as from that date the Group has lost its control. 9 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 1.5. EMPLOYEES The employees of all levels working for the Group’s companies were actively involved in the Company’s operations in 2023, therefore, in-person or remote meetings of employees with the state officials were organised periodically in order to present the Company’s strategy, goals, and performance results. The employees were involved in decision-making pro- cesses through team tasks, thus encouraging their ini- tiative and creativity. Such model of communication and cooperation not only facilitated better understanding of the Company’s aspirations, but it also strengthened the relationship between employees, which are an integral part to achieving long-term and sustainable business re- sults. In addition, it established conditions for creating innovative ideas and solutions directly contributing to the Company’s growth and competitiveness on the market. The purpose and values of the Company continued to be actively communicated in 2023. The annual performance improvement interviews enabled to not only set the goals for the employees, but also to provide feedback on value-based conduct. Traditionally, an employee engage- ment survey was carried out, its results were presented to employees, and actions aimed at improving employee engagement were planned. The well-being of employees is our priority. We organ- ised a traditional summer celebration, provided addi- tional benefits: birthday and Christmas presents, recog- nized the contribution of long-term employees, offered flu shots, and provided additional benefits to employees working remotely. Furthermore, we provided all employ- ees with the opportunity to receive professional psycho- logical counseling. All Group’s companies continued to invest in upgrading the qualifications of their employees, organising internal and external trainings both in-person and remotely. Spe- cial attention was paid to the training and integration of new employees. The Company periodically participates in salary surveys and adapts salary systems in each country to market trends and changes. Currently, there are a total of 1485 employees working for the Group’s companies. There are 1341 employees in Lithuania and 144 employees in Latvia. Number of employees by country: LITHUANIA LATVIA employees employees 1,341 144 The total number of employees of the Group is 1,485 10 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.1. MAIN AREAS OF ACTIVITY 2.1.1. Administration of apartment buildings The Group’s companies provide apartment building administration services: take all actions necessary to preserve common-use objects and ensure their proper function as well as carry out ongoing technical maintenance. The Companies take care of maintaining the mechanical durability of the main structures of the buildings, repairing minor defects, caring out preventive maintenance, tuning, ensuring safe operation of engineering equipment designed for general use, liquidation of accidents, handling and preparing heat and hot water supply systems. The Group’s companies provide administration, technical maintenance and repair services of apartment buildings in Lithuania and Latvia. MANAGEMENT AND CORPORATE GOVERNANCE REPORT 11 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report The Group’s companies increased the area of supervised apartment buildings by signing new contracts with owners of apartment buildings in Lithuania. During the year, new comprehensive housing maintenance services were additionally provided to 103 apartment buildings, the total area of which is almost 225,000 square meters. The Company focused more on the quality of ser- vices provided, customer service, and sustainable business solutions. The Group’s companies continued to measure the cus- tomer satisfaction index (NPS) on a daily basis and ap- plied relevant operational processes based on its results in order to improve the quality of services and meet cus- tomers’ expectations. Compared to the previous year, customers’ satisfaction with the Company and the ser- vices provided by it increased by 24 percent. At the beginning of the summer, the Company started buying green electricity produced by wind farms for most of its customers’ common use premises. Such solution en- abled the Company’s customers to use sustainable energy, contributed to cost reduction, and decrease in carbon di- oxide emissions into environment. The Group’s companies saved 2,241 tons of CO2 by the end of the year. A new product, “Smart Home” was introduced to cus- tomers in 2023. It enables a smart remote control of the heating station of an apartment building with the use of artificial intelligence algorithms. The system regulates heating flows throughout the building, adapts to external and internal temperature changes and se- lects the most suitable heating method for each room. This solution enables saving up to 15 percent of heat throughout the building. The Group’s companies continued focusing on the devel- opment of digitised services. “BonoDomo”, a new self- service platform launched in March 2022, had 150,000 active accounts at the end of the year. Customers han- dled almost 0.5 million invoices via this platform and the total number of user logins exceeded 3.5 million. Area of currently maintained buildings in Lithuania amounts to 10 million m 2 The newly launched self-service platform BonoDomo has 150,000 active accounts. 12 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report Area of currently maintained buildings in Latvia amounts to 0.7 million m 2 The Company within the Group operating in Lat- via provides services in Riga, Liepaja, Ventspils, and Ogre Town. Customer request management, invoicing, and new customer management sys- tems were upgraded in 2023. As a result, opera- tion of the Company has become more efficient, and led to increased quality of services provided to customers. In the middle of the year, the Company within the Group acquired a small Company SIA “Multihouse”, which pro- vides residential building administration services for ten apartment buildings in Liepaja. The Company within the Group will continue to increase the area of serviced buildings organically through new acquisitions and geographical expansion in other cities of the country. 13 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report Changes in the area of managed apartment buildings in the Group companies, million m 2 23.3 16.3 11.9 10.6 2020 2021 2022 2023 Area of apartment buildings managed by the Group decreased mainly due to sale of subsidiaries operating in St. Pe- tersburg during 2022 (3.6 million m 2 ), sale of business in Spain during 2021 (4 million m 2 ) and sale of business in Poland in 2023 (1.08 million m 2 ). 14 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.1.2. Management of commercial building facilities The Group’s companies provide commercial building management services that ensure reliable functioning of the building systems and lower maintenance costs. The Companies provide a wide range of services for building maintenance: from engineering equipment, management and saving of energy resources to interior cleaning. The Group’s companies provide facilities management services for commercial buildings in Lithuania and Latvia. In Lithuania, “City Service Engineering” expanded its clientele in 2023 with 29 newly signed contracts. Company has started to provide comprehensive facilities management services to “Vlantana”, one of the largest- transport and logistics companies in Europe. The parties agreed on the maintenance services of the company’s headquarters of 52,000 square meters, which include a modern complex of buildings, warehouses, training cent- er, gas station, and workshops. Furthermore, “City Ser- vice Engineering” expanded its client base by adding new Business Centers in Vilnius: “S28”, “Park Town”, “Meraki” as well as the Shopping Center “Nordika” and others. New services and products were introduced to Lithu- anian market, with special attention given to the new priority area - electric car charging solutions for private and business customers. The range of services includes sales, installation, and maintenance of charging stations. Contracts for the maintenance of charging stations were signed with such companies as “Enefit”, “Elektrum”, and the Lithuanian Road Administration over the past year. In 2023, “Apex Intelligence”, a company developing in- telligent solutions for building energy system optimisa- tion based on artificial intelligence algorithms, changed its name to “Exergio”. “Exergio” ensures efficient remote collection and use of building data and predictive mainte- nance “Technopolis”, “Eastnine”, “Palink”, “Mano Būstas”, “Quadrum”, “Swedbank” and others use this innovative service in their buildings managed by “Exergio” in Lithu- ania. A cooperation agreement concluded with “City Service Engineering” enables this Company to provide its customers with smart building maintenance services using the “Exergio” platform. Last year, contracts were signed with “Turto bankas”, “Sanitex”, “Newsec” for the provision of services to 53 real estate objects. The to- tal area of buildings where “Exergio” service is used has reached 2 million sq. m. 29 contracts with new customers were signed in Lithuania. Major focus was placed on the development of the prod- uct and expansion in foreign markets, 12 contracts were concluded with sale and installation partners in Poland, Hungary, Oman, Ireland, United Kingdom, Czech Repub- lic, and Latvia. Introduction of “Exergio” service has been made to a new 28,500 sq. m. “Nowy Rynek” Business Center in Poznań, Poland. In Latvia, new comprehensive building management maintenance contracts have been signed or extended with “Rīgas meži” (recycled paper products), Riga Technical University, “Lumi Capital”, the Information Center of the Ministry of the Interior, etc. 15 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report Changes in the areas of commercial, public and industrial buildings in managed by the Group companies, m 2 2021 2022 2023 2017 2018 4.2 4.2 4.5 4.0 4.2 4.7 5.1 2019 2020 16 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.1.3. Maintenance and cleaning of territories The group’s companies provide a full range of grounds maintenance and cleaning services: interior and exterior cleaning, maintenance of private grounds and the environment around apartment buildings, snow, sand and leaf removal, grass cutting, special cleaning and supply of hygiene materials. Cleaning and grounds maintenance services are available in Lithuania and Latvia. In Lithuania , Group’s companies provide staircase, terri- tory and premises cleaning and maintenance services in Vil- nius, Kaunas, Klaipėda, Šiauliai, Alytus, Šilutė, Šilalė, Telšiai, Radviliškis, Panevėžys, Palanga and Tauragė. “City Service Cleaning” provides cleaning services in com - mercial facilities: shopping centers, sports clubs, exhibition halls, production and energy facilities, etc. in Vilnius, Kaunas, Klaipėda, Šiauliai, Panevėžys and Alytus. As of the 1st of May, “City Service Cleaning” stopped us - ing conventional chemical cleaning products and chooses only environmentally friendly cleaning products without any harmful effect on the environment and human health. The Company was motivated to take such step to con - tribute to the preservation of the environment, ensure the cleanliness of the premises and to take more responsi- ble care of the health of customers and employees of the Company. The Companies are constantly expanding the range of ser - vices and investing in the purchase of new equipment. In Latvia , the Group’s companies take care of the cleanli- ness of apartment buildings. 17 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.1.4. Other activities The Group’s companies in Lithuania and Latvia provide other services in addition to their main activities. In Lithuania , the Group’s companies carried out building renovation projects in 353 buildings, provided maintenance services to 198 gas stations, and recovered debts of approximately 3.67 million euros in court and through pre-trial proceedings on behalf of customers. the Group companies provided maintenance services to 198 petrol stations. Renovation was carried out in 12 houses. The Company operating in Latvia continued the renova- tion of apartment buildings under a new governance initia- tive. Renovation was carried out in 12 buildings. 18 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.2. PERFORMANCE IMPROVEMENT The Group continued using business process management methods, strategy planning, and cascading tools according to the LEAN methodology and adapted best practices for managing project activities. The development of a sustainability strategy began at the end of 2022 and Group intends to integrate it into the overall business strategy. MANAGEMENT AND CORPORATE GOVERNANCE REPORT In Lithuania, the Group’s companies focused on cus- tomer satisfaction, employee engagement, and increasing the Company’s value. 40 gemba walks were carried out in the Group’s companies, 205 of them were adjusted and updated and 8 new processes were created during the year 2023. Automated data processing solutions al- lowed to save 278 working hours per month. New in- formation systems are being implemented to provide services to customers in a more efficient and high quality manner. Special focus is on the involvement of employ- ees in the improvement of operations. 23 trainings were held during which employees deepened their knowledge in the areas of project management, LEAN methodol- ogy, sustainability, and operational processes. Consulta- tions on business processes were provided to employees. The employees of the Group submitted 106 ideas via the “Idea Bank” initiative in 2023. In Latvia, processes are constantly reviewed and im- proved. The service model is being improved and is re- sulting in faster and higher quality services provided to customers. Increasing involvement of managers and em- ployees as well as developing competencies remained a major focus point. 19 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report On 10 January 2023 SIA Nira Fonds apsaimniekošana Salnas 21 title was changed into SIA Manas Mājas Salnas 21. Other contact details did not change. On 25 January 2023 the title of UAB Apex Intelligence was changed into UAB Exergio. Other contact details did not change. On 06 February 2023 reorganization on the companies UAB Pastatų priežiūros tarnyba and UAB Mano būsto priežiūra was completed. After the process of reorganization UAB Pastatų priežiūros tarnyba was incorporated into UAB Mano būsto priežiūra with all the assets, rights and obligations. UAB Pastatų priežiūros tarnyba ceased operations and were deregistered. After reorganization UAB Mano būsto priežiūra management and other contact details did not change. On 10 March 2023, an increase of the share capital of PortalPRO S. L. was registered. The share capital of PortalPRO S. L. increased to EUR 435,972. Share capital of the company is divided into 1,000 ordinary shares, the nominal value of which remained at EUR 3. On 21 March 2023 the Group, through its Polish subsidiary, initiated voluntary liquidation of Parama Blue Sp. z o.o. On 27 March 2023 the Group sold 100% stake in PortalPRO s.r.o., which provided supply chain management services. Value of the share sale-purchase agreement is CZK 50 thousand (EUR 2,1 thousand). Net assets of disposed subsidiary at the date of disposal amounted to EUR (20) thousand (CZK (475) thousand). On 13 April 2023 the Group, through its Polish subsidiary, initiated voluntary liquidation of Parama White Sp. z o.o. On 18 April 2023, an increase of the share capital of LDA PortalPRO was registered. The share capital of LDA PortalPRO increased to EUR 46,900. Share capital of the company is divided into 46,900 ordinary shares, the nominal value of which remained at EUR 1. On 28 April 2023, an increase of the share capital of PortalPRO Sp. z. o. o. was registered. The share capital of UAB PortalPRO Sp. z. o. o. increased to PLN 960,600 (EUR 216,410). Share capital of the company is divided into 960,600 ordinary shares, the nominal value of which remained at PLN 1. On 03 May 2023, an increase of the share capital of UAB PortalPRO was registered. The share capital of UAB PortalPRO increased to EUR 2,338,557. Share capital of the company is divided into 2,338,557 ordinary shares, the nominal value of which remained at EUR 1. On 03 May 2023 the Group sold 100% stake in UAB PortalPRO and its subsidiary UAB Getfiks, which provided supply chain management services. Value of the share sale-purchase agreement is EUR 393 thousand. The carrying value of the net asset of the subsidiaries disposed at the date of issuing these financial statements amounted to EUR 606 thousand. On 03 May 2023 the Group sold 100% stake in UAB Medžiagų tiekimo centras, which provided supply of materials services. Value of the share sale-purchase agreement is EUR 629 thousand. The carrying value of the net asset of the subsidiary disposed at the date of issuing these financial statements amounted to EUR 290 thousand. On 08 May 2023 the Group, through its Polish subsidiary, initiated voluntary liquidation of Parama Red Sp. z o.o. On 09 May 2023 the Group, through its Polish subsidiary, initiated voluntary liquidation of Parama Yellow Sp. z o.o. On 11 May 2023 the title of UAB Mano Būstas was changed into Mano Būsto klientų patirčių centras, UAB. Other contact details did not change. On 12 May 2023 the title of UAB City Service was changed into Mano Būstas, UAB. Other contact details did not change. On 12 May 2023 the Group sold 100% stake in SIA PortalPRO. Value of the share sale-purchase agreement is EUR 32 thousand. The carrying value of the net asset of the subsidiary disposed at the date of issuing these financial statements amounted to EUR 32 thousand. 2.3. SIGNIFICANT EVENTS 20 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report On 16 May 2023 the Company signed the share purchase-sale agreement for the sale of UAB Baltijos būsto priežiūra and all of its subsidiaries operating in Poland. Value of the share sale-purchase agreement is EUR 956 thousand. The carrying value of the net asset of the subsidiaries disposed at the date of issuing these financial statements amounted to EUR (6,624) thousand. UAB Baltijos būsto priežiūra and its subsidiaries were operating in the field of utilities and apartment building administration in Poland. On 18 May 2023 the Company signed the share purchase-sale agreement for the sale of Deleterma Sp. z o.o. and all of its subsidiaries operating in Poland. Value of the share sale-purchase agreement is EUR 1. The carrying value of the net asset of the subsidiaries disposed at the date of issuing these financial statements amounted to EUR (1,094) thousand. Deleterma Sp. z o.o. and its subsidiaries were engaged in administration of dwelling-houses services provided in Poland. On 22 May 2023 the Group sold 100% stake in PortalPRO LDA. Value of the share sale-purchase agreement is EUR 100. The carrying value of the net asset of the subsidiary disposed at the date of issuing these financial statements amounted to EUR (28) thousand. On 30 May 2023 the Group, through its Latvian subsidiary acquired 100% of the shares of SIA MultiHouse (acquisition price EUR 32 thousand) which is based in Latvia. SIA MultiHouse is engaged in administration of dwelling-houses. On 21 June 2023 the Supervisory Board of the Company was re-elected. The supervisory board will continue to consist of Andrius Janukonis and Gintautas Jaugielavičius. On 29 June 2023 the Group sold 100% stake in PortalPRO Sp. Z o.o., which provided supply chain management services. Value of the share sale-purchase agreement is PLN 49 thousand (EUR 11 thousand). Net assets of disposed subsidiary at the date of disposal amounted to EUR (85) thousand (PLN (377) thousand). On 28 July 2023 the Group sold 100% stake in PortalPRO, S.L., which provided supply chain management services. Value of the share sale-purchase agreement is EUR 26 thousand. The carrying value of the net asset of the subsidiary disposed at the date of issuing these financial statements amounted to EUR (13) thousand. On 7 August 2023 reduced share capital of UAB Pastatų valdymas was registered. The share capital of UAB Pastatų valdymas after the reduction amounts to EUR 3 486. Share capital of the company is divided into 1 202 ordinary shares, the nominal value of which remained at EUR 2,9. On 31 August 2023 reduced share capital of UAB Mano Būstas NPC was registered. The share capital of UAB Mano Būstas NPC after the reduction is EUR 1674 902. Share capital of the company is divided into 57 835 ordinary shares, the nominal value of which remained at EUR 28,96. On 1 September 2023 reduced share capital of UAB Mano Būstas Vilnius was registered. The share capital of UAB Mano Būstas Vilnius after the reduction is EUR 1572 222. Share capital of the company is divided into 5421 454 ordinary shares, the nominal value of which remained at EUR 0,29. On 6 September 2023 the Group sold 100% stake in Eurobroker advisors correduria de seguros, S.L. which provided insurance brokerage services. Value of the share sale-purchase agreement was EUR 1000. The carrying value of the net asset of the subsidiary disposed at the date of issuing these financial statements amounted to EUR (113) thousand. On 20 September 2023 the Group sold 100% stake in Grupo Aresi de inversiones (Spain), S.L. which was the holding company of Company‘s activities in Spain. Value of the share sale-purchase agreement was EUR 1 (one euro). The carrying value of the net asset of the subsidiary disposed at the date of issuing these financial statements amounted to EUR (714) thousand. On 23 October 2023 reduced share capital of UAB Būsto aplinka was registered. The share capital of UAB Būsto aplinka after the reduction is EUR 358 125. Share capital of the company is divided into 1234 914 ordinary shares, the nominal value of which remained at EUR 0,29. On 25 October 2023 reduced share capital of UAB Mano Būstas Kaunas was registered. The share capital of UAB Mano Būstas Kaunas after the reduction is EUR 323 889. Share capital of the company is divided into 11 184 ordinary shares, the nominal value of which remained at EUR 28,96. 21 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report On 25 October 2023 reduced share capital of UAB Mano Būstas Šiauliai was registered. The share capital of UAB Mano Būstas Šiauliai after the reduction is EUR 939 463. Share capital of the company is divided into 3239 528 ordinary shares, the nominal value of which remained at EUR 0,29. On 26 October 2023 reduced share capital of UAB City Service Cleaning was registered. The share capital of UAB City Service Cleaning after the reduction is EUR 203 891. Share capital of the company is divided into 703 072 ordinary shares, the nominal value of which remained at EUR 0,29. On 26 October 2023 reduced share capital of UAB Mano Būstas Sostinė was registered. The share capital of UAB Mano Būstas Sostinė after the reduction is EUR 74 369. Share capital of the company is divided into 2 568 ordinary shares, the nominal value of which remained at EUR 28,96. On 6 November 2023 reduced share capital of UAB Mano Būstas Baltija was registered. The share capital of UAB Mano Būstas Baltija after the reduction is EUR 99 548. Share capital of the company is divided into 103 293 ordinary shares, the nominal value of which remained at EUR 2,90. On 30 November 2023, City Service SE (hereinafter - the Company) signed a financing agreement with „Swedbank“, AB (enterprise code 112029651), which allows the Company to borrow up to EUR 18,9 million. The loan shall be used to finance working capital and to refinance existing loans. On 20 December 2023, an Extraordinary General Meeting of Shareholders of City Service SE (hereinafter - EGM) was convened. During an EGM the decision was made to set off the losses recorded in the balance sheet of City Service SE. The losses were set off using the legal reserve and share premium. 22 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report The risks remain similar to last year‘s: inflation, customers’ ability to pay, competition-influenced stricter demands from commercial and residential clients, supply of qualified personnel in the market. Regarding inflation and customers‘ ability to pay Group doesn‘t see significant risk as the prices are stabilized and salary growth is stable. The scope of residential apartment building administration and maintenance services, the essential requirements for service providers, and the tariff calculation procedure are set and regulated in detail by the national and local authorities. Local authorities are empowered to set maximum tariffs for such services, together with the relevant inspectorates control the proper implementation by service providers of the administration and maintenance requirements set out in legislation. Local authorities impose sanctions for failure to comply with the set requirements. Any claims concerning the services provided may be presented to the authorities or service providers by individual owners as well. Taking into account the aforementioned, additional risk factors in the field of apartment building administration and maintenance include any possible amendments to the enforced legislation, the frequency of adoption of such amendments, resolutions passed by central or local authorities which provide additional obligations for service providers and the results of controls carried out by various inspectorates and local authorities. Timely and correct indexation of the set maximum tariffs is also a risk factor which has an impact on the Group’s activities in the field of residential apartment building administration and maintenance. There were no other material changes in the legal regulation of the area of administration and maintenance of apartment buildings in 2023, and neither were there any decisions providing significant additional obligations for service providers. Supervising institutions did not did not identify any major deficiencies in the provision of the services or inconsistencies with the legislative requirements. CREDIT RISK The Group’s procedures are in force to ensure on a permanent basis that sales are made to customers with an appropriate credit history and do not exceed an acceptable credit exposure limit. There are no individual customers exceeding 10% of segment sales. The maximum exposure to credit risk is represented by the carrying amount of each financial asset. Therefore, the management considers that its maximum exposure is reflected by the amount of trade and other receivables, net of allowance for doubtful accounts recognised at the date of the statement of financial position. INTEREST RATE RISK The major part of the Group’s borrowings (loans and financial lease obligations) are subject to EURIBOR which create an interest rate risk (Notes 15 and 17). There are no financial instruments designated in the financial statements to manage the exposure to the interest rate risk outstanding as of 31 December 2023 and 2022. The sensitivity of the Group’s profit before tax to a reasonably possible change in interest rates would have a negative effect on the profit before the income tax in amount of EUR (210) thousand if the interest rates would increase by 1 basis point (EUR (163) thousand in the year 2022). The Group doesn‘t see significant interest rates risk as the loan from the bank was refinanced with more convenient terms – longer maturity period, interest rates margin is lower. SEASONALITY The Group doesn’t have observable seasonality as usually revenues from facility management and residential building administration are based on contractual flat terms and services and works are provided continuously. However, the most profitable is Q3 as the major part of additional works are completed during this season due to favorable weather conditions. 2.4. KEY RISK ACTIVITY TYPES AND UNCERTAINTIES In 2023 the market was stable, prices and purchasing power did not decline in comparison with 2022. Due to heavy competition in facility management market the Group had to concentrate on further efficiency of activities. Building administration tariff has not changed significantly in a year. Improved customers experience and active sales led to rapid increase in additional services sales volume. 23 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.5. THE MAIN FINANCIAL RATIOS CONCERNING THE FINANCIAL YEAR KEY FINANCIAL INDICATORS 2019 2020 2021 2022 2023 Revenue from contracts with customers 178,020 154,507 135,475 115,353 109,480 Revenue from contracts with customers in Lithuania market 95,478 83,837 74,878 78,467 95,124 Revenue from contracts with customers in foreign markets (Poland, Baltic States, CIS and Spain) 82,542 70,670 60,597 36,886 14,356 Area under management in Lithuania (thousand sq. m) 14,420 13,634 13,658 13,803 14,076 Area under management in foreign markets (Poland, other Baltic States) 20,811 13,681 6,867 2,766 1,698 EBITDA 12,562 13,201 (7,348) 664 10,377 EBITDA margin 7% 9% -5% 1% 9% Operating profit (loss) (EBIT) 3,560 6,471 (13,455) (3,177) 6,577 EBIT margin 2% 4% -10% -3% 6% Earnings (loss) before tax (EBT) 2,467 7,390 (13,316) (4,400) 7,461 EBT margin 1% 5% -10% -4% 7% Net profit (loss) 1,455 5,114 (14,978) (5,176) 5,912 Net profit (loss) in foreign markets (Poland, Latvia, St. Petersburg, Spain, Czech and Portugal) (613) (4,817) (13,400) (10,752) (2,522) Net profit (loss) margin 1% 3% -11% -4% 5% Profit (loss) per share (EUR) 0.05 0.16 (0.47) (0.15) 0.19 Return on equity (ROE) 3% 11% -75% -29% 25% Return on assets (ROA) 1% 4% -16% -7% 7% * Key financial data and ratios in 2019-2023 are represented including subsidiaries that were disposed in 2020-2023 (further disclosed in Note 8 Discontinued operations). All amounts in key financial indicators are in EUR thousand unless otherwise stated. ** Group companies operating in St. Petersburg were disposed during 2022, Poland, Spain, Czech and Portugal disposed during 2023 (further disclosed in 2.3. Significant events). EBITDA = Net profit + Income Tax + Depreciation and Amortization + Other finance income (expenses) + Interest income (expenses) + Loss (gain) on sale of investments EBITDA margin = EBITDA / Revenue from contracts with customers * 100 % Profit (loss) from operations (EBIT) = Net profit + Income Tax + Other finance income (expenses) + Interest income (expenses) + Loss (gain) on sale of investments EBIT margin = EBIT / Revenue from contracts with customers * 100 % Profit (loss) before tax (EBT) = Net profit (loss) - Income Tax EBT margin = EBT / Revenue from contracts with customers * 100 % Net profit (loss) = EBT + Income Tax Net profit (loss) margin = Net profit / Revenue from contracts with customers Profit (loss) per share (EUR) = Net profit / Amount of shares Return on equity (ROE) = Net profit / Equity * 100 % Return on assets (ROA) = Net profit / Assets * 100% 24 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report Area under management, thousand m 2 NET profit (loss), thousand Eur NET profit (loss), margin % Sales, thousand Eur 154,507 78,467 95,124 135,475 13,634 2,766 1,698 13,658 83,837 36,886 14,356 74,878 Sales in foreign markets (Poland, Baltic States, St. Petersburg and Spain**) Area under management in Lithuania Sales in foreign markets (Poland, Baltic States, St. Petersburg and Spain) Sales in Lithuania market 13,681 13,803 14,076 6,867 5,114 -14,978 -5,176 5,912 3.31 5.40 -11.06 -4.49 2020 2022 20232021 2020 2023 2020 2022 20232021 2020 2023 2021 2022 2021 2022 HIGHLIGHTS * Group companies operating in St. Petersburg were disposed during 2022. ** In 2021 the Company through its Spanish subsidiaries has signed business transfer agreement on sale of apartment building administration business. *** In 2023 foreign markets consist only from Latvia, as business in Poland was sold. 25 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.6. THE STRUCTURE OF THE COMPANY’S SHARE CAPITAL The share capital of the Company is EUR 9,483 thousand as of 31 December 2023. It is divided into 31,610 thousand ordinary shares with the nominal value of EUR 0.30 each. All shares of the Company are paid up. As of 31 December 2023 all 31,610 thousand ordinary shares of the Company are included into the Parallel Market of Warsaw Stock Exchange and Baltic First North Foreign Shares trading list of NASDAQ Baltic Market (ISIN Code of the shares is EE3100126368). Trading Code of the shares on Warsaw Stock Exchange is CTS, on NASDAQ Baltic Market - CTS1L. The Company does not have any other classes of shares than ordinary shares mentioned above, there are no any restrictions of share rights or special control rights for the shareholders settled in the Statutes of the Company. No shares of the Company are held by itself or its subsidiaries. No convertible securities, exchangeable securities or securities with warrants are outstanding; likewise, there are no outstanding acquisition rights or undertakings to increase share capital. There are no shareholders with special control rights in the Company; the ordinary shares grant equal rights to all the shareholders of the Company. THE RIGHTS CONFERRED BY THE SHARES ARE AS FOLLOWS: ● to receive a portion of the Company’s profit (dividends); ● to receive the Company’s funds when the capital of the Company is reduced with intend to pay out the Company’s funds to the shareholders; ● to receive shares without payment if the capital is increased from the shareholders’ equity (bonus issue); ● to have a pre-emption right in acquiring the shares or convertible debentures issued by the Company, except in the case when the General Meeting decides to withdraw the pre-emption right for all the shareholders; ● to receive a part of the assets of the Company in liquidation; ● to attend General Meetings; ● to vote at General Meetings according to voting rights carried by their shares; ● to receive information on the activities of the Company from the Management Board at the General Meeting, unless this may cause significant damage to the interests of the Company; ● to demand the calling of a General Meeting, if this is demanded by shareholders whose shares represent at least one-twentieth of the share capital of the Company; ● to call a General Meeting, if the Management Board does not call a General Meeting within one month after receipt of such a demand by shareholders whose shares represent at least one-twentieth of the share capital of the Company; ● to demand at the General Meeting a resolution to conduct a special audit on matters regarding the management or financial situation of the Company, if this is demanded by shareholders whose shares represent at least one-tenth of the share capital of the Company; ● other property and non-property rights set out in the Commercial Code. 26 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.7. THE SHAREHOLDERS OF THE COMPANY On 31 December 2023 the total number of shareholders of the Company was 70. 2.8. RESTRICTIONS ON THE TRANSFER OF SECURITIES AND RESTRICTIONS ON VOTING RIGHTS To the best knowledge of the Company and its management, the transfer of the shares was free from any restrictions on the transfer of the Company’s shares in 2023. Company’s shares distribution among shareholders who have more than 5 % shares of the Company as of 31 Decem- ber 2023 was the following: To the best knowledge of the Company and its management, the voting rights were free from any other restrictions on the shares issued by the Company. To the best knowledge of the Company, all shareholders of the Company have the voting right in the General Meeting. * Number of the shareholders includes shareholders who hold more than 0.5 per cent of the votes through a nominee accounts (according to amendments that entered into force in 10 September 2020 in the Securities Register Maintenance Act (§ 6 Nominee account (subsection 9.2)) and the shareholders who hold their shares directly (not through nominee accounts). NUMBER OF SHARES HELD OWNED PERCENTAGE OF THE SHARE CAPITAL AND VOTES, % UAB Unit Invest, legal entity code 305873584, address: Ozo str. 12A-1, Vilnius, Lithuania 26,813,293 84.83 % Other private and institutional shareholders 4,796,707 15.17 % TOTAL 31,610,000 100 % Other private and institutional shareholders UAB Unit Invest 84.83% 15.17% 27 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.9. COMPANY’S SUPERVISORY BOARD AND MANAGEMENT BOARD 2.9.1. Company’s supervisory board The Supervisory Board is a collegial management body of the Company. The Supervisory Board shall consist of one (1) to seven (7) members elected for a term of 4 (four) years by the General meeting in accordance with the procedure provided for by the Law on Companies of the Republic of Estonia. Only a natural person may be elected to serve on the Supervisory Board. There is no limitation on the number of terms of offices a member of the Supervisory Board may serve. The Supervisory Board shall elect its chairman from among its members. The General Meeting may remove from office the entire Supervisory Board or its individual mem- bers before the expiry of their term of office. A member of the Supervisory Board may resign from office prior to the expiry of his term of office by giving a written notice thereof to the Company. The powers of the Supervisory Board shall cover consideration of the following issues and taking of the following decisions: ● to elect and remove from the office the members of the Management Board, set their remuneration, other terms of office (employment), approve Management Board regulations; ● to appoint and remove procurators; ● for the Company to become a founder or a member of other legal entities, to acquire, transfer or dissolve (liquidate) any such entities, as well as decisions to transfer or encumber any shares (parts, shares of stock) or rights assigned thereto held by the Company to other persons; ● to establish or terminate activities of affiliates or representative offices of the Company, approve their regulations; ● to transfer, lease or encumber immovables or registered movables of the balance value exceeding 1/20 (one-twentieth) of the Company’s share capital (per each type of transaction); ● to make investments exceeding approved budget for the current financial year; ● to assume loans or debt obligations exceeding approved budget for the current financial year; ● to offer surety or guarantee of obligations of third parties for an amount in excess of 1/20 (one- twentieth) of the share capital of the Company; ● to acquire long-term assets at a price exceeding 1/20 (one-twentieth) of the Company’s share capital; ● to engage the Company into new business activities or to discontinue any specific activity currently performed; ● to approve participation and (or) conclusion of peaceful settlement agreements in legal proceedings where the amount of claims made to or by the Company exceeds 1/5 (one fifth) of the share capital of the Company; ● to issue debentures of the Company or other forms of borrowing from any natural or legal persons (regardless of the amount); ● to conclude transactions between the Company and the management board members which are beyond the scope of everyday economic activities of the Company or exceed the market price; ● to determine which information will be considered the Company’s commercial (industrial) secret and confidential information; ● to approve operating strategy, annual report, interim report, management structure of the Company, as well as positions of employees, positions to which employees are recruited by holding competitions; ● to approve merger, acquisition, reorganization, separation, foundation of new legal entities or similar corporate legal actions; ● to approve acquisition of all long-term assets (including but not limited companies, real estate, cars, tools, equipment, computers, software, telephones etc.); ● to determine the methods used by the Company to calculate the depreciation of tangible assets and the amortization of intangible assets. 28 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report The Supervisory Board shall plan the activities of the Company, organize the Management of the Company and supervise the activities of the Management Board. The Supervisory Board also has the right to decide on other issues which are not assigned to the competence ● the implementation of the operating strategy of the Company; ● the organization of the activities of the Company; ● the financial status of the Company; of the Management Board or the General Meeting of shareholders pursuant to law or the Statutes. The Su- pervisory Board analyses and assesses the Company’s draft of its annual set of financial statements and draft of profit/loss appropriation and along with annual report shall submit them to the General Meeting. ● the results of business activities, income and expenditure estimated, stocktaking; ● data and other accounting data of changes in the assets; ● quarterly investment plans. The Supervisory Board shall analyze and evaluate documents submitted by the Management Board of the company on: 29 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report NAME AND SURNAME POSITION START OF TERM END OF TERM Andrius Janukonis Chairman of the Supervisory Board June 21, 2023 June 21, 2027 Gintautas Jaugielavičius Member of the Supervisory Board June 21, 2023 June 21, 2027 As of 31 December 2023, the Supervisory Board of the Company comprises of the following persons: Andrius Janukonis (born in 1971) is the Chairman of the Supervisory Board of City Service SE (since 2009 un- til 2015 the Chairman of the Board). He holds a Master’s degree in Law. He is a member of the board of UAB Unit Invest (since 2021). Gintautas Jaugielavičius (born in 1971) is a Member of the Supervisory Board of City Service SE (since 2005 until 2015 a Member of the Board). He holds a Bachelor’s degree in Economics. At present, he works as a consult- ant for UAB Unit Invest and is a member of the board of UAB Unit Invest (since 2021). 30 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report The Management Board of the Company comprises of three (3) members who are representing and directing the Company. The members of the Management Board are elected by Supervisory Board for a term of four (4) years. Supervisory Board has right to elect and remove from the office the members of the Management Board, set their remuneration, other terms of office (employment), approve Management Board regulations. A member of the Management Board may resign from office prior to the expiry of his term of office by giving a written notice. Management Board members are authorized to represent the Company in all legal acts which do not fall within com- petence are of other Management bodies. The individual members of the Management Board have competence, are accountable and responsible within the following jurisdictions and areas of activity of the Company and its directly controlled subsidiaries under Management Board regulations. Management Board member isn’t authorized to issue or repurchase shares of the Company. Also there is no agreements between the Company and its Management Board or employees. 2.9.2. Company’s management board As of 31 December 2023 the Management Board of the Company comprises of the following persons: NAME AND SURNAME POSITION WITHIN THE GROUP START OF TERM END OF TERM Artūras Gudelis Chairman of the Management Board June 26, 2021 June 26, 2025 Vytautas Turonis Member of the Management Board June 26, 2021 June 26, 2025 Dalius Šimaitis Member of the Management Board June 26, 2021 June 26, 2025 They do not own any shares of the Company. 31 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report Artūras Gudelis (born in 1977) is a Chairman of the Management Board of City Service SE (since 2017). Artūras Gudelis was a Member of the Supervisory Board of City Service SE (2015 – 2017). He holds Bachelor‘s degree in Economics and Master‘s degree in Business Management. Artūras Gudelis is responsible for carrying the formal func- tions of the chairman of the Management Board as well as for signing of the consolidated financial statements, rep- resenting the Company in the stock exchanges, securities depositories and in relations with the investors, as well as in all other general matters related to the Company. Vytautas Turonis (born in 1972) is a Member of the Management Board of City Service SE (since 2017). Vy- tautas Turonis works as the General Manager for the Baltics at CS SE. He holds a Bachelor‘s degree in Inter- national Business. Previously he worked as the Market- ing Manager of UAB Specialus Autotransportas (2003 – 2004). He started to work in the Company as the Market Development Department Manager (2004 – 2008). Vytautas Turonis is responsible and accountable for the organization and supervision of Group activities (includ- ing the financial matters) in Lithuania, Latvia and Estonia. Dalius Šimaitis (born in 1977) is a Member of the Management Board of City Service SE (since 2019). Pre- viously he worked as the maintenance department di- rector at UAB Mano būstas (2016 - 2019). Mr. Šimaitis works in City Service SE since year 2016. He holds a Bachelor‘s degree in Thermal Engineering and a Master‘s degree in Energy Engineering. Dalius Šimaitis is responsible and accountable for techni- cal operations and supply chain management, standardi- zation policy within the Group in all jurisdictions. 32 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.10. DIVIDEND POLICY The Company does not have an approved policy on dividend distributions and any restrictions thereon. Decision on distribution of dividends to shareholders is adopted by the General Meeting. 2.11. PROCEDURE OF AMENDMENT OF THE STATUTES OF THE COMPANY The Statutes of the Company shall be amended in accordance with the procedure provided for by the Law on Companies of the Republic of Estonia and the Statutes of the Company. The Statutes of the Company may be amended only by the decision of the General Meeting, exceptions may occur under the Law on Companies of the Republic of Estonia. The resolution regarding amendment of the Statutes of the Company shall be taken in the General Meeting by at least 2/3 of all votes conferred by the shares of the shareholders present at the General Meeting. Following the decision taken by the General Meeting to amend the Statutes of the Company, the full text of the amended Statutes shall be drawn up and signed by the person authorized by the General Meeting. The amended Statutes shall become effec- tive and may be used as the basis following registration of the amended Statutes with the Commercial register of the Republic of Estonia. In the period since the 1st of January 2023 by the 31st of December 2023 and the day of Annual Report is released Company‘s Statutes are valid in wording registered in Estonian Commercial register on Register of Legal Entities. The relevant Statutes of the Company is available on its website at www.cityservice.eu. 2.12. MATERIAL AGREEMENTS CONCLUDED BY THE COMPANY WHICH MAY BE IMPORTANT AFTER CHANGE OF CONTROL OF THE COMPANY There were no material agreements concluded by the Company which came into effect, were amended or terminated following a change of control of the Company during the reporting period. 33 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.13. AUDITING SYSTEM AND DESCRIPTION OF THE MAIN FEATURES OF INTERNAL AUDIT AND RISK MANAGEMENT SYSTEMS IN CONNECTION WITH THE PROCESS OF THE PREPARATION OF THE ANNUAL ACCOUNTS The Company has the Audit Committee in place. The Regulations of the activity of the Audit Committee were approved by the Supervisory Board. According to the Regulations of the activity of the Audit Committee the main functions of this committee are as follows: • to monitor and analyse processing of financial infor- mation, including observing the process of the prepa- ration of financial reports of the Company; • to provide the Supervisory Board with recommen- dations regarding the selection and/or removal of an external audit company; • to provide the Supervisory Board with recommen- dations regarding the selection and/or removal of the internal auditor; • to observe the efficiency of the internal control sys- tems, risk management and internal audit systems; • to observe the process of carrying out an external audit; • to observe how the external auditor or audit com- pany follow the principles of independence and ob- jectivity; • to fulfil other functions specified in the legal acts of the Republic of Estonia, including to: • monitor and analyse efficiency of risk management and internal control; • monitor and analyse the process of auditing of annual accounts and consolidated accounts; • monitor and analyse independence of an audit firm and a sworn auditor representing an audit firm on the basis of law and compliance of the activities thereof with other requirements of the Auditors Ac- tivities Act of the Republic of Estonia (in Estonian: audiitortegevuse seadus); • make recommendations or proposals to the Super- visory Board regarding prevention or elimination of problems and inefficiencies in an organisation and compliance with laws and the good practice of pro- fessional activities; • to immediately inform the Supervisory Board about the information presented to the Audit Committee by the audit company regarding any issues arisen dur- ing the audit especially in case of significant short- comings of internal control related to financial re- ports. Members of the Audit Committee shall be appointed by the Supervisory Board. The Audit Committee consists of 3 members, one of whom shall be independent and the other two members shall be appointed out of the non-overhead staff of the Administration of the Company or Subsidiaries of the Company. The internal auditor, a member of the Man- agement Board of the Company or a procurator or a person performing an audit of the Company shall not be a member of the Audit Committee. At least two of the members of the Audit Committee shall be experts in accounting, finance or law. The cri- teria of independency and eligibility requirements to be appointed a member of the Audit Committee are de- termined in the Regulations of the activity of the Audit Committee. The term of office of the Audit Committee shall be 4 (four) years. An uninterrupted term of office of a mem- ber of the Audit Committee shall be no longer than 12 years. A member of the Audit Committee shall have the right to resign upon submitting before 10 days written notice to the Supervisory Board. The Supervisory Board shall have the right to recall one or all the members of the Audit Committee should they fail to perform their functions and/or should they no longer conform to the requirements specified in the applicable legal acts or the Regulations of the activity of the Audit Committee. 34 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report The principal objective of the Audit Committee is to generate higher added value to the Company. Audit Committee operates in accordance with the Regula- tions approved by the General Meeting of Sharehold- ers of the Company. The Audit Committee follows in its activities the requirements of effective legal acts and seeks overall implementation of the recommendations of Corporate Governance Code, for the Companies Listed on Warsaw Stock Exchange. MRS. ILONA MATUSEVIČIENĖ – a chairman of the Audit committee, independent member, does not work at the Company. MRS. AUŠRA ANIULYTĖ – independent member, does not work at the Company. The Audit Committee monitors the external audit firm of the Company at the performance of Company’s An- nual Report and the Annual set of the Financial State- ments audit. The conclusions of the Audit Committee are presented to the Supervisory Board of the Company in accord- ance with the requirements of the Regulations of the Audit Committee. The Group does not have internal audit department. MRS. VASILINA VALATKAITĖ-JAKŠTIENĖ - consolidation manager of the Company. Audit Committee members do not own shares of the Company. Members of the audit committee of the company: 35 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.14. INFORMATION ON COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE The Company observes applicable legislation, the rules of the Warsaw Stock Exchange, and the Best Practice for GPW Listed Companies 2023 (hereinafter also referred to as the “WSE Corporate Governance Code”). The Company intends to be as transparent as it is legally and practically possible using multilingual Company’s website. However, due to, inter alia, differences between Polish and Estonian corporate law the Company does not comply with the following rules of the WSE Corporate Governance Code: 1.3.1. Environmental factors, including measures and risks relating to climate change and sustainable development. The Company does not have a formalized business strategy that takes into account ESG topics, including measures and risks related to climate change and sustainable development issues. However, it will be applied in the future. 1.3.2. Social and employee factors, including among others ac- tions taken and planned to ensure equal treatment of women and men, decent working conditions, respect for employees’ rights, dialogue with local communities, customer relations. The Company does not have a formalized business strategy that takes into account the ESG subject matter, taking into account the issues described in rule 1.3.2. However, it will be applied in the future. 1.4. To ensure quality communications with stakeholders, as a part of the business strategy, companies publish on their website information concerning the framework of the strat- egy, measurable goals, including in particular long-term goals, planned activities and their status, defined by measures, both financial and non-financial. ESG information concerning the strategy should be among others. The Company does not have a formalized business strategy that takes into account the ESG subject matter in the described scope. Currently, the Management Board of the Company presents information on the assumptions of its business strategy in the submitted pe- riodic reports. 1.4.1. Explain how the decision-making processes of the company and its group members integrate climate change, including the resulting risks. The Company does not have a formalized business strategy that takes into account the ESG subject matter, taking into account the issues described in rule 1.4.1. 1.4.2. Present the equal pay index for employees, defined as the percentage difference between the average monthly pay (including bonuses, awards and other benefits) of women and men in the last year, and present information about actions taken to eliminate any pay gaps, including a presentation of related risks and the time horizon of the equality target. The Company has not formally adopted a strategy that would contain information in the ESG area described in rule 1.4. - such statistics are not kept. However, the Company ensures equal remuneration paid to its employees through equal rates of basic remuneration for the same / similar positions and in the same departments. 1.5. Companies disclose at least on an annual basis the amounts expensed by the company and its group in support of culture, sports, charities, the media, social organisations, trade unions, etc. If the company or its group have such ex- penses in the reporting year, the disclosure presents a list of such expenses. Company does not publish the information about the amounts expensed in support of culture, sports, charities, the media, social organisations, trade unions, etc. 2.1. Companies should have in place a diversity policy appli- cable to the management board and the supervisory board, approved by the supervisory board and the general meeting, respectively. The diversity policy defines diversity goals and criteria, among others including gender, education, expertise, age, professional experience, and specifies the target dates and the monitoring systems for such goals. With regard to gender diversity of corporate bodies, the participation of the minor - ity group in each body should be at least 30%. The Company does not have a formal diversity policy, it does not apply any limitations to the diversity of its bodies and makes every ef - fort to ensure diversity in bodies in all areas, also in terms of gender. The selection criteria for performing functions in the Company’s bodies are the competences, experience, educa - tion as well as time and organizational capacity of the candi- date for a given function. 2.2. Decisions to elect members of the management board or the supervisory board of companies should ensure that the composition of those bodies is diverse by appointing persons ensuring diversity, among others in order to achieve the target minimum participation of the minority group of at least 30% according to the goals of the established diver- sity policy referred to in principle 2.1. As at the date of this report, the Company does not have a diversity policy with regard to the Management Board and Supervisory Board of the Company. The most important selection criteria are the competences of the members of the Management Board and the Supervisory Board. The Company is not able to appoint candidates for positions in governing bodies and to influence the decisions of the Shareholders and the Supervisory Board of the Company. 36 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.3. At least two members of the supervisory board meet the criteria of being independent referred to in the Act of 11 May 2017 on Auditors, Audit Firms and Public Supervision, and have no actual and material relations with any sharehold- er who holds at least 5% of the total vote in the company. However, taking into consideration that following the Stat- utes of the Company the Supervisory Board is comprised of three to five members, depending on circumstances, the Company does not rule out proposing to the General Meet- ing to elect two independent members to the Supervisory Board in the future. 2.11.5. Assessment of the rationality of expenses referred to in principle 1.5. 2.11.6. Information regarding the degree of implementation of the diversity policy applicable to the management board and the supervisory board, including the achievement of goals referred to in principle 2.1. The Company does not have a formal diversity policy with respect to the Management Board and Supervisory Board of the Company. 3.4. The remuneration of persons responsible for risk and compliance management and of the head of internal audit should depend on the performance of delegated tasks rather than short-term results of the company. The Company does not have separate units responsible for this scope of tasks that would be remunerated on this account. 3.5. Persons responsible for risk and compliance manage- ment report directly to the president or other member of the management board. The Company has no separate units responsible for the scope of tasks described in principle 3.5. 3.6. The head of internal audit reports organizationally to the president of the management board and functionally to the chair of the audit committee or the chair of the supervi- sory board if the supervisory board performs the functions of the audit committee. The Company has no separate units responsible for the scope of tasks described in principle 3.6. 3.7. Principles 3.4 to 3.6 apply also to members of the com- pany’s group which are material to its activity if they appoint persons to perform such tasks. Among the entities from the Company’s group, no persons were appointed to perform the tasks referred to in principles 3.4. - 3.6. 4.1. Companies should enable their shareholders to partici- pate in a general meeting by means of electronic communica- tion (e-meeting) if justified by the expectations of sharehold- ers notified to the company, provided that the company is in a position to provide the technical infrastructure necessary for such general meeting to proceed. Company does not rule out applying thereof in the future whenever the shareholders submit such request, provided that it has sufficient technical conditions, in particular ensuring technical and legal security. 4.3. Companies provide a public real-life broadcast of the general meeting. The Company will consider the possibility of broadcasting the general meeting, provided that it has suffi- cient technical conditions, in particular ensuring technical and legal security. 4.9.1. Candidates for members of the supervisory board should be nominated with a notice necessary for sharehold- ers present at the general meeting to make an informed de- cision and in any case no later than three days before the general meeting; the names of candidates and all related doc- uments should be immediately published on the company’s website; Candidates for members of the Supervisory Board may be put forward by shareholders during a general meeting containing an item on the agenda regarding the appointment of supervisory board members. 4.9.2. Candidates for members of the supervisory board make a declaration concerning fulfilment of the requirements for members of the audit committee referred to in the Act of 11 May 2017 on Auditors, Audit Firms and Public Supervision and having actual and material relations with any shareholder who holds at least 5% of the total vote in the company. The Company is established in Estonia and it follows Esto- nian law when concerning fulfilment of the requirements for members of the Supervisory Board. 4.11. Members of the management board and members of the supervisory board participate in a general meeting, at the location of the meeting or via means of bilateral real-time electronic communication, as necessary to speak on mat- ters discussed by the general meeting and answer questions asked at the general meeting. The management board pre- sents to participants of an annual general meeting the finan- cial results of the company and other relevant information, including non-financial information, contained in the financial statements to be approved by the general meeting. The man- agement board presents key events of the last financial year, compares presented data with previous years, and presents the degree of implementation of the plans for the last year. Only members of the Management Board participate in the general meeting. 2.14. INFORMATION ON COMPLIANCE WITH THE CORPORATE GOVERNANCE CODE 37 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 2.15. REMUNERATION REPORT The management remuneration is set based on the long-term objectives of the Group, considering the financial results of the Group and the legitimate interests of investors and creditors. The remuneration of the management in respect of the financial year 2023 was granted without derogation. The- Group‘s management remuneration amounted to EUR 447 thousand in 2023 (EUR 915 thousand in 2022). 38 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 3.1. OVERVIEW Just like every year, in 2023, the Group engaging in operations in Lithuania and in Latvia and, while holding one of the leading positions on the market, applied sustainable business solutions, contributed to a large number of social projects and initiatives that helped improve the lives of both residents and the Company’s employees. SOCIAL RESPONSIBILITY REPORT It is important to emphasize that the Group’s companies constantly strive to create and nurture a reliable rela- tionship with customers, ensure a better quality of their living environment. Customer experiences and feedback are constantly communicated via the Group’s internal communication channels and the local media, targeted strategies are prepared to analyse customer needs in the process of setting new goals. In the field of community relations, the Group makes great effort to strengthen cooperation and part- nership with various communities, educational institu- tions, law enforcement and non-governmental organiza- tions. The implemented initiatives encourage cooperation between residents in apartment buildings and Group’s companies, a responsible approach to jointly managed property and creation of traditions. In the field of environmental protection, all Group’s companies implemented various solutions aimed at contributing to conservation of natural resources, re- duction of CO2 emissions, and presented the achieved indicators publicly in the Group’s Sustainability Report. The Group’s companies encourage both their custom- ers and their employees to follow this way by organizing trainings, seminars, and general initiatives aimed at reduc- ing environmental pollution and restoring the environ- ment. One of such initiatives is the national forest plant- ing event, where employees of the Group’s companies planted 2,500 trees in Radviliškis District. 39 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 3.2. MARKET The Group’s companies focused on increasing customer ssatisfaction index, improving the quality of services and the Group’s image in 2023. CUSTOMER RELATIONS The Group’s companies continued to make effort to meet the expectations of their customers. New pro- cesses were created and the existing ones were im- proved, leading to better customer service and in- creased trust. Communication with the customers and partners con- tinued to be maintained through different and most ac- ceptable channels: telephone, e-mail and newsletters, news boards, self-service portals, social networks, indi- vidual meetings, special applications. Today the Group has a community of 100 thousand customers who have stopped using paper invoices and resolves apartment maintenance matters via self-service platform “BonoDomo”, a convenient way to manage all facilities services, receive special offers, and find relevant news from major Lithuanian cities. To business customers the Group has offered “eCSE”, a commercial building management platform designed for telephones or any smart devices. By using this platform our partners can save time, reduce paper and vehicle costs. 40 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 3.3. RELATIONS WITH EMPLOYEES Just like every year, the Group’s companies were focused on the personal growth of employees and encouraged cooperation. Employee engagement, open discussions, and health and safety discussions were constantly encouraged top- ics in the Group. The Group is tolerant concerning age, sex, race, religion, background and beliefs and strives to ensure equal opportunities and rights for all employees. The closed Facebook group allows employees to com- municate and share their achievements and relevant in- formation. Unique electronic publication “eBŪSTINĖ” is used for sharing the most relevant news, acknowledg- ments from customers, and daily moments of employees. All employees of the Group were welcome to enjoy summer celebration, which served as an opportunity to hand out awards to long-term employees and employ- ees with excellent performance. The contract with the platform of emotional health professionals “visipsichologai.lt” was extended, thus en- suring the opportunity for our employees to use their services completely confidential any time. All consul- tations provided by these professionals were financed by the Group in order to support and strengthen the emotional well-being of employees. It is also important to mention that all employees con- tinued to be covered by accident insurance. Managers of the Group’s companies held periodic vid- eo and live conferences and presented changes in the Group, answered relevant questions and tackled going concerns. The collective labour agreement was extended in some companies while a new one was signed in others, which provided additional holidays to employees, depend- ing on their length of service, members of union were provided with one additional day of holidays, additional benefits in case of anniversaries, marriages, births of children, 20 % higher severance pay in case of dismissal. Annual employee performance improvement interviews were held with employees to set the goals and discuss the encountered problems aiming for developing em- ployee competences and planning careers in the Group. In 2023, just like in 2022, the Group conducted an anonymous employee engagement survey, thus giving the opportunity to the employees to openly answer the questions and express their opinion on improvements needed. The summarized results were presented to all employees of the Companies during a remote confer- ence. In order to ensure good working atmosphere, Group encouraged colleagues to appreciate the efforts made by their colleagues. Nominations of colleagues from all departments, including the administration and technical staff, were encouraged. 41 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report TRAININGS AND SEMINARS Various development opportunities continued to be cre- ated for employees in 2023. Anyone wishing to join the organized internal and external trainings was welcome to do so, while e-training platform “eCITY” enabled em- ployees to study independently and find relevant infor- mation needed for work. The electronic training platform was used to offer cours- es to employees enabling them to familiarize with Cus- tomer Service, Remote Work, Introduction to LEAN, Document Management System, Occupational Safety and Fire Safety for Newcomers, Company Process Pro- cedures, etc. Knowledge tests were provided for self as- sessment. New employee training is provided for newcomers, during which new employees could familiarize with the Group’s vision, mission, values, activities, and the LEAN methodology. The Group cooperate with educational institutions by giv- ing the opportunity for their students and pupils with the necessary education to take part in internships or start working in the Group’s companies. During the meet- ings with educational institutions the Group presented practical professional information about Group’s specific activities and career opportunities, held discussions with teachers and students, in order to build a warm and close relationship. The Group is grateful to the representatives of educa- tional institutions for their warm reception and mean- ingful discussions during internship arrangement. After presentation of the Group’s sustainability initiatives the Group was granted the role of “SUSTAINABILITY” am- bassador. By actively participating in the “Career Day” the Group continues to offer wide range of available activities and strengthens attractiveness of the Group’s companies for educational community. Group’s commitment to sustain- ability and close collaboration with educational institu- tions is an important basis for Group’s success and re- sponsible business practices. 42 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 3.4. SOCIAL INITIATIVES FOR COMMUNITIES “Kalba Kaimynai” [Neighbours Speak] remained as one of the most important and largest social projects in Lithuania in 2023. Regularly published information in social network Facebook covers seven Lithuanian cities. In five of them, 50 % of the content consists of local news and 50 % of the news from the Group’s companies. This project has grown over the course of eight years and today unites more than 113 thousand followers, moreover the total number of followers of “Kalba Kaimynai” on “Facebook” has increased by 3 % over the past year. The Group continued its successful cooperation with Football Club “Ataka”, which gave the Club the oppor- tunity to continue football training for children from so- cially disadvantaged families. In 2023 the Group continued the cooperation with the Lithuanian Pensioners Union “Bočiai”. The Group donated to the “Stiprūs kartu” [Strong To- gether] civil initiative “Keliu vėliavą už Ukrainą NATO” [Raising the Flag for Ukraine in NATO]. The team of “Mano BŪSTAS” raised 350 Ukrainian flags on nearly 250 apartment buildings in the capital Vilnius to show sup- port for Ukraine. The dreams of almost 100 children growing up in diffi- cult social conditions were fulfilled together with “Fondas Janukonis” [Janukonis’ Fund] before Christmas. The em- ployees packed the gifts themselves, and some of them were delivered in person. The children under the care of Šilutė “Vaiko gerovės ir globos centras” [Child Welfare and Care Center] were also visited before the holidays leaving them with gifts and sweet surprises. The Group gave Christmas trees to residents during the Christmas period and invited them to decorate them to- gether. This initiative helped bolster the community spirit and encouraged them to decorate both their homes as well as the courtyards of apartment buildings. Two competitions were held for residents last year. Peo- ple were invited to share communal stories from the lives of their neighbours and the winners were given barbecue parties organised in the courtyards of their apartment buildings to celebrate the European Neighbours’ Day. The Christmas decoration competition, which has become a tradition, also contributed to a strengthened community as people were encouraged to decorate common spaces, upload photographs to the space created by News Portal “DELFI” and win shopping center gift vouchers. The project Kalba Kaimynai has grown over eight years and today has more than 113 000 followers on Facebook. During the year, the overall engagement rate of Kalba Kaimynai readers increased to 3%. 43 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 3.5. ENVIRONMENTAL ISSUES / ENERGY SAVING To set an example for others and to make the environment cleaner, the Group continued to avoid the use of plastic water bottles and disposable water products in its offices, collected and recycled coffee grounds, and collected and recycled used galvanic cells. The Group also continued to train its employees to use digital rather than paper-based internal documentation. It is worth noting that the Group’s central corporate office is located in an energy-sustainable office building. In 2023, the renovation of old and polluting blocks of flats was a major focus. Renovating an old block of flats saves around 50-70% of the pre-renovation heat consump- tion. On average, 10,750 tonnes of CO2 emissions are reduced in one year. These are the results calculated by the Group’s company, which has already helped clients to implement 172 renovation projects in multi-apartment buildings. In non-renovated buildings, the Group actively encour- aged and assisted residents to implement other energy- saving solutions, such as upgrading or modernising heat points, insulating energy-inefficient building structures, and replacing old common-use windows and doors. They also helped to educate customers on simple ways to save heat in both apartments and common areas. USING ARTIFICIAL INTELLIGENCE Smart building management is a key factor in CO2 emis- sions. Even a slight malfunction of the automation can lead to significant energy waste, regardless of the build- ing’s design efficiency. Artificial intelligence systems en- sure the sustainable use of energy resources in commer- cial buildings. “Exergio” platform, developed by experts in the field and continuously improved, has been providing future sustainability requirements for buildings and expanding on the Polish market for three years. “Exergio” is the targeted collection, systematisation, analysis, and remote management of building data streams using time-tested algorithms: scanning data from the smallest sensors to the largest data streams. 44 CITY SERVICE SE CONSOLIDATED ANNUAL REPORT 2023 Management report 3.6. TAXONOMY OVERVIEW In recent years, the European Commission has collaborated with experts in various fields to establish a universal language and clear definitions for sustainability, known as the “EU taxonomy.” The EU taxonomy regulation describes a framework to classify “green” or “sustainable” economic activities exe- cuted in the EU. This is a crucial step in achieving the EU’s climate and energy objectives and increasing sustainable investments. On 6 July 2021, the European Commission adopted the Delegated Act supplementing Article 8 of the Taxonomy Regulation (“the Disclosures Delegated Act”), which requires large financial and non-financial companies to provide information to investors about the environmental performance of their assets and economic activities. Starting from 2021, companies were required to report the eligibility of economic activities identified by the Commission in the act for climate mitigation and adaptation. In 2022 there was an additional requirement to disclose information about taxonomy economic activi- ties that meet the criteria (for financial year ended 2022), so this information is presented further. Taxonomy-eligible activities examined as taxonomy-aligned activities in the Group: We continue to carry out the following clear step-based processes in which we analyze the compliance of our activities with the Taxonomy Regulation: 1. Identifying Taxonomy-eligible economic activities of the Group 2. Examining substantial contribution criteria 3. Examining the principle of doing no significant harm to other environmental objectives (DNSH) 4. Verifying the compliance with minimum social safe- guards 5. Calculating financial KPIs • 6.5. Transport by motorbikes, passenger cars and light commercial vehicles • 7.3. Installation, maintenance and repair of energy ef- ficiency equipment 2022 Taxonomy-eligible Taxonomy-non-eligible Revenue,% 1.76% 98.24% Taxonomy CAPEX, % 41.84% 58.16% Taxonomy OPEX, % 5.48% 94.52% 2023 Taxonomy-eligible Taxonomy-non-eligible Revenue,% 2.19% 97.81% Taxonomy CAPEX, % 68.01% 31.99% Taxonomy OPEX, % 17.15% 82.85% • 7.5. Installation, maintenance and repair of instru- ments and devices for measuring, regulation and con- trolling energy performance of buildings • 10.1. Non-life insurance: underwriting of climate- related perils 23 20 CONSOLIDATED FINANCIAL STATEMENTS For the twelve months period ended 31 December 2023, thousand euros CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 46 Consolidated statement of financial position As of 31 As of 31 Notes December 2023 December 2022 ASSETS Non-current assets Goodwill 5 8,799 8,799 Other intangible assets 6 18,956 18,978 Property, plant and equipment 7 813 994 Right of use assets 17 2,153 3,902 Non-current receivables 11 5,533 4,941 Deferred income tax asset 24 2,090 1,501 Total non-current assets 38,344 39,115 Current assets Inventories 9 672 1,047 Prepayments 10 1,736 1,579 Trade receivables 12 25,506 20,483 Receivables from related parties (including loans granted) 29 2,196 217 Other receivables 11 4,039 3,939 Prepaid income tax 200 372 Contract assets 2.16 1,154 1,485 Cash and cash equivalents 13 9,176 3,434 Total current assets 44,679 32,556 Assets held for sale 8 - 6,032 Total assets 83,023 77,703 (cont’d on the next page) The accompanying notes are an integral part of these financial statements. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 47 Consolidated statement of financial position (cont’d) As of 31 As of 31 EQUITY AND LIABILITIES Notes December 2023 December 2022 Equity Share capital 1 9,483 9,483 Share premium 14 8,490 21,067 Reserves 14 - 948 Retained earnings 5,874 (13,525) Reserves of a disposal group classified as held for sale 8 - (92) Equity attributable to equity holders of the parent 23,847 17,881 Non-controlling interests 176 138 Total equity 24,023 18,019 Liabilities Non-current liabilities Non-current borrowings 15 10,279 10,459 Lease liabilities 17 1,542 2,739 Deferred income tax liability 24 1,729 1,335 Provisions for employee benefits, non-current 18 119 214 Other provisions - 130 Other liabilities 20, 21 3,876 4,209 Total non-current liabilities 17,545 19,086 Current liabilities Current loans 15 9,000 1,829 Current portion of non-current borrowings 15 1,138 3,038 Current portion of lease liabilities 17 681 1,313 Trade payables and payables to related parties 19, 29 13,281 12,086 Contract liabilities 20 6,893 7,891 Income tax payable 24 975 333 Provisions for employee benefits, current 18 155 - Other current liabilities 21 9,332 10,094 Total current liabilities 41,455 36,584 Liabilities associated with assets held for sale 8 - 4,014 Total liabilities 59,000 59,684 Total equity and liabilities 83,023 77,703 The accompanying notes are an integral part of these financial statements. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 48 Consolidated statement of comprehensive income Notes 2023 2022 Continuing operations Revenue from contracts with customers 4 101,674 84,385 Cost of sales 22 (75,313) (60,185) Gross profit 26,361 24,200 General and administrative expenses 23 (19,660) (19,671) Impairment of goodwill, other intangible and other non-current - (1,511) assets - Expected credit losses on financial assets 12 (275) (568) Other operating income 408 708 Other operating expenses (238) (198) Profit from operations 6,596 2,960 Interest income 250 134 Other finance income 230 - Gain on sale of investments 1 14,223 2,025 Interest expenses (1,254) (899) Other finance expenses (9) (47) (Loss) on sale of investments 1 (12,599) (1,911) Profit before tax from continuing operations 7,437 2,262 Income tax 24 (1,519) (877) Net profit from continuing operations 5,918 1,385 Discontinued operations Net (loss) from discontinued operations 8 (6) (6,561) Net profit (loss) 5,912 (5,176) Other comprehensive income that will be reclassified subsequently to profit or loss Exchange differences on translation of foreign operations - 3,319 Total other comprehensive income for the year - 3,319 Net profit (loss) attributable to: The shareholders of the Company 5,874 (4,660) Non-controlling interests 38 (516) 5,912 (5,176) Total comprehensive income attributable to: The shareholders of the Company 5,874 (1,503) Non-controlling interests 38 (354) 5,912 (1,857) Basic and diluted earnings per share (EUR) 25 0.19 (0.15) From continuing operations 25 0.19 0.06 From discontinued operations 25 - (0.21) The accompanying notes are an integral part of these financial statements. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 49 Consolidated statement of changes in equity Attributable to equity holders of the parent Reserve of Foreign disposal currency group Non- Share Share translation Other Retained held for controlling Group Notes capital premium reserve reserves earnings sale Subtotal interest Total Balance as of 31 December 2021 9,483 21,067 (3,249) 948 (8,865) - 19,384 492 19,876 Net profit (loss) for the year - - - - (4,660) - (4,660) (516) (5,176) Other comprehensive income - - 3,157 - - - 3,157 162 3,319 Total comprehensive income - - 3,157 - (4,660) - (1,503) (354) (1,857) Reserves of a disposal group classified as held for sale - - 92 - - (92) - - - Balance as of 31 9,483 21,067 - 948 (13,525) (92) 17,881 138 18,019 December 2022 Net profit (loss) for the year - - - - 5,874 - 5,874 38 5,912 Other comprehensive income - - - - - - - - - Total comprehensive income - - - - 5,874 - 5,874 38 5,912 Transfers to (from) - (12,577) - (948) 13,525 - - - - reserves 14 Disposal of subsidiaries - - - - - 92 92 - 92 Dividends declared - - - - - - - - - Balance as of 31 9,483 8,490 - - 5,874 - 23,847 176 24,023 December 2023 The accompanying notes are an integral part of these financial statements. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 50 Consolidated statement of cash flows Notes 2023 2022 Cash flows from (to) operating activities Net profit (loss) from continuing operations 5,918 1,385 Net profit (loss) from discontinued operations (6) (6,561) Adjusting items: Income tax expenses 24 1,549 776 Depreciation and amortization 6, 7, 8, 17 3,800 3,841 Impairment and write-off of accounts receivable 214 366 Impairment and write-off of inventory and prepayments - 3 (Gain) loss on disposal of property, plant and equipment 93 (871) (Gain) loss from sale of investments 1 (1,624) (116) Impairment of goodwill and other intangible assets 5, 6 - 130 Interest (income) (131) (154) Interest expenses 1,268 1,036 Fair value less costs to sell adjustment for assets held for sale 8 - 5,374 Other financial activity result, net (385) 516 Changes in working capital: 10,696 5,725 (Increase) decrease in inventories 994 (1,080) (Increase) decrease in trade receivables, receivables from related parties, contract assets, non-current receivables, other receivables and other current assets (5,896) 300 (Increase) decrease in prepayments (7) (554) (Increase) decrease in trade payables and payables to related 533 6,764 parties Income tax (paid) (961) 4,003 (Increase) decrease in advances received, contract liabilities (8,401) (1,361) and other current liabilities Net cash flows from operating activities (3,042) 13,797 (cont’d on the next page) The accompanying notes are an integral part of these financial statements. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 51 Consolidated statement of cash flows (cont‘d) Notes 2023 2022 Cash flows from (to) investing activities (Acquisition) of non-current assets 6, 7, 8 (2,442) (3,707) Proceeds from sale of non-current assets 6, 7, 8 1,461 1,579 (Acquisition) of investments in subsidiaries (net of cash 1, 5 52 (6,275) acquired in the Group) Disposal of investments in subsidiaries (net of cash disposed) (704) 545 and associates 1 Interest received 131 155 Loans (granted) 29 (3,485) - Receivable loans repaid 29 3,100 2,245 Net cash flows from (to) investing activities (1,887) (5,458) Cash flows from (to) financing activities Proceeds from loans 15 29,739 1,552 (Repayment) of financial lease liabilities 17 (2,481) (1,986) Loans (repaid) 15 (15,596) (9,583) Interest (paid) 15 (1,268) (1,044) Net cash flows from (to) financing activities 10,394 (11,061) Net (decrease) increase in cash and cash equivalents 5,465 (2,722) Foreign exchange difference 45 216 Cash and cash equivalents at the beginning of the year 3,666 6,172 Cash and cash equivalents at the end of the year 9,176 3,666 Group cash flows for 2023 and 2022 comprise total consolidated Group, including discontinued operations. Grouped discontinued operations cash flows are disclosed in Note 8. The accompanying notes are an integral part of these financial statements. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 52 Notes to the financial statements 1 General information City Service SE (hereinafter – “the Company”) is a public limited liability company registered in the Republic of Estonia on 2 April 2015, which in the course of reorganization has taken over a public limited liability company City Service AS rights and liabilities. The Company controls corporate group, engaged in the provision of facility management and integrated utility services. The City Service group (hereinafter – “the Group”) is the market leader in facility management and integrated utility services in the Baltic States. It provides services in Lithuania and Latvia. As of 31 December 2023 the number of employees of the Group was 1,485 (as of 31 December 2022 – 1,594). The decrease was related mainly to disposed subsidiaries in Poland and Spain. As of 31 December 2023 and 2022 all 31,610 thousand ordinary shares of the Company are included into the Parallel Market of Warsaw Stock Exchange (ISIN Code of the shares is EE3100126368) and Baltic First North Foreign Shares trading list of NASDAQ Baltic Market (ISIN Code of the shares is EE3100126368). Trading Code of the shares on Warsaw Stock Exchange is CTS, on NASDAQ Baltic Market - CTS1L. As of 31 December 2023 and 2022 the shareholders of the Company were: 2023 2022 Owned Owned percentage of percentage of the share the share Number of capital and Number of capital and shares held votes, % shares held votes, % UAB Unit Invest 26,813,293 84.83% 26,813,293 84.83% Other private and institutional shareholders 4,796,707 15.17% 4,796,707 15.17% Total 31,610,000 100 % 31,610,000 100 % The ultimate parent of the Company is UAB Unit Invest, a holding company registered in Lithuania. The parent of City Service SE, UAB Unit Invest has pledged part of the Company’s shares, i.e. 17,396,275 units, which constitutes 55.03% the authorized capital of the Company, to a bank. The right to transfer, pledge or dispose of the abovementioned shares otherwise has been restricted. All other property and non-property rights of UAB Unit Invest, as the shareholder, are free from any encumbrances or restrictions. Share capital of the Company The share capital of the Company is EUR 9,483 thousand as of 31 December 2023 and 2022. It is divided into 31,610 thousand ordinary shares with the nominal value of EUR 0.30 each. All shares of the Company are fully paid. The Company does not have any other classes of shares than ordinary shares mentioned above, there are no restrictions of share rights or special control rights for the shareholders set in the articles of association of the Company. No shares of the Company are held by itself or its subsidiaries. No convertible securities, exchangeable securities or securities with warrants are outstanding; likewise, there are no outstanding acquisition rights or undertakings to increase share capital as of 31 December 2023 and 2022. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 53 1 General information (cont’d) Structure of the Group On 31 December 2023 the City Service SE group consists of the parent City Service SE and the following directly and indirectly controlled subsidiaries: Share of the Share of the stock held by stock held by Company Country the Group as of the Group as of Main activities 31 December 31 December 2023 2022 UAB Alytaus namų valda Lithuania 76% 76% Dormant UAB Baltijos būsto priežiūra Lithuania - 100% Dormant UAB Baltijos NT valdymas Lithuania 100% 100% Real estate management UAB Baltijos transporto valdymas Lithuania 100% 100% Asset management UAB Biržų butų ūkis Lithuania 57.71% 57.71% Administration of dwelling-houses UAB BonoDomo Lithuania 100% 100% IT services UAB BonoDomo Pay Lithuania 100% 100% Intermediary activities of an electronic money institution UAB Butų ūkio valdos Lithuania 100% 100% Administration of dwelling-houses UAB Būsto aplinka Lithuania 100% 100% Maintenance and cleaning of dwelling- houses territories and premises UAB Mano būstas Lithuania 100% 100% Holding company UAB City Service Cleaning Lithuania 100% 100% Maintenance and cleaning of commercial real estate, territories and premises UAB City Service Engineering Lithuania 100% 100% Commercial real estate management and building maintenance UAB CSG IT Lithuania 100% 100% IT services UAB Energijos taupymo paslaugos Lithuania 100% 100% Energy saving solution services UAB Energetinių projektų valdymas Lithuania 100% 100% PPP project company UAB EPC projektai Lithuania 100% 100% Dormant UAB Exergio Lithuania 100% 100% IT energy saving solutions for buildings UAB Getfiks Lithuania - 100% Supply chain management UAB Neries būstas Lithuania - 100% Dormant UAB Mano aplinka Lithuania 100% 100% Maintenance and cleaning of public territories and premises UAB Mano bendrabutis Lithuania 100% 100% Administration of buildings UAB Mano Būsto klientų patirčių centras Lithuania 100% 100% Client service center services UAB Mano Būstas Alytus Lithuania 100% 100% Administration of dwelling-houses UAB Mano Būstas Aukštaitija Lithuania 100% 100% Administration of dwelling-houses UAB Mano Būstas Baltija Lithuania 100% 100% Administration of dwelling-houses UAB Mano Būstas Dainava Lithuania 100% 100% Administration of dwelling-houses UAB Mano Būstas Neris Lithuania 100% 100% Administration of dwelling-houses UAB Mano Būstas NPC Lithuania 100% 100% Administration of dwelling-houses UAB Mano Būstas Kaunas Lithuania 100% 100% Administration of dwelling-houses UAB Mano Būstas Klaipėda Lithuania 100% 100% Administration of dwelling-houses UAB Mano Būstas Radviliškis Lithuania 100% 100% Administration of dwelling-houses UAB Mano Būstas Sostinė Lithuania 100% 100% Administration of dwelling-houses UAB Mano Būstas Šiauliai Lithuania 100% 100% Administration of dwelling-houses UAB Mano Būstas Ukmergė Lithuania 100% 100% Administration of dwelling-houses UAB Mano Būstas Vakarai Lithuania 99.97% 99.97% Administration of dwelling-houses UAB Mano Būstas Vilnius Lithuania 100% 100% Administration of dwelling-houses UAB Mano Būsto priežiūra Lithuania 100% 100% Building maintenance UAB Medžiagų tiekimo centras Lithuania - 100% Supply of materials UAB Merlangas Lithuania 100% 100% Administration of dwelling-houses UAB Nacionalinis renovacijos fondas Lithuania 100% 100% Administration of dwelling-houses renovation projects UAB Pastatų priežiūra Lithuania 100% 100% Building maintenance UAB Pastatų priežiūros tarnyba Lithuania - 100% Technical maintenance of heating systems UAB Pastatų valdymas Lithuania 100% 100% Administration of dwelling-houses CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 54 UAB PortalPRO Lithuania - 100% Supply chain management UAB Rinkų vystymas Lithuania 100% 100% Dormant UAB Skolos LT Lithuania 100% 100% Debt collection services UAB Šiaulių NT valdymas Lithuania 100% 100% Dormant UAB Unitechna Lithuania 100% 100% Maintenance and construction of gas stations PortalPRO s.r.o. Czech - 100% IT services Aresi administracion de fincas S. L. Spain - 100% Administration of dwelling-houses Concentra Servicios y Mantenimiento, S.A. Spain 100% 100% Commercial real estate management and building maintenance Eurobroker Advisors Sorreduria de Seguros, S.L. Spain - 100% Insurance services Euronamas Gestion de Fincas Centro, S.L. Spain - 100% Administration of dwelling-houses Grupo Aresi de Inversiones, S.L. Spain - 100% Holding company PORTALPRO, S.L. Spain - 100% Supply chain management Vetell dos iberica, S.L. Spain 100% 100% Administration of dwelling-houses SIA BILANCE Latvia 100% 100% Administration of dwelling-houses SIA BonoDomo Latvia 100% 100% Dormant SIA City Service Latvia 100% 100% Holding company SIA City Service Engineering Latvia 100% 100% Commercial real estate management and building maintenance SIA Ēku pārvaldīšanas serviss Latvia 100% 100% Building maintenance SIA PortalPRO Latvia - 100% Dormant SIA Latvijas Namsaimnieks Latvia 100% 100% Administration of dwelling-houses SIA Livonijas Nami Latvia 100% 100% Administration of dwelling-houses SIA Namu serviss APSE Latvia 100% 100% Administration of dwelling-houses SIA Manas MĀJAS Latvia 100% 100% Administration of dwelling-houses SIA Manas MĀJAS 2 Latvia 100% 100% Administration of dwelling-houses SIA Manas Mājas Salnas 21 Latvia 100% 100% Administration of dwelling-houses SIA Manas MĀJAS 3 Latvia 100% 100% Administration of dwelling-houses SIA Multihouse Latvia 100% - Administration of dwelling-houses SIA Ventspils nami Latvia 100% 100% Administration of dwelling-houses Atrium 21 sp. z o.o. Poland - 100% Administration of dwelling-houses Deleterma sp. z o.o. Poland - 100% Country holding company Certus-Serwis Sp. z o. o. Poland - 100% Administration of dwelling-houses Concierge - Zarządzanie Nieruchomościami sp. z o.o. Poland - 100% Administration of dwelling-houses Dom Best sp. z o.o. Poland - 100% Administration of dwelling-houses EnergiaOK sp. z o.o. Poland - 100% Sale of electricity Famix sp. z o.o. Poland - 100% Administration of dwelling-houses Grupa Techniczna 24 sp. z o.o. Poland - 100% Building maintenance Parama Blue sp. z o.o. Poland - 100% Dormant Parama Group sp. z o.o. Poland - 100% Holding company Parama Yellow sp. z o.o. Poland - 100% Dormant Parama Red sp. z o.o. Poland - 100% Dormant Parama White sp. z o.o. Poland - 100% Dormant PORTALPRO sp. z o.o. Poland - 100% Supply chain management Progresline sp. z o.o. Poland - 100% Administration of dwelling-houses Santer Zarządzanie Nieruchomościami sp. z o.o. Poland - 100% Administration of dwelling-houses Skydas - Przeglądy Budowlane sp. z o.o. Poland - 100% Dormant TED sp. z o.o. Poland - 100% Real estate management Tumieszkamy sp. z o. o. Poland - 100% Dormant Wolska Aparthotel sp. z o. o. Poland - 100% Accommodation services Zespół Zarządców Nieruchomości sp. z o.o. Poland - 100% Administration of dwelling-houses ZZN Inwestycje sp. z o.o. Poland - 100% Dormant PORTALPRO, UNIPESSOAL LDA Portugal - 100% Dormant * The Group ceased to consolidate Concentra Servicios y Mantenimiento, S.A. (including sub-consolidated subsidiary Vetell dos iberica, S.L.) in its financial statements after bankruptcy administrator was appointed on 10 May 2017, as from that date the Group has lost its control. ** The Group ceased to consolidate Wolska Aparthotel sp. z o. o. in its Financial statements after bankruptcy administrator was appointed on 3 June 2020, as from that date the Group has lost its control. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 55 1 General information (cont‘d) Changes in the Group in 2023 In 2023 the Group, through Latvian subsidiary acquired 100% of the shares of SIA MultiHouse (acquisition price EUR 32 thousand) which is based in Latvia. Acquisitions in more details are disclosed in Note 5. In 2023 reorganization of the companies UAB Pastatų priežiūros tarnyba and UAB Mano būsto priežiūra was completed. After the process of reorganization UAB Pastatų priežiūros tarnyba was incorporated into UAB Mano būsto priežiūra with all the assets, rights, and obligations. Group company UAB Baltijos būsto priežiūra and its subsidiaries operating in Poland (EnergiaOK Sp.z.o.o., Grupa Techniczna 24 Sp.z.o.o., UAB Neries būstas, Zespol Zarzadcow Nieruchomosci Sp.z.o.o, Tumieszkamy Sp.z.o.o, Dom Best Sp.z.o.o, Famix Sp.z.o.o, Santer Zarzadcow Nieruchomosci Sp.z.o.o, Ted Sp.z.o.o, Certus Serwis Sp.z.o.o) were sold on 16 May 2023 and after that date ceased to be consolidated in these financial statements. Total value of the shares sale – purchase agreement is EUR 2,9 thousand. Information about the disposed subsidiaries is summarized below: UAB Baltijos EnergiaOK Grupa UAB Neries Techniczna 24 būsto priežiūra Sp.z.o.o Sp.z.o.o būstas Date of disposal 16 May, 2023 16 May, 2023 16 May, 2023 16 May, 2023 Goodwill - - - - Non-current assets other than goodwill 6 1 11 3 Current assets other than cash and cash - 67 100 5 equivalents Cash and cash equivalents 4 744 1,022 8 Non-current and current liabilities (9,084) (8) (46) (133) Total net assets disposed of attributable to equity holders of the parent (9,074) 804 1,087 (117) attributable to non-controlling interests - - - - Allowance on previously eliminated 8,102 - - - intercompany receivables Total consideration received, all consisting 3 - - - of cash and cash equivalents Zespol Tumieszkamy Dom Best Nieruchomosci Famix Sp.z.o.o. Sp.z.o.o Sp.z.o.o Sp.z.o.o Date of disposal 16 May, 2023 16 May, 2023 16 May, 2023 16 May, 2023 Goodwill - - - - Non-current assets other than goodwill 3,151 413 7 1 Current assets other than cash and cash (1,145) 27 13 - equivalents Cash and cash equivalents 321 (113) 85 (396) Non-current and current liabilities (1,917) (389) (9) - Total net assets disposed of attributable to equity holders of the parent 410 (62) 96 (395) attributable to non-controlling interests - - - - Total consideration received, all consisting of cash and cash equivalents - - - - CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 56 1 General information (cont‘d) Santer Certus Zarzadcow Ted Sp.z.o.o Serwis Nieruchomosci Sp.z.o.o Date of disposal Sp.z.o.o 16 May, 2023 16 May, 2023 16 May, 2023 Goodwill - - - Non-current assets other than goodwill 2 - - Current assets other than cash and cash 19 16 - equivalents Cash and cash equivalents 359 (333) 23 Non-current and current liabilities (31) - - Total net assets disposed of attributable to equity holders of the parent 349 (317) 23 attributable to non-controlling interests - - - Total consideration received, all consisting - - - of cash and cash equivalents The Group recorded the net loss of EUR 903 thousand from the sale of shares of the subsidiaries under the line of (Loss) on sale of investment arising from derecognition of net assets of subsidiaries disposed (EUR (1,843) thousand) and recycling to profit (loss) of translation reserve attributable to disposed subsidiaries (EUR 940 thousand). Group company Deleterma Sp.z.o.o. and its subsidiaries (Tumieszkamy Sp.z.o.o, ZZN Investycje Sp.z.o.o, Progresline Sp.z.o.o, Parama Group Sp.z.o.o, Atrium 21 Sp.z.o.o, Concierge Zarzadzanie Nieruchimosciami Sp.z.o.o, Skydas Przeglady Budowlane Sp.z.o.o.) were sold on 18 May 2023 and after that date ceased to be consolidated in these financial statements. Total value of the shares sale – purchase agreement is EUR 1 (one Euro). Information about the disposed subsidiary is summarized below: Deleterma ZZN Progresline Investycje Sp.z.o.o Sp.z.o.o Sp.z.o.o Date of disposal 18 May, 2023 18 May, 2023 18 May, 2023 Goodwill - - - Non-current assets other than goodwill - - - Current assets other than cash and cash 441 - 5 equivalents Cash and cash equivalents 34 - 100 Non-current and current liabilities (14,029) - (1) Total net assets disposed of attributable to equity holders of the parent (13,554) - 104 attributable to non-controlling interests - - - Allowance on previously eliminated 13,050 - - intercompany receivables Total consideration received, all consisting of cash and cash equivalents - - - CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 57 1 General information (cont‘d) Parama Concierge Skydas Group Atrium 21 Zarzadzanie Przeglady Sp.z.o.o Nieruchimosci Budowlane Sp.z.o.o ami Sp.z.o.o Sp.z.o.o Date of disposal 18 May, 2023 18 May, 2023 18 May, 2023 18 May, 2023 Goodwill - - - - Non-current assets other than goodwill - - - - Current assets other than cash and cash - 7 2 - equivalents Cash and cash equivalents 33 (914) 177 (29) Non-current and current liabilities - - - - Total net assets disposed of attributable to equity holders of the parent 33 (907) 179 (29) attributable to non-controlling interests - - - - Total consideration received, all consisting of cash and cash equivalents - - - - The Group recorded the net profit of EUR 1,124 thousand from the sale of shares of the subsidiary under the line of Gain on sale of investment arising from derecognition of net assets of subsidiaries disposed (EUR 1,474 thousand) and recycling to profit (loss) of translation reserve attributable to disposed subsidiaries (EUR (350) thousand). Group companies Parama Blue Sp.z.o.o, Parama Red Sp.z.o.o, Parama Yellow Sp.z.o.o, Parama White Sp.z.o.o were liquidated during first and second quarter of 2023. Information about the liquidated subsidiaries is summarized below: Parama Blue Parama White Parama Red Parama Yellow Date of disposal Sp.z.o.o Sp.z.o.o Sp.z.o.o Sp.z.o.o 21 March, 2023 13 April, 2023 08 May, 2023 09 May, 2023 Goodwill - - - - Non-current assets other than goodwill - - - - Current assets other than cash and cash - - - - equivalents Cash and cash equivalents - - - - Non-current and current liabilities (3) (8) (4) (3) Total net assets disposed of attributable to equity holders of the parent (3) (8) (4) (3) attributable to non-controlling interests - - - - Total consideration received, all consisting of cash and cash equivalents - - - - The Group recorded the net profit of EUR 18 thousand from the liquidation of the subsidiaries under the line of Gain on sale of investment arising from derecognition of net assets of subsidiaries. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 58 1 General information (cont‘d) Supply chain management companies PortalPro, acting in Poland, Czech Republic, Latvia, Spain, Portugal and Lithuania were sold during 2023 to related party and ceased to be consolidated in these financial statements. Total value of the transactions is EUR 651 thousand. Information about the disposed subsidiaries is summarized below: PortalPro Medžiagų PortalPro s.r.o Getfix UAB tiekimo UAB centras UAB Date of disposal 27 March, 2023 03 May, 2023 03 May, 2023 03 May, 2023 Goodwill - - 207 - Non-current assets other than goodwill - 2,179 1 - Current assets other than cash and cash 1 (1,103) 9 389 equivalents Cash and cash equivalents 22 46 4 114 Non-current and current liabilities (43) (1,124) (5) (265) Total net assets disposed of attributable to equity holders of the parent (20) (2) 216 238 attributable to non-controlling interests - - - - Total consideration received, all consisting of cash and cash equivalents 2 3 - 577 PortalPro SIA PortalPro LDA PortalPro PortalPro S.L Sp.z.o.o Date of disposal 12 May, 2023 22 May, 2023 29 June, 2023 28 July, 2023 Goodwill - - - - Non-current assets other than goodwill - - - 1 Current assets other than cash and cash 35 66 28 24 equivalents Cash and cash equivalents - 12 13 9 Non-current and current liabilities (3) (105) (131) (226) Total net assets disposed of attributable to equity holders of the parent 32 (27) (90) (192) attributable to non-controlling interests - - - - Total consideration received, all consisting of cash and cash equivalents 32 - 11 26 The Group recorded the net profit of EUR 484 thousand from the sale of shares of the subsidiary which is accounted in Gain on sale of investments in consolidated statement of comprehensive income. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 59 1 General information (cont‘d) Group company Eurobroker Advisors Correduria De Seguros, S.L. was sold on 6 September 2023 and after that date ceased to be consolidated in these financial statements. Total value of the shares sale – purchase agreement is EUR 1 thousand. Information about the disposed subsidiary is summarized below: Eurobrokes Advisors Date of disposal 06 September, 2023 Non-current assets other than goodwill 27 Current assets other than cash and cash equivalents 25 Cash and cash equivalents 5 Non-current and current liabilities (171) Total net assets disposed of attributable to equity holders of the parent (114) attributable to non-controlling interests - Total consideration received, all consisting of cash and cash equivalents 1 Group company Grupo Aresi De Inversiones S.L. and its subsidiaries (Euronamas Gestion De Fincas Centro, S.L. and Aresi Administracion De Fincas S.L.) were sold on 20 September 2023 and after that date ceased to be consolidated in these financial statements. Total value of the share sale – purchase agreement is EUR 1 (one Euro). Information about the disposed subsidiary is summarized below: Grupo Aresi De Euronamas Aresi Gestion De Fincas Administracion De Inversiones S.L Centro, S.L. Fincas S.L. 20 September, 20 September, 20 September, Date of disposal 2023 2023 2023 Goodwill - - - Non-current assets other than goodwill 24 18 - Current assets other than cash and cash 22 90 3 equivalents Cash and cash equivalents 7 1 - Non-current and current liabilities (16,262) (513) (81) Total net assets disposed of attributable to equity holders of the parent (16,209) (404) (78) attributable to non-controlling interests - - - Allowance on previously eliminated 15,313 - - intercompany receivables Total consideration received, all consisting of cash and cash equivalents - - - The Group recorded a net profit of EUR 1,378 thousand from the sale of shares of the subsidiary which is accounted in Gain on sale of investments in consolidated statement of comprehensive income. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 60 1 General information (cont‘d) Changes in the Group in 2022 In 2022 the Group, through its Lithuanian subsidiary, acquired: • 99.99% stake in IMPROXY - TECNOLOGIAS DE INFORMAÇÃO LDA (acquisition price EUR 3 million) ; • 90% stake in Homefile S.R.L. (acquisition price EUR 620 thousand); • 90% stake in Homefile Support S.R.L. (acquisition price EUR 286 thousand); • 100% stake in UAB Getfiks (acquisition price EUR 213 thousand); • 100% stake in INTEGRI s.r.o (acquisition price CZK 34.7 million (EUR 1,394 thousand). • 100% stake in Invert KFT (acquisition price EUR 417 thousand). • 100% stake in O.K.-Soft Sokolov s.r.o. (acquisition price CZK 16,100 thousand (EUR 643 thousand). In 2022 the Group, through its Czech subsidiary, acquired: • 100% stake in SWAN Liberec, s.r.o. (acquisition price CZK 4,394 thousand (EUR 178 thousand). Acquisitions in more details are disclosed in Note 5. In 2022 there were no reorganizations (changes in the legal structure of the Group) performed. In 2022 the Group established several subsidiaries (100% of shares belong to the Group): • On 03 March 2022, the Group, through its Lithuanian subsidiary established a new company InHouse Finance KFT (share capital HUF 3 million (EUR 8 thousand). • On 03 May 2022 the Group, through its Lithuanian subsidiary, established a new company BonoDomo Pay, UAB (share capital EUR 2.5 thousand). • On 09 September 2022 the Company established a new subsidiary in Portugal PORTALPRO, UNIPESSOAL LDA (share capital of company is EUR 100). • On 29 December 2022 the Company established a new subsidiary in Czech Republic PortalPRO s.r.o. (share capital of company is CZK 50 thousand (EUR 2 thousand). Group company UAB Baltijos turto valdymas and its subsidiaries operating in Russian Federation (OAO Siti Servis, ZAO Siti Servis, OOO Podjemnie mechanizmy, OOO Specializirovannoe remontno-naladochnoe upravlenie, OOO Zhilkomservis No 3 Frunzenskogo rajona, OOO MN Grupp, OOO Chistij dom, OOO PortalPRO) were sold on 18 May 2022 and after that date ceased to be consolidated in these financial statements. Total value of the shares sale – purchase agreement is EUR 1,472 thousand. Information about the disposed subsidiaries is summarized below: UAB Baltijos OAO Siti Servis ZAO Siti Servis OOO Podjemnie turto valdymas mechanizmy Date of disposal 18 May, 2022 18 May, 2022 18 May, 2022 18 May, 2022 Goodwill - - 154 - Non-current assets other than goodwill 3 407 285 29 Current assets other than cash and cash - 3,492 2,007 21 equivalents Cash and cash equivalents 10 239 521 10 Non-current and current liabilities (2,697) (3,772) (1,433) (164) Total net assets disposed of attributable to equity holders of the parent (2,684) 366 1,534 (104) attributable to non-controlling interests - - - - Total consideration received, all 1,47 2 - - - consisting of cash and cash equivalents CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 61 1 General information (cont‘d) OOO OOO Specializirov Zhilkomservi annoe s No 3 OOO MN OOO Chistij OOO remontno- Frunzenskog Grupp dom PortalPRO naladochnoe upravlenie o rajona Date of disposal 18 May, 2022 18 May, 2022 18 May, 2022 18 May, 2022 18 May, 2022 Goodwill 35 272 - 1 - Non-current assets other than 182 1,521 1,837 25 29 goodwill Current assets other than cash and cash equivalents 586 3,632 116 18 20 Cash and cash equivalents 24 310 2 130 1 Non-current and current liabilities (803) (3,498) (1,763) (234) (8) Total net assets disposed of attributable to equity holders of the parent 24 2,127 192 (60) 42 attributable to interests non-controlling - 110 - - - Total consideration received, all consisting of cash and cash - - - - - equivalents The Group recorded the net loss of EUR (75) thousand from the sale of shares of the subsidiary under the line of (Loss) on sale of investment arising from derecognition of net assets of subsidiaries disposed (EUR (1,920) thousand) and recycling to profit (loss) of translation reserve attributable to disposed subsidiaries (EUR 1,845 thousand). Group company UAB InHouse Digital and its subsidiaries (STARLIT s.r.o., INTEGRI, s.r.o., SWAN Liberec, s.r.o., O.K.-Soft Sokolov s.r.o., Improxy - Technologias de informacao LDA, Homefile S.R.L, Homefile Support S.R.L, InHouse Finance KFT, Invert KFT) were sold on 19 September 2022 to related party (parent company) and after that date ceased to be consolidated in these financial statements. Total value of the shares sale – purchase agreement is EUR 7,928 thousand. Information about the disposed subsidiary is summarized below: UAB InHouse STARLIT INTEGRI, SWAN O.K.-Soft Digital s.r.o. s.r.o. Liberec, s.r.o. Sokolov s.r.o. 19 19 19 19 19 September, September, September, September, September, Date of disposal 2022 2022 2022 2022 2022 Goodwill - 1,300 1,158 152 582 Non-current assets other than 186 734 - 1 19 goodwill Current assets other than cash and cash equivalents 12 42 22 11 10 Cash and cash equivalents 17 68 68 25 80 Non-current and current liabilities (9,865) (217) (56) (1) (17) Total net assets disposed of attributable to equity holders of the parent (9,650) 1,927 1,192 188 674 attributable to interests non-controlling - - - - - Total consideration received, all consisting of cash and cash 3 - - - - equivalents CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 62 1 General information (cont‘d) Improxy - Technologias Homefile Homefile InHouse de S.R.L Support Finance KFT Invert KFT informacao S.R.L LDA 19 19 19 19 19 September, September, September, September, September, Date of disposal 2022 2022 2022 2022 2022 Goodwill 2,811 604 278 - 315 Non-current assets other than 275 5 - 121 4 goodwill Current assets other than cash and cash equivalents 8 40 5 15 23 Cash and cash equivalents 27 39 18 22 20 Non-current and current liabilities (220) (15) (10) (7) (6) Total net assets disposed of attributable to equity holders of the parent 2,901 673 291 151 356 attributable to interests non-controlling - - - - - Total consideration received, all consisting of cash and cash - - - - - equivalents The Group recorded the net loss of EUR 1,300 thousand from the sale of shares of the subsidiary under the line of (Loss) on sale of investment arising from derecognition of net assets of subsidiaries disposed (EUR 1,333 thousand) and recycling to profit (loss) of translation reserve attributable to disposed subsidiaries (EUR (33) thousand). Group company UAB Mano aplinka plius was sold on 31 August 2022 and after that date ceased to be consolidated in these financial statements. Total value of the shares sale – purchase agreement is EUR 810 thousand. Information about the disposed subsidiary is summarized below: UAB Mano aplinka plius Date of disposal 31 August, 2022 Non-current assets other than goodwill 69 Current assets other than cash and cash equivalents 68 Cash and cash equivalents 42 Non-current and current liabilities (70) Total net assets disposed of attributable to equity holders of the parent 109 attributable to non-controlling interests - Total consideration received, all consisting of cash and cash equivalents 810 The Group recorded the net profit of EUR 701 thousand from the sale of shares of the subsidiary which is accounted in Gain on sale of investments in consolidated statement of comprehensive income. Group company Home Rent sp. z o.o. was sold on 10 November 2022 and after that date ceased to be consolidated in these financial statements. Total value of the shares sale – purchase agreement is PLN 38 thousand (EUR 8 thousand). Information about the disposed subsidiary is summarized below: CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 63 1 General information (cont‘d) Home Rent sp. z o.o. Date of disposal 10 November, 2022 Non-current assets other than goodwill 1 Current assets other than cash and cash equivalents 5 Cash and cash equivalents 81 Non-current and current liabilities (82) Total net assets disposed of attributable to equity holders of the parent 2.5 attributable to non-controlling interests 2.5 Total consideration received, all consisting of cash and cash equivalents 8 The Group recorded the net profit of EUR 3 thousand from the sale of shares of the subsidiary which is accounted respectively EUR 2 thousand in Gain on sale of investments in consolidated statement of comprehensive income and EUR 1 thousand on Foreign currency translation reserve in consolidated statement of changes in equity. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 64 2 Material accounting policies 2.1. Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union (hereinafter the EU). The consolidated financial statements have been prepared on a historical cost basis. The Company’s management authorized these financial statements on 30 April 2024. The 2024 shareholders of the Company have a statutory right to either approve these financial statements or not approve them and require the management to prepare a new set of financial statements. Adoption of new and/or changed IFRS and International Financial Reporting Interpretations Committee (IFRIC) interpretations The accounting policies adopted are consistent with those of the previous financial year except for the following IFRS amendments which have been adopted by the Group as of 1 January 2023: • IFRS 17 insurance contracts, • IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (Amendments), • IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (Amendments), • IAS 12 Income taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments), • IAS 12 Income taxes: International Tax Reform - Pillar Two Model Rules (Amendments) The application of following amendments, mandatory from January 1, 2023, does not have a significant impact on the Group's financial statements: • IFRS 17 insurance contracts. The standard is effective for annual periods beginning on or after 1 January 2023. This is a comprehensive new accounting standard for insurance contracts, covering recognition and measurement, presentation and disclosure. IFRS 17 applies to all types of insurance contracts issued, as well as to certain guarantees and financial instruments with discretional participation contracts. • IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates (Amendments). The amendments become effective for annual reporting periods beginning on or after January 1, 2023 and apply to changes in accounting policies and changes in accounting estimates that occur on or after the start of that period. The amendments introduce a new definition of accounting estimates, defined as monetary amounts in financial statements that are subject to measurement uncertainty, if they do not result from a correction of prior period error. Also, the amendments clarify what changes in accounting estimates are and how these differ from changes in accounting policies and corrections of errors. • IAS 12 Income taxes: International Tax Reform - Pillar Two Model Rules (Amendments). The amendments are effective immediately upon issuance, but certain disclosure requirements are effective later. The Organization for Economic Co-operation and Development’s (OECD) published the Pillar Two model rules in December 2021 to ensure that large multinational companies would be subject to a minimum 15% tax rate. On 23 May 2023, the IASB issued International Tax Reform—Pillar Two Model Rules – Amendments to IAS 12. The amendments introduce a mandatory temporary exception to the accounting for deferred taxes arising from the jurisdictional implementation of the Pillar Two model rules and disclosure requirements for affected entities on the potential exposure to Pillar Two income taxes. The Amendments require, for periods in which Pillar Two legislation is (substantively) enacted but not yet effective, disclosure of known or reasonably estimable information that helps users of financial statements understand the entity’s exposure arising from Pillar Two income taxes. To comply with these requirements, an entity is required to disclose qualitative and quantitative information about its exposure to Pillar Two income taxes at the end of the reporting period. The disclosure of the current tax expense related to Pillar Two income taxes and the disclosures in relation to periods before the legislation is effective are required for annual reporting periods beginning on or after 1 January 2023, but are not required for any interim period ending on or before 31 December 2023. The Group has applied the mandatory exception to recognizing and disclosing information about deferred tax assets and liabilities arising from Pillar Two income taxes. Furthermore, the Group has reviewed its corporate structure in light of the introduction of Pillar Two Model Rules in various jurisdictions. Since the Group’s consolidated turnover does not reach EUR 750 million, Group does not operate in low-tax jurisdictions and the Group’s effective tax rate is above 15% in all jurisdictions in which it operates, it has determined that it is not subject to Pillar Two “top-up” taxes. Therefore, the consolidated financial statements do not include information required by paragraphs 88A-88D of IAS 12. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 65 2 Material accounting policies (cont’d) 2.1. Basis of preparation (cont’d) • IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies (Amendments). The Amendments are effective for annual periods beginning on or after January 1, 2023. The amendments provide guidance on the application of materiality judgements to accounting policy disclosures. In particular, the amendments to IAS 1 replace the requirement to disclose ‘significant’ accounting policies with a requirement to disclose ‘material’ accounting policies. Also, guidance and illustrative examples are added in the Practice Statement to assist in the application of the materiality concept when making judgements about accounting policy disclosures. The Group amended the consolidated financial statements according to IAS 1 requirements. • IAS 12 Income taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments). The amendments are effective for annual periods beginning on or after January 1, 2023. The amendments narrow the scope of and provide further clarity on the initial recognition exception under IAS 12 and specify how companies should account for deferred tax related to assets and liabilities arising from a single transaction, such as leases and decommissioning obligations. The amendments clarify that where payments that settle a liability are deductible for tax purposes, it is a matter of judgement, having considered the applicable tax law, whether such deductions are attributable for tax purposes to the liability or to the related asset component. Under the amendments, the initial recognition exception does not apply to transactions that, on initial recognition, give rise to equal taxable and deductible temporary differences. It only applies if the recognition of a lease asset and lease liability (or decommissioning liability and decommissioning asset component) give rise to taxable and deductible temporary differences that are not equal. The Company has adopted the requirements of IAS 12 and these are disclosed in note 24. Standards issued but not yet effective Management has preliminary assessed the possible application of the following amendment and concluded that no material impact is expected for consolidated financial statements: • IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current (Amendments). The amendments are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted, and will need to be applied retrospectively in accordance with IAS 8. The objective of the amendments is to clarify the principles in IAS 1 for the classification of liabilities as either current or non-current. The amendments clarify the meaning of a right to defer settlement, the requirement for this right to exist at the end of the reporting period, that management intent does not affect current or non-current classification, that options by the counterparty that could result in settlement by the transfer of the entity’s own equity instruments do not affect current or non-current classification. Also, the amendments specify that only covenants with which an entity must comply on or before the reporting date will affect a liability’s classification. Additional disclosures are also required for non-current liabilities arising from loan arrangements that are subject to covenants to be complied with within twelve months after the reporting period. • IFRS 16 Leases: Lease Liability in a Sale and Leaseback (Amendments). The amendments are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted. The amendments are intended to improve the requirements that a seller-lessee uses in measuring the lease liability arising in a sale and leaseback transaction in IFRS 16, while it does not change the accounting for leases unrelated to sale and leaseback transactions. In particular, the seller-lessee determines ‘lease payments’ or ‘revised lease payments’ in such a way that the seller-lessee would not recognize any amount of the gain or loss that relates to the right of use it retains. Applying these requirements does not prevent the seller-lessee from recognizing, in profit or loss, any gain or loss relating to the partial or full termination of a lease. A seller-lessee applies the amendment retrospectively in accordance with IAS 8 to sale and leaseback transactions entered into after the date of initial application, being the beginning of the annual reporting period in which an entity first applied IFRS 16. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 66 2 Material accounting policies (cont’d) 2.1. Basis of preparation (cont’d) Standards issued but have not yet been endorsed for use in the EU Management has preliminary assessed the possible application of the following amendment and concluded that it would have no effect for consolidated financial statements: • IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments Disclosure - Supplier Finance Arrangements (Amendments). The amendments are effective for annual reporting periods beginning on or after January 1, 2024, with earlier application permitted. The amendments supplement requirements already in IFRS and require an entity to disclose the terms and conditions of supplier finance arrangements. Additionally, entities are required to disclose at the beginning and end of reporting period the carrying amounts of supplier finance arrangement financial liabilities and the line items in which those liabilities are presented as well as the carrying amounts of financial liabilities and line items, for which the finance providers have already settled the corresponding trade payables. Entities should also disclose the type and effect of non-cash changes in the carrying amounts of supplier finance arrangement financial liabilities, which prevent the carrying amounts of the financial liabilities from being comparable. Furthermore, the amendments require an entity to disclose at the beginning and end of the reporting period the range of payment due dates for financial liabilities owed to the finance providers and for comparable trade payables that are not part of those arrangements. The amendments have not yet been endorsed by the EU. • IAS 21 The Effects of Changes in Foreign Exchange Rates: Lack of Exchangeability (Amendments) . The amendments are effective for annual reporting periods beginning on or after January 1, 2025, with earlier application permitted. The amendments specify how an entity should assess whether a currency is exchangeable and how it should determine a spot exchange rate when exchangeability is lacking. A currency is considered to be exchangeable into another currency when an entity is able to obtain the other currency within a time frame that allows for a normal administrative delay and through a market or exchange mechanism in which an exchange transaction would create enforceable rights and obligations. If a currency is not exchangeable into another currency, an entity is required to estimate the spot exchange rate at the measurement date. An entity’s objective in estimating the spot exchange rate is to reflect the rate at which an orderly exchange transaction would take place at the measurement date between market participants under prevailing economic conditions. The amendments note that an entity can use an observable exchange rate without adjustment or another estimation technique. The amendments have not yet been endorsed by the EU. • Amendment in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture . The amendments address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS 28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary. In December 2015 the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research project on the equity method of accounting. The amendments have not yet been endorsed by the EU. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 67 2 Material accounting policies (cont’d) 2.2. Measurement and presentation currency The amounts shown in these financial statements are presented in the local currency of the Republic of Estonia, Euro (EUR), rounded to EUR thousand, unless otherwise stated. Due to rounding the amounts presented in the financial statements, notes may not reconcile by insignificant amounts. The functional currency of the Company is Euro. The functional currencies of foreign subsidiaries are the respective foreign currencies of the country of residence. Items included in the financial statements of these subsidiaries are measured using their functional currency. Transactions in foreign currencies are initially recorded in the functional currency as of the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange as at the date of the statement of financial position. The assets and liabilities of foreign subsidiaries are translated into Euro at the reporting date using the rate of exchange as of the date of the statement of financial position, and the statement of comprehensive income are translated at the average exchange rates for the year. The exchange differences arising on this translation are recognized in other comprehensive income. On disposal of a foreign subsidiary, the deferred cumulative amount recognized in other comprehensive income relating to that foreign operation is recognized in profit or loss. Non-current receivables from or loans granted to foreign subsidiaries that are neither planned nor likely to be settled in the future are considered to be a part of the Company’s net investment in the foreign operation. In the Group’s consolidated financial statements the exchange differences recognized in the individual financial statements of the subsidiary in relation to these monetary items are reclassified to other comprehensive income. On disposal of a foreign subsidiary, the deferred cumulative amount recognized in other comprehensive income relating to that foreign operation is recognized in profit or loss. 2.3. Principles of consolidation The consolidated financial statements of the Group include City Service SE and its subsidiaries. The financial statements of the subsidiaries are prepared for the same reporting year, using consistent accounting policies. Subsidiaries are consolidated from the date from which effective control is transferred to the Company and cease to be consolidated from the date on which control is transferred out of the Group. The net result of disposed subsidiaries is accounted for under the item of gain (loss) on sale of investments in consolidated statement of comprehensive income. When control over subsidiaries is lost due to other reasons (bankruptcies, liquidations), the net result of the deconsolidation of subsidiaries is accounted for under the item of operating expenses in consolidated statement of comprehensive income. Upon loss of control over subsidiary, the Group measures and recognizes any retained investment at its fair value. Any difference between the carrying amount of subsidiary upon loss of control and the fair value of the retained investment and proceeds from disposal is recognized in profit or loss. Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. Acquisition costs incurred are expensed and included in administrative expenses. Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognized for non-controlling interest over the net identifiable assets acquired and liabilities assumed. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 68 2 Material accounting policies (cont’d) 2.4. Measurement and presentation currency (cont’d) If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognized in profit or loss. After initial recognition, goodwill is measured at cost less any accumulated impairment losses (tested annually). For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained. 2.5. Investments in subsidiaries and associates (the Company) Investments in subsidiaries and associates in the unconsolidated primary statements of the Company (Note 30) are carried at cost, less impairment. 2.6. Non-current assets held for sale and discontinued operations The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale rather than through continuing use. Such non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. The criteria for held for sale classification is regarded as met only when the sale is highly probable and management is committed to the sale expected within one year from the date of the classification. Assets and liabilities classified as held for sale are presented separately as current items in the statement of financial position. A disposal group qualifies as discontinued operation if it is a component of an entity that either has been disposed of, or is classified as held for sale, and represents a separate major line of business or geographical area of operations. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of profit or loss. Additional disclosures are provided in Note 8. All other notes to the financial statements include amounts for continuing operations, unless indicated otherwise. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) Buildings • Its intention to complete and its ability and intention to use or sell the asset; • How the asset will generate future economic benefits; • The availability of resources to complete the asset; • The ability to measure reliably the expenditure during development. Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortization and accumulated impairment losses. Amortization of the asset begins when development is complete, and the asset is available for use. It is amortized over the period of expected future benefit. Amortization is recorded in cost of sales. During the period of development, the asset is tested for impairment annually. 2.8. Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. The useful lives, residual values and depreciation method are reviewed annually. Depreciation is computed on a straight-line basis over the following estimated useful lives: 15 – 50 years Vehicles 69 4 – 10 years Other property, plant and equipment 3 – 6 years Customer relationships Intangible assets acquired separately are measured initially at cost. The cost of intangible assets acquired in a business After initial recognition, intangible assets with finite lives are measured at cost less accumulated amortization and any accumulated impairment losses. Intangible assets are amortized on a straight-line basis over their useful lives: 5 – 40 years 2 Material accounting policies (cont’d) 2.7. Intangible assets other than goodwill combination is fair value as at the date of acquisition. Other intangible assets Intangible assets, other than goodwill, are assessed for impairment whenever there is an indication that the intangible asset may be impaired. The useful lives, residual values and amortization method are reviewed annually to ensure that they are consistent with the expected pattern of economic benefits from items in intangible assets other than goodwill. The Group does not have any intangible assets with indefinite useful life other than goodwill. Research costs are expensed as incurred. Development expenditures on an individual project are recognized as an • The technical feasibility of completing the intangible asset so that the asset will be available for use or sale; 3 – 10 years intangible asset when the Group can demonstrate: CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 70 2 Material accounting policies (cont’d) 2.9. Financial assets A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Initial recognition and measurement Financial assets are classified, at initial recognition, as subsequently measured at amortized cost, fair value through other comprehensive income (OCI), and fair value through profit or loss. The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. A regular way purchases or sales of financial assets are recognized on the trade date, i.e., the date that the Group commits to purchase or sell the asset. Reverse factoring application Reverse factoring model is being used by offering third party financing to Group clients. Receivables from such services are being accounted in trade receivables in the consolidated statement of financial position as the Group is taking the risk of collection of the payments. Payables to a financing company are being accounted in trade payables and payables to related parties in the consolidated statement of financial position as the financing model meets the requirements of decision of IFRS Interpretations Committee published in June 2020, where reverse factoring arrangements were described. Financial assets at amortized cost (debt instruments) The Group measures financial assets which have cash flows consistent with solely payment of principal and interest and are held in a business model to hold and collect the contractual cash flows at amortized cost. Financial assets at amortized cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired. The Group’s financial assets at amortized cost includes trade receivables, prepayments and non-current receivables. Non- current receivables mainly comprise of long-term part of receivables for residential buildings’ repair works performed and are received in from 1 to 3 years period. The Group’s non-current and current receivables from related parties comprise of loans and receivables from commissions. Impairment of trade receivables For trade receivables and contract assets, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognizes a loss allowance based on lifetime ECLs at each reporting date. The Group has established the provision matrixes for each separate market, where the Group operates. Such matrixes are based on their historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment, including GDP growth and unemployment rates. The provision matrixes have been structured based on homogeneous customers’ groups. Impairment of non-current receivables is calculated in the same way as not overdue accounts receivable, because no non-current receivables are overdue as at 31 December 2023 and 31 December 2022. For material individual customers the Group performs an assessment of specifically expected credit losses, taking into account the customer’s credit history as well as forward looking factors and risk factors specific to the debtor. The Group considers a financial asset in default when contractual payments are 365 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 71 2 Material accounting policies (cont’d) 2.9. Financial assets (cont’d) The Company recognizes an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Company expects to receive, discounted at an approximation of the original effective interest rate. ECLs are recognized in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). At the end of every reporting period it is assessed whether credit risk significantly increased from initial recognition taking into account change in probability of default during the maturity of the instrument. During this process the Company summarizes debt instruments into stages 1, 2 and 3: • Stage 1: on initial recognition the Company recognizes a 12-month ECL. Stage 1 debt instruments include instruments which credit risk improved and which were transferred back from Stage 2. • Stage 2: When a loan has shown a significant increase in credit risk since origination, the Company records an allowance for the lifetime ECL. Stage 2 debt instruments include instruments which credit risk improved, and which were transferred back from Stage 3. The Company considers that significant increase in credit risk is when debt is overdue more than 60 days for intercompany loans and 30 days for external loans granted or when it is visible from financial information that debtor is experiencing financial difficulties. • Stage 3: For loans considered credit-impaired, the Company recognizes the lifetime expected credit losses for these loans. The Company considers the loan credit-impaired, when debt is overdue more than 180 days for intercompany loans and 90 days for external loans granted or when it is visible from financial information that debtor is experiencing financial difficulties. The method is similar to that for Stage 2 assets, with the probability of default set at 100%. Financial liabilities Initial recognition and measurement Financial liabilities are classified, at initial recognition, as loans, borrowings and payables. All financial liabilities are recognized initially at fair value and net of directly attributable transaction costs. The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts and lease liabilities. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 72 2 Material accounting policies (cont’d) 2.10. Fair value measurements The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: • Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities; • Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; • Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. 2.11. Inventories Inventories are valued at the lower of cost or net realizable value, after impairment evaluation for obsolete and slow moving items. Unrealizable inventory is fully written-off. 2.12. Cash Cash includes cash on hand and cash in banks. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand and in current bank accounts as well as deposits in bank with original term equal to or less than 3 months. Restricted cash balances comprise balances of cash which are restricted as to withdrawal under the terms of long-term agreements. Restricted cash balances are excluded from cash and cash equivalents in the consolidated statement of cash flows. Restricted cash is presented as current and non-current accounts receivable in the statement of financial position as of 31 December 2023 and 2022 and disclosed in Note 13. 2.13. Right of use assets and lease liabilities The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows: • Buildings 1 to 10 years • Vehicles 4 to 10 years The right-of-use assets are also subject to impairment. The Group presents rights-of-use assets separately from property, plant and equipment in the statement of financial position. If there is a change in the lease term or in the assessment of an option to purchase, the Group determines the revised discount rate as the interest rate implicit in the lease for the of the lease term, if that rate can be readily determined, or the lessee’s incremental borrowing rate at the date of reassessment, if the interest rate implicit in the lease cannot be readily determined. The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low value assets are recognized as expense on a straight-line basis over the lease term. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 73 2 Material accounting policies (cont’d) 2.14. Provision for employee benefits According to the requirements of Lithuanian Labour Code, each employee leaving company at the age of retirement is entitled to a one-off payment in the amount of 2 months salary. Current year cost of employee benefits is recognized as incurred in the statement of comprehensive income. The past service costs are recognized as an expense as incurred in profit or loss. Any gains or losses appearing as a result of curtailment and/or settlement are recognized in the statement of comprehensive income as incurred. The above-mentioned employee benefit obligation is calculated based on actuarial assumptions, using the projected unit credit method. Obligation is recognized in the statement of financial position and reflects the present value of these benefits on the preparation date of the statement of financial position. Present value of the non-current obligation to employees is determined by discounting estimated future cash flows using the discount rate which reflects the interest rate of the Government bonds of the same currency and similar maturity as the employment benefits. Actuarial gains and losses are recognized in statement of other comprehensive income as incurred. 2.15. Income tax The Group companies are taxed individually, irrespective of the overall results of the Group. Income tax charge is based on profit for the year and considers deferred taxation. The charge for taxation included in these financial statements is based on the calculation made by the management in accordance with tax legislation of the Republic of Estonia, the Republic of Lithuania and the Republic of Latvia. The standard income tax rate in Lithuania was 15% in 2023 and 2022. In accordance with Latvian Income Tax Act, income tax is not levied on companies’ profits but on dividends distributed. The tax rate in 2023 was 20/80 of the amount distributed as the net dividend (20/80 in 2022). As the object of taxation is dividends, not profit, there are generally no differences between the carrying amounts and tax bases of assets and liabilities which could give rise to deferred tax assets or liabilities. The income tax payable on dividends is recognized as the income tax expense of the period in which the dividends are declared. As an exception to the above, deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. In accordance with the effective Estonian Income Tax Act, income tax is not levied on companies’ profits but on dividends distributed. The tax rate in 2023 was 20/80 of the amount distributed as the net dividend (20/80 in 2022). The reduced rate of 14/86 is applied on regular net dividend, calculated as an average of taxable dividend paid during the previous three calendar years. As the object of taxation is dividends, not profit, there are generally no differences between the carrying amounts and tax bases of assets and liabilities which could give rise to deferred tax assets or liabilities. The income tax payable on dividends is recognized as the income tax expense of the period in which the dividends are declared. As an exception to the above, deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. As at 31 December 2023, the Group’s retained earnings amounted to EUR 5,874 thousand. Income tax upon the payment of dividends is 20/80 or 14/86 on the net dividends paid out, except from certain dividends received from foreign subsidiaries and permanent establishments that can be distributed to the shareholders tax free. As a result of such distribution, additional material income tax liability would arise upon the payment of all the retained earnings as net dividends. Tax losses in Lithuania can be carried forward for indefinite period, except for the losses incurred as a result of disposal of securities and/or derivative financial instruments. Such carrying forward is disrupted if the company changes its activities due to which these losses incurred except when the company does not continue its activities due to reasons which do not depend on company itself. The losses from disposal of securities and/or derivative financial instruments can be carried forward for 5 consecutive years and only be used to reduce the taxable income earned from the transactions of the same nature. Tax losses carried forward can be used to reduce the taxable income earned during the reporting year by maximum 70%. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 74 2 Material accounting policies (cont’d) 2.15. Income tax (cont’d) Deferred taxes are calculated using the liability method. Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled based on tax rates enacted or substantially enacted at the date of the statement of financial position. Deferred tax assets have been recognized in the statement of financial position to the extent the management believes it will be realized in the foreseeable future, based on taxable profit forecasts. If it is believed that part of the deferred tax is not going to be realized, this part of the deferred tax asset is not recognized in the financial statements. Impact of IAS 12 Income taxes amendment is disclosed in note 24. 2.16. Revenue recognition Revenue from contracts with customers The Group has generally concluded that it is the principal in its revenue arrangements (except for utilities payment collection services provided in Latvia as described further) even in the cases when subcontractors are used in the process of provisions of the services, because it typically controls the goods or services before transferring them to the customer. Group companies also are responsible for the quality of services and have the right to use flexible pricing. In Latvia the Group is providing services of utility services invoicing and collection of respective fees and for these transactions the Group is acting as an agent of the utilities suppliers based on the assessment of the management as the Group does not control the services before they are transferred to the customer, including their pricing. Therefore, the Group nets inflows and outflows of administered utilities turnovers, associated with residential houses administration activity in Latvia, as the Group’s companies engaged in such activity primarily act as agent in respect of utilities provision for its clients. Also, funds collected from residents on behalf of the residential communities as community fund for future repairs and maintenance, are not reported as the Group’s revenue. The Group is in the business of providing administration of apartment buildings and commercial facility management services. The Group concluded that it transfers control of administration of apartment buildings and commercial facility management services over-time, because the customer simultaneously receives and consumes the benefits provided by the Group’s performance. Sales revenue for these services are invoiced and accounted on a monthly basis and it relates to one agreed performance obligation. The Group also provides cleaning and maintenance services and other on demand services to its customers. Revenue from contracts with customers is recognized when these services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those services. The Group concluded that it transfers control over these services over time depending on the level of performance obligation fulfilment. Group provides repair or construction works for the clients when required. The Group concluded that it transfers control over these services over-time, because the customer simultaneously receives and consumes the benefits provided by the Group’s performance. Also, Group’s performance does not create an asset with alternative use to the Group and the Group has an enforceable right to payment for performance completed to date. When the Group can reasonably measure its progress towards complete satisfaction of the performance obligation, the Group recognizes revenue and expenses in relation to each repair or construction contract over time, based on the progress of performance. The progress of performance is assessed based on the proportion of the costs incurred in fulfilling the contract up to date over to the total estimated costs of the contract. In such cases, Group has one agreed performance obligation. Revenue from other than described above services or sales of inventory is recognized when services are rendered or inventory transferred to the clients and this type of revenue is relatively not material to the financial statements. Due to the Group’s business nature, apart from what is described in this note, the management did not make any other significant accounting judgements, estimates and assumptions relating to revenue from contracts with customers recognition, as there are no complex/multi-elemental goods or services, no variable consideration, financing component, volume rebates, discounts, rights of return, contract cost or amounts payable to the customers. Dividend income from subsidiaries is recognized in the Company’s unconsolidated financial statements (Note 32) when the dividends are declared by the subsidiary. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 75 2 Material accounting policies (cont’d) 2.16. Revenue recognition (cont’d) Interest income or expense is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument to the net carrying amount of the financial asset or liability. It is included in interest income or expenses in the statement of comprehensive income. Contract assets A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognized for the earned consideration that is conditional. Accrued income representing estimated amount of services which has been performed but not have been agreed with and accepted by the customer until the last day of the month and for which invoice is issued next month is presented as Contract assets and are reclassified to the account receivable as soon as services are accepted and sales invoices are issued in subsequent month. Trade receivables A receivable represents the Group’s right to an amount of consideration that is unconditional (i.e., only the passage of time is required before payment of the consideration is due). Contract liabilities A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognized when the payment is made, or the payment is due (whichever is earlier). Contract liabilities are recognized as revenue when the Group satisfied performance obligation under the contract. 2.17. Impairment of non-financial assets Non-financial assets Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that carrying amount of an asset may not be recoverable. Whenever the carrying amount of an asset exceeds its recoverable amount, an impairment loss is recognized in profit or loss. Reversal of impairment losses recognized in prior years is recorded when there is an indication that the impairment losses recognized for the asset no longer exist or have decreased. The reversal is accounted for in the same caption of profit or loss as the impairment loss. Goodwill is tested for impairment annually as at 31 December and when circumstances indicate that the carrying value may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. The recoverable amount of Lithuania, Latvia cash generating units is determined based on the value in use calculation using cash flow projections based on the five-year financial forecasts prepared by the management. Both goodwill and customer relationships intangible assets for each CGU unit are included in the carrying value tested. Significant assumptions used for the assessment of the value in use are described in the Note 5. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognized. Impairment losses relating to goodwill cannot be reversed in future periods. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 76 3 Use of judgements and estimates in preparation of financial statements The preparation of financial statements in conformity with IFRS as adopted by EU requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses and disclosure of contingencies. The areas of estimation used in the preparation of the accompanying financial statements relate to depreciation (Note 2.7 and Note 7), amortization (Note 2.6 and Note 6), impairment evaluation of goodwill, other intangible assets and property, plant and equipment, including allocation of Group assets to cash generating units (Note 2.3, 2.18 and Note 5), trade receivables allowance and trade receivable classification to current and non-current (Note 2.18, Note 13), other assets impairment (Note 2.18, Note 6, Note 10, Note 11 and Note 12), recognition and realization of deferred tax asset (Note 24), contingencies related to the Group’s subsidiaries (Note 15, Note 28), valuation and presentation of discontinued operations and all of its subsidiaries (Note 8), valuation and presentation of assets held for sale (Note 8) and application of purchase price allocation in business combinations (Note 5). Future events may occur which will cause the assumptions used in arriving at the estimates to change. The effect of any changes in estimates will be recorded in the financial statements, when determinable. At the date of preparing these financial statements, the underlying assumptions and estimates were not subject to a significant risk that from today’s point of view it is likely that the carrying amounts of assets and liabilities will have to be adjusted significantly in the subsequent fiscal year, except for the items described below. The management made the following important judgments and estimates in the preparation of these financial statements: Useful life of customer relationships intangible assets Estimated useful life of customer relationships intangible assets, which are accounted for under other intangible assets and their acquisition value amounts to EUR 19,397 thousand as of 31 December 2023 and EUR 19,397 thousand as of 31 December 2022. The management amortizes these customer relationship intangible assets over the estimated validity period of existing contracts, which is 5-40 years. The Group was in compliance with the bank covenants in 2023. Applicable value As of 31 Covenant December 2023 Debt Service Coverage Ratio (DSCR) 1 >1.2 2.09 Financial debt to EBITDA 2 <3 2.41 Capital ratio 3 >25% 28.3% The Group was in compliance with its bank covenants as of 31 December 2022, except for the capital expenditures covenant, however, Group received a waiver from the bank that it would not take any actions to terminate the credit agreement, require early repayment or to apply any other sanctions due to the breach as of 31 December 2022. Applicable value As of 31 Covenant December 2022 <EUR 2,500 3,723 Capital expenditures thousand Financial debt to EBITDA <5 4.10 Capital ratio >24% 24.51% 1 Debt service coverage ratio – measures Group’s available cash flow to pay current debt obligations. The ratio is calculated by dividing net EBITDA by debt service, including principal and interest. 2 Financial debt to EBITDA assesses available EBITDA to support current and non-current interest bearing debt. 3 Capital ratio is the percentage of Group‘s equity to its total assets. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 77 3 Use of judgements and estimates in preparation of financial statements (cont’d) Deferred tax recognized from tax loss carry forward In addition, deferred tax asset recognized from tax loss carry forward - significant judgment exists that forecasted results will be achieved and tax losses will be utilized in the foreseeable future. The management estimated what part of the deferred tax asset will be utilized based on the best knowledge of the operations and results of the Group companies as at 31 December 2023 and 2022 and remaining amount will be carried on and utilized in the next reporting periods (Note 24). Receivables which are overdue As disclosed in Note 12 as of 31 December 2023 the Group has EUR 1,591 thousand (EUR 1,145 thousand as of 31 December 2022) overdue more than a year current receivables from trade customers (public and private) which were not impaired. Management estimate is based on the analysis of individual material overdue balances as well as analysis of general collection periods in a respective country and taking into account forward looking estimations. Group’s management reviewed macroeconomic indicators (inflation, GDP, unemployment rate and wages) and changes in overdue trade receivables in Lithuania and Latvia. Based on Group management opinion increased overdue balances are related to normal course of business and no corrections related to additional impairment of overdue receivables is needed. Goodwill and other intangible assets As disclosed in Note 5 and Note 6, as of 31 December 2023 the Group has goodwill and other intangible assets (contracts with the clients) in the amount of EUR 22,130 thousand (EUR 22,628 thousand – as of 31 December 2022). Significant management estimates were required in the cash generating units impairment testing performed as of 31 December 2023 and 31 December 2022, such as forecasting of future EBITDA 4 levels, determining annual growth rate, determining weighted average cost of capital (Note 5, 6) . Presentation of contract liabilities In order to present more accurate presentation, Group management used estimate and as of 31 December 2023 reclassified EUR 3,277 thousand of the current contract liabilities to non-current based on the historical yearly usage of such liabilities (as of 31 December 2022 EUR 3,835 thousand) (Note 20). Lease term The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has several lease contracts that include extension and termination options. The Group applies judgement in evaluating whether it is reasonably certain whether to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate. Lease interest rate The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The Group estimates the IBR using observable inputs (such as market interest rates). Climate change The Group is constantly reviewing the latest legislation on climate change and considers its impact to financial statements. Currently, the Group takes relevant actions to protect the environment and reduce carbon emissions. All the actions taken, and targets reached by the Group are disclosed in detail in the Groups’ annual sustainability report, which is available on the Groups’ website www.cityservice.eu. However, at this moment there are no legal acts, judgements or estimates that would have a material impact on the financial reporting. 4 EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization Net profit (loss) with added back income tax, interest income (expenses), gain (loss) on sale of investments, other finance gain (expenses), depreciation and amortization expenses. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 78 4 Segment information For management purposes, the Group is organized into business units based on services provided and have one main reportable segment as follows: • Buildings’ administration Segment of Buildings’ administration includes services of administration and maintenance of commercial and residential buildings. The segment also includes services of maintenance of engineering systems to educational institutions and other different activities which are not material. For this reason, the administration segment is divided into two segments geographically: Lithuania and Latvia. The segment information is presented as analyzed by chief operating decision maker of the Group (the Board). Segment performance is evaluated based on operating profit or loss calculated as gross profit less general and administrative expenses. However, general and administrative expenses related to Group’s management activities, financing (including finance costs and finance income), and income taxes of the Group are managed on a group basis and are not allocated to operating segments. Transfer prices between operating segments are based on the prices set by the management, which management considers to be similar to transactions with third parties. Operating segments In these financial statements information about operating segments areas means a constituent part of the Group revenue from external customers attributed to the Group’s country of domicile and attributed to all foreign countries in total from which the Group derives revenue. The following tables present revenue, profit and certain asset and liability information regarding the Group's reportable operating segments for continuing operations: Year ended Buildings’ administration 31 December 2023 All other Total segments Lithuania Latvia Revenue from contracts with customers 95,124 6,437 113 101,674 Total revenue from contracts with customers 101,674 Segment results 9,039 14 (312) 8,741 Unallocated expenses (2,145) Profit from operations 6,596 Net financial income 841 Profit before income tax 7,437 Income tax expenses (1,519) Net profit (loss) for the year 5,918 Other segment information Additions to non-current assets other than financial 1,726 24 - 1,750 instruments and deferred tax assets Non-current assets 33,017 5,327 - 38,344 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 79 4 Segment information (cont’d) Year ended Buildings’ administration 31 December 2022 All other Total segments Lithuania Latvia Revenue from contracts with customers 78,468 5,678 239 84,385 Total revenue from contracts with customers 84,385 Segment results 2,923 7 722 3,652 Unallocated expenses (692) Profit from operations 2,960 Net financial income (698) Profit before income tax 2,262 Income tax expenses (877) Net profit (loss) for the year 1,385 Other segment information Additions to non-current assets other than financial 2,891 19 247 3,157 instruments and deferred tax assets Non-current assets 33,703 5,313 99 39,115 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 80 5 Goodwill Note Group Cost: Balance as of 1 January 2022 12,144 Additions 6,142 Exchange differences 69 Discontinued operations and assets held for sale 8 (7,880) Balance as of 31 December 2022 10,475 Balance as of 31 December 2023 10,475 Impairment: Balance as of 1 January 2022 1,564 Exchange differences (20) Impairment recognized 130 Discontinued operations 8 2 Balance as of 31 December 2022 1,676 Balance as of 31 December 2023 1,676 Net book value as of 31 December 2022 8,799 Net book value as of 31 December 2023 8,799 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 81 5 Goodwill (cont’d) Acquisitions during 2023 As described in Note 1, during 2023 the Group acquired the following entity: Name of entity acquired Acquisition cost Notes Multi House EUR 32 thousand EUR 32 thousand paid in cash At the acquisition of this subsidiary a bargain goodwill of EUR (15) thousand has been accounted for in consolidated statement of comprehensive income. The provisional fair values of the assets acquired, liabilities and contingent liabilities assumed at the date of acquisitions made during 2023 were as follows: Fair value of assets, liabilities and contingent Multi House SIA liabilities Date of acquisition 30 May, 2023 Goodwill (15) Other non-current assets 83 Property, plant and equipment 1 Trade receivables 37 Other current assets - Cash and cash equivalents 84 Total assets 190 Long-term liabilities 12 Trade payables 23 Other current liabilities 123 Total liabilities 158 The carrying values of the acquired assets and liabilities assumed were as follows: Book value Multi House SIA Date of acquisition 30 May, 2023 Other non-current assets 83 Property, plant and equipment 1 Trade receivables 37 Other current assets - Cash and cash equivalents 84 Total assets 205 Long-term liabilities 12 Trade payables 23 Other current liabilities 123 Total liabilities 158 Total identifiable net assets at book value 47 attributable to equity holders of the parent 47 attributable to non-controlling interests - CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 82 5 Goodwill (cont’d) The differences between the amounts paid and the provisional fair values of assets acquired, liabilities and contingent liabilities assumed on the acquisitions of 2023 were as follows: Multi House SIA Date of acquisition 30 May, 2023 Fair value of acquired assets, liabilities and contingent liabilities attributable to the Group 47 Goodwill (15) Total purchase consideration 32 Fair value of non-controlling interest acquired - Cash acquired 84 Total purchase consideration, net of cash (52) acquired Multi House SIA Date of acquisition 30 May, 2023 Profit (loss) incurred since acquisition date to 31 5 December 2023 Total revenue since acquisition date to 31 December 114 2023 Total revenue for the year 2023 (unaudited) 207 Total net result for the year 2023 (unaudited) 7 Acquisitions during 2022 As described in Note 1, during 2022 the Group acquired the following entities: Name of entity acquired Acquisition cost Notes INTEGRI s.r.o. EUR 1,394 thousand All paid in cash Homefile S.R.L EUR 620 thousand EUR 520 thousand paid in cash Homefile Support S.R.L EUR 286 thousand All paid in cash Improxy - Technologias de informacao LDA EUR 3,000 thousand All paid in cash UAB Getfiks EUR 213 thousand All paid in cash O.K.-Soft Sokolov s.r.o. EUR 643 thousand All paid in cash SWAN Liberec, s.r.o. EUR 178 thousand All paid in cash Invert KFT EUR 417 thousand EUR 377 thousand paid in cash At the acquisition of these subsidiaries a total provisional amount of goodwill of EUR 6,142 thousand has been accounted for. The goodwill appears due to expected synergies, which are expected to be derived from horizontal expansion of business. In order to keep certain minimum capital requirements agreed with the bank, all the companies mentioned above were sold during 2022 (Note 1 and Note 8). CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 83 5 Goodwill (cont’d) The fair values of the assets acquired, liabilities and contingent liabilities assumed at the date of acquisitions made during 2022 were as follows: Improxy - Fair value of assets, Technologias Homefile S.R.L Homefile Support UAB Getfiks liabilities and contingent de informacao S.R.L liabilities LDA Date of acquisition 01 March 02 March 02 March 04 March Goodwill 2,811 604 279 207 Other intangible assets 180 - - - Property, plant and equipment 104 - - 1 Trade receivables 7 15 8 5 Other current assets 77 19 - 1 Total assets 3,179 638 287 214 Long-term liabilities 50 - - - Trade payables 10 - - 1 Other current liabilities 119 18 1 - Total liabilities 179 18 1 1 Fair value of assets, liabilities Invert KFT SWAN Liberec s.r.o. INTEGRI s.r.o. O.K.-Soft and contingent Sokolov s.r.o. liabilities Date of acquisition 05 April 13 May 18 March 18 May Goodwill 358 151 1,143 589 Other intangible assets - - - - Property, plant and equipment 3 2 - 19 Trade receivables 15 5 3 4 Other current assets 49 23 1,129 43 Total assets 425 181 2,275 655 Long-term liabilities - - 24 - Trade payables - - 4 5 Other current 8 3 853 7 liabilities Total liabilities 8 3 881 12 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 84 5 Goodwill (cont’d) The carrying values of the acquired assets and liabilities assumed were as follows: Improxy – Technologias Homefile Homefile Support UAB Getfiks de informacao S.R.L S.R.L Book value LDA Date of acquisition 01 March 02 March 02 March 04 March Intangible assets 180 - - - Property, plant and equipment 104 - - 1 Trade receivables 7 15 8 6 Other current assets 77 19 - 1 Total assets 368 34 8 8 Long-term liabilities 50 - - - Trade payables 10 - - 1 Other current liabilities 119 18 1 - Total liabilities 179 18 1 1 Total identifiable net 189 16 7 7 assets at book value attributable to equity holders 189 16 7 7 of the parent attributable to non- controlling interests - - - - INTEGRI s.r.o. Invert KFT O.K.-Soft Sokolov SWAN Liberec Book value s.r.o. s.r.o. Date of acquisition 18 March 05 April 18 May 13 May Intangible assets - - - - Property, plant and equipment - 3 19 2 Trade receivables 3 15 4 5 Other current assets 1,129 49 29 23 Total assets 1,132 67 52 30 Long-term liabilities 24 - - - Trade payables 4 - 5 - Other current 853 8 - 3 liabilities Total liabilities 881 8 5 3 Total identifiable 251 59 47 27 net assets at book value attributable to equity 251 59 47 27 holders of the parent attributable to non- controlling interests - - - - CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 85 5 Goodwill (cont’d) The differences between the amounts paid and the provisional fair values of assets acquired, liabilities and contingent liabilities assumed on the acquisitions of 2022 were as follows: Improxy – Technologias Homefile Homefile S.R.L UAB Getfiks de informacao Support S.R.L LDA Date of acquisition 01 March 02 March 02 March 04 March Fair value of acquired assets, liabilities and contingent liabilities 189 7 16 6 attributable to the Group Goodwill 2,811 279 604 207 Total purchase 3,000 286 620 213 consideration Fair value of non- controlling interest - - - - acquired Cash acquired 61 - 19 1 Total purchase consideration, net of cash 2,939 286 601 212 acquired INTEGRI s.r.o. Invert KFT O.K.-Soft Sokolov SWAN Liberec s.r.o. s.r.o. Date of acquisition 18 March 05 April 18 May 13 May Fair value of acquired assets, liabilities and contingent liabilities 251 59 54 27 attributable to the Group Goodwill 1,143 358 589 151 Total purchase 1,394 417 643 178 consideration Fair value of non- controlling interest - - - - acquired Cash acquired 295 48 30 23 Total purchase consideration, net of cash 1,099 369 613 155 acquired CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 86 5 Goodwill (cont’d) Improxy – Technologias Homefile S.R.L Homefile Support UAB Getfiks de informacao S.R.L LDA Date of acquisition 01 March 02 March 02 March 04 March Profit (loss) incurred since acquisition date (99) 52 5 1 to 31 December 2022 Total revenue since acquisition date to 31 573 68 26 27 December 2022 Total revenue for the year 2022 (unaudited) 746 83 36 37 Total net result for the year 2022 (unaudited) (66) 68 13 (10) INTEGRI s.r.o. Invert KFT O.K.-Soft SWAN Liberec Sokolov s.r.o. s.r.o. Date of acquisition 18 March 05 April 18 May 13 May Profit (loss) incurred since acquisition date to 31 (37) (12) 36 9 December 2022 Total revenue since acquisition date to 31 175 29 49 31 December 2022 Total revenue for the year 330 70 125 84 2022 (unaudited) Total net result for the year 2022 (unaudited) 68 (5) 63 33 For the purpose of impairment evaluation, the goodwill as of 31 December 2023 and 2022 was allocated to the following CGU: Carrying value Carrying value of allocated of allocated goodwill as of goodwill as of 31 December 31 December Cash generating unit 2023 2022 Subsidiaries operating in Lithuania 8,011 8,011 Subsidiaries operating in Latvia 788 788 8,799 8,799 As of 31 December 2023 there was no impairment of goodwill accounted for (EUR 130 thousand as of 31 December 2022). Expenses in 2022 were included in impairment of goodwill, other intangible assets and other non-current assets line in the consolidated statement of comprehensive income. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 87 5 Goodwill (cont’d) The forecasted revenues for CGU involved in administration of dwelling houses in Lithuania, Latvia were estimated based on the area of the dwelling-houses administered as of 31 December 2023 assuming that the area administered will remain the same in the future years and the growth in revenue will be derived from a service fee increase, which was forecasted to be in line with the estimated inflation rate. The costs were projected based on the actual cost level taking into account estimated inflation. Cash flows beyond the five-year period were extrapolated using 2% growth rate (2% in 2022) in Lithuania and 2-3% growth rate (2%-2.5% in 2022) in Latvia that reflects the best estimate of the management based on the current situation in the respective industry. All these elements and their trends constitute the EBITDA projections applied by the Group for CGU testing. The pre-tax discount rate used by the management was estimated for each individual cash generating unit as a weighted average cost of capital for that particular cash generating unit and is equal to 11.58% for cash generating units located in Lithuania (14% in 2022), 13.49% for cash generating unit located in Latvia (15.61% in 2022). In the opinion of the Group’s management, the most important and most change-like assumptions are the forecasted level of revenues and discount rate. Based on management’s estimations, a reasonable change in these assumptions in Lithuanian cash generating units would not result in any impairment as of 31 December 2023. At the moment of preparing these financial statements the management of the Group did not expect any significant changes in the assumptions used. In Latvia the impairment assessment is highly dependent on the assumptions used in the model. Below is provided sensitivity analysis for key assumptions of impairment assessment as at 31 December 2023: - A decrease in annual revenue growth rate by 1.0 p.p. would result in EUR 471 thousand additional impairment loss to goodwill; - An increase in pre-tax WACC (discount rate) by 1.0 p.p. would result in EUR 516 thousand additional impairment loss to goodwill. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 88 6 Other intangible assets Movement of other intangible assets in 2023 and 2022 is presented below: Notes Other intangible assets Cost: Balance as of 1 January 2022 37,712 Additions arising from acquisitions of subsidiaries 5 180 Additions 2,886 Disposals (3,449) Disposals related to discontinued operations 8 (11,468) Exchange differences 322 Balance as of 31 December 2022 26,183 Additions 1,209 Disposals and retirements (1,084) Balance as of 31 December 2023 26,308 Accumulated amortization and impairment: Balance as of 1 January 2022 16,623 Charge for the year 1,180 Disposals (212) Disposals of subsidiaries (777) Disposals related to discontinued operations 8 (9,598) Exchange differences (11) Balance as of 31 December 2022 7,205 Charge for the year 1,175 Disposals and retirements (1,028) Balance as of 31 December 2023 7,352 Net book value as of 31 December 2022 18,978 Net book value as of 31 December 2023 18,956 As of 31 December 2023 the Group has capitalized internally generated intangible assets of EUR 972 thousand (EUR 2,613 thousand as of December 2022). Capitalized internally generated intangible assets are related to software, planned to be used in administration of dwelling houses and facility management activities. The main part of other intangible assets consists of customer relationship intangible assets, which are amortized during the period of 5-40 years. As of 31 December 2023 net book value of such intangible assets constituted EUR 13,331 thousand (EUR 13,970 thousand as of 31 December 2022). Other part of intangible assets consists of licenses, software, and other intangible assets. Part of the other intangible assets of the Group with the acquisition value of EUR 1,285 thousand as of 31 December 2023 were fully amortized but still in use (EUR 1,325 thousand of the Group as of 31 December 2022). CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 89 7 Property, plant and equipment Movement of property, plant and equipment in 2023 and 2022 is presented below: Other property, Construct- plant and ion in Buildings Vehicles equipment progress Total Cost: Balance as of 1 January 2022 1,086 3,162 10,173 21 14,442 Additions arising from acquisitions of subsidiaries 97 21 11 - 129 Additions - 45 352 442 839 Disposals related to discontinued operations (96) (923) (614) - (1,633) Disposals and retirements (560) (859) (709) - (2,128) Reclassification to assets held for sale (45) (315) (7,991) - (8,351) Exchange differences - 206 1 - 207 Reclassifications - - 463 (463) - Balance as of 31 December 2022 482 1,337 1,686 - 3,505 Additions arising from acquisitions of subsidiaries - - 4 - 4 Additions - - 541 - 541 Disposals related to discontinued operations - - (1) - (1) Reclassification - 128 - - 128 Disposals and retirements (387) (383) (75) - (845) Balance as of 31 December 2023 95 1,082 2,155 - 3,332 Accumulated depreciation and impairment: Balance as of 1 January 2022 452 2,985 6,485 - 9,922 Charge for the year 17 50 1,090 - 1,157 Disposals and retirements (276) (845) (561) - (1,682) Disposals related to discontinued operations - (760) (422) - (1,182) Reclassification to asset held for sale (45) (304) (5,558) - (5,907) Exchange differences (1) 191 13 - 203 Balance as of 31 December 2022 147 1,317 1,047 - 2,511 Charge for the year 6 3 369 - 378 Additions arising from acquisitions of subsidiaries - - 3 - 3 Disposals and retirements (58) (374) 53 - (379) Disposals related to discontinued operations - - (1) - (1) Reclassification - - 7 - 7 Balance as of 31 December 2023 95 946 1,478 - 2,519 Net book value as of 31 December 2022 335 20 639 - 994 Net book value as of 31 December 2023 - 136 677 - 813 * other property, plant and equipment mainly consist of cleaning equipment, furniture and other assets. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 7 Property, plant and equipment (cont‘d) The depreciation charge of the Group’s property, plant and equipment for the year 2023 amounts to EUR 378 thousand (EUR 1,157 thousand in the year 2022). Amount of EUR 362 thousand for the year 2023 (EUR 1,147 thousand for the year 2022) has been included into general and administrative expenses in the Group’s statement of comprehensive and discontinued operations (Note 8). Property, plant and equipment (of the entire consolidated Group, including discontinued operations and assets held for sale) with an acquisition cost of EUR 1,394 thousand was fully depreciated as of 31 December 2023 (EUR 1,758 thousand as of 31 December 2022), but were still in active use. As of 31 December 2023 and 2022 no property, plant and equipment of the Group was pledged to banks as collateral for the loans (Note 15). As of 31 December 2023 and 2022 there was no impairment of property, plant and equipment. 90 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 91 8 Discontinued operations and assets held for sale Group management evaluated IFRS 5 criteria for assets held for sale and as at 31 December 2023 and there were no entities which met the criteria to be classified as held for sale and represented in the Consolidated Statement of financial position. As of 31 December 2022, the criteria to be classified as held for sale and presented as such in the Consolidated Statement of financial position, was met by Deleterma sp. z o.o. and UAB Baltijos būsto priežiūra along with the subsidiaries of both entities: PROGRESLINE Sp.z o.o., ZZN Inwestycje Sp.z o.o., Tumieszkamy Sp.z o.o., Wolska Aparthotel Sp.z o.o., Parama Group Sp.z o.o., Atrium 21 Sp.z o.o., Skydas - Przeglądy Budowlane Sp.z o.o., Parama Red Sp.z o.o., Parama White Sp.z o.o., Concierge - Zarządzanie Nieruchomościami Sp.z o.o., Parama Blue Sp.z o.o., Parama Yellow Sp.z o.o., EnergiaOK sp. z o.o., Grupa Techniczna 24 Sp. z o.o, UAB Neries būstas, Zespół Zarządców Nieruchomości sp. z o.o. , Famix sp. z.o.o., TED Sp. z o.o., Dom - Best Sp. z o.o., Certus - Serwis Sp. z o.o, SANTER Zarządzanie Nieruchomościami. Deleterma sp. z o.o. and UAB Baltijos būsto priežiūra together with subsidiaries represent the business segment in Poland. Group of companies that develops business related to the PortalPRO platform in various European countries were also classified as assets held for sale as of 31 December 2022. This group of companies includes SIA PortalPRO, PortalPRO S.L., PortalPRO Sp.z o.o, PortalPRO LDA, PortalPRO s.r.o., UAB PortalPRO, UAB Medžiagų tiekimo centras, UAB Getfiks. In 2022, immediately after the classification of the above-mentioned subsidiaries as assets held for sale, the Group management performed the re-measurement of the carrying amount of the assets in the disposal group to their fair value less costs to sell which is estimated to be EUR 2,018 thousand. Therefore EUR 5,374 thousand write-down was recognized on 31 December 2022 to reduce the carrying amount of the assets in the disposal group to their fair value less costs. This was recognized in net loss from discontinued operations in the consolidated statement of comprehensive income. No additional write-down was recognized in twelve months of 2023. The result of discontinued operations is as follows: 2023 2022 Sales 7,806 30,968 Cost of sales (7,193) (24,228) Gross profit 613 6,740 General and administrative expenses 92 (7,085) Impairment of goodwill, other intangibles and other non-current assets - (3,989) and fair value adjustment for assets held for sale Credit loss expenses on financial assets 62 (253) Other operating income 333 1,300 Other operating expense (1,119) (2,850) Profit (loss) from operations (19) (6,137) Interest income 13 84 Other finance income 69 19 Interest expenses (39) (142) Other finance expense - (488) (Gain) on sale of investments - 2 Profit (loss) before taxes 24 (6,662) Income tax (30) 101 Net profit (loss) (6) (6,561) All income tax expenses presented in the disclosure are attributable to discontinued operations. Gain on sale of the above- mentioned part of the discontinued operation is a non- taxable item. Result of the sale transaction is described in the statement of comprehensive income. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 8 Discontinued operations and assets held for sale (cont’d) On 18 May 2022, the Group sold 100% stake in UAB Baltijos turto valdymas, which was a 100% shareholder of companies based in St. Petersburg, Russian Federation. On 19 September 2022 the Company has signed the share purchase - sale agreement for the sale of UAB InHouse Digital and all of its subsidiaries, which were acquired in Portugal, the Czech Republic, Romania and Hungary from the end of 2021 until the transaction. At the end of 2022, the Company adopted a plan to sell the companies operating in Poland within 12 months. After evaluation of IFRS 5 Discontinued operations criteria UAB Baltijos turto valdymas, OOO MN Grupp, OOO Chistij dom, OOO Specializirovannoe remontno-naladochnoe upravlenie, OOO PortalPRO, OOO Podjemnie mechanizmy, OAO Siti Servis, ZAO Siti Servis, OOO Zhilkomservis No 3 Frunzenskogo rajona, UAB InHouse Digital, IMPROXY - TECHNOLOGIAS DE INFORMACAO LDA, INTEGRI, s.r.o., Homefile S.R.L., Homefile Suport Solutions S.R.L., InHouse Finance Kft., Starlit s.r.o. and Swan Liberec s.r.o., Deleterma Sp. z o.o., PROGRESLINE Sp.z o.o., ZZN Inwestycje Sp.z o.o., Tumieszkamy Sp.z o.o., Wolska Aparthotel Sp.z o.o., Parama Group Sp.z o.o., Atrium 21 Sp.z o.o., Skydas - Przeglądy Budowlane Sp.z o.o., Parama Red Sp.z o.o., Parama White Sp.z o.o., Concierge - Zarządzanie Nieruchomościami Sp.z o.o., Parama Blue Sp.z o.o., Parama Yellow Sp.z o.o., UAB Baltijos būsto priežiūra, EnergiaOK sp. z o.o., Grupa Techniczna 24 Sp. z o.o, UAB Neries būstas, Zespół Zarządców Nieruchomości sp. z o.o. , Tumieszkamy sp. z o.o., Famix sp. z.o.o., TED Sp. z o.o., Dom - Best Sp. z o.o., SANTER Zarządzanie Nieruchomościami, Certus - Serwis Sp. z o.o. were concluded to represent discontinued operations as companies represented major line of businesses in different geographical regions and all of the discontinued operations criteria were met. Moreover, companies presented as discontinued operations in the consolidated statement of comprehensive income and excluded from continuing activities in 2022. The result of discontinued operations is as follows: 2022 Sales 30,968 Cost of sales (24,228) Gross profit 6,740 General and administrative expenses (7,085) Impairment of goodwill, other intangibles and other non-current assets (3,989) and fair value adjustment for assets held for sale Credit loss expenses on financial assets (253) Other operating income 1,300 Other operating expense (2,850) Profit from operations (6,137) Interest income 84 Other finance income 19 Interest expenses (142) Other finance expense (488) (Gain) on sale of investments 2 Profit before taxes (6,662) Income tax 101 Net profit (loss) (6,561) All income tax expenses presented in the disclosure are attributable to discontinued operations. Gain on sale of the above- mentioned part of the discontinued operation is a non- taxable item. Result of the sale transaction is described in the statement of comprehensive income. 92 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 93 8 Discontinued operations and assets held for sale (cont’d) The major classes of assets, equity and liabilities attributable to assets held for sale as of 31 December 2022 are the following: ASSETS As of 31 December 2022 Non-current assets Goodwill 207 Other intangible assets 1,872 Property, plant and equipment 2,445 Right of use assets 578 Non-current receivables 94 Deferred income tax asset 688 Total non-current assets 5,884 Current assets Inventories 1,150 Prepayments 380 Trade receivables 1,701 Other receivables 2,026 Prepaid income tax 32 Accrued income and other current assets 1 Cash and cash equivalents 232 Total current assets 5,522 Fair value less costs to sell measurement (5,374) Total assets 6,032 EQUITY AND LIABILITIES EQUITY Equity 2,110 Reserves of a disposal group classified as held for sale (92) Total Reserves of a disposal group classified as held for sale 2,018 8 LIABILITIES As of 31 December 2022 Non-current liabilities Lease liabilities 381 Provisions for employee benefits 18 Non-current payables 37 Total non-current liabilities 436 Current liabilities Current portion of lease liabilities 209 Trade payables and payables to related parties 1,508 Contract assets 138 Income tax payable 4 Provisions for employee benefits 11 Current provisions 481 Other current liabilities 1,227 Total current liabilities 3,578 Total equity and liabilities 6,032 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 94 8 Discontinued operations and assets held for sale (cont’d) The net cash flows incurred from (to) discontinued operations are as follows: 2023 2022 Net cash flows (to) from operating activities 1,388 (4,216) Net cash flows from (to) investing activities (447) (5,904) Net cash flows (to) from financing activities (38) 922 Net (decrease) increase in cash flows 903 ( 9,198) 9 Inventories As of 31 Group As of 31 December 2023 December 2022 Raw and auxiliary materials (fair value less costs to sell) 420 505 Goods for resale (fair value less costs to sell) 250 540 Other (fair value less costs to sell) 2 2 672 1,047 During 2023, EUR 4,706 (EUR 2,978 in 2022) was recognized as an expense in cost of sales. 10 Prepayments Prepayments of the Group amount to EUR 1,736 thousand (net of EUR 338 thousand allowance) as of 31 December 2023 (EUR 1,579 thousand (net of EUR 381 thousand allowance) as of 31 December 2022) and mainly include prepayments to suppliers and subcontractors. 11 Other non-current and current receivables Group As of 31 As of 31 December 2023 December 2022 Non-current receivables for residential buildings' repair works 2,372 1,891 performed Restricted cash and guarantees provided 2,530 1,358 Receivable VAT 546 913 ESCO (Energy saving projects) 2,739 2,928 Other 1,565 1,866 Allowance of long-term part of receivables for residential buildings' (181) (77) repair works performed 9,571 8,880 Non-current receivables mainly consist of long-term part of receivables for residential buildings repair works performed in the amount of EUR 2,372 thousand (net of EUR 181 thousand impairment) as of 31 December 2023 (EUR 1,891 thousand (net of EUR 77 thousand allowance) as of 31 December 2022). Non-current part of the projects related to ESCO (Energy saving projects) amounted to EUR 2,565 thousand as of 31 December 2023 (EUR 2,754 thousand as of 31 December 2022). As of 31 December 2023 the Group had restricted cash of EUR 2,530 thousand (EUR 1,358 thousand as of 31 December 2022) held in the bank as guarantee provided to customers: EUR 423 thousand is accounted in non-current receivables (EUR 181 thousand as of 31 December 2022) while EUR 2,107 thousand – in other receivables in the statement of financial position as of 31 December 2023 (EUR 1,177 thousand as of 31 December 2022) . CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 95 12 Trade receivables Group As of 31 As of 31 December 2023 December 2022 Trade receivables, gross 31,755 27,814 Less: allowance for expected credit losses (6,249) (7,331) 25,506 20,483 Change in allowance for expected credit losses for trade receivables for the years 2023 and 2022 has been included into credit loss expenses on financial assets in the statement of comprehensive income. Trade receivables and other receivables are generally non-interest bearing and are usually collectible on 30 - 90 days terms. Movements in the allowance for impairment of the Group’s receivables were as follows: Individually Collectively Total assessed assessed Balance as of 1 January 2022 996 13,853 14,849 Charge for the year 130 541 671 Exchange differences (9) 1,832 1,823 Reversed during the year (14) (181) (195) Disposals related to discontinued operations - (8,075) (8,075) Transfer to assets held for sale (982) (760) (1,742) Balance as of 31 December 2022 121 7,210 7,331 Charge for the year 20 177 197 Disposals of subsidiaries - (3,034) (3,034) Disposals related to discontinued operations 982 760 1,742 Exchange differences - 89 89 Reversed during the year (6) (69) (75) Balance as of 31 December 2023 1,117 5,133 6,250 As of 31 December 2023 the average percentages used for allowance formation are as follows: 1.63% for not past due, 1.63% for past due less than 30 days, 1.63% for past due 30-60 days, 1.63% for past due 60-90 days, 25% for past due 90-180 days, 35% for past due 180-360 days, 65% for past due 1-3 years, 100% for past due more than 3 years. The ageing analysis of the Group’s trade receivables (presented net of loss allowance) as of 31 December 2023 is as follows: Trade receivables Days past due More Less than 30 – 60 60 – 90 90 – 360 than 360 Trade receivables 30 days days days days days Total 2022 15,789 1,576 543 359 1,071 1,145 20,483 2023 19,580 2,034 628 552 1,121 1,591 25,506 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 96 13 Cash Group As of 31 As of 31 December 2023 December 2022 Cash at bank 9,173 3,430 Cash on hand 3 4 9,176 3,434 As of 31 December 2023 the Group had restricted cash, held in the bank as guarantee provided to customers - see further information in Note 11. 14 Reserves and share premium Legal reserve A legal reserve is a compulsory reserve under Estonian legislation and the Statutes of the Company. Annual transfers of not less than 1/20 (one-twentieth) of net profit, calculated for statutory reporting purposes are required until the reserve reaches 1/10 (one-tenth) of the share capital. In December 2023 the reserve along with share premium was transferred to cover Group’s losses (as of 31 December 2022 the reserve was fully composed and amounted to EUR 948 thousand). Share premium Share premium represents the excess of the share issue price over nominal value of the shares issued. In December 2023 part of share premium was transferred to cover accumulated Group’s losses and amounts to EUR 8,490 thousand as of 31 December 2023 (EUR 21,067 thousand as of 31 December 2022). CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 97 15 Borrowings The list of borrowings of the Group as of 31 December 2023 and 2022 are as follows: Group As of 31 As of 31 Currency of the loan December 2023 December 2022 Current loans Bank loans EUR 9,000 1,829 Current loan balance 9,000 1,829 Non-current loans Bank loans EUR 11,417 13,497 Less: current portion of long term loans (1,138) (3,038) Non-current loan balance 10,279 10,459 The Group was in compliance with its bank covenants as of 31 December 2023, covenants are disclosed in Note 3. For the loans of the Group variable interest rates apply. Actual interest rates are close to effective interest rates. As of 31 December 2023 the weighted average annual interest rate of borrowings outstanding was 5.67% (4.17% as of 31 December 2022). In 2023 and 2022 the period of re-pricing of floating interest rates on borrowings was 3 months. Interest is paid monthly. The Group has no unutilized borrowing facilities as of 31 December 2023 (EUR 5,171 thousand as of 31 December 2022). For the loans and overdraft the Company and its subsidiaries have pledged to the bank accounts of the Company and its subsidiaries in Lithuania. Shares of UAB Mano būstas are pledged to AB Swedbank bank as well. Terms of repayment of non-current debt are as follows: Group As of 31 As of 31 Term December 2023 December 2022 Within one year 1,138 3,038 From one to five years 8,882 9,138 More than five years 1,397 1,321 11,417 13,497 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 98 15 Borrowings The following tables present financial liabilities movement during the financial year: Cash flows Cash flows New leases Deconsolidat Foreign 31 December from to loans and ion of exchange 2023 1 January proceeds leases repaid subsidiaries effect 2023 from loans Current interest-bearing loans and borrowing 1,829 9,000 (1,829) - - - 9,000 (excluding items listed below) Non-current interest- bearing loans and borrowings (excluding 13,497 20,649 (15,133) - (9,252) 369 10,130 items listed below) Obligations under lease contracts (Note 17) 4,052 - (2,498) 589 (554) 27 1,616 Total liabilities from financing activities 19,378 29,649 (19,460) 589 (9,806) 396 20,746 Deconsolidation Reclassification to 1 Cash flows Cash flows of subsidiaries assets held for Foreign 31 January from to loans New sale exchange December 2021 proceeds and leases leases effect 2022 from loans repaid Current interest- bearing loans and borrowing 5,901 - (4,072) - - - - 1,829 (excluding items listed below) Non-current interest-bearing loans and borrowings 18,947 1,552 (5,511) - (1,491) - - 13,497 (excluding items listed below) Obligations under lease contracts 6,205 - (1,986) 1,382 (1,231) (590) 272 4,052 (Note 17) Total liabilities from financing 31,053 1,552 (11,569) 1,382 (2,722) (590) 272 19,378 activities 16 Provisions The were no provisions accounted for in the Group’s subsidiaries as of 31 December 2023. As of 31 December 2022 the Group had outstanding provisions for the amount of EUR 130 thousand for probable unfavorable court decisions related to the acquisitions of the client portfolios in Spain. Group’s subsidiaries in Spain were sold in 2023 (Note 1). CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 99 17 Lease As of 31 December 2023 the interest rate on the lease liabilities obligations is 6month EURIBOR + 1.6% - 2.05%, 3 month EURIBOR + 1.7% (as of 31 December 2022 - 6 month EURIBOR + 1.6%, 3 month EURIBOR + 1.7%). Interest is paid monthly. The terms of the lease agreements are from 1 to 10 years. The currencies of the lease agreements are EUR. Set out below are the carrying amounts of right-of-use assets recognized and the movements during the period: Acquisition cost Buildings Vehicles Total Balance as of 1 January 2022 7,185 3,942 11,127 Additions 1,357 - 1,357 Decrease related to lease modifications (1,464) - (1,464) Decrease related to lease termination - (1,461) (1,461) Exchange differences 307 - 307 Disposals related to discontinued operations (2,485) - (2,485) Balance as of 31 December 2022 4,900 2,481 7,381 Additions 385 171 556 Decrease related to lease modifications (96) - (96) Reclassification - (127) (127) Decrease related to lease termination (2,749) (54) (2,803) Balance as of 31 December 2023 2,440 2,471 4,911 Accumulated depreciation and impairment Balance as of 1 January 2022 2,433 2,869 5,302 Charge for the year 1,083 421 1,504 Decrease related to lease modifications (1,307) - (1,307) Decrease related to lease termination - (1,351) (1,351) Exchange differences 57 - 57 Disposals related to discontinued operations (726) - (726) Balance as of 31 December 2022 1,540 1,939 3,479 Charge for the year 732 363 1,095 Decrease related to lease modifications (28) - (28) Decrease related to lease termination (1,735) (53) (1,788) Balance as of 31 December 2023 509 2,249 2,758 Right of use assets as of 31 December 2022 3,360 542 3,902 Right of use assets as of 31 December 2023 1,931 222 2,153 Maturity analysis of lease payments under the above-mentioned lease contracts as of 31 December 2023 and under lease contracts as of 31 December 2022 are as follows: Group As of 31 As of 31 December 2023 December 2022 Within one year 738 1,382 From one to five years 1,512 2,588 More than five years 120 240 Total lease obligations 2,370 4,210 Interest (147) (158) Present value of lease obligations 2,223 4,052 Lease obligations are accounted as: - current 681 1,313 - non-current 1,542 2,739 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 100 17 Lease (cont’d) Set out below are IFRS 16 impact to profit (loss): 2023 2022 Depreciation expense of right-of-use assets 1,095 1,504 Interest expense on lease liabilities 36 77 Expense relating to short-term leases or leases of low-value assets 327 321 (included in administrative expenses) Gain on sale of property 51 - Total amount recognized in profit (loss) 1,509 1,902 Group has no variable lease payments. The Group had total cash outflows for leases of EUR 2,517 thousand in 2023 (EUR 2,063 thousand in 2022). The Group had EUR 556 thousand non-cash additions to right-of-use assets and lease liabilities in 2023 (EUR 1,357 thousand in 2022). 18 Provision for employee benefits As of 31 December 2023 and 2022 the Group accounted for employee benefits for employees leaving the Group at the age of retirement (Note 2.14). Related expenses are included into general and administrative expenses in the Group’s statement of comprehensive income. Group As of 31 As of 31 December 2023 December 2022 As of 31 December of the previous year 214 230 Additions arising from new subsidiaries - 86 Change during the year 60 (102) As of 31 December of the financial year 274 214 Main assumptions applied while evaluating the Group’s provision for employee benefits as of 31 December 2023 and 2022 are as follows: Group As of 31 As of 31 December 2023 December 2022 Discount rate 4.1% 4.4% Anticipated annual salary increase 3.0% 3.0% 19 Trade payables and payables to related parties Group As of 31 As of 31 December 2023 December 2022 Trade payables 8,161 8,611 Payables to related parties (Note 29) 5,120 3,475 13,281 12,086 Trade payables are non-interest bearing and are normally settled on 30-day terms. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 101 20 Contract liabilities - advances received As of 31 December 2023 EUR 10,170 thousand amount represents advances received from the owners of commercial and residential buildings administrated by the Group for repair and other works and other contract liabilities and EUR 3,277 thousand of it were related to long-term obligations (EUR 11,861 thousand and EUR 3,835 thousand as of 31 December 2022 respectively). During the reporting period, EUR 5,258 thousand was recognized in revenue from contracts with customers in the consolidated statement of comprehensive income that was included in the contract liability balance at the beginning of the period (EUR 4,347 thousand durin g 2022). 21 Other liabilities Group As of 31 As of 31 December 2023 December 2022 Salaries and social security 2,812 2,645 Vacation pay accrual 2,500 2,270 Accrued expenses 265 236 Non-current trade payables 599 411 Other current liabilities 3,755 4,943 9,931 10,505 Non-current trade payables comprise of other long-term obligations to suppliers and is accounted for under non-current liabilities in consolidated statement of financial position. 22 Cost of sales Group 2023 2022 Services of subcontractors and materials used 43,478 31,137 Wages and salaries and social security 24,921 20,974 Cost of goods sold 683 1,750 Depreciation 16 10 Other 6,215 6,314 Total cost of sales 75,313 60,185 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 102 23 General and administrative expenses Group 2023 2022 Wages and salaries and social security 10,288 9,929 Depreciation and amortization 2,710 2,726 Consulting and similar expenses 1,627 1,486 Advertising 468 554 Transportation and fuel expenses 358 458 Short term rent of premises and other assets 327 321 Computer software maintenance 315 489 Commissions for collection of payments 307 344 Taxes other than income tax 305 120 Insurance 291 221 Representational costs 257 251 Business trips and training 193 118 Communication expenses 146 198 Bank charges 99 103 Charity and support 58 36 Utilities 49 69 Other 1,862 2,248 Total general and administrative expenses 19,660 19,671 * Includes EUR 1,5 thousand of translation services and EUR 179 of news portal subscription expenses incurred during the audit period of 2022 from audit company Ernst & Young Baltic. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 103 24 Income tax Group 2023 2022 Components of the income tax expenses Current income tax 1,701 1,267 Deferred income tax (income) (181) (390) Income tax expenses recorded in the statement 1,520 877 of comprehensive income Group As of 31 As of 31 December 2023 December 2022 Deferred income tax asset Expected credit losses of accounts receivable 767 671 Accruals and similar temporary differences 387 366 Tax loss carried forward 493 297 Tax goodwill 148 164 Allowance for inventories 3 3 Lease liabilities (RoUA) 292 - Net deferred income tax asset 2,090 1,501 Deferred income tax liability Property, plant and equipment and intangible assets (1,439) (1,335) Right of use assets (290) - Deferred income tax liability (1,729) (1,335) Deferred income tax, net 362 166 Presented in the statement of financial position as follows: Deferred income tax asset Continuing operations 2,091 1,501 Assets held for sale (Note 8) - 685 Deferred income tax liability Continuing operations (1,729) (1,335) Liabilities held for sale (Note 8) - - Tax loss carried forward can be utilized indefinitely in Lithuania: EUR 3,286 thousand as of 31 December 2023 (EUR 493 thousand recognized as deferred tax), EUR 1,989 thousand as of 31 December 2022 (EUR 297 thousand recognized as deferred tax). Deferred income tax asset and liability, related to entities operating in Lithuania, were accounted at 15% rate in 2023 and 2022. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 104 24 Income tax (cont’d) The changes of temporary differences before and after tax effect in the Group were as follows: Balance as of Recognized in Exchange Disposed Balance as of 31 December profit or loss differences subsidiaries 31 December 2022 2023 Allowance for accounts 4,471 649 - - 5,120 receivable Allowance for inventories 17 2 - - 19 Accruals and similar temporary 2,490 87 - - 2,577 differences Lease liabilities - (1,932) - - (1,932) (RoUA) Tax loss carried 1,979 1,363 - (57) 3,286 forward Tax goodwill 1,095 (110) - - 984 Property, plant and equipment and intangible assets (8,903) (693) - - (9,596) Right of use assets - 1,946 - - 1,946 Total temporary 1,149 1,312 - (57) 2,404 differences Deferred income 172 198 - (9) 361 tax, net * Amount differs from deferred income tax in the table above because of the tax loss transferred and used between subsidiaries. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 105 24 Income tax (cont’d) The changes of temporary differences before and after tax effect in the Group were as follows: Transfer to Balance as Balance as of Recognized assets held of 31 31 December in profit or Exchange for sale Disposed December 2021 loss differences subsidiaries 2022 Allowance for accounts 9,240 (2,743) (269) (1,726) (31) 4,471 receivable Allowance for inventories 472 (421) (34) - - 17 Accruals and similar 5,857 774 (130) (2,548) (1,463) 2,490 temporary differences Deferred 24 (23) (1) - - - income Tax loss 6,880 2,419 (80) (6,058) (1,182) 1,979 carried forward Tax goodwill 587 508 - - - 1,095 Property, plant and equipment (10,358) 455 67 - 933 (8,903) and intangible assets Accrued (81) 81 - - - - income Total temporary differences 12,621 1,050 (447) (10,332) (1,743) 1,149 before valuation allowance Valuation (8,240) 1,396 276 6,568 - - allowance Total temporary 4,381 2,446 (171) (3,764) (1,743) 1,149 differences Deferred 716 678 114 (688) (654) 166 income tax, net * Amount differs from deferred income tax in the table above because of the tax loss transferred and used between subsidiaries. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 106 24 Income tax (cont’d) The reported amount of income tax expenses attributable to the year can be reconciled to the amount of income tax expenses that would result from applying Lithuanian income tax rate (15%), since most of the operations of the Group is conducted in Lithuania, to pre-tax income as follows: Group 2023 2022 Income tax expenses computed at 15% in 2023 and 2022 (1,116) (614) Effect of different tax rates applicable to foreign subsidiaries (13) - Permanent differences (390) (263) Income tax expenses reported in the statement of comprehensive income (1,519) (877) Income tax attributable to a discontinued operations (30) (103) (1,549) (980) 25 Basic and diluted earnings per share (EUR) Basic earnings per share are calculated by dividing the net profit attributable to the shareholders by the weighted average number of ordinary shares issued and paid during the year. The Company has no diluting instruments, therefore basic and diluted earnings per share are equal. Calculation of basic and diluted earnings per share is presented below: Group 2023 2022 Net profit (loss) attributable to the shareholders of the Parent 5,880 1,901 Net (loss) from discontinued operations attributable to the shareholders (6) (6,561) 5,874 (4,660) Net profit (loss) attributable to the shareholders of the Parent Number of shares (thousand), opening balance 31,610 31,610 Number of shares (thousand), closing balance 31,610 31,610 Weighted average number of shares (thousand) 31,610 31,610 Basic and diluted earnings per share (EUR) 0.19 (0.15) From continuing operations 0.19 0.06 From discontinued operations - (0.21) 26 Dividends per share 2023 2022 Approved dividends - - Number of shares (in thousand) 31,610 31,610 Approved dividends per share (EUR) - - * The year when the dividends are approved. ** At the date when dividends are approved. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 107 27 Financial assets and liabilities and risk management Credit risk The Group’s procedures are in force to ensure on a permanent basis that sales are made to customers with an appropriate credit history and do not exceed an acceptable credit exposure limit. There are no individual customers exceeding 10% of segment sales. The maximum exposure to credit risk is represented by the carrying amount of each financial assets and contract assets. Therefore, the management considers that its maximum exposure is reflected by the amount of non-current receivables, trade receivables and other receivables, cash, net of allowance for doubtful accounts recognized at the date of the statement of financial position. Interest rate risk The major part of the Group’s borrowings (loans and financial lease obligations) are subject to variable rates, related to EURIBOR which create an interest rate risk (Notes 15 and 17). There are no financial instruments designated to manage the exposure to the interest rate risk outstanding as of 31 December 2023 and 2022. The following table demonstrates the sensitivity of the Group’s profit before tax (through the impact on floating rate borrowings) to a reasonably possible change in interest rates, with all other variables held constant. There is no impact on the Group’s comprehensive income, other than that to current year profit. Effect on the profit Increase/decrease before the income 2023 in basis points tax EUR +1 (210) PLN +1 - 2022 EUR +1 (163) PLN +1 - Liquidity risk The Group’s policy is to maintain sufficient cash and cash equivalents or have available funding through an adequate amount of committed overdraft and loans to meet its commitments at a given date in accordance with its strategic plans. The Group’s liquidity (current assets / current liabilities) and quick ((current assets – inventory) / current liabilities) ratios as of 31 December 2023 were 1.08 and 1.06 respectively (0.89 and 0.86 as of 31 December 2022 respectively). CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 108 27 Financial assets and liabilities and risk management (cont’d) The table below summarizes the maturity profile of the Group’s financial liabilities as of 31 December 2023 and 2022 based on contractual undiscounted payments: Less than 1 More than 5 On demand year 1 to 5 years years Total Non-current interest-bearing - - 10,859 1,511 12,370 borrowings Current portion of non-current - 3,609 - - 3,609 interest-bearing borrowings Current loans 9,000 - - - 9,000 Lease liabilities - 738 1,512 120 2,370 Trade payables and payables - 13,281 - - 13,281 to related parties Other current liabilities - 4,175 - - 4,175 Balance as of 31 December 9,000 21,803 12,371 1,631 44,805 2023 Non-current interest-bearing - - 9,295 1,609 10,904 borrowings Current portion of non-current - 5,108 - - 5,108 interest-bearing borrowings Current loans - 1,829 - - 1,829 Lease liabilities - 1,382 2,588 240 4,210 Trade payables and payables - 12,086 - - 12,086 to related parties Other current liabilities - 4,698 - - 4,698 Balance as of 31 December - 25,103 11,883 1,849 38,835 2022 Foreign exchange risk Monetary assets and liabilities of the Group denominated in various currencies as of 31 December 2023 and 2022 were as follows: 2023 2022 Assets Liabilities Assets Liabilities PLN - - 4,325 3,527 CZK - - 2 - EUR 49,881 51,613 36,783 48,078 49,881 51,613 41,110 51,605 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 109 27 Financial assets and liabilities and risk management (cont’d) The following tables demonstrate the sensitivity of the Group’s profit before tax (due to change in the fair value of monetary assets and liabilities) to a reasonably possible change in respect of currency exchange rate with all other variables held constant. PLN held by the Parent: Increase/ Effect on the decrease in profit before the exchange rate income tax 2023 EUR + 15.00 % - EUR - 15.00 % - 2022 EUR + 15.00 % 719 EUR - 15.00 % (719) EUR held by Polish subsidiaries: Increase/ Effect on the decrease in profit before the exchange rate income tax 2023 EUR + 15.00 % - EUR - 15.00 % - 2022 EUR + 15.00 % (2,290) EUR - 15.00 % 2,290 Fair value of financial instruments The Group’s principal financial instruments not carried at fair value are trade and other receivables, non-current receivables, trade and other payables, non-current and current borrowings. Fair value is defined as the amount at which the instrument could be exchanged between knowledgeable and willing parties in an arm’s length transaction, other than in forced or liquidation sale. The following methods and assumptions are used to estimate the fair value of each class of financial instruments: (a) The carrying amount of current trade and other accounts receivable, current accounts payable and current borrowings approximates fair value due to short maturity; (b) The fair value of non-current receivables and borrowings is based on the quoted market price for the same or similar issues or on the current rates available for borrowings with the same maturity profile. The fair value of non- current borrowings with variable and fixed interest rates approximates their carrying amounts. The fair values of the Group’s financial assets and financial liabilities approximate their carrying values. Based on fair value measurement categorization principles described in Note 2.9, the Group categorizes inputs used for borrowings from financial institutions valuation as level 2. Inputs for other financial assets and liabilities valuation are categorized as level 3. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 110 28 Commitments and contingencies Lawsuit to City Service SE from Vilnius City municipality’s administration On 21 April 2017 the Company received a notice from Vilnius County Court that Vilnius City municipality’s administration and General Procurator‘s office submitted a lawsuit against the Company on recovery of losses. The lawsuit brings, in the management’s opinion, unfounded allegations that Vilnius City municipality might have suffered losses arising from public procurement agreements concluded in years 2002 to 2010 between Vilnius City municipality and the Company. The quantum of the lawsuit is EUR 20.6 million. Since 2002, the Company under above mentioned public procurement agreements has been providing heating facilities management and technical maintenance services under ESCO model to education institutions established by Vilnius City municipality. ESCO model allowed to enhance energy efficiency and provided for substantial savings from energy expenses in public establishments. According to these agreements, City Service SE committed to maintain temperature levels in public establishments above occupational exposure standards, to reduce costs of system maintenance, and to make investments on behalf of the Company to achieve above-mentioned commitments. In 2014 Vilnius city municipality announced that thanks to ESCO model, implemented in cooperation with City Service SE, Vilnius city benefited significant savings through the period of 2002-2013, as high as EUR 36.2 million. During the 2018 pre-trial investigation was initiated by the Financial Crime Investigation Service under the Ministry of the Interior and it was terminated. During the 2019 Vilnius County Court adopted decision which City Service SE convinced to be unfounded and illegal. During 2020 Court of Appeal of Lithuania decided to annul the decision of Vilnius County Court. During 2021 the Supreme Court of Lithuania accepted the cassation appeals of the Vilnius City Municipality Administration and Prosecutor General’s Office. The Company submitted responses to the appeals of the cassators stating the reasons for disagreement regarding the arguments submitted by the cassators in their cassation appeals. And Supreme Court annulled the decision of the Court of Appeal of Lithuania that was issued on 8 October 2020 and referred the case back to the Court of Appeal of Lithuania. On 17 February 2022 the Court of Appeal of Lithuania announced its decision in this case. The Court of Appeal of Lithuania adjudged EUR 4.6 million from the Company to Vilnius City municipality. The Court also stated that Vilnius City municipality is also liable for the part of the losses. On 22 March 2022, the Company and Vilnius City Municipality Administration signed an agreement regarding the payment of the amount of EUR 4.6 million according to the instalment plan up to 31 December 2023. The was no outstanding amount accounted in other current liabilities in consolidated statement of financial position as of 31 December 2023 (EUR 2,045 thousand as of 31 December 2022) (Note 21). CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 111 29 Related party transactions The parties are considered related when one party has the possibility to control the other one or has significant influence over the other party in making financial and operating decisions. The related parties of the Group and the Company are as follows: − UAB Unit invest – the ultimate shareholder and parent of the company; − Subsidiaries and associates of UAB Unit Invest (same ultimate controlling shareholder); − Associates of City Service SE subsidiaries (for the list of the associates, see also Note 1); − A. Gudelis, V. Turonis, D. Šimaitis (Management of the Group companies). Transactions with related parties include: − sales and purchases of goods and services in the ordinary course of business; − acquisitions and disposals of property, plant and equipment; − disposals of subsidiaries (disclosed in Note 1). UAB Mano būstas and SIA City Service have provided surety for City Service SE to AB Swedbank under credit agreement. Companies are liable to the extent of all its assets to the Bank with respect to the same amount as the City Service SE. Shares of UAB Mano būstas are pledged to AB Swedbank as well. Payables and receivables between related parties are non-interest bearing. Receivables and payables payment terms between the related parties are up to 15-30 days, except for the dividends and loans, which are repaid in accordance with the legal or contractual requirements, respectively. 2023 Entity Relation Purchases Sales Receivables Loans Payables and and granted advances prepayments received UAB Vandens Subsidiary of parent 5 550 59 - - parkas company UAB Verslo Subsidiary of finansavimo parent - - 454 - 4,715 sprendimai company Subsidiary of UAB PortalPRO parent - 340 16 - - company UAB Medziagu Subsidiary of parent 649 86 655 78 236 tiekimo centras company Subsidiaries of UAB Subsidiaries of parent 914 1,082 381 552 169 Unit invest company 1,568 2,058 1,565 630 5,120 Loans granted comprise of loans to former subsidiaries which were sold to subsidiary of ultimate controlling parent (Note 1). The loans are repayable in 2024, interest is charged at EURIBOR 5 for 3 months plus lenders margin of 5%. 5 EURIBOR – Euro Interbank Offered rate CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 112 29 Related party transactions (cont‘d) 2022 Relation Purchases Sales Receivables and Payables and prepayments advances Entity received Subsidiary of UAB ICOR parent 395 136 33 34 company Subsidiary of UAB Inhouse Digital parent - - 2 1,089 company UAB Verslo Subsidiary of finansavimo parent - 4 58 2,231 sprendimai company Subsidiaries of UAB Subsidiaries of parent 316 656 124 121 Unit invest company 711 796 217 3,475 The ageing analysis of the Group’s receivables from related parties as of 31 December is as follows: Trade receivables Less Days past due More than 30 30 – 60 60 – 90 90 – 360 than 360 Trade receivables days days days days days Total 2022 160 29 14 1 8 5 217 2023 481 72 181 191 632 8 1,565 Remuneration of the management and other payments The Group’s management comprises of 3 members in 2023 (7 in 2022). The Group’s management remuneration amounted to EUR 447 thousand in 2023 (EUR 915 thousand in 2022). In 2023 and 2022 the management of the Group did not receive any loans or guarantees; no other payments or property transfers were made or accrued. There was no supervisory board remuneration in 2023 and 2022. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 113 30 Capital management The primary objectives of the Group‘s capital management are to ensure that the Group complies with externally imposed capital requirements and that the Group maintains healthy capital ratios in order to support the business and to maximize shareholders’ value. For capital management purposes, capital comprises equity attributable to equity holders of the Parent Company. The Group manages capital structure and makes adjustments to it in the light of changes in economic conditions and risk characteristics of the activities. To maintain or adjust the capital structure, the Group may issue new shares, adjust the dividend payment to shareholders and/or return capital to shareholders. No changes were made in the objectives, policies or processes of capital management during the years ended 31 December 2023 and 2022. The Group companies registered in Lithuania and Estonia are obliged to upkeep their equity (as per statutory financial statements) at not less than 50% of their share capital (comprised of share capital), as imposed by the Law on Companies of the Republic of Lithuania and the Commercial Code of the Republic of Estonia. As of 31 December 2023 and as of 31 December 2022 all Group companies met these requirements. In addition, the Group has committed to its lenders to keep to certain minimum capital requirements which were met as of 31 December 2023 as of 31 December 2022. There were no other externally imposed capital requirements on the Group. The Group monitors capital using debt to equity ratio. There is no target debt to equity ratio set out by the Group’s management, however, current ratio presented below is considered as good performance indicator, taking into account the changes in the Group (Note 1). Group 2023 2022 Non-current liabilities (including deferred tax) 17,545 19,086 Current liabilities 41,455 40,598 Liabilities 58,999 59,684 Equity 24,023 18,019 Debt to equity ratio 2 3 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 114 31 Subsequent events On 8 January 2024 member of the Management Board Mr. Dalius Šimaitis has resigned from the management board. As from 8 January 2024, City Service SE Management Board consists of 2 (two) members: Artūras Gudelis and Vytautas Turonis. On 12 February 2024 the title of UAB Energetinių projektų valdymas was changed into UAB Kapitalo sprendimai. Other contact details did not change. On 10 March 2024 the Group, through its Latvian subsidiary from unrelated party acquired 100% of the shares of SIA Jauntukums (acquisition price EUR 205 thousand) which is based in Latvia. SIA Jauntukums is engaged in administration of dwelling-houses. At the moment of issuance of these financial statements Group‘s management was not able to obtain reliable financial information of the newly acquired company and evaluate fair value of net assets as at the acquisition. On 10 March 2024 the Group, through its Latvian subsidiary from unrelated party acquired 100% of the shares of SIA Nebruk Jelgava (acquisition price EUR 212 thousand) which is based in Latvia. SIA Nebruk Jelgava is engaged in administration of dwelling-houses. At the moment of issuance of these financial statements Group‘s management was not able to obtain reliable financial information of the newly acquired company and evaluate fair value of net assets as at the acquisition. On 10 March 2024 the Group, through its Latvian subsidiary from unrelated party acquired 100% of the shares of SIA Nia Nami (acquisition price EUR 533 thousand) which is based in Latvia. SIA Nia Nami is engaged in administration of dwelling- houses. At the moment of issuance of these financial statements Group‘s management was not able to obtain reliable financial information of the newly acquired company and evaluate fair value of net assets as at the acquisition. On 29 March 2024 due to the acquisition of three new companies in the Republic of Latvia, credit agreement between City Service SE and Swedbank, AB concluded on 30 November 2023, have been amended, increasing the credit taken under the credit agreement from EUR 9 000 000 (nine million euros) to EUR 9 440 000 (nine million four hundred forty thousand euros) with borrowing capacity increased (the purpose of which is an overdraft) from EUR 8 925 000 (eight million nine hundred twenty-five thousand euros) to EUR 9 585 000 (nine million five hundred eighty five thousand euros). CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 115 32 Parent company’s unconsolidated financial statements The unconsolidated financial statements of the parent company have been prepared in accordance with the Accounting Act of the Republic of Estonia and these are not separate financial statements of the parent company in the meaning of IAS 27 “Separate Financial Statements”. The parent’s unconsolidated financial statements have been prepared using the same accounting policies as for the preparation of the consolidated financial statements, except for the accounting policy of the investments in subsidiaries and associates which are carried at cost, less impairment (Note 2.5). As of 31 As of 31 Statement of financial position December 2023 December 2022 ASSETS Non-current assets Property, plant and equipment 2 3 Investments into subsidiaries 63,920 64,338 Non-current receivables 5,481 6,845 Deferred income tax asset 324 158 Total non-current assets 69,727 71,344 Current assets Inventories 21 - Prepayments 149 86 Trade receivables 2,593 3,067 Receivables from related parties (including loans granted) 926 1 Other receivables 407 202 Cash 3,913 8 Total current assets 8,009 3,364 Total assets 77,736 74,708 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 116 32 Parent company’s unconsolidated financial statements (cont’d) Statement of financial position (cont’d) As of 31 December As of 31 December 2023 2022 EQUITY AND LIABILITIES Equity Share capital 9,483 9,483 Share premium 8,490 21,067 Reserves - 948 Retained earnings 31,688 9,251 Total equity 49,661 40,749 Liabilities Non-current liabilities Non-current borrowings 8,175 8,090 Total non-current liabilities 8,175 8,090 Current liabilities Current loans 9,000 1,829 Current portion of non-current borrowings 825 2,775 Trade payables and payables to related parties 9,730 18,000 Contract liabilities 15 971 Income tax - 71 Other current liabilities 330 2,223 Total current liabilities 19,900 25,869 Total liabilities 28,075 33,959 Total equity and liabilities 77,736 74,708 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 117 32 Parent company’s unconsolidated financial statements (cont’d) Statement of comprehensive income 2023 2022 Revenue from contracts with customers 883 173 Cost of sales (35) - Gross profit 848 173 General and administrative expenses (2,838) (977) Expected credit losses on financial assets (35) (9,288) Other operating income - 104 Profit from operations (2,025) (9,988) Interest income 1,573 1,981 Other finance income 12,529 10,296 Interest expenses (1,024) (845) Profit (loss) on sale of investments (2,307) 3,302 Other finance expenses - (33) Profit (loss) before tax 8,746 4,713 Income tax (expense) benefit 166 (64) Net profit (loss) 8,912 4,649 Other comprehensive income - - Total comprehensive income for the year, net of tax 8,912 4,649 CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 118 32 Parent company’s unconsolidated financial statements (cont’d) Statement of changes Share Share Legal Other Retained in equity capital premium reserve reserves earnings Total Balance as of 1 9,483 21,067 948 - 9,251 40,749 January 2023 Net profit for the year - - - - 8,912 8,912 Other comprehensive income - - - - - - Total comprehensive income - - - - 8,912 8,912 Transfer from reserves - (12,577) (948) - 13,525 - Balance as of 31 9,483 8,490 - - 31,688 49,661 December 2023 Book value of holdings under control or significant influence (63,920) Value of holdings under control of significant 42,398 influence, calculated under equity method Adjusted unconsolidated equity 28,139 as of 31 December 2023 * Adjusted unconsolidated equity differs from the consolidated equity as of 31 December 2023 because the Company’s share of losses of certain subsidiaries exceeds its interest in respective subsidiaries, accounted for based on equity method. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 119 32 Parent company’s unconsolidated financial statements (cont’d) Statement of changes Share Share Legal Other Retained Total in equity capital premium reserve reserves earnings Balance as of 1 9,483 21,067 948 - 4,602 36,100 January 2022 Net profit for the year - - - - 4,649 4,649 Other comprehensive income - - - - - - Total comprehensive income - - - - 4,649 4,649 Balance as of 31 9,483 21,067 948 - 9,251 40,749 December 2022 Book value of holdings under control or significant influence (64,338) Value of holdings under control of significant 78,457 influence, calculated under equity method Adjusted unconsolidated equity 54,868 as of 31 December 2022 * Adjusted unconsolidated equity differs from the consolidated equity as of 31 December 2022 because the Company’s share of losses of certain subsidiaries exceeds its interest in respective subsidiaries, accounted for based on equity method. CITY SERVICE SE, company code 12827710, Narva mnt. 5, Tallinn, Estonia CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 December 2023 (all amounts are in EUR thousand unless otherwise stated) 32 Parent company’s unconsolidated financial statements (cont’d) Statement of cash flows 2023 2022 Cash flows from (to) operating activities Net profit from continued operations 8,912 4,649 Adjusting items: Income tax expenses (166) 64 Depreciation and amortization 1 2 Impairment and write-off of accounts receivable (6,081) 9,192 Dividend (income) (12,320) (3,301) Loss (gain) from sale of investment 2,307 (10,296) Impairment of goodwill (697) 96 Interest (income) (1,573) (1,981) Interest expenses 1,024 845 Changes in provisions - (1) Other financial activity result, net (209) 33 Changes in working capital: (8,802) (698) (Increase) decrease in inventories (21) - (Increase) decrease in trade receivables, receivables from related parties, non-current receivables, other receivables and other current 9,197 (9,852) assets (Increase) decrease in prepayments (63) (67) (Increase) decrease in trade payables and payables to related parties (6,362) 16,043 Income tax paid (71) (9) (Increase) decrease in advances received and other current liabilities (2,639) (1,697) Net cash flows from (to) operating activities (8,761) 3,720 Cash flows from (to) investing activities (Acquisition) of non-current assets (2) (2) Proceeds from sale of non-current assets 2 1 (Acquisition) of investments in subsidiaries (2,620) (5,721) Disposal of investments in subsidiaries 928 3,306 Dividends and interest received 13,893 12,277 Loans (granted) (5,044) (15,253) Loans repaid 3,136 12,227 Net cash flows (to) from investing activities 10,293 6,835 Cash flows (to) financing activities Proceeds from loans 20,771 1,121 Loans (repaid) (17,374) (10,907) Interest (paid) (1,024) (845) Net cash flows from (to) financing activities 2,373 (10,631) Net increase in cash and cash equivalents 3,905 (76) Cash and cash equivalents at the beginning of the year 8 84 Cash and cash equivalents at the end of the year 3,913 8 120