Eltel

Quarterly Report • Jul 27, 2023

Eltel Group

Half-year report January–June 2023

Stockholm, Sweden, 27 July 2023

April–June 2023

• Net sales EUR 208.1 million (208.6). Total growth -0.2% and organic growth1) in segments 8.4%
• Adjusted EBITDA EUR 5.6 million (7.9)
• Adjusted EBITA2) EUR -1.5 million (0.5) and adjusted EBITA margin -0.7% (0.1)
• Adjusted EBITA2) in segments EUR 2.1 million (4.4) and adjusted EBITA margin in segments 1.1% (2.4)
• Items affecting comparability EUR 0.0 million (0.0)
• Operating result (EBIT) EUR -1.5 million (0.4) and EBIT margin -0.7% (0.2)
• Net result EUR -4.6 million (-2.6)
• Earnings per share EUR -0.03 (-0.02), basic and diluted
• Cash flow from operating activities EUR -2.2 million (8.8)

January–June 2023

• Net sales EUR 396.5 million (392.6). Total growth 1.0% and organic growth1) in segments 7.8%
• Adjusted EBITDA EUR 8.0 million (13.0)
• Adjusted EBITA2) EUR -7.0 million (-2.0) and adjusted EBITA margin -1.8% (-0.5)
• Adjusted EBITA2) in segments EUR 0.0 million (5.1) and adjusted EBITA margin in segments 0.0% (1.5)
• Items affecting comparability EUR -6.1 million (0.0)
• Operating result (EBIT) EUR -13.1 million (-2.1) and EBIT margin -3.3% (-0.5)
• Net result EUR -19.7 million (-7.0)
• Earnings per share EUR -0.13 (-0.05), basic and diluted
• Cash flow from operating activities EUR -25.9 million (0.0)
• Net debt EUR 141.6 million (131.0)

Significant events during and after the reporting period

• On 6 April, Eltel issued subordinated sustainability-linked hybrid capital securities in the aggregate principal amount of EUR 25 million.
• During the second quarter, Eltel signed contracts with a combined value of about EUR 164 million (65). Read more on page 13.
• On 13 April, it was announced that Eltel Norway signed a one-year prolongation to its agreement with Telenor for about EUR 70–90 million.
• On 3 May, it was announced that Eltel and Helen have signed an agreement for a large-scale solar park in Finland, worth about EUR 3.1 million.
• On 25 May, it was announced that Eltel's Smart Grids business in Sweden signed a contract with Vattenfall to install 664,000 smart meters to a value of EUR 51 million.
• On 29 June, Eltel made the announcement that Tarja Leikas will assume the role of CFO as of 1 August 2023, replacing Saila Miettinen-Lähde who is stepping down from her role, effective 31 July 2023.
• After the reporting period, on 20 July, it was announced that Eltel Finland has signed an agreement with Fingrid to build a 64 km long 400+110 kV transmission line. The contract is worth about EUR 19 million.

Key figures

EUR million	Apr-Jun 2023	Apr-Jun 2023	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Net sales	208.1	208.6	396.5	392.6	823.6
Net sales growth, %	-0.2%	-0.8%	1.0%	0.0%	1.4%
Adjusted EBITDA	5.6	7.9	8.0	13.0	27.8
Adjusted EBITA2)	-1.5	0.5	-7.0	-2.0	-1.9
Adjusted EBITA margin, %	-0.7%	0.2%	-1.8%	-0.5%	-0.2%
Adjusted EBITA2), segments	2.1	4.4	0.0	5.1	9.9
Adjusted EBITA margin, %, segments	1.1%	2.4%	0.0%	1.5%	1.4%
Operating result (EBIT)	-1.5	0.4	-13.1	-2.1	-2.0
Return on operative capital employed (ROCE), %	-11.7%	13.5%	-11.7%	13.5%	-3.5%
Net working capital	-2.4	-12.1	-2.4	-12.1	-21.0
Net debt	141.6	131.0	141.6	131.0	125.5
Number of employees, average	5,041	5,050	5,072	5,040	5,053

1) Organic growth is adjusted for currency effects.

2) Eltel follows the profitability of segments with adjusted EBITA, which does not include restructuring costs and other items affecting comparability. Eltel has changed its terminology since Q1 2023 from operative EBITA to adjusted EBITA for the purpose of additional clarity and alignment with market practice. Please see pages 24–25 for definitions of the key ratios.

Comments by the CEO

The second quarter was, to a large extent, a continuation of Q1 with mixed results across our segments. Our intensified sales efforts continued to drive volumes, with an 8.4% organic growth in the segments and a 5.0% increase for the Group, adjusted for currency effects.

Except for in Norway, the demand for our services was rising, and we secured new contracts worth about EUR 164 million, maintaining the momentum of increasing the volume compared to the same quarter of previous year. This reaffirms our capacity to secure new business on improved terms and at increased prices. Nevertheless, the uncertainties associated with future investments by telecom operators may influence our future growth.

Regarding profitability, Q2 has shown improvement from Q1, leading to an adjusted EBITA margin of 1.1% for the segments and -0.7% for the Group. We continued to be challenged with decreased volumes in Norway and issues in specific Power Services contracts in Finland, but remain focused on addressing these challenges and on leveraging growth opportunities to improve our profitability.

In Finland, we anticipated these challenges in late 2022, and we have since put mitigating actions in place. These measures will lead to gradual profitability improvements. A strong fiber market in Finland is driving significant growth in net sales, and we have several ongoing opportunities in the renewable energy sector.

In Norway, further reductions in customer investments led to overcapacity and inefficiency in the second quarter. During the first half of the year, customer investments declined further than foreseen when implementing the restructuring program. Consequently, additional restructuring actions in Norway will be taken.

Sweden continued its strong growth trajectory, marking the seventh consecutive quarter of increased net sales in local currency. Moreover, the country unit maintained a positive adjusted EBITA margin for the fourth consecutive quarter, underscoring the turnaround in the Swedish operations.

Denmark continued to perform strong, with a substantial increase in net sales and improved margins. This positive outcome reflects the country unit's ability to drive growth from existing contracts as well as from new wins, and success in increasing prices.

We have started to see positive effects from implementing indexes in contracts, which partly compensate the cost increases of the past year. We remain committed to executing cost-saving measures, capitalizing on growth opportunities, especially in the renewable energy sector, and striving for improved profitability in the long term.

Despite the current challenges in the business, I am optimistic about the future. I am confident that we are doing the right things in Eltel and we have what is needed to contribute to the development towards a more digitalized, electrified and sustainable society.

Håkan Dahlström, President & CEO

About Eltel and the Group strategy

Eltel in brief

Eltel is a leading service provider for critical infrastructure that enables renewable energy and high-performing communication networks. Operations are conducted in the Nordic countries, Poland, Germany and Lithuania within country-based organizations that have full responsibility for their financial results. Within Power, Eltel provides maintenance of power grids, upgrades and project work to national transmission system operators and distribution network owners. Within Communication, Eltel provides similar services to telecom operators and other owners of communication networks.

Eltel's markets are characterized by a high concentration of customers and competitors offering similar products and services.

Our strategy – towards sustainable profitable growth

Through our strategy, we build the foundation for investing in sustainable profitable growth. This involves:

• Improve efficiency and profitability of the current business, including price increases
• Broaden the customer base
• Grow in new and adjacent markets, such as renewable energy and public infrastructure
• Integrate sustainability as part of our offerings and operations
• Develop our concepts and commercial capabilities
• Implement new business models and expand our position in the value chain

The strategy will enable Eltel to continue to develop, grow and invest in order to ensure long-term value creation for the company, its shareholders and society at large.

Eltel's financial targets by end of 2025

Group adjusted EBITA margin	5%
Annual growth	2–4%
Leverage	1.5–2.5x net debt/adjusted EBITDA
Dividend payout	Subject to leverage target

Q4 22

Q1 23 Q2 23

Net sales, rolling 12 months Net sales, quarterly

Q3 22

Q2 22

M€

90 50

170 210 250

130

Net sales and earnings Group

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Net sales	208.1	208.6	396.5	392.6	823.6
Adjusted EBITDA	5.6	7.9	8.0	13.0	27.8
Adjusted EBITA	-1.5	0.5	-7.0	-2.0	-1.9
Items affecting comparability	-	-	-6.1	-	-
EBIT	-1.5	0.4	-13.1	-2.1	-2.0
Net result	-4.6	-2.6	-19.7	-7.0	-14.9
Key ratios
Net sales growth, %	-0.2%	-0.8%	1.0%	0.0%	1.4%
Organic growth1), % in segments	8.4%	-2.4%	7.8%	-1.2%	1.8%
Currency translation effect in net sales, MEUR	-11.0	-1.2	-17.9	-1.3	-9.3
Adjusted EBITA margin, %	-0.7%	0.2%	-1.8%	-0.5%	-0.2%
Tax rate, %	-1.9%	-106.4%	-3.4%	-27.2%	-30.5%
Earnings per share after dilution, EUR	-0.03	-0.02	-0.13	-0.05	-0.10

1) Organic growth is adjusted for currency effects.

April–June 2023

Net sales decreased by 0.2% to EUR 208.1 million (208.6). In local currency, net sales grew by 5.0%. Currency effects had a negative impact of EUR 11.0 million. In segments net sales increased by EUR 4.4 million. Organic net sales in segments, adjusted for currency effects, increased by 8.4%. Growth in Finland, Denmark and Sweden continued but in Norway and High Voltage Poland net sales declined.

Adjusted EBITDA was EUR 5.6 million (7.9). Adjusted EBITA decreased to EUR -1.5 million (0.5) and the adjusted EBITA margin was -0.7% (0.2). Adjusted EBITA in segments was EUR 2.1 million (4.4) and the margin was 1.1% (2.4). Improved performance in Denmark and Sweden was offset by continued challenges in Finland and Norway. In Other business, adjusted EBITA was EUR -0.9 million (-1.9).

Items affecting comparability amounted to EUR 0.0 million (0.0).

For further information regarding net sales and adjusted EBITA development, refer to the respective sections on the segments.

EBIT amounted to EUR -1.5 million (0.4).

Net financial expenses increased to EUR 3.0 million (1.7), mainly due to change in interest cost.

Tax costs amounted to EUR 0.1 million (1.3). No deferred tax assets were booked for countries with losses in the period. The effective tax rate was -1.9% (-106.4).

Net result for the period was EUR -4.6 million (-2.6). Earnings per share were EUR -0.03 (-0.02).

January–June 2023

Net sales increased by 1.0% to EUR 396.5 million (392.6). In local currency, net sales grew by 5.6%. Currency effects had a negative impact of EUR 17.9 million. In segments net sales increased by EUR 9.2 million. Organic net sales in segments, adjusted for currency effects, increased by 7.8%. The growth was driven by increased volumes in Finland, Denmark and Sweden. In Norway and in Other business net sales decreased.

Adjusted EBITDA was EUR 8.0 million (13.0). Adjusted EBITA decreased to EUR -7.0 million (-2.0) and the adjusted EBITA margin was -1.8% (-0.5). Adjusted EBITA in segments was EUR 0.0 million (5.1) and the margin was 0.0% (1.5). In Other business, adjusted EBITA was EUR -1.9 million (-2.5).

Items affecting comparability comprised a restructuring charge that amounted to EUR 6.1 million (0.0). Following reductions in customer investments in Norway and result deterioration both in Norway and Finland, a restructuring and cost savings program was communicated in connection with the Q4 2022 report. The actions were finalized during the first quarter of 2023. The restructuring included reduction in the workforce by approximately 150 full-time employees, termination and wind down of certain customer agreements, closing of selected locations and reducing fleet to adjust to the needs of the current operations.

During the first half of the year, customer investments in Norway declined further than foreseen when implementing the restructuring program. Additional restructuring actions in Norway will therefore be taken.

For further information regarding net sales and adjusted EBITA development, refer to the respective sections on the segments.

EBIT amounted to EUR -13.1 million (-2.1).

Net financial expenses amounted to EUR 5.9 million (3.4), mainly due to change in interest cost.

Tax costs amounted to EUR 0.6 million (1.5). No deferred tax assets were booked for countries with losses in the period. The effective tax rate was -3.4% (-27.2).

Net result for the period was EUR -19.7million (-7.0). Earnings per share were EUR -0.13 (-0.05)

Overview of segments

Net sales

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Finland	85.2	71.9	149.6	130.7	290.1
Sweden	50.8	49.4	99.7	93.3	193.8
Norway	32.4	46.6	64.7	88.2	176.8
Denmark	21.4	17.5	43.3	35.6	74.3
Sum segments	189.9	185.5	357.2	347.9	735.0
Other business	20.3	25.7	43.0	49.1	99.4
Eliminations	-2.1	-2.6	-3.6	-4.5	-10.8
Total net sales	208.1	208.6	396.5	392.6	823.6

Adjusted EBITA

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Finland	0.8	3.6	-1.5	4.5	8.2
Sweden	0.9	-0.4	1.4	-2.2	-1.0
Norway	-0.8	1.3	-2.4	2.7	2.1
Denmark	1.1	0.0	2.5	0.1	0.6
Sum segments	2.1	4.4	0.0	5.1	9.9
Other business	-0.9	-1.9	-1.9	-2.5	-4.0
Group functions	-2.7	-2.0	-5.2	-4.6	-7.8
Total adjusted EBITA	-1.5	0.5	-7.0	-2.0	-1.9

Adjusted EBITA margin

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Finland	1.0%	5.0%	-1.0%	3.4%	2.8%
Sweden	1.9%	-0.9%	1.4%	-2.4%	-0.5%
Norway	-2.5%	2.8%	-3.7%	3.1%	1.2%
Denmark	5.3%	-0.3%	5.7%	0.3%	0.9%
Sum segments	1.1%	2.4%	0.0%	1.5%	1.4%
Other business	-4.5%	-7.5%	-4.3%	-5.0%	-4.0%
Total adjusted EBITA margin, %	-0.7%	0.2%	-1.8%	-0.5%	-0.2%

Eltel's main operations in the four Nordic countries are presented as segments. In Q2 2023, the segments represented 90% of the net sales.

Management follows segment results by adjusted EBITA, which does not include items affecting comparability. Items affecting comparability include expenses recognized in Q1 2023 for restructuring and rightsizing activities aiming to adjust the capacity of Eltel's operations.

Other business includes High Voltage Poland, Smart Grids Germany, Lithuania as well as closing activities for Power Transmission International.

Net sales by segment

Adjusted EBITA by segment

Net sales and adjusted EBITA – Segments

Finland

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Net sales	85.2	71.9	149.6	130.7	290.1
Adjusted EBITA1)	0.8	3.6	-1.5	4.5	8.2
Number of employees, average	1,486	1,504	1,495	1,498	1,498
Key ratios
Net sales growth, %	18.5%	-9.9%	14.4%	-7.0%	-3.2%
Adjusted EBITA margin, %	1.0%	5.0%	-1.0%	3.4%	2.8%

1) Excluding restructuring costs.

April–June 2023

Net sales increased by EUR 13.3 million, or 18.5%, to EUR 85.2 million (71.9). Growth was mainly driven by a strong fiber market within Communication and good development in Power Transmission.

Adjusted EBITA decreased to EUR 0.8 million (3.6). The adjusted EBITA margin was 1.0% (5.0). Profitability in Communication remained healthy, but the overall result continued to be affected by increased costs and certain unfavorable agreements within Power Services.

On 3 May, it was announced that Eltel and the Finnish energy company Helen signed an agreement for the delivery of a large-scale solar park in Lohja, Finland. The move into the solar PV market is a milestone for Eltel, supporting the company's continued expansion into the renewable energy sector. The contract is worth about EUR 3.1 million.

After the reporting period, on 20 July, it was announced that Eltel Finland has signed an agreement with Fingrid to build a 64 km long 400+110 kV transmission line. The contract is worth about EUR 19 million.

January–June 2023

Net sales increased by EUR 18.8 million, or 14.4%, to EUR 149.6 million (130.7), reflecting good demand in Communication, particularly fiber, as well as growth in Power Transmission.

Adjusted EBITA decreased to EUR -1.5 million (4.5). The adjusted EBITA margin was -1.0% (3.4). Profitability in Communication was offset by challenges in Power Services.

As part of the restructuring and cost savings program, communicated in connection with the Q4 2022 report, Eltel Finland has terminated certain customer agreements, reduced the workforce by 47 full-time employees, closed selected facilities and reduced the number of vehicles.

Sweden

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Net sales	50.8	49.4	99.7	93.3	193.8
Adjusted EBITA	0.9	-0.4	1.4	-2.2	-1.0
Number of employees, average	1,012	911	1,002	912	919
Key ratios
Net sales growth, %	2.9%	10.7%	6.8%	8.9%	6.4%
Organic growth1), %	13.4%	14.0%	16.1%	12.2%	11.6%
Currency translation effect in net sales, MEUR	-5.2	-1.5	-8.6	-2.9	-9.5
Adjusted EBITA margin, %	1.9%	-0.9%	1.4%	-2.4%	-0.5%

1) Adjusted for currency effects.

April–June 2023

Net sales increased by EUR 1.4 million, or 2.9%, to EUR 50.8 million (49.4). Currency effects had a negative impact of EUR 5.2 million. Growth in local currency was 13.4% (14.0), marking the seventh consecutive quarter of top-line growth year-on-year. Organic growth was driven by Smart Grids and Communication.

Adjusted EBITA improved to EUR 0.9 million (-0.4). The adjusted EBITA margin was 1.9% (-0.9). The increase was mainly attributed to higher volumes and improved operational efficiency.

On 25 May, it was announced that Eltel's Smart Grids business in Sweden signed a contract with Vattenfall to install 664,000 new generation smart electricity meters to a value of EUR 51 million.

January–June 2023

Net sales increased by EUR 6.4 million, or 6.8%, to EUR 99.7 million (93.3). Currency effects had a negative impact of EUR 8.6 million. The growth in local currency was 16.1% and is mainly attributed to increased volumes in Communication and Smart Grids.

Adjusted EBITA improved to EUR 1.4 million (-2.2). The adjusted EBITA margin was 1.4% (-2.4). Progress came from increased volumes and operational optimizations, in parts due to the effects of the efficiency program One Eltel.

Norway

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Net sales	32.4	46.6	64.7	88.2	176.8
Adjusted EBITA1)	-0.8	1.3	-2.4	2.7	2.1
Number of employees, average	871	935	894	937	938
Key ratios
Net sales growth, %	-30.5%	10.9%	-26.7%	16.1%	10.2%
Organic growth2), %	-17.9%	9.6%	-16.3%	13.3%	9.4%
Currency translation effect in net sales, MEUR	-5.9	0.5	-9.2	2.1	1.4
Adjusted EBITA margin, %	-2.5%	2.8%	-3.7%	3.1%	1.2%

1) Excluding restructuring costs. 2) Adjusted for currency effects.

April–June 2023

Net sales decreased by EUR 14.2 million, or 30.5%, to EUR 32.4 million (46.6). Currency effect was EUR -5.9 million. Growth in local currency was -17.9%. Main reason was lower volumes due to reduced customer investments.

Adjusted EBITA decreased to EUR -0.8 million (1.3). The adjusted EBITA margin was -2.5% (2.8), primarily due to overcapacity caused by volumes which, during the implementation of the restructuring program, declined more than foreseen. Considering the current situation, further restructuring actions will be taken.

On 13 April, it was announced that Eltel Norway and Telenor, have extended their collaboration for an additional year based on an option in the current agreement. The estimated order value for the option year 2024 is about EUR 70–90 million.

January–June 2023

Net sales decreased by EUR 23.6 million, or 26.7%, to EUR 64.7 million (88.2). Currency effect was EUR -9.2 million. Growth in local currency was -16.3%. Main reason was lower volumes due to reduced customer investments.

Adjusted EBITA decreased to EUR -2.4 million (2.7). The adjusted EBITA margin was -3.7% (3.1). Lower volumes caused overcapacity and inefficiency in the organization.

As part of the restructuring and cost savings program, communicated in connection with the Q4 2022 report, the workforce has been reduced by 100 full-time employees, certain customer agreements have been terminated, selected facilities have been closed and the number of vehicles has been reduced.

Denmark

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Net sales	21.4	17.5	43.3	35.6	74.3
Adjusted EBITA	1.1	-0.0	2.5	0.1	0.6
Number of employees, average	512	477	506	476	484
Key ratios
Net sales growth, %	22.3%	-28.8%	21.4%	-29.8%	-15.5%
Organic growth1), %	22.4%	-28.8%	21.5%	-29.8%	-15.5%
Currency translation effect in net sales, MEUR	0.0	0.0	0.0	0.0	0.0
Adjusted EBITA margin, %	5.3%	-0.3%	5.7%	0.3%	0.9%

1) Adjusted for currency effects.

April–June 2023

Net sales increased by EUR 3.9 million, or 22.3%, to EUR 21.4 million (17.5). The significant growth primarily stemmed from increased activities within our existing contracts.

Adjusted EBITA improved to EUR 1.1 million (-0.0). The adjusted EBITA margin was 5.3% (-0.3). The improved profitability is attributed to increased volumes, successful project execution and higher pricing.

January–June 2023

Net sales increased by EUR 7.6 million, or 21.4%, to EUR 43.3 million (35.6). The significant increase primarily resulted from higher volumes in ongoing contracts.

Adjusted EBITA improved to EUR 2.5 million (0.1). The adjusted EBITA margin was 5.7% (0.3). The strong performance stemmed from increased volumes, operational improvements and higher pricing.

Other business

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Net sales	20.3	25.7	43.0	49.1	99.4
Adjusted EBITA	-0.9	-1.9	-1.9	-2.5	-4.0
Number of employees, average	997	1,082	1,018	1,074	1,071

Other business includes High Voltage Poland, Smart Grids Germany, Lithuania as well as closing activities for Power Transmission International.

April–June 2023

January–June 2023

Net sales decreased by EUR 5.4 million to EUR 20.3 million (25.7), reflecting lower volumes in High Voltage Poland.

Adjusted EBITA improved to EUR -0.9 million (-1.9). High Voltage Poland saw a reduction in losses with an adjusted EBITA of EUR -1.7 million (-3.0). Margins in Smart Grids Germany were healthy, although impacted by higher costs. Closing activities in Power Transmission International contributed positively to the result.

Net sales decreased by EUR 6.2 million to EUR 43.0 million (49.1) due to a shift of scope to smaller projects and services in High Voltage Poland.

Adjusted EBITA improved to EUR -1.9 million (-2.5). High Voltage Poland had an adjusted EBITA of EUR -3.2 million (-4.3). The impact of Power Transmission International was neutral thanks to the positive contribution in Q2.

Cash flow

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
EBIT	-1.5	0.4	-13.1	-2.1	-2.0
Depreciation and amortization	7.1	7.4	15.0	15.0	29.8
EBITDA	5.6	7.9	1.9	13.0	27.8
Changes in working capital	-4.1	5.4	-15.3	-4.4	4.6
Total financial expenses and taxes	-2.5	-4.0	-10.1	-7.1	-12.5
Adjustment for gain/loss on sales of assets	0.0	0.0	0.0	0.0	-0.1
Other	-1.2	-0.5	-2.4	-1.4	-3.4
Cash flow from operating activities	-2.2	8.8	-25.9	0.0	16.4
Cash flow from investing activities	-0.8	-0.8	-2.1	-1.4	-3.9
Cash flow from financing activities	1.9	14.1	1.6	11.7	3.1
Net change in cash and cash equivalents	-1.0	22.1	-26.4	10.2	15.5
Cash and cash equivalents at beginning of period	21.5	20.8	47.9	32.3	32.3
Foreign exchange rate effect	-0.2	-0.4	-1.3	0.0	0.1
Cash and cash equivalents at end of period	20.2	42.5	20.2	42.5	47.9

Condensed consolidated statement of cash flows is presented on page 17.

April–June 2023

Cash flow from operating activities was EUR -2.2 million (8.8). Main items included EBITDA EUR 5.6 million (7.9), cash flow from change in net working capital EUR -4.1 million (5.4), financial items EUR -2.4 million (-2.3) and income taxes EUR -0.1 million (-1.7).

Net cash flow from investing activities was EUR -0.8 million (-0.8) consisting of net capital expenditure on machinery and equipment.

Cash flow from financing activities was EUR 1.9 million (14.1). Utilization of short-term financing decreased by EUR 9.5 million (increase of 19.5), amortization of term loan amounted to EUR 7.5 million (0.0) and payment of lease liabilities were EUR 5.2 million (5.3). Net proceeds from issue of the hybrid bond and related transaction costs amounted to EUR 24.2 million (0.0).

January–June 2023

Cash flow from operating activities was EUR -25.9 million (0.0). Main items included EBITDA EUR 1.9 million (13.0), cash flow from change in net working capital EUR -15.3 million (-4.4), financial items EUR -6.3 million (-2.8) and income taxes EUR -3.8 million (-4.3). Cash flow from financial items and income taxes is impacted by timing differences between income statement and payments.

Cash flow has historically displayed a strong seasonal pattern, with weaker cash flow recorded during the period until the end of the third quarter due to higher production activity. Eltel's net working capital level is also impacted by remaining working capital-intensive projects, mainly in High Voltage Poland. These projects, and delays in them, result in continued tie up of substantial working capital and are expected to create volatility in the net working capital also going forward.

Net cash flow from investing activities was EUR -2.1 million (-1.4) consisting of net capital expenditure on machinery and equipment.

Cash flow from financing activities was EUR 1.6 million (11.7). Utilization of short-term financing decreased by EUR 4.5 million (increase of 14.0). Amortization of term loan amounted to EUR 7.5 million and payments of lease liabilities were EUR 10.6 million (10.8). Net proceeds from issue of the hybrid bond and related transaction costs amounted to EUR 24.2 million (0.0). In 2022 Eltel drew a EUR 35.0 million term loan and repaid the remaining old term loan of EUR 27.0 million. In 2022 Eltel also issued and purchased shares in accordance with a long-term incentive program, which had a cash flow impact of EUR 1.0 million and EUR -1.0 million, respectively.

Financial position, cash and cash equivalents

Equity at the end of the period was EUR 210.2 million (223.5) and total assets were EUR 612.5 million (628.6). The equity ratio was 37.4% (38.0).

Interest-bearing liabilities and net debt

EUR million	30 Jun 2023	30 Jun 2022	31 Dec 2022
Interest-bearing debt	113.1	122.3	125.1
Leasing liabilities	48.1	50.7	47.8
Allocation of effective interest to periods	0.6	0.5	0.5
Less cash and cash equivalents	-20.2	-42.5	-47.9
Net debt	141.6	131.0	125.5

EUR million	30 Jun 2023	30 Jun 2022	31 Dec 2022
Non-current interest-bearing debt	21.5	34.6	34.7
Current interest-bearing debt	91.6	87.7	90.4
Total interest-bearing debt	113.1	122.3	125.1
Non-current leasing liabilities	30.4	32.8	31.0
Current leasing liabilities	17.7	17.9	16.8
Total leasing liabilities	48.1	50.7	47.8

Hybrid bond

On 6 April 2023, Eltel AB issued subordinated sustainabilitylinked hybrid capital securities in the aggregate principal amount of EUR 25 million (the "hybrid bond"). The hybrid bond is classified as equity and it is subordinated to the company's other debt obligations. The hybrid bond has no maturity date, but Eltel has the right to redeem it at so-called reset date in July 2026 and at every interest payment date thereafter. The hybrid bond is sustainability-linked, and a premium up to 1.20% of the principal amount is paid if the sustainability targets measured at 31 December 2025 are not met. The hybrid bond bears interest at a fixed rate of 13.50% per annum until the reset date.

Credit facilities

	30 Jun
EUR million	2023	Maturity
Term loan, current	5.5	Dec 2023-Jun 2024
Term loan, non-current	1.0	Sep 2024
Term loan, non-current	21.0	Jan 2025
		Jan 2025 (+ extension
Revolving credit facility	90.0	options until Jan 2027)
		Jan 2025 (+ extension
Account overdrafts	15.0	options until Jan 2027)
Total committed credit
facilities	132.5
Commercial paper program	150.0	N/A

Available liquidity reserves, including the committed revolving credit facility, account overdrafts and cash and cash equivalents, amounted to EUR 54.2 million (113.5). Additional to the committed facilities, the Group also has access to short-term debt capital markets via a commercial paper program of EUR 150 million. On 30 June 2023, EUR 14.0 million (53.0) of the commercial paper program and EUR 71.0 million (34.0) of the revolving credit facility were utilized.

Commercial guarantees

On 30 June 2023, the commercial guarantees issued by the banks and other financial institutions on behalf of the Group amounted to EUR 87.0 million (92.0).

Other information

Risks and uncertainty factors

Inflation impacts Eltel across its cost base, including fuel and material prices as well as availability and cost of subcontractors and employees. Mitigating actions have been taken and Eltel has agreements in place to recover parts of the cost increases with most of its largest customers. However, there is a risk the degree of compensation does not fully cover the inflationary impact.

The current market volatility and the unpredictability of the volume of customer investments may have a negative impact on Eltel's net sales. There is a risk the restructuring and cost savings program taken in Q1 2023 is not sufficient to restore our profitability.

Eltel has faced significant profitability challenges in its High Voltage business in Poland, partly due to cost increases and the impact of the war in Ukraine on sourcing of materials and subcontractors. Restructuring of the business is ongoing, but there is a risk of negative results also going forward.

There is a risk that the covenants under the existing financing agreement are not met. Seasonal variation in Eltel's operations and related working capital build-up may also expose the company to liquidity risk.

At year-end 2022 the value of goodwill in segments Sweden and Norway was disclosed to be sensitive to impairment in case of negative changes to the estimated future cash flows or a further increase in discount rate (WACC). In the first half of 2023, Eltel's performance in Sweden has developed positively, whereas in Norway customer investments have been lower than earlier expected and visibility to the development of market demand for Eltel's core offerings has been limited. Eltel is currently assessing its long-term business expectations and uncertainties in the market environment. The outcome of the assessment may lead to impairment of goodwill. In addition, the market interest rates have increased significantly in recent periods. This has led to a higher WACC used in the impairment calculations and consequently to an increased risk of goodwill impairment.

For additional information regarding risks and uncertainties, please refer to Eltel's 2022 Annual Report which was published on 30 March 2023 and is available on Eltel's website at www.eltelgroup.com.

Large agreements announced during and after the reporting period

On 13 April, it was announced that Eltel Norway signed a one-year prolongation to its agreement with Telenor for about EUR 70–90 million.

On 3 May, it was announced that Eltel and the Finnish energy company Helen have signed an agreement for the delivery of a large-scale solar park in Lohja, Finland, worth about EUR 3.1 million.

On 25 May, it was announced that Eltel's Smart Grids business in Sweden signed a contract with Vattenfall to install 664,000 new generation smart electricity meters to a value of EUR 51 million.

After the reporting period, on 20 July, it was announced that Eltel Finland has signed an agreement with Fingrid to build a 64 km long 400+110 kV transmission line. The contract is worth about EUR 19 million.

Related party transactions

During the quarter, no significant transactions took place between Eltel and related parties.

Seasonality

Eltel's businesses are generally characterized by seasonal patterns and cyclicality of the project business that adds volatility to net sales, adjusted EBITA and cash flow. Seasonality is normally driven by a number of factors, including weather conditions, the timing of customer order placements and completion of work phases. The Eltel Group has historically reported higher revenues and operating profit in the second half of the year. Cash flow has historically displayed a strong seasonal pattern, with weaker cash flow recorded during the period until the end of the third quarter due to higher production activity. At the end of the year, as production volumes decrease as a result of completion of projects, cash flow has normally been stronger. For more details, please refer to quarterly key financial figures for the Group on page 19.

Presentation of the half-year 2023 report

Analysts and media are invited to participate in the half-year 2023 report briefing on 27 July 2023 at 10:00 am CEST where Eltel's President and CEO Håkan Dahlström and CFO Saila Miettinen-Lähde will host a presentation. A combined webcast and teleconference as well as the presentation will be available at www.eltelgroup.com/investors.

For further information, please contact:

Saila Miettinen-Lähde, CFO Phone: +358 40 548 3695, saila.miettinen-lahde@eltelnetworks.com

Elin Otter, Director, Communications and Investor Relations Phone: +46 72 59 54 692, elin.otter@eltelnetworks.com

Financial calendar

• Interim report January–September: 2 November 2023
• Full-year report January–December: 14 February 2024

This information is information that Eltel AB is obliged to make public pursuant to the EU Market Abuse Regulation and the Swedish Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 08:00 CEST on 27 July 2023.

Board's assurance

The Board of Directors and CEO certify that the half-year interim report gives a true and fair presentation of the Parent Company's and Group's business, financial position and result of operations, and describes material risks and uncertainties facing the Parent Company and the companies included in the Group.

Signatures of the Board of Directors and CEO

Stockholm, Sweden, 27 July 2023

Eltel AB (publ)

Ulf Mattsson, Chairman Ann Emilson Gunilla Fransson Joakim Olsson Erja Sankari Roland Sundén

Employee representatives: Stefan Söderholm

Björn Tallberg

Håkan Dahlström, President and CEO

The information in this interim report has not been reviewed by the company's auditors.

Condensed financial information

Condensed consolidated income statement

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Net sales	208.1	208.6	396.5	392.6	823.6
Cost of sales	-189.6	-187.7	-367.7	-354.7	-748.9
Gross profit	18.5	21.0	28.8	37.9	74.7
Other income	0.9	0.2	1.5	0.5	0.9
Selling and administrative expenses	-20.4	-20.7	-42.7	-40.5	-77.2
Other expenses	-0.5	-0.0	-0.7	-0.0	-0.4
Operating result (EBIT)	-1.5	0.4	-13.1	-2.1	-2.0
Financial income	0.2	0.0	0.4	0.0	0.2
Financial expenses	-3.2	-1.7	-6.3	-3.5	-9.6
Net financial expenses	-3.0	-1.7	-5.9	-3.4	-9.5
Result before taxes	-4.5	-1.2	-19.0	-5.5	-11.4
Taxes	-0.1	-1.3	-0.6	-1.5	-3.5
Net result	-4.6	-2.6	-19.7	-7.0	-14.9
Attributable to:
Equity holders of the parent	-4.5	-2.7	-19.6	-7.2	-15.0
Non-controlling interest	-0.1	0.2	-0.1	0.2	0.1
Earnings per share (EPS)
Basic, EUR	-0.03	-0.02	-0.13	-0.05	-0.10
Diluted, EUR	-0.03	-0.02	-0.13	-0.05	-0.10

Condensed consolidated statement of comprehensive income

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Net profit for the period	-4.6	-2.6	-19.7	-7.0	-14.9
Other comprehensive income:
Items that will not be reclassified to profit and loss
Revaluation of defined benefit plans, net of tax	2.4	6.2	4.5	7.8	7.8
Items that may be subsequently reclassified to profit and loss
Net investment hedges, net of tax	-	-0.1	-	0.0	-0.0
Currency translation differences	-3.8	-6.4	-9.3	-5.2	-9.1
Total	-3.8	-6.4	-9.3	-5.2	-9.1
Other comprehensive income/loss for the period, net
of tax	-1.4	-0.2	-4.9	2.6	-1.3
Total comprehensive income/loss for the period	-6.0	-2.8	-24.5	-4.4	-16.2
Total comprehensive income/loss attributable to:
Equity holders of the parent	-5.9	-3.0	-24.5	-4.5	-16.2
Non-controlling interest	-0.1	0.2	-0.1	0.2	0.1

Condensed consolidated balance sheet

EUR million	30 Jun 2023	30 Jun 2022	31 Dec 2022
ASSETS
Non-current assets
Goodwill	247.2	259.6	256.0
Intangible assets	33.4	37.2	35.3
Property, plant and equipment	10.3	10.4	10.7
Right-of-use assets	46.2	49.5	46.5
Deferred tax assets	26.5	16.8	16.3
Financial assets	14.5	5.9	7.1
Total non-current assets	378.1	379.4	371.9
Current assets
Inventories	24.0	19.4	24.8
Trade and other receivables	190.2	187.3	177.1
Cash and cash equivalents	20.2	42.5	47.9
Total current assets	234.4	249.3	249.8
TOTAL ASSETS	612.5	628.6	621.7
EQUITY AND LIABILITIES
Equity
Equity attributable to shareholders of the parent	177.9	215.7	204.0
Hybrid bond	25.0	-	-
Non-controlling interest	7.3	7.9	7.4
Total equity	210.2	223.5	211.3
Non-current liabilities
Interest-bearing debt	21.5	34.6	34.7
Leasing liabilities	30.4	32.8	31.0
Retirement benefit obligations	6.1	7.1	6.0
Deferred tax liabilities	20.3	10.4	10.3
Provisions	2.7	3.0	2.6
Other non-current liabilities	0.6	0.6	0.6
Total non-current liabilities	81.6	88.5	85.2
Current liabilities
Interest-bearing debt	91.6	87.7	90.4
Leasing liabilities	17.7	17.9	16.8
Provisions	5.1	3.1	3.3
Advances received	51.1	40.1	50.6
Trade and other payables	155.2	167.8	164.1
Total current liabilities	320.7	316.5	325.2
Total liabilities	402.3	405.0	410.4
TOTAL EQUITY AND LIABILITIES	612.5	628.6	621.7

Condensed consolidated statement of cash flows

	Jan-Jun	Jan-Jun	Jan-Dec
EUR million	2023	2022	2022
Cash flow from operating activities
Operating result (EBIT)	-13.1	-2.1	-2.0
Adjustments:
Depreciation and amortization	15.0	15.0	29.8
Gain/loss on sales of assets	-	-	-0.1
Defined benefit pension plans	-1.7	-1.7	-3.3
Other non-cash adjustments	-0.7	0.2	-0.1
Cash flow from operations before interests, taxes and changes in working capital	-0.5	11.5	24.2
Interest and other financial expenses paid, net	-6.3	-2.8	-7.8
Income taxes received/paid	-3.8	-4.3	-4.7
Total financial expenses and taxes	-10.1	-7.1	-12.5
Changes in working capital:
Trade and other receivables	-16.8	1.5	8.7
Trade and other payables	0.6	-3.5	3.8
Inventories	0.9	-2.4	-7.9
Changes in working capital	-15.3	-4.4	4.6
Net cash from operating activities	-25.9	0.0	16.4
Cash flow from investing activities
Purchases of property, plant and equipment (PPE)	-2.1	-1.4	-4.1
Proceeds from sale of property, plant and equipment (PPE)	0.0	-	0.2
Net cash from investing activities	-2.1	-1.4	-3.9
Cash flow from financing activities
Proceeds from issuance of hybrid bond	24.4	-	-
Payments of transaction costs and interests for hybrid bond	-0.2	-	-
Proceeds from issuance of share capital	-	1.0	1.0
Acquisition of own shares	-	-1.0	-1.0
Proceeds from long-term financial liabilities	-	35.0	35.0
Proceeds from short-term financial liabilities	44.5	39.5	76.5
Payments of short-term financial liabilities	-49.0	-25.5	-60.0
Payments of financial liabilities, term loans	-7.5	-27.0	-27.0
Payments of lease liabilities	-10.6	-10.8	-21.6
Dividends to non-controlling interest	-	-	-0.4
Change in non-liquid financial assets	-0.0	0.5	0.6
Net cash from financing activities	1.6	11.7	3.1
Net change in cash and cash equivalents	-26.4	10.2	15.5
Cash and cash equivalents at beginning of period	47.9	32.3	32.3
Foreign exchange rate effect	-1.3	0.0	0.1
Cash and cash equivalents at end of period	20.2	42.5	47.9

Condensed consolidated statement of changes in equity

	Equity attributable to shareholders of the parent
EUR million	Share capital	Other paid-in capital	Accumu lated losses	Revaluation of defined benefit plans, net of tax	Hedging reserve	Currency translation	Total	Hybrid bond	Non controlling interest	Total equity
Equity at 1 Jan 2023	159.6	489.9	-381.2	-31.1	10.9	-44.0	204.0	-	7.4	211.3
Total comprehensive income for the period	-	-	-19.6	4.5	-	-9.3	-24.5	-	-0.1	-24.5
Proceeds from hybrid bond	-	-	-	-	-	-	-	25.0	-	25.0
Transaction costs and interests on hybrid bond	-	-	-1.7	-	-		-1.7	-	-	-1.7
Transactions with owners:
Equity-settled share-based payment	-	-	0.0	-	-	-	0.0	-	-	0.0
Total transaction with owners	-	-	0.0	-	-	-	0.0	-	-	0.0
Equity at 30 Jun 2023	159.6	489.9	-402.4	-26.6	10.9	-53.4	177.9	25.0	7.3	210.2

	Equity attributable to shareholders of the parent
EUR million	Share capital	Other paid-in capital	Accumu lated losses	Revaluation of defined benefit plans, net of tax	Hedging reserve	Currency translation	Total	Hybrid bond	Non controlling interest	Total equity
Equity at 1 Jan 2022	158.8	490.6	-366.2	-38.9	10.9	-35.0	220.2	-	7.7	227.9
Total comprehensive income for the period	-	-	-7.2	7.8	0.0	-5.2	-4.5	-	0.2	-4.4
Transactions with owners:
Share capital reduction	-0.2	0.2	-	-	-	-	-	-	-	-
Proceeds from shares issued	1.0	-	-	-	-	-	1.0	-	-	1.0
Purchase of own shares	-	-1.0	-	-	-	-	-1.0	-	-	-1.0
Equity-settled share-based payment	-	-	0.0	-	-	-	0.0	-	-	0.0
Total transaction with owners	0.7	-0.7	0.0	-	-	-	0.0	-	-	0.0
Equity at 30 Jun 2022	159.6	489.9	-373.4	-31.1	10.9	-40.2	215.7	-	7.9	223.6

		Equity attributable to shareholders of the parent
EUR million	Share capital	Other paid-in capital	Accumu lated losses	Revaluation of defined benefit plans, net of tax	Hedging reserve	Currency translation	Total	Hybrid bond	Non controlling interest	Total equity
Equity at 1 Jan 2022	158.8	490.6	-366.2	-38.9	10.9	-35.0	220.2	-	7.7	227.9
Total comprehensive income for the period	-	-	-15.0	7.8	0.0	-9.1	-16.2	-	0.1	-16.2
Transactions with owners:
Share capital reduction	-0.2	0.2	-	-	-	-	-	-	-	-
Proceeds from shares issued	1.0	-	-	-	-	-	1.0	-	-	1.0
Purchase of own shares	-	-1.0	-	-	-	-	-1.0	-	-	-1.0
Equity-settled share-based payment	-	-	0.0	-	-	-	0.0	-	-	0.0
Dividends paid to non-controlling interests	-	-	-	-	-	-	-	-	-0.4	-0.4
Total transaction with owners	0.7	-0.7	0.0	-	-	-	0.0	-	-0.4	-0.4
Equity at 31 Dec 2022	159.6	489.9	-381.2	-31.1	10.9	-44.0	204.0	-	7.4	211.3

Key figures

Key figures for the period

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022	Rolling 12-mon
Net sales	208.1	208.6	396.5	392.6	823.6	827.5
Net sales growth, %	-0.2	-0.8	1.0	0.0	1.4	1.8
Adjusted EBITDA	5.6	7.9	8.0	13.0	27.8	22.8
Adjusted EBITA	-1.5	0.5	-7.0	-2.0	-1.9	-6.9
Adjusted EBITA margin, %	-0.7	0.2	-1.8	-0.5	-0.2	-0.8
Adjusted EBITA, segments	2.1	4.4	0.0	5.1	9.9	4.8
Adjusted EBITA margin, %, segments	1.1	2.4	0.0	1.5	1.4	0.6
Items affecting comparability	-	-	-6.1	-	-	-6.1
EBITDA	5.6	7.9	1.9	13.0	27.8	16.7
Operating result (EBIT)	-1.5	0.4	-13.1	-2.1	-2.0	-13.0
EBIT margin, %	-0.7	0.2	-3.3	-0.5	-0.2	-1.6
Result after financial items	-4.5	-1.2	-19.0	-5.5	-11.4	-25.0
Net result for the period	-4.6	-2.6	-19.7	-7.0	-14.9	-27.6
Earnings per share EUR, basic and diluted	-0.03	-0.02	-0.13	-0.05	-0.10	-0.18
Return on equity (ROE), %1)	-13.5	-0.5	-13.5	-0.5	-6.8	-13.5
Return on operative capital employed (ROCE), %1)	-11.7	13.5	-11.7	13.5	-3.5	-11.7
Leverage ratio1)	6.2	3.3	6.2	3.3	4.5	6.2
Net working capital	-2.4	-12.1	-2.4	-12.1	-21.0	-2.4
Number of personnel, average	5,041	5,050	5,072	5,040	5,053	5,069

Quarterly key figures

	Apr-Jun	Jan-Mar	Oct-Dec	Jul-Sep	Apr-Jun	Jan-Mar
EUR million	2023	2023	2022	2022	2022	2022
Net sales	208.1	188.4	224.0	207.0	208.6	184.0
Net sales growth, %	-0.2	2.4	-1.0	6.8	-0.8	1.1
Adjusted EBITDA	5.6	2.4	3.3	11.5	7.9	5.1
Adjusted EBITA	-1.5	-5.5	-4.0	4.1	0.5	-2.4
Adjusted EBITA margin, %	-0.7	-2.9	-1.8	2.0	0.2	-1.3
Adjusted EBITA, segments	2.1	-2.1	-1.8	6.6	4.4	0.7
Adjusted EBITA margin, %, segments	1.1	-1.2	-0.9	3.6	2.4	0.4
Items affecting comparability	-	-6.1	-	-	-	-
EBITDA	5.6	-3.7	3.3	11.5	7.9	5.1
Operating result (EBIT)	-1.5	-11.6	-4.0	4.1	0.4	-2.5
EBIT margin, %	-0.7	-6.2	-1.8	2.0	0.2	-1.4
Result after financial items	-4.5	-14.5	-7.9	2.0	-1.2	-4.3
Net result for the period	-4.6	-15.1	-7.7	-0.3	-2.6	-4.4
Earnings per share EUR, basic and diluted	-0.03	-0.10	-0.05	-0.00	-0.02	-0.03
Return on equity (ROE), %1)	-13.5	-12.2	-6.8	-1.4	-0.5	1.4
Return on operative capital employed (ROCE), %1)	-11.7	-7.9	-3.5	10.2	13.5	17.4
Leverage ratio1)	6.2	6.3	4.5	4.3	3.3	3.1
Net working capital	-2.4	-5.4	-21.0	26.3	-12.1	-6.7
Number of personnel, average	5,041	5,103	5,079	5,053	5,050	5,031

1) Calculated on a rolling 12-month basis.

Please see pages 24–25 for definitions of the key ratios.

Notes to the condensed consolidated interim financial statements

Accounting principles

This condensed interim report has been prepared in accordance with IAS 34 Interim Financial Reporting and applicable regulations in the Swedish Annual Accounts Act. The accounting principles adopted are the same with those of the Group's and the Parent Company's annual financial statements for the year ended 31 December 2022 except for the following amendment that is effective from 1 January 2023: Deferred Tax related to Assets and Liabilities arising from a Single Transaction (amendment to IAS 12). The amendment requires companies to recognize gross amount of deferred tax assets and liabilities on transactions, such as leases. The group has previously netted the deferred tax impact on leases and the impact of the amendment as of 1 January 2023 has been an increase of deferred tax assets of EUR 10.2 million and deferred tax liabilities of EUR 9.9 million on right-of-use assets and lease liabilities. There was no impact on equity.

On 6 April 2023 Eltel issued subordinated sustainability-linked hybrid capital securities (the "hybrid bond"). The instrument has no maturity date and, if no dividends are distributed, the payment of interest can be deferred in perpetuity. The hybrid bond bears interest at a fixed rate of 13.50% per annum until the reset date in July 2026. After the reset date, the hybrid bond will bear interest at a floating rate corresponding to 3-month EURIBOR plus a spread of 10.29% and a margin of 5.00% per annum. The interest payment obligation arises if the annual shareholders' meeting decides to distribute dividends. The hybrid bond is classified as an equity instrument and recognized at fair value. Interest is recorded into retained earnings when the commitment to payment arises.

Net sales by segment

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Finland	85.2	71.9	149.6	130.7	290.1
Sweden	50.8	49.4	99.7	93.3	193.8
Norway	32.4	46.6	64.7	88.2	176.8
Denmark	21.4	17.5	43.3	35.6	74.3
Other business1)	20.3	25.7	43.0	49.1	99.4
Eliminations	-2.1	-2.6	-3.6	-4.5	-10.8
Net sales, total	208.1	208.6	396.5	392.6	823.6

1) Other business includes High Voltage Poland, Smart Grids Germany, Lithuania as well as closing activities for Power Transmission International. Other business is not considered a segment.

Net sales by segment by business

EUR million		Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Finland	Communication	37.3	26.1	61.5	46.6	113.0
	Power	47.9	45.9	88.1	84.1	177.2
Sweden	Communication	40.8	43.2	80.8	80.1	166.2
	Power	10.0	6.2	18.9	13.1	27.6
Norway Communication	32.4	46.5	64.5	88.0	176.3
	Power	0.1	0.2	0.2	0.3	0.5
Denmark Communication	17.5	12.8	33.9	26.3	55.9
	Power	3.9	4.8	9.4	9.3	18.3
Other business Communication Power Other operations	3.9	3.9	7.7	7.0	15.8
	15.7	21.5	34.5	41.9	83.3
	0.8	0.3	0.8	0.2	0.3
Eliminations		-2.1	-2.6	-3.6	-4.5	-10.8
Net sales, total		208.1	208.6	396.5	392.6	823.6

Internal net sales consist mainly of net sales from Communication in Lithuania, reported in Other business. There are no material internal net sales in any of the segments.

Net sales by business

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Communication	130.1	130.1	245.3	244.2	517.9
Power	77.4	78.3	150.6	148.2	305.6
Other operations	0.8	0.3	0.8	0.2	0.3
Net sales, total	208.1	208.6	396.5	392.6	823.6

Net sales by service split

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Project delivery	44.6	48.4	89.8	95.4	164.9
Upgrade services	110.8	109.3	205.6	200.8	437.4
Maintenance	52.7	51.0	101.1	96.4	221.3
Net sales, total	208.1	208.6	396.5	392.6	823.6

Reconciliation of segment results

	Apr-Jun	Apr-Jun	Jan-Jun	Jan-Jun	Jan-Dec
EUR million	2023	2022	2023	2022	2022
Adjusted EBITA by segment
Finland	0.8	3.6	-1.5	4.5	8.2
Sweden	0.9	-0.4	1.4	-2.2	-1.0
Norway	-0.8	1.3	-2.4	2.7	2.1
Denmark	1.1	0.0	2.5	0.1	0.6
Sum segments	2.1	4.4	0.0	5.1	9.9
Other business	-0.9	-1.9	-1.9	-2.5	-4.0
Group functions	-2.7	-2.0	-5.2	-4.6	-7.8
Adjusted EBITA, Group	-1.5	0.5	-7.0	-2.0	-1.9
Restructuring	-	-	-6.1	-	-
Total items affecting comparability in EBITA	-	-	-6.1	-	-
Amortization of acquisition-related intangible asset	-	-0.0	-	-0.1	-0.1
Operating result (EBIT)	-1.5	0.4	-13.1	-2.1	-2.0
Financial expenses, net	-3.0	-1.7	-5.9	-3.4	-9.5
Result before taxes	-4.5	-1.2	-19.0	-5.5	-11.4

The January-June 2023 results include a EUR 6.1 million restructuring charge. Following reductions in customer investments and result deterioration in Norway and Finland, a restructuring and cost savings program was communicated in connection with the Q4 2022 report. The actions were finalized during the first quarter of 2023. The restructuring included reduction in the workforce by approximately 150 full-time employees, termination and wind down of certain customer agreements, closing of selected locations and reducing fleet to adjust to the needs of the current operations.

Personnel by segment	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Finland	1,486	1,504	1,495	1,498	1,498
Sweden	1,012	911	1,002	912	919
Norway	871	935	894	937	938
Denmark	512	477	506	476	484
Other business	997	1,082	1,018	1,074	1,071
Group functions	162	141	157	144	143
Total personnel, average	5,041	5,050	5,072	5,040	5,053
Total personnel, end of period	5,087	5,089	5,087	5,089	5,063

Committed order backlog

EUR million	30 Jun	30 Jun	31 Dec
	2023	2022	2022
Committed order backlog	578.5	461.3	468.2

Committed order backlog in Eltel is defined as the total value of committed purchase orders received but not yet recognized as net sales. It does not include frame agreements unless a binding purchase order has been received. Committed order backlog is therefore the best measure of unsatisfied performance obligations according to IFRS 15 Revenue from contracts with customers. The currency impact in committed order backlog at 30 Jun 2023 was EUR -19.8 million.

Net working capital and operative capital employed

EUR million	30 Jun 2023	30 Jun 2022	31 Dec 2022
Inventories	24.0	19.4	24.8
Trade and other receivables	190.2	187.3	177.1
Provisions	-7.8	-6.1	-5.9
Advances received	-51.1	-40.1	-50.6
Trade and other payables	-155.2	-167.8	-164.1
Other	-2.4	-4.8	-2.3
Net working capital	-2.4	-12.1	-21.0
Intangible assets excluding acquisition-related allocations	7.5	10.5	8.9
Property, plant and equipment	10.3	10.4	10.7
Right-of-use assets	46.2	49.5	46.5
Operative capital employed	59.5	58.3	45.1

Provisions

	30 Jun	30 Jun	31 Dec
EUR million	2023	2022	2022
Non-current provisions	2.7	3.0	2.6
Current provisions	5.1	3.1	3.3
Total provisions	7.8	6.1	5.9
EUR million	30 Jun 2023	30 Jun 2022	31 Dec 2022
1 Jan	5.9	8.6	8.6
Changes:
Restructuring provisions	2.1	-	-
Other provisions	-0.2	-2.5	-2.7
Balance at the end of reporting period	7.8	6.1	5.9

Contract balances

EUR million	30 Jun 2023	30 Jun 2022	31 Dec 2022
Trade receivables	81.7	70.3	82.6
Contract assets	87.5	97.0	73.3
Total assets related to contracts with customers	169.2	167.2	155.9
Advances received from contracts with customers	45.0	40.1	45.2
Total liabilities related to contracts with customers	45.0	40.1	45.2

Trade receivables and contract assets are included in the trade and other receivable line in the above net working capital table. Advances received from contracts with customers represent contract liabilities.

Deferred taxes

	30 Jun	30 Jun	31 Dec
EUR million	2023	2022	2022
Deferred tax assets	26.5	16.8	16.3
Deferred tax liabilities	-20.3	-10.4	-10.3
Net deferred tax assets	6.3	6.4	6.0

The increase in the gross amounts of deferred tax assets and liabilities relates to recognition of deferred taxes for Right-of-use assets and leasing liabilities according to amendment in IAS 12 that became effective on 1 January 2023. There were no changes in deferred tax assets for losses carried forward in Q2 2023. In December 2022, gross amount of EUR 10.5 million (12.9) was recognized, of which EUR 5.6 million (5.9) related to operations in Sweden. Deferred tax assets are recognized for tax loss carry forwards to the extent that the utilization against current year taxable profits and future taxable profits is probable. The future taxable profit estimate is based on current business plans approved by management.

Leasing

Right-of-use assets	30 Jun	30 Jun	31 Dec
EUR million	2023	2022	2022
Buildings	20.2	28.7	25.0
Machinery and equipment	26.0	20.7	21.5
Total	46.2	49.5	46.5

Changes in the right-of-use assets during the period	30 Jun	30 Jun	31 Dec
EUR million	2023	2022	2022
1 Jan	46.5	53.3	53.3
Additions	16.6	9.6	19.2
Depreciations	-11.5	-10.9	-21.8
Other	-5.3	-2.5	-4.1
Balance at the end of period	46.2	49.5	46.5
Leasing liabilities

	30 Jun	30 Jun	31 Dec
EUR million	2023	2022	2022
Non-current	30.4	32.8	31.0
Current	17.7	17.9	16.8
Total	48.1	50.7	47.8

Financial instruments

Derivative financial instruments		30 Jun 2023 30 Jun 2022			31 Dec 2022
EUR million	Nominal values	Net fair values	Nominal values	Net fair values	Nominal values	Net fair values
Foreign exchange rate derivatives	16.2	0.1	31.4	0.1	39.7	0.0
Total	16.2	0.1	31.4	0.1	39.7	0.0

Financial assets recognized at fair value through profit and loss comprise solely derivatives. Fair values of the derivative instruments are based on market values (level 2 observable input information) at balance sheet date.

Fair value of financial instruments measured at cost

The carrying amount of financial assets and financial liabilities is a reasonable approximation of their fair value. Changes in the market interest rates are reflected in the future interest flows of interest-bearing debt within a short period.

Earnings per share	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Net result attributable to equity holders of the parent	-4.5	-2.7	-19.6	-7.2	-15.0
Interest on hybrid bond	-0.8	-	-0.8	-	-
Net result attributable to ordinary shares	-5.3	-2.7	-20.4	-7.2	-15.0
Weighted average number of ordinary shares, basic	156,736,781	156,649,081	156,736,781	156,649,081	156,699,058
Weighted average number of ordinary shares, diluted	156,736,781	156,741,092	156,736,781	156,737,480	156,789,278
Earnings per share EUR, basic	-0.03	-0.02	-0.13	-0.05	-0.10
Earnings per share EUR, diluted	-0.03	-0.02	-0.13	-0.05	-0.10

Definitions and key ratios

Eltel applies ESMA's (European Securities and Markets Authority) guidelines for alternative performance measures (APM). In addition to the financial measures defined in IFRS, certain key figures, which qualify as alternative performance measures (APMs) are presented to reflect the underlying business performance, facilitate analysis of the Group's development as followed by Group Management and enhance comparability from period to period. The definition of these key figures is presented below and relevant information enabling reconciliations to IFRS measures can be found in connection with relevant parts of the report. These APMs should not be considered as a substitute for measures in accordance with IFRS.

IFRS key ratios
Earnings per share (EPS)	Net result attributable to equity holders of the parent Weighted average number of ordinary shares
Alternative performance measures (APMs)
Key Figure	Definition and reason for use	Reference
Adjusted EBITA and -margin	Eltel has changed its terminology since Q1 2023 from operative EBITA to adjusted EBITA for the purpose of additional clarity and alignment with the market practice.
	Adjusted EBITA and -margin, % are used by management to measure business and segment profitability and exclude items affecting comparability. Income statement line items below adjusted EBITA are not allocated to segments.
	Adjusted EBITA: Operating result before acquisition-related amortizations and items affecting comparability	Reconciliation of segment results
	Adjusted EBITA margin, %: Adjusted EBITA x 100 Net sales
	Adjusted EBITA and -margin, % for segments represent the sum of segments: Finland, Sweden, Norway and Denmark.
Items affecting comparability	These include capital gains and/or losses and transaction costs related to divestments and acquisitions, restructuring and resizing expenses and other items that according to Eltel's management's assessment are not related to normal business operations.	Reconciliation of segment results
EBITDA and adjusted EBITDA	EBITDA is operating result (EBIT) before depreciations and amortizations. Adjusted EBITDA excludes items affecting comparability. Adjusted EBITDA is used in calculating the leverage ratio.	Cash flow, key figures, quarterly key figures
EBIT margin	Operating result (EBIT) and -margin% are used to measure profitability before interest and taxes.
	EBIT margin, %: EBIT x 100 Net sales	Income statement
	Return on equity (ROE), % represents the rate of return that shareholders receive on their investments.
Return on equity (ROE), %	Return on equity (ROE), %1):	Income statement and balance sheet
	Net result x 100
	Total equity (average over the reporting period)

1) Calculated on a rolling 12-month basis.

Key figure	Definition and reason for use	Reference
	Operative capital employed is the amount of net operating assets the business uses in its operations.
Operative capital employed	Return on operative capital employed (ROCE), % represents how effectively total net operating assets are used in order to generate return in the operating business.
and Return on operative capital employed (ROCE), %	Operative capital employed: Net working capital + Intangible assets excluding goodwill and acquisition related allocations + Property, plant and equipment and Right-of-use assets	Net working capital and operative capital employed
	Return on operative capital employed (ROCE), %1): Adjusted EBITA x 100 Operative capital employed (average over the reporting period)
Net debt and leverage ratio	Net debt represents Eltel's indebtedness. It is used to monitor capital structure and financial capacity. It is also used in calculating the leverage ratio. The leverage ratio is defined as covenant in Eltel's financing agreement. Net debt: Interest-bearing debt - cash and cash equivalents Net debt Leverage ratio1): Adjusted EBITDA	Interest-bearing liabilities and net debt
Net working capital	Net working capital is used to follow the amount of short-term running capital needed for the business to operate. Used also as a factor to calculate operative capital employed. Net working capital: Net of inventories, trade and other receivables, provisions, advances received and trade and other payables, excluding items in these balance sheet items that are not considered to form part of operative working capital: derivative valuations and income tax liabilities.	Net working capital and operative capital employed
Committed order backlog	Committed order backlog is the total value of committed orders received but not yet recognized as sales. It does not include frame agreements unless a binding purchase order has been received. It is the best measure of unsatisfied performance obligations according to IFRS 15 Revenue from contracts with customer.

1) Calculated on a rolling 12-month basis.

Parent Company

Eltel AB is the ultimate parent company of Eltel Group. The operational and strategic management functions of Eltel Group are centralized in Eltel AB but it has no operative business activities. Eltel AB owns and governs the shares related to Eltel Group and its risks are mainly attributable to the value and activities of its subsidiaries. The interim report for the parent company is prepared in accordance with the chapter 9, Interim report, in the Swedish Annual Accounts Act.

Parent Company condensed income statement

EUR million	Apr-Jun 2023	Apr-Jun 2022	Jan-Jun 2023	Jan-Jun 2022	Jan-Dec 2022
Net sales	1.1	1.5	1.1	1.5	2.5
Administrative expenses	-2.2	-3.2	-3.7	-4.2	-7.3
Operating result	-1.1	-1.7	-2.6	-2.8	-4.8
Interest and other financial income	5.2	5.4	10.3	10.8	21.5
Interest and other financial expenses	-0.8	-0.0	-1.6	-0.9	-1.9
Net financial items	4.4	5.4	8.7	9.9	19.6
Result after financial items	3.3	3.7	6.1	7.1	14.8
Group contributions given	-	-	-	-	-14.5
Net result	3.3	3.7	6.1	7.1	0.3

Parent Company condensed balance sheet

EUR million	30 Jun 2023	30 Jun 2022	31 Dec 2022
ASSETS
Non-current assets
Financial assets
Shares in Group companies	68.3	68.3	68.3
Long-term loans receivable from Group companies	471.3	499.8	475.6
Intangible assets	0.0	0.0	0.0
Non-current assets	539.6	568.2	543.9
Current assets
Trade and other receivables	1.3	1.9	1.3
Cash pool receivable	4.5	2.3	4.4
Cash and cash equivalents	0.1	0.1	0.1
Current assets	6.0	4.2	5.8
TOTAL ASSETS	545.6	572.4	549.7
EQUITY AND LIABILITIES
Restricted equity
Share capital	159.6	159.6	159.6
Statutory reserve	0.7	0.7	0.7
Restricted equity	160.3	160.3	160.3
Non-restricted equity
Retained earnings	283.6	284.9	284.9
Hybrid bond	25.0	-	-
Net result for the period	6.1	7.1	0.3
Non-restricted equity	314.7	292.1	285.3
Total equity	475.0	452.3	445.5
Current liabilities
Debt	13.9	52.9	33.3
Liabilities to Group companies	54.3	66.7	70.3
Trade and other payables	2.4	0.5	0.5
Current liabilities	70.6	120.1	104.2
Total liabilities	70.6	120.1	104.2
TOTAL EQUITY AND LIABILITIES	545.6	572.4	549.7

At year-end, Eltel had secured its debt obligations towards the banks by share and intragroup loan pledges and floating charges over certain assets of the Group, all on customary terms and conditions.

27 (28)

Equity

EUR million	Transaction costs and Equity-settled
	1 Jan 2023	Hybrid bond	interests on hybrid bond	share-based payment	Net result	30 Jun 2023
Share capital	159.6	-	-	-	-	159.6
Statutory reserve	0.7	-	-	-	-	0.7
Non-restricted equity	285.3	25.0	-1.7	0.0	6.1	314.7
Total	445.5	25.0	-1.7	0.0	6.1	475.0

As of 30 June 2023, the total number of registered and outstanding shares of Eltel amounts to 158,231,081, whereof 156,736,781 are ordinary shares and 1,494,300 are class C shares. The number of votes in Eltel amounts to 156,886,211 and the registered share capital amounts to EUR 159,575,695.

Always powered, always connected - we make it happen by transforming society for a sustainable future.

Eltel AB

28 (28)

Visiting address: Adolfsbergsvägen 13, Bromma POB 126 23, SE-112 92 Stockholm, SWEDEN Corp. id no. 556728-6652

tel. +46 8 585 376 00 info@eltelnetworks.com www.eltelgroup.com www.eltelnetworks.com