Financial Review

2021

Etteplan

Content

Board of Directors' Review January 1–December 31, 2021 3

Consolidated Financial Statements 11

Consolidated statement of comprehensive income 11

Consolidated statement of financial position 12

Consolidated statement of cash flows 13

Consolidated statement of changes in equity 14

Notes to the consolidated financial statements 15

1 GENERAL INFORMATION 15

2 A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 15

3 CRITICAL ACCOUNTING ESTIMATES AND MANAGEMENT JUDGMENT BASED DECISIONS 24

4 MANAGEMENT OF FINANCIAL RISKS 25

5 BUSINESS COMBINATIONS 28

6 SEGMENT REPORTING 31

7 REVENUE FROM CONTRACTS WITH CUSTOMERS 32

8 OTHER OPERATING INCOME 33

9 NON-RECURRING ITEMS 33

10 MATERIALS AND SERVICES 33

11 NUMBER OF PERSONNEL AND STAFF COSTS 34

12 OTHER OPERATING EXPENSES 34

13 AUDIT FEES 34

14 FINANCIAL INCOME 35

15 FINANCIAL EXPENSES 35

16 TRANSLATION DIFFERENCES RECOGNIZED IN INCOME STATEMENT 35

17 INCOME TAXES 35

18 EARNINGS PER SHARE 36

19 INTANGIBLE ASSETS 36

20 TANGIBLE ASSETS 38

21 FINANCIAL INSTRUMENTS BY MEASUREMENT CATEGORY 39

22 IMPAIRMENT TESTING 40

23 INVENTORY 41

24 TRADE AND OTHER RECEIVABLES 42

25 EQUITY 42

26 SHARE-BASED PAYMENTS 43

27 INTEREST-BEARING LIABILITIES 43

28 OTHER NON-CURRENT LIABILITIES 44

29 TRADE AND OTHER PAYABLES 44

30 DEFERRED TAXES 44

31 PLEDGES, MORTGAGES AND GUARANTEES 45

32 RELATED-PARTY TRANSACTIONS 45

33 EVENTS AFTER THE BALANCE SHEET DATE 47

34 KEY FIGURES FOR FINANCIAL TRENDS 47

35 KEY FIGURES FOR SHARES 48

36 FORMULAS FOR THE KEY FIGURES 49

Parent Company's Financial Statements 51

Shares and shareholders 61

Board of Directors' dividend proposal 65

Auditor's Report 66

Investor information 70

This is a voluntarily published pdf report, which does not fulfill the disclosure obligation pursuant to Section 7.5§ of the Securities Markets Act.

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Board of Directors' review January 1–December 31, 2021

Operating environment

The majority of Etteplan's customers are industrial companies, with several global megatrends currently influencing the development of their operating environment. For example, structural changes in the global economy, urbanization and climate change are all influencing companies, national economies and people's lives. In addition to these megatrends, the engineering industry is influenced primarily by three trends: digitalization, accelerating technological development and the lack of engineering resources. These trends are creating a need for intelligent and efficient engineering solutions in all industrial sectors. The trend of centralizing service purchasing continues as customer demand becomes increasingly international, presenting growth opportunities for global engineering companies. The continued trend of service outsourcing has a positive effect on the industry's development and it supports Etteplan's growth. As the market situation improves, competition for employees and specialized experts in certain areas is becoming tighter and affecting the development of the sector as a whole in all market areas.

The most important factor affecting Etteplan's business is the global development of the machinery and metal industry. The prolongation of the COVID-19 pandemic continues to have an impact on the market situation and supply chains. Travel restrictions in various countries, which can change quickly, influence business operations to some degree.

Our industrial customers have adapted to the prevailing situation and our customers' business operations are developing favorably. For this reason, we expect the demand situation to remain fairly good throughout 2022.

Development of demand by customer industry

The pandemic continues to affect demand in all customer industries, but the effects of the pandemic on different customer segments vary. Demand in the Forest, Pulp and Paper industry was at a fairly good level. Demand in the Energy industry was at a good level. Demand in the Mining industry was at a good level. Demand in the Lifting and Hoisting industry was at a good level. Demand in the ICT industry remained good. Demand in the Automotive and Transportation industry was at a moderate level. Demand in the Chemical industry was at a good level.

Development of demand in Etteplan's operating countries

The pandemic continued to affect the market situation in many European countries. In Finland, the overall market situation remained fairly good, although the pandemic affected demand and increased uncertainty.

In final quarter of 2021, the euro-denominated value of new orders received by the technology industry companies was 40 percent higher than in the third quarter and 4 percent higher than in the corresponding period the previous year. Based on the orders during the latter part of 2021, it is estimated that revenue in the beginning of 2022 will be higher compared to the corresponding period last year.

Market uncertainty also affected demand slightly in Sweden, Denmark, the Netherlands, Germany and Poland. The demand situation in China remained good in spite of uncertainty in the construction industry.

Revenue

Etteplan's revenue grew by 15.6 percent and was EUR 300.1 million (2020: EUR 259.7 million). At comparable exchange rates, revenue increased by 14.7 percent. Organic growth was 8.9 percent. At comparable exchange rates, organic growth was 8.0 percent. Revenue from key accounts grew by 6.6 percent.

During the year, we continued our investments in organic growth by recruiting personnel and establishing new teams. The use of subcontractors increased especially in the software business. Previously completed acquisitions and outsourcing agreements had a positive effect on our development.

Etteplan's business is subject to periodic fluctuation due to the number of working days, holiday seasons and the timing of product development and investment projects in customer companies, which

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mainly take place in the spring and the latter part of the year. The revenue in the third quarter is typically lower than that of other quarters.

The revenue of acquired companies is not included in the organic growth of revenue for the 12 months following the acquisition. TekPartner A/S increased revenue starting from January 1, 2021, F.I.T. Fahrzeug Ingenieurtechnik GmbH starting from May 1, 2021, Skyrise.tech S.A. starting from June 1, 2021, Adina Solutions Oy starting from August 1, 2021, and BST Buck Systemtechnik GmbH starting from October 1, 2021. Cognitas GmbH and Syncore Technologies AB, which were acquired at the beginning of 2022, will be included in Etteplan's figures starting from January 1 and February 1, 2022, respectively.

Result

Profitability for the full year was at a good level, in line with our targets, thanks to good operational efficiency. Investments in organic growth, such as establishing new teams, had an effect on profitability.

Operating profit (EBITA) improved by 15.2 percent and was EUR 30.1 (26.2) million, or 10.0 (10.1) percent of revenue.

Operating profit (EBIT) improved by 15.1 percent and was EUR 25.8 (22.4) million, or 8.6 (8.6) percent of revenue.

The combined effect of non-recurring items on operating profit (EBITA) and operating profit (EBIT) was EUR -0.7 (-0.9) million. The non-recurring costs were related to acquisitions and organizational restructuring.

Financial expenses amounted to EUR 1.5 (1.7) million.

Profit before taxes was EUR 24.9 (21,1) million. Taxes in the income statement amounted to 19.4 (19.0) percent of the result before taxes. The amount of taxes was EUR 4.8 (4.0) million.

The profit for the financial year was EUR 20.0 (17.1) million.

Basic earnings per share were EUR 0.80 (0.69). Equity per share was EUR 3.97 (3.50) at the end of December. Return on capital employed (ROCE) before taxes was 16.0 (16.0) percent.

Cash flow and financial position

Operating cash flow was EUR 27.1 (38.0) million. Cash flow after investments was EUR 10.8 (30.5) million. Operating cash flow was exceptionally strong in 2020 due to pandemic-related adjustment measures. In 2021, growth tied up capital and affected the accrual of operating cash flow.

The Group's cash and cash equivalents stood at EUR 30.4 (24.4) million at the end of December.

The Group's interest-bearing liabilities amounted to EUR 78.5 (65.0) million at the end of December. A loan withdrawn in December 2021 for the purpose of the Cognitas GmbH acquisition carried out at the beginning of 2022 contributed to the increase in interest-bearing liabilities. Lease liabilities represented EUR 22.7 (24.5) million of interest-bearing liabilities.

The total of unused short-term credit facilities stood at EUR 14.5 (16.5) million.

Total assets on December 31, 2021, were EUR 253.0 (217.9) million. Goodwill on the balance sheet was EUR 92.4 (83.7) million.

At the end of December, the equity ratio was 39.7 (40.5) percent.

Capital expenditure

The Group's gross investments were EUR 30.6 (29.7) million. The gross investments mainly consisted of acquisition-related items, increases in lease liabilities and equipment purchases.

Personnel

The number of personnel stood at 3,629 employees at the end of December 2021 (2020: 3,267 employees). The number of personnel increased by 11.1 percent compared to the end of 2020.

The Group employed 3,480 (3,320) people on average in 2021.

The number of people employed by the Group outside of Finland increased and stood at 1,624 (1,351) at the end of December.

At the end of December 2021, 13 employees were temporarily laid off. The number of temporarily laid off employees in Finland, Sweden and Germany was 165 at the end of 2020. Part of the temporary layoffs were implemented as part-time layoffs.

At this stage of the pandemic, the new year began with employees mostly working remotely in all of our operating countries. We expect our personnel to return partly to in-office work when the pandemic stabilizes, but remote work will remain a part of our flexible work model. We have invested in the management and development of remote work and we will benefit from these investments as business settles into the new normal when the pandemic abates.

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Business review

Etteplan published its renewed strategy, Increasing value for customers, and updated its financial targets in December 2019. Etteplan began preparations and planning related to the renewed strategy, but many projects were suspended due to attention being shifted to the COVID-19 pandemic. Measures aimed at implementing the strategy have continued again after the pandemic eased up slightly starting from late 2020. In 2021, investments in organic growth were continued by developing the service offering and by establishing several new teams. We believe that our strategy will drive the success of the Company also after the pandemic.

The key objective of the Company's strategy is to create even higher value for customers and support them in the industrial change. The three key elements of our strategy are customer value, service solutions and success with people. The most important focus areas of growth are the continuous development of service solutions, digitalization and international growth.

Etteplan's customers are investing in digitalization and intelligent devices, which presents significant growth opportunities for the Company. In recent years, Etteplan has also invested in digitalization and software development with the aim of expanding its service offering and competence capital in order to respond to the digitalization needs of customers. At the same time, we are investing in organic growth as well as the development of our own business and increasing its rate of digitalization.

We continue the development of technology solutions as part of our service solutions. We are strengthening our expertise in areas such as additive manufacturing, digital twin solutions, artificial intelligence and other digital technologies.

Etteplan's target is to achieve revenue of EUR 500 million in 2024. We seek growth organically and by acquisitions. Etteplan's goal is to also grow internationally, provide solutions from all of the Company's service areas in all of its market areas and increase the share of revenue accumulated outside Finland to 50 percent.

Revenue accumulated outside Finland amounted to EUR 130.1 (100.4) million, or 43 (39) percent of the Group's total revenue.

The development of the Chinese market was excellent, with the number of hours sold increasing by 57.0 percent. Etteplan strengthened its presence in the Chinese market and opened its tenth office in the megacity of Nanjing. Nanjing is the capital of Jiangsu province and the second-largest city in the East China region in terms of population. Expansion in East China responds to the growing demand for Etteplan's services among local customers in the region in particular.

Etteplan's target is to increase the share of revenue represented by Managed Services to 75 percent. The share of revenue represented by Managed Services remained unchanged and stood at 63 (61) percent.

The growth in the share of Managed Services enhances Etteplan's capacity management and improves profitability. Etteplan has achieved its operating profit (EBITA) target, 10 percent of revenue, for two consecutive years now.

Acquisitions

In September 2021, Etteplan acquired the Germany-based company BST Buck Systemtechnik GmbH. The company specializes in Software Development, Process Automatization & Hardware Engineering and employs slightly more than 30 specialists.

In August 2021, Etteplan strengthened its know-how in the technical documentation of software by acquiring Adina Solutions Oy from Finland. Adina Solutions Oy employs a total of 13 content producers and technical communications professionals.

In June 2021, Etteplan acquired the Polish software development company Skyrise.tech. S.A. In 2020, Skyrise.tech's revenue amounted to approximately EUR 3.5 million and it employs approximately 80 specialists and partners. The acquisition involves a directed share issue to the owners of the acquired company. Read more under the topic Shares.

In May 2021, Etteplan strengthened its position in the technical documentation market in Germany by acquiring F.I.T. Fahrzeug Ingenieurtechnik GmbH. The company employs approximately 15 specialists.

In January 2021, Etteplan acquired the Denmark-based software development company TekPartner A/S. The company's revenue in 2019 amounted to approximately EUR 8 million and it delivers its services through a combination of its own team of 19 highly qualified professionals and a network of partners.

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Governance

Simplifying the Group structure

As a result of acquisitions made in the past few years, Etteplan has several legal entities in different countries. We aim to improve the efficiency of our operations by simplifying the Group's legal structure. We started projects in 2021 in the Netherlands, Germany and Finland. The changes will improve the efficiency of our internal operations, simplify the implementation of our customer projects and ensure equal treatment for our personnel.

General meeting

Etteplan Oyj's Annual General Meeting was held on April 8, 2021. The Annual General Meeting approved the financial statements and discharged the members of the Board of Directors and the President and CEO from liability for the financial year 2020.

The Annual General Meeting resolved, in accordance with the proposal of the Board of Directors, to pay a dividend of EUR 0.34 per share for the financial year 2020 and to leave the remaining funds in unrestricted equity. The dividend decided on by the Annual General Meeting was paid to the shareholders registered on the record date in the shareholders' register maintained by Euroclear Finland Ltd. The record date for the dividend payout was April 12, 2021, and the date of dividend payout was April 19, 2021.

In accordance with the proposal of Etteplan's Nomination and Remuneration Committee, the Annual General Meeting resolved that the Board of Directors shall consist of five members. In accordance with the proposal of the Nomination and Remuneration Committee, the Annual General Meeting resolved on the annual remuneration of the members of the Board of Directors, the Chairman of the Board and the members of the Nomination and Remuneration Committee and the Audit Committee.

In accordance with the proposal of the Nomination and Remuneration Committee of the Board of Directors, the Annual General Meeting re-elected Matti Huttunen, Robert Ingman, Päivi Lindqvist, Leena Saarinen and Mikko Tepponen as members of the Board of Directors. KPMG Oy Ab, Authorized Public Accountants, with Authorized Public Accountant Kim Järvi as the main responsible auditor, was elected as the Company's auditor.

In its organization meeting subsequent to the Annual General Meeting, the Board of Directors of Etteplan Oyj elected Robert Ingman as Chairman of the Board of Directors. Matti Huttunen was elected the Chairman and Robert Ingman and Leena Saarinen as members of the Nomination and Remuneration Committee of Etteplan Oyj. Leena Saarinen was elected the Chairman and Päivi Lindqvist and Mikko Tepponen as members of the Audit Committee of Etteplan Oyj.

Board authorizations

The Annual General Meeting 2021 authorized the Board of Directors to resolve on the repurchase of the Company's own shares in one or more tranches using the Company's unrestricted equity. A maximum of 2,000,000 shares in the Company may be repurchased. The Company may deviate from the obligation to repurchase shares in proportion to the shareholders' current holdings, i.e. the Board has the right to decide on a directed repurchase of the Company's own shares.

The authorization includes the right for the Board to resolve on the repurchase of the Company's own shares through a tender offer made to all shareholders on equal terms and conditions and at the price determined by the Board, or in public trading organized by the Nasdaq Helsinki Ltd at the market price valid at any given time, so that the Company's total holding of own shares does not exceed ten (10) percent of all the shares in the Company. The minimum price for the shares to be repurchased is the lowest market price quoted for the shares in the Company in public trading and, correspondingly, the maximum price is the highest market price quoted for the shares in the Company in public trading during the validity of the authorization.

Should the shares in the Company be repurchased in public trading, such shares will not be purchased in proportion to the shareholders' current holdings. In that case, there must be a weighty financial reason for the Company to repurchase its own shares. The shares may be repurchased in order to be used as consideration in potential acquisitions or in other structural arrangements. The shares may also be used for carrying out the Company's incentive schemes for its personnel. The repurchased shares may be retained by the Company, invalidated or transferred further. The repurchase of the Company's own shares will reduce the non-restricted equity of the Company.

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The authorization is valid for 18 months from the date of the resolution of the Annual General Meeting starting on April 8, 2021, and ending on October 7, 2022. The authorization replaces the corresponding previous authorization.

The Annual General Meeting 2021 decided to authorize the Board of Directors to resolve on the issuance of a maximum of 2,500,000 shares through issuance of shares, option rights or other special rights entitling to shares under Chapter 10, Section 1 of the Finnish Companies Act in one or more issues. The authorization includes the right to decide to issue either new shares or shares held by the Company.

The authorization includes the right to deviate from the existing shareholders' pre-emptive subscription right as set forth in Chapter 9, Article 3 of the Companies Act. Therefore, the Board of Directors has the right to direct the share issue, or issuance of the option rights or other special rights conferring entitlement to shares. The authorization also includes the right to decide on all the terms of share issue, option rights or other special rights conferring entitlement to shares. The authorization therefore includes the right to determine share subscription prices, persons entitled to subscribe the shares and other terms and conditions applicable to the subscription. In order to deviate from the shareholders' pre-emptive subscription right, the Company must have a weighty financial reason such as financing of a company acquisition, other arrangement in connection with the development of the Company's business or equity or an incentive scheme to the personnel. In connection with the share issuance, the Board of Directors is entitled to decide that the shares may be subscribed against contribution in kind or otherwise under special terms and conditions. The authorization includes the right to determine whether the subscription price will be entered into the share capital or into the unrestricted equity fund.

The authorization is valid for two (2) years from the date of the resolution of the Annual General Meeting, starting on April 8, 2021, and ending on April 7, 2023.

Etteplan's shares are listed on Nasdaq Helsinki Ltd's Mid Cap market capitalization group in the Industrials sector under the ETTE ticker. The Company has one series of shares. All shares confer an equal right to a dividend and the Company's funds.

The Company's share capital on December 31, 2021, was EUR 5,000,000.00 and the total number of shares was 25,083,308.

In a stock exchange release published on June 14, 2021, Etteplan announced it had acquired the Polish software development company Skyrise.tech S.A. and would carry out a directed share issue to the owners of the acquired company. In accordance with the terms of the share issue, Etteplan offered 120,000 new Etteplan shares for subscription to the owners of Skyrise.tech.

In its meeting on June 17, 2021, Etteplan's Board of Directors resolved on the final terms of the directed share issue pursuant to the share issue authorization granted to it by the Annual General Meeting of Shareholders held on April 8, 2021. The key terms of the share issue were announced in a stock exchange release on June 17, 2021.

The shares were entered in the trade register on August 18, 2021, and issued in the form of book-entry securities in the book-entry securities system maintained by Euroclear Finland Oy in the beginning of September.

The shares were conveyed and they bear all shareholder rights starting from their entry into the trade register. However, trading in the new shares will only be possible after the expiration of the three-year lock-up period agreed upon at the time of the transaction.

After the directed share issue, Etteplan's Board of Directors may, based on the authorization granted by the Annual General Meeting 2021, decide on the issuance of a maximum of 2,380,000 more shares through issuance of shares or in another manner specified in the authorization. The Annual General Meeting 2021 decided to authorize the Board of Directors to resolve on the issuance of a maximum of 2,500,000 shares through issuance of shares or option rights.

Trading in shares

The number of Etteplan Oyj shares traded during 2021 was 1,539,757 (2020: 1,564,244), for a total value of EUR 25.15 (14.80) million. The share price low was EUR 12.95, the high EUR 19.45, the average EUR 16.33 and the closing price EUR 16.90. Market capitalization on December 31, 2021, was EUR 421.22 (322.25) million. On December 31, 2021, Etteplan had 3,604 shareholders (3,323).

Share repurchase program

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Meeting on April 8, 2021. The shares are repurchased in order to be used to fulfill obligations pertaining to the share-based incentive plan for the Group's key personnel. The number of repurchased shares will not exceed 80,000 shares and the corresponding number of voting rights, which corresponds to approximately 0.32 percent of the current total number of Etteplan's shares. According to the Board's decision, the maximum repurchase price is EUR 19.00 per share. Shares will be repurchased on Nasdaq Helsinki Ltd at the market price quoted at the time of the repurchase, as provided by the regulations on public trading of shares.

The repurchasing of shares began on May 21, 2021, and ended on October 12, 2021, when the maximum amount of repurchased shares was reached.

In 2021, Etteplan repurchased a total of 80,000 of the Company's own shares. The Company held 159,046 of its own shares on December 31, 2021 (December 31, 2020: 79,046), which corresponds to 0.63 percent of all shares and voting rights.

Flaggings

Etteplan Oyj received no flagging notices in 2021.

Etteplan Oyj’s incentive plan for key personnel 2020–2022

On February 5, 2020, Etteplan's Board of Directors resolved to establish a new share-based incentive plan for the Group key personnel. The aim of the plan is to combine the objectives of the shareholders and the key personnel in order to increase the value of the Company, to commit the key personnel to the Company, and to offer them a competitive reward plan based on holding the Company shares.

The plan includes one earning period which comprises calendar years 2020–2022. The earning period covers the same years as Etteplan's strategy update published in March 2019. The plan is in line with Etteplan's strategy and supports the achievement of the Company's financial targets.

The earning criteria are Etteplan Group's revenue increase and the development of Total Shareholder Return (TSR). The potential reward will be paid partly in the Company's shares and partly in cash after the end of the earning period. The proportion to be paid in cash is intended to cover taxes and tax-related costs arising from the reward to the key personnel.

Approximately 25 people belong to the plan, including the Management Group of Etteplan. The rewards to be paid on the basis of the plan will correspond to the value of an approximate maximum total of 390,000 Etteplan Oyj shares (including also the proportion to be paid in cash). The shares to be paid out as potential rewards will be transferred from the shares held by the Company or shares acquired from the market, and therefore the incentive plan will have no diluting effect on the share value.

Event after the review period: Change in Etteplan’s Management Group

Tero Leppänen, M.Sc. (Computer Science), has been appointed Senior Vice President, Software and Embedded Solutions and a member of Etteplan's Management Group effective from January 3, 2022. Leppänen has worked at Etteplan since 2016 in various leadership positions, most recently as Vice President, Testing and Product Verification Business Unit and member of the Software and Embedded Solutions service area's management team. Leppänen joined Etteplan through the acquisition of Espotel Oy in 2016 and, prior to that, he worked at Efore Oyj. Tom Leskinen, the former Senior Vice President, Software and Embedded Solutions, will continue his career outside of Etteplan.

Event after the review period: Etteplan acquired Cognitas from Canon and becomes a market-leading company in technical documentation in Germany

Etteplan has on January 17, 2022 acquired Cognitas GmbH, a German technical information lifecycle management company, from Canon Germany GmbH. The acquisition strengthens Etteplan's position in Germany and continues our strategic investments in Central Europe. With the acquisition, Etteplan becomes a market-leading company in technical documentation in Germany and reinforces its leading position in Europe.

Founded by Siemens in 2000, Cognitas has been owned by Canon Germany since 2014. Cognitas is a leading German consulting and services company in the field of technical documentation, with annual revenue of approximately EUR 15 million. Cognitas employs 200 professionals in consulting and technical information authoring and management. The parties have agreed not to publish the purchase price.

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Event after the review period: Etteplan acquired Syncore, an embedded system specialist in Sweden - a directed share issue to the owners of the acquired company

Etteplan strengthened its position in Sweden and on February 2, 2022 acquired Syncore Technologies AB, a technology services company focusing on embedded systems. The acquisition is in line with Etteplan's growth strategy as it complements our expertise and increases our international presence.

Founded in 2000, Syncore is specialized in advanced embedded systems projects such as design, hardware and software development, and product lifecycle services, especially for customers in the industrial systems, aerospace and defense industries. In 2020, Syncore's net sales were approximately EUR 5 million and it employs 46 embedded systems experts in Linköping, Sweden. The parties have agreed not to publish the purchase price.

As part of the financing of the transaction, Etteplan Oyj's Board of Directors, at its meeting held on February 1, 2022, made a conditional decision on the share issue based on the share issue authorization given to the Board of Directors by the Annual General Meeting on April 8, 2021. The directed share issue is related to the acquisition of Syncore Technologies AB. In accordance with the terms of the transaction, the purchase price will be paid through a share issue to the sellers and cash. The contract of sale, which was a condition of the decision, was signed today, February 2, 2022, and at the same time the sellers subscribed for 117,485 Etteplan new shares as a part payment for the purchase amount. The subscription price per share to be paid for the shares is EUR 16.42.

Operating risks and uncertainty factors

Etteplan's financial results are exposed to a number of strategic, operational and financial risks. The uncertainties caused by the general economic development continue to constitute risks for Etteplan's business. The possibility of changes in customers' business operations is a significant risk to Etteplan's operations. The Company's operations are based on skilled staff. The availability of competent professionals is an important factor for ensuring profitable growth and operations. The increased difficulties in recruiting professional staff, particularly in certain expert disciplines, continues to present a business risk. The COVID-19 pandemic continues to have an impact on Etteplan's business and the prolongation of the situation would have a negative impact on the Company's development.

Etteplan assesses business risks annually and actively monitors their development during the year. The focus of the assessment is particularly on monitoring changes in already identified risks, identifying new business risks and developing proactive risk management. The results of the assessment are presented in Etteplan's Corporate Governance Statement.

Market outlook 2022

The most important factor affecting Etteplan's business is the global development of the machinery and metal industry. The prolongation of the COVID-19 pandemic continues to have an impact on the market situation and supply chains. Our customers have adapted to the effects of the pandemic, and their business is currently developing positively. The prevailing financial and geopolitical situation may affect the market development. However, we expect the demand situation to remain fairly good throughout 2022.

Financial guidance 2022

Etteplan issues guidance for revenue and operating profit (EBIT) as a numerical range and issues the following estimate:

Revenue in 2022 is estimated to be EUR 340–370 (2021: 300.1) million, and

operating profit (EBIT) in 2022 is estimated to be EUR 28–32 (2021: 25.8) million.

The Board's proposal for distribution of 2021 profits

The parent company's distributable shareholders' equity according to the balance sheet on December 31, 2021, is EUR 57,744,043.25. The Board of Directors will propose to the Annual General Meeting, which will convene on April 6, 2022, that on the dividend payout date a dividend of EUR 0.40 per share be paid on the company's externally owned shares, for a total amount of EUR 10,033,323.20 at most, and that the remaining profit be transferred to retained earnings.

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Annual General Meeting 2021

Etteplan Oyj's Annual General Meeting will be held on Wednesday, April 6, 2022. The summons to the AGM is published as a separate release.

Corporate Governance statement

Etteplan publishes the Corporate Governance Statement for 2021 separately from the Board of Directors' review. The statement is available on the Company's website www.etteplan.com.

Statement of non-financial information

Etteplan publishes the Statement of non-financial information for 2021 separately from the Board of Directors' review. The statement is available on the Company's website www.etteplan.com.

Non-IFRS key figures

Etteplan presents non-IFRS key figures to supplement its consolidated financial statements which are prepared in accordance with IFRS. These key figures are designed to measure growth and provide insight into the Company's underlying operational performance. This section describes the most important non-IFRS key figures used by the Group. Formulas for key figures (IFRS and Non-IFRS) are presented on page 49.

Operating profit (EBITA) and EBITA, %

Operating profit (EBITA) is presented, because it reflects the Group's operational performance better than Operating profit (EBIT). Operating profit (EBITA) does not include amortization of fair value adjustments at acquisitions. EBITA, % presents Operating profit (EBITA) as a percentage share of revenue. The table below shows a reconciliation between Operating profit (EBITA) and Operating profit (EBIT).

EUR 1,000	2021	2020
Operating profit (EBIT)	25,754	22,380
Amortization on fair value adjustments at acquisitions	4,385	3,791
Operating profit (EBITA)	30,139	26,172

Organic/un-organic growth and growth in comparable currencies

Organic (revenue) growth is presented in addition to total revenue growth, because it improves the comparability of revenue growth between periods by presenting the revenue growth without the effects of the last 12 months' acquisitions. Organic growth is calculated by comparing revenue between comparison periods excluding revenue from acquisitions that have taken place in the past 12 months. The revenue growth created by last 12 months' acquisitions is presented as un-organic growth. Revenue growth in comparable currencies is presented, because it improves the comparability of revenue growth between periods by presenting the revenue growth with comparable exchange rates. For the calculation of growth in comparable currencies, revenue for the current period is calculated by using the comparable period's exchange rates. The figure is presented for Group revenue and organic growth.

The share of revenue represented by Managed Services

Etteplan measures the share of revenue represented by Managed Services (MSI Index). Managed Services are service solutions, such as projects and continuous services, where the customer pays for results instead of resources. The share of revenue represented by Managed Services is presented, because it describes Etteplan's strategy implementation and explains, in part, the changes in profitability.

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Consolidated Financial Statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

EUR 1,000	Note	Jan 1–Dec 31, 2021	Jan 1–Dec 31, 2020
Revenue	7	300,111	259,702
Other operating income	8	1,289	3,622
Materials and services	10	-31,685	-23,317
Employee benefits expenses	11	-197,596	-177,301
Other operating expenses	12	-28,527	-22,300
Depreciation and amortization	19, 20	-17,839	-18,026
Operating profit (EBIT)		25,754 8.6%	22,380 8.6%
Financial income	14	593	422
Financial expenses	15	-1,480	-1,722
Profit before taxes		24,867	21,080
Income taxes	17	-4,823	-4,003
Profit for the financial year		20,044	17,077
Other comprehensive income, that may be reclassified to profit or loss
Currency translation differences		-589	1,415
Other comprehensive income, that will not be reclassified to profit or loss
Change in fair value of equity investments at fair value through other comprehensive income		32	-7
Other comprehensive income for the year, net of tax	17	-557	1,409
Total comprehensive income for the year		19,487	18,486
Profit for the financial year attributable to
Equity holders of the parent company		20,044	17,077
Total comprehensive income attributable to
Equity holders of the parent company		19,487	18,486
Earnings per share calculated from the profit attributable to equity holders of the parent company
Basic earnings per share, EUR	18	0.80	0.69
Diluted earnings per share, EUR	18	0.80	0.69

The notes are an integral part of the Financial Statements.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

EUR 1,000	Note	Dec 31, 2021	Dec 31, 2020
ASSETS
Non-current assets
Goodwill	22	92,380	83,685
Other intangible assets	19	28,807	26,011
Tangible assets	20	24,759	25,698
Investments at fair value through other comprehensive income	21	418	378
Other non-current receivables	21	54	54
Deferred tax assets	30	731	493
Non-current assets, total		147,150	136,320
Current assets
Inventory	23	376	336
Work in progress	7	26,810	17,764
Trade and other receivables	24	47,988	38,883
Current tax assets		273	208
Cash and cash equivalents		30,356	24,407
Current assets, total		105,803	81,598
TOTAL ASSETS		252,953	217,918
EUR 1,000	Note	Dec 31, 2021	Dec 31, 2020
---	---	---	---
EQUITY AND LIABILITIES
Equity
Share capital	25	5,000	5,000
Share premium account	25	6,701	6,701
Unrestricted equity fund	25	22,037	20,101
Own shares	25	-1,245	-124
Cumulative translation adjustment	25	-3,473	-2,884
Other reserves	25	133	101
Retained earnings	25	69,761	58,178
Equity, total		98,914	87,074
Non-current liabilities
Deferred tax liabilities	30	7,408	6,502
Loans from financial institutions	27	30,350	12,900
Lease liabilities	27	8,777	8,608
Other non-current liabilities	28	827	27
Non-current liabilities, total		47,362	28,038
Current liabilities
Loans from financial institutions	27	25,453	27,583
Lease liabilities	27	13,894	15,883
Advances received	7	3,891	2,770
Trade and other payables	29	61,673	54,608
Current income tax liabilities		1,766	1,962
Current liabilities, total		106,677	102,806
Liabilities, total		154,039	130,844
TOTAL EQUITY AND LIABILITIES		252,953	217,918

The notes are an integral part of the Financial Statements.

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CONSOLIDATED STATEMENT OF CASH FLOWS

EUR 1,000	Note	Jan 1–Dec 31, 2021	Jan 1–Dec 31, 2020

OPERATING CASH FLOW
Cash receipts from customers		287,564	267,784
Operating expenses paid		-253,056	-223,600
Operating cash flow before financial items and taxes		34,508	44,184

Interests and other payments for financial expenses	15	-1,289	-1,257
Interest received	14	80	79
Income taxes paid	17	-6,205	-5,010
Operating cash flow (A)		27,093	37,997

INVESTING CASH FLOW
Purchase of tangible and intangible assets	19, 20	-2,157	-1,639
Acquisition of subsidiaries, net of cash acquired	5	-14,255	-5,885
Proceeds from sale of tangible and intangible assets		17	30
Proceeds from repayment of loans		73	0
Investing cash flow (B)		-16,321	-7,494

Cash flow after investments (A+B)		10,772	30,503
EUR 1,000	Note	Jan 1–Dec 31, 2021	Jan 1–Dec 31, 2020
---	---	---	---
FINANCING CASH FLOW
Proceeds from directed share issue	25	1,936	0
Purchase of own shares	25	-1,382	0
Proceeds from current loans	27	6,941	11,698
Repayments of current loans	27	-30,060	-12,217
Proceeds from non-current loans	27	37,503	0
Repayments of non-current loans	27	-6	-695
Payment of lease liabilities	20	-11,478	-12,131
Dividend paid	25	-8,461	-8,682
Financing cash flow (C)		-5,007	-22,028

Variation in cash (A+B+C) increase (+) / decrease (-)		5,765	8,475
Assets at the beginning of the financial period		24,407	15,878
Exchange gains or losses on cash and cash equivalents		184	55
Assets at the end of the financial period		30,356	24,407

The notes are an integral part of the Financial Statements.

The total cash outflow for leases is presented in note 20.

Non-monetary changes in interest bearing liabilities is presented in note 4.1.3.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

EUR 1,000	Share capital	Share premium account	Unrestricted equity fund	Other reserves	Own shares	Cumulative translation adjustment	Retained earnings	Total
Equity Jan 1, 2020	5,000	6,701	20,101	108	-700	-4,299	49,829	76,740
Comprehensive income for the year
Profit for the financial year	0	0	0	0	0	0	17,077	17,077
Other comprehensive income for the year
Change in fair value of equity investments at fair value through other comprehensive income	0	0	0	-7	0	0	0	-7
Cumulative translation adjustment	0	0	0	0	0	1,415	0	1,415
Other comprehensive income for the year, net of tax	0	0	0	-7	0	1,415	0	1,409
Total comprehensive income for the year	0	0	0	-7	0	1,415	17,077	18,486
Transactions with owners
Dividends	0	0	0	0	0	0	-8,682	-8,682
Share-based incentive plan	0	0	0	0	576	0	-45	531
Transactions with owners, total	0	0	0	0	576	0	-8,728	-8,152
Equity Dec 31, 2020	5,000	6,701	20,101	101	-124	-2,884	58,178	87,074
Equity Jan 1, 2021	5,000	6,701	20,101	101	-124	-2,884	58,178	87,074
Comprehensive income for the year
Profit for the financial year	0	0	0	0	0	0	20,044	20,044
Other comprehensive income for the year
Change in fair value of equity investments at fair value through other comprehensive income	0	0	0	32	0	0	0	32
Cumulative translation adjustment	0	0	0	0	0	-589	0	-589
Other comprehensive income for the year, net of tax	0	0	0	32	0	-589	0	-557
Total comprehensive income for the year	0	0	0	32	0	-589	20,044	19,487
Transactions with owners
Dividends	0	0	0	0	0	0	-8,461	-8,461
Directed share issue	0	0	1,936	0	0	0	0	1,936
Purchase of own shares	0	0	0	0	-1,382	0	0	-1,382
Share-based incentive plan	0	0	0	0	260	0	0	260
Transactions with owners, total	0	0	1,936	0	-1,122	0	-8,461	-7,647
Equity Dec 31, 2021	5,000	6,701	22,037	133	-1,245	-3,473	69,761	98,914

The notes are an integral part of the Financial Statements.

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 GENERAL INFORMATION

The Parent Company of Etteplan Group is Etteplan Oyj. Etteplan Oyj is a Finnish public limited company established under Finnish law. The Company is domiciled in Espoo, Finland and its registered office is located in Tekniikantie 4, 02150 Espoo, Finland. The Company's principal place of business is also located in Tekniikantie 4, 02150 Espoo. Etteplan's shares are listed on Nasdaq Helsinki Ltd's Medium Cap market capitalization group in the Industrials sector under the ETTE ticker.

Etteplan provides solutions for software and embedded solutions, industrial equipment and plant engineering and technical documentation solutions to the world's leading companies in the manufacturing industry. Our services are geared to improve the competitiveness of our customers' products, services and engineering processes throughout the product life cycle. The results of Etteplan's innovative engineering can be seen in numerous industrial solutions and everyday products.

A copy of the Consolidated Financial Statements can be obtained from the Company's website www.etteplan.com or from the office of the Group's Parent Company at the address Askonkatu 9 E, 15100 Lahti, Finland.

The Etteplan Oyj Board of Directors approved these Financial Statements for publication at its meeting on February 10, 2022.

According to the Finnish Limited Liability Companies Act, the shareholders have the opportunity to approve or reject the Financial Statements at the Annual General Meeting held after the publication. Furthermore, the Annual General Meeting can decide on the modification of the Financial Statements.

2 A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these Consolidated Financial Statements are set out in this section. These policies have been consistently applied to all the years presented, unless stated otherwise.

2.1 Basis for preparation

The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS). They have been prepared in accordance with IAS and IFRS standards and SIC and IFRIC interpretations approved for implementation in EU directive N:o 1606/2002 at December 31, 2021. The notes to the Financial Statements are also prepared in accordance with the Finnish accounting and company regulation, which complements the IFRS requirements. The Consolidated Financial Statements have been prepared under the historical cost convention, except for certain financial assets and financial liabilities, which are recognized at fair value.

The preparation of the Financial Statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

Figures in the Financial Statements are presented in thousands of euros and are therefore rounded.

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2.1.1 Changes in accounting policy and disclosures

New and amended standards adopted by the Group

The new standards, amendments and interpretations effective for the financial year beginning January 1, 2021, did not have a significant effect on the Consolidated Financial Statements of the Group.

Forthcoming requirements

The new standards, amendments and interpretations issued, but effective later than for the financial year beginning January 1, 2021, are not expected to have a significant effect on the Consolidated Financial Statements of the Group.

2.2 Consolidation

Subsidiaries are all such entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. If the business combination is achieved in stages, the acquisition date fair value of the Group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss. Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date. A contingent consideration classified as liability is revalued to fair value at the end of each financial year and the resulting profit or loss is recognized in the income statement. Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. 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.

Inter-company transactions, balances, income and expenses on transactions between the Group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognized in assets are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

2.3 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The Management Group is identified as the chief operating decision-maker. The chief operating decision-maker assesses the financial performance and position of the Group, and makes strategic decisions. The financial information, which the chief operating decision-maker uses as a basis for decision making, does not differ substantially from the information presented in the Consolidated Statement of Comprehensive Income and Statement of Financial Position.

2.4 Foreign currency translation

Functional and presentation currency

Items included in the Financial Statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The functional currencies of the Group entities are the same as their home currencies. The Consolidated Financial Statements are presented in euro, which is the Group's presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions, or valuation, where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement, except when deferred in other comprehensive income as a net investment hedge. Foreign exchange gains and losses that relate to loans and cash and cash equivalents are presented in the income statement within "Financial income" or "Financial expenses." All other foreign exchange gains and losses are presented in the income statement within "Other operating expenses."

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Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet
income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions) and
all resulting exchange differences are recognized in other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing rate. Exchange differences arising are recognized in equity.

2.5 Intangible assets

Intangible assets acquired in business combinations are recognized at fair value at the acquisition date. Other intangible assets are recorded in the balance sheet at historical cost. Assets with limited useful lives are amortized on a straight-line basis over their useful lives. The amortization periods of intangible assets are:

Software and other intangible rights	3–7 years
Internally created software	3–5 years
Customer base (acquisitions)	10 years
Non-competition agreements (acquisitions)	3 years
Other intangible assets	3 years

The residual value, useful life and amortization method of each asset is examined at the end of each financial year and adjusted, if necessary, to reflect the changes in expectations of the economic benefits to be gained from the asset.

Intangible assets are classified as follows;

Intangible rights mainly include software licenses owned by the Group.

Internally created intangible assets include activated development costs related to software products created by the Group. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognized as intangible assets when the following criteria are met:

it is technically feasible to complete the software so that it will be available for use
management intends to complete the software and use or sell it
there is an ability to use or sell the software
it can be demonstrated how the software will generate probable future economic benefits
adequate technical, financial and other resources to complete the development and to use or sell the software are available, and
the expenditure attributable to the software during its development can be reliably measured.

Directly attributable costs, which are capitalized as part of the software product include the software development employee costs and such overhead costs that are directly attributable to the development. Other development expenditures that do not meet these criteria are recognized as an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. Computer software development costs recognized as assets are amortized over their useful lives. Significant, unfinished intangible assets are tested for impairment annually. Research costs are recognized as an expense as incurred.

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Fair value adjustments in acquisitions include intangible assets acquired in business combinations; customer base and non-competition agreements.

Leased software is activated as described in note 2.15.

Goodwill corresponds to that part of the acquisition cost which exceeds the Group's share of the fair value, on the date of purchase, for the net asset value of the acquired subsidiary. Goodwill is measured at historical cost less impairment. Goodwill is not amortized, but is tested for impairment annually and whenever there is objective evidence of goodwill impairment. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units that are expected to benefit from the business combination in which the goodwill arose, taking into account the current organization structure and level of reporting.

2.6 Tangible assets

Tangible assets are stated at historical cost less accumulated depreciation and impairment loss. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of a replaced part is derecognized. All other repairs and maintenance are charged to the income statement during the financial period in which they occur.

Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

Buildings	50 years
Leased office premises	1.5–7 years
Computers	3 years
Vehicles	4–5 years
Office furniture	5–10 years
Renovation of premises	5–7 years

Land areas are not depreciated.

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (note 2.7). Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in other operating income or expenses in the income statement.

Tangible right-of-use assets consist of leased computers and cars as well as leased office premises activated as described in note 2.15.

2.7 Impairment of non-financial assets

The Group assesses at the end of each reporting period, whether there are indications of impairment of non-financial assets. Assets that have an indefinite useful life – for example, goodwill or intangible assets not ready to use – are not subject to amortization and are tested annually for impairment. Assets that are subject to amortization, as well as assets with unlimited useful life, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognized through profit or loss for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to dispose and value-in-use. Value-in-use is defined as the discounted estimated future net cash flows generated by the asset or cash-generating unit. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows followed for internal management (cash-generating units).

The impairment loss recognized for non-financial assets other than goodwill is reversed, in case there has been a change in the estimates of recoverable amount. The impairment loss is only reversed to the amount of the book value of the asset before impairment. An impairment loss for goodwill is not reversed under any circumstances.

The essential assumptions for impairment tests are presented in note 22 to the Financial Statements (Impairment testing).

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2.8 Financial instruments

Financial instruments and their fair values by measurement category are detailed in note 21.

Recognition

Regular purchases and sales of financial instruments are recognized on the trade-date – the date on which the Group commits to purchase or sell the instrument. At initial recognition, the Group measures a financial instrument at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial instrument. Transaction costs of financial instruments carried at FVPL are expensed in profit or loss.

Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Financial liabilities are derecognized when the liability has ceased, that is, the obligation specified in the agreement is fulfilled or revoked or its validity has ended.

Classification

The Group classifies its financial instruments in the following subsequent measurement categories:

Categories of financial assets:

measured at amortized cost
measured at fair value through Other Comprehensive Income (FVOCI), and
measured at fair value through profit or loss (FVPL).

The classification of financial assets depends on the Group's business model for managing the financial assets and the contractual terms of the cash flows. The classification changes only if the business model changes.

Categories of financial liabilities:

measured at amortized cost, and
measured at fair value through profit or loss (FVPL).

Subsequent measurement

Gains and losses for assets and liabilities measured at fair value will either be recorded in profit or loss or OCI.

The Group measures all its equity investments at FVOCI, because the Group's management has made an irrevocable election to present fair value gains and losses on equity investments in OCI. There is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of these investments. Only the dividends from these investments are recognized in profit or loss when the Group's right to receive payments is established.

Trade receivables are recognized initially at fair value and are subsequently measured at amortized cost, less provision for impairment. Trade receivables are classified as current assets, if collection is expected in one year or less. Otherwise, they are classified as non-current assets. Expected credit losses are estimated as described in note 4.1.4. Trade receivables transferred to a financial institution in factoring arrangements are not included in the Consolidated Statement of Financial Position, because the Group has transferred substantially all risks and rewards of ownership of the transferred trade receivables.

Cash and cash equivalents include cash in hand and deposits held at call with banks. Items included under cash and cash equivalents have maturities of three months or less from the date of acquisition. Cash and cash equivalents are derecognized when the Group's contractual right to receive cash flows has expired or essentially all of the risks and rewards incident to ownership have been transferred from the Group.

Trade payables and other payables are obligations to pay for goods or services that have been acquired from suppliers in the ordinary course of business. They are classified as current liabilities unless payment is not due within one year or less after the reporting period.

Loans are recognized initially at fair value, net of transaction costs incurred. Loans are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

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Impairment

The Group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. See note 4.1.4 for further details.

2.9 Inventory

Inventory is stated at the lower of cost and net realizable value. Cost is determined using the FIFO method. Cost comprises direct materials, direct labor and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

2.10 Equity

Etteplan Oyj has one series of shares. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where any Group company purchases the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company's equity holders until the shares are canceled or reissued. Where such shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the equity holders of the Parent Company.

A liability is recognized for the amount of any dividend declared, being appropriately authorized and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period.

2.11 Current and deferred income tax

The taxes in the consolidated income statement include the current tax for the Group companies, corrections to taxes from previous financial periods, and the change in deferred taxes. Current tax is calculated on taxable income according to the tax rate in force in each country concerned. In the case of items entered directly in shareholders' equity, the tax effect is recognized in equity.

Deferred income tax is recognized on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill. Deferred income tax is not accounted for if it arises from the initial recognition of an asset or liability, in a transaction other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. The most significant temporary differences arise from the depreciation and amortization of assets and the provisions of foreign subsidiaries. Deferred taxes are determined by using the tax base in force on the balance sheet date or the enacted tax base at the time of tax base transition.

Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. It is evaluated at the end of each financial period, whether the conditions for recognizing a deferred tax asset are met.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

2.12 Employee benefits

Pension obligations

Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined benefit and defined contribution plans.

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A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions are recognized as employee benefit expenses when they are due. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.

A defined benefit plan is a pension plan that is not a defined contribution plan. Typically defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. In Sweden and the Netherlands, the Group has defined benefit plans, which are so called multi-employer plans, of which there is not sufficient information available to use benefit accounting. These plans are accounted as defined contribution plans.

Bonus plans

The Group recognizes a liability and an expense for bonuses based on a formula that takes into consideration the profit attributable to the Company's shareholders after certain adjustments. The Group recognizes the expense and liability where contractually obliged or where there is a past practice that has created a constructive obligation.

Share-based incentive plans

Share-based incentive plans are treated as arrangements that are settled partly as shares and partly as cash. The part of a remuneration earned that the participants receive as Etteplan Oyj shares is treated as an arrangement that is settled as shares and recorded in shareholders' equity; the part of a remuneration earned that is paid in cash to pay off taxes and other levies is recorded in liabilities. The fair value of the employee services received in exchange for the grant of the shares is recognized as an expense. The total amount to be expensed is determined by reference to the fair value of the shares granted taking into account market performance conditions and non-vesting conditions. At the end of each reporting period, the Group revises its estimates of the number of shares that are expected to vest based on the non-market vesting conditions and service conditions. The Group recognizes the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment in equity.

2.13 Revenue recognition

Etteplan's revenue streams consist mainly of the following three service areas:

Engineering Solutions refer to the innovation, engineering and calculations of the technical attributes of machinery or equipment for the purpose of product development and manufacturing. Assignments are typically product development projects for a new product, plant engineering projects or Engineering-to-Order projects, involving the customization of the product in accordance with end customer requirements and the market area's legislation.

Software and Embedded Solutions refer to product development services and technology solutions that allow the controlling of machines and equipment and enable their digital connectivity as part of the Internet of Things.

Technical Documentation Solutions refer to the documentation of a product's technical attributes, such as manuals and service instructions for the users of a product, as well as related content management and distribution in print or digital form.

Revenue includes revenue from contracts with customers adjusted for indirect taxes and discounts. Revenue is recognized following a five-step model, on the basis of which the timing and amount of revenue to be recognized is determined. The model involves identifying the contract with the customer and its performance obligations, determining transaction prices, allocating transaction prices to performance obligations and recognizing revenue. Revenue is recognized when the customer obtains control of the promised service or product; either over time or at a point in time. The Group recognizes revenue in a way that represents the rendering of the promised services or goods to the customer, and to such an amount that represents the compensation the Group expects to be entitled to in exchange for the goods and services.

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Etteplan divides its services into the following categories according to the applied method of revenue recognition:

Design and consultancy projects, where either a fixed price or a target price limiting the amount of revenue that can be recognized for the project is set in the agreement with the customer. In this type of projects, revenue is recognized over time based on the percentage of completion method, because the Group's performance creates an asset that has no alternative use for the Group and the Group has an enforceable right to payment for performance completed to date. The percentage of completion is measured as the costs of the project realized as a proportion to the total expected costs of the project, because it is seen as the most accurate way of measuring the transfer of control to the customer. If the agreement includes separately identifiable performance obligations, revenue for each performance obligation is recognized separately. In the case of contracts whose outcome cannot be assessed reliably, project expenditure is expensed and revenue is recognized to an amount not exceeding the expenditure. The total loss on a contract that will probably result in a loss is reserved and expensed immediately. Incentives, additional work and changes related to the project are recognized in the revenue and costs of the project to the extent that can be estimated reliably, or that is agreed upon with the customer. The revenue for additional work and changes are recognized separately when they comprise a separate performance obligation and are priced according to stand-alone transaction prices.
Design and consultancy projects, where all costs incurred can be invoiced to the customer without other limitations than the agreed invoicing price. In this type of projects revenue is recognized over time as the service is being performed. The performance obligation in the agreement with the customer is most typically one working hour and it is considered to be fulfilled over time, because the customer simultaneously receives and consumes the benefits provided by the service.
Arrangements, where the customer buys a license to software created by Etteplan and maintenance related to the license. Revenue for the license itself is recognized when the customer obtains access to the license. Revenue for maintenance related to the license is recognized over time as the service is rendered.

Transaction prices are based on customer agreements, where separate prices are set for separate performance obligations. Generally, the pricing of separate performance obligations equals their standalone transaction prices. Changes to customer agreements as well as additional work agreed on, are mainly recognized as separate customer agreements. The Group has enforceable right to payment for performance completed to date, in case the project is terminated, in essentially all of its projects.

Costs incurred from work performed and transferred to customer, but not yet invoiced, are activated as contract assets and included in the balance sheet line item "Work in progress." Contract assets are transferred to Trade payables upon invoicing, which is generally done on a monthly basis. Invoices are most typically payable within 30 days. Payments received from customers in advance of work being transferred are recorded as contract liabilities in the balance sheet line item "Advance payments." These amounts are recognized as revenue as the work is being transferred to the customer.

In applying IFRS 15 the Group uses the practical expedient permitted by the standard and does not disclose the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied as at the end of the reporting period or the estimated timing of satisfaction, because the unsatisfied performance obligations are either part of contracts that have an original expected duration of one year or less or the Group has the right to invoice a customer at an amount that corresponds directly with its performance to date.

Government grants

Government grants that are intended to compensate costs are recognized as income over the same period as the related costs are recognized.

2.14 Interest and dividend income

Interest income is recognized using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flows discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired receivables is recognized using the original effective interest rate. Dividend income is recognized when the shareholder gains the right to receive payment.

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2.15 Lease agreements

The Group leases various premises, equipment, software and cars. Rental contracts are typically made for fixed periods of 3 to 10 years but may have extension options as described below.

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Leases are recognized as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group.

Lease liabilities (note 27) include the net present value of the following lease payments:

fixed payments (including in-substance fixed payments), less any lease incentives receivable
variable lease payments that are based on an index or a rate
amounts expected to be payable by the lessee under residual value guarantees
the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.

The lease liability is subsequently measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset.

The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The interest expenses related to leases are presented in note 15.

Right-of-use assets (notes 19 and 20) are measured at cost comprising the following:

the amount of the initial measurement of lease liability
any lease payments made at or before the commencement date less any lease incentives received
any initial direct costs, and
restoration costs.

After the commencement date the right-of-use asset is measured at amortized cost less impairment. It is adjusted with certain remeasurements of the lease liability. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. The right-of-use asset is tested for impairment, when necessary, and the possible impairment is recognized through profit or loss.

The Group uses the practical expedient included in IFRS 16 standard and recognizes payments associated with leases of low-value assets on a straight-line basis as an expense in profit or loss. Low-value assets comprise IT equipment and items of office furniture (note 12).

Extension options are included in several of the Group's office premises rental agreements. These terms are used to maximize operational flexibility in terms of managing contracts. The Group's management uses judgment when determining the extent to which the extension options are used. The extension options are used in such a way that the lease term for lease agreements is at least 18 months also for lease agreements with non-cancelable term of under 18 months, unless the lease agreement in question is canceled or a decision for a specific timing of cancellation has been made. For lease agreements in which the original non-cancelable term is 18 months or more, extension options are used up to 18 months, when the remaining non-cancelable term is under 18 months. The management believes this gives the most accurate view of the Group's total lease liability. If the extension options were used up to 12 months instead of 18 months, the right-of-use assets and lease liability related to premises would decrease by approximately EUR 1.8 million. If the extension options were used up to 24 months the corresponding effect in balance sheet items would be an increase of approximately EUR 1.8 million.

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2.16 Non-recurring items

Non-recurring items are disclosed separately in the Financial Statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income and expense that are shown separately due to the significance of their nature or amount. Non-recurring items can include, among other things, costs and income related to business combinations as well as certain reorganization costs.

CRITICAL ACCOUNTING ESTIMATES AND MANAGEMENT JUDGMENT BASED DECISIONS

When preparing the Consolidated Financial Statements, estimates and assessments must be made concerning the future. These may affect assets and liabilities at the time of balance sheet preparation, as well as income and expenses in the reporting period. Actual figures may differ from those used in the financial statements. The Group's management may have to make judgment based decisions relating to the choice and application of accounting policies for the financial statements. This particularly concerns the cases when effective IFRSs allow alternative valuation, recording and presenting manners.

Judgments and estimates made in the preparation of the financial statements are based on the management's best judgment on the closing date. They are based on previous experience and future expectations considered to be most likely on the closing date. These include, in particular, factors related to the Group's financial operating environment affecting sales and the cost level. The Group monitors the realization of these estimates and assumptions. The effects of any changes in estimates and assumptions are recognized in the period in which they have been detected.

The assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.

Fair value measurement in connection with acquisitions

In business combinations, tangible assets have been compared with the market prices of equivalent assets, and decline in the value of acquired assets due to various factors has been estimated. The fair value measurement of intangible assets is based on estimates of asset-related cash flows. The management believes that the estimates and assumptions are sufficiently precise for use as the basis for fair value measurement. Any indications of impairment of tangible and intangible assets are reviewed annually.

Impairment testing

The Group tests goodwill and intangible assets with unlimited useful lives for impairment annually. Indications of impairment are evaluated in the manner described in note 2.7. Recoverable amounts for cash-generating units are based on value-in-use calculations. Estimates are required in making these calculations. Values recorded in the balance sheet at the end of the financial year were EUR 92,380 thousand (2020: EUR 83,685 thousand). Additional information on the sensitivity of the recoverable amounts to changes in assumptions used is disclosed in Note 22 Impairment testing.

Contingent considerations

The amount of a contingent consideration in a business combination is often dependent on the future economic development of the business acquired. The actual outcome may deviate from the assumptions made at initial recognition, which can lead to revaluation of the previously recognized contingent consideration.

Revenue recognition

Revenue recognized over time is based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided. The percentage of completion is measured as the costs of the project realized as a proportion to the total expected costs of the project. Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change, and at each reporting date. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in the period in which the circumstances that trigger the revision become known by management.

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4 MANAGEMENT OF FINANCIAL RISKS

This note explains the Group's exposure to financial risks and how these risks could affect the Group's future financial performance.

4.1 Financial risk factors

In its business operations, the Group is exposed to several types of financial risks: foreign-currency, interest, financing and liquidity, counterparty and credit risks. The objective of financial risk management is to protect the Group from unfavorable changes in the financial market and thus contribute as much as possible to guaranteeing the Group's profitability and equity, and to guarantee sufficient liquidity in a cost-efficient manner. Management of financial risks has been centralized with the Group's financial department, which is responsible for identification and evaluation of, and protection against, the Group's financial risks. Furthermore, the financial department is responsible, in a centralized fashion, for funding of the Group, and it provides the management with information about the financial situation of the Group and the business units.

4.1.1 Foreign-currency risk

Foreign-currency risk related to different currencies comes about as a result of foreign currency-denominated commercial transactions and from translation of foreign currency-denominated balance sheet items into the reporting currency.

Transaction risk

The majority of the Group's business operations are handled in the currency of the project country of the respective Group company. This means that both sales and costs are in the same currency. In the period under review, the Group did not have significant transaction risks generated from the currency flow in foreign currencies. The Group did not take steps to protect itself against transaction risks during the review period.

Translation risk

The Group is exposed to a translation risk caused by fluctuations in foreign currency exchange rates, when it translates balance sheet items of subsidiaries based outside the euro area into its reporting currency. The main risk is with goodwill booked in Swedish Krona (SEK). The goodwill booked in SEK at the end of the financial year was EUR 26,655 thousand (2020: EUR 27,229 thousand).

A sensitivity analysis of the effect of reasonable potential changes in exchange rates on the Group's profit for the financial year, equity and goodwill at balance sheet date is presented in the table below. In the analysis, the change in exchange rates has been estimated to be +/- 10 percent from reporting date, and other factors are estimated to remain unchanged.

2021 EUR 1,000	Effect on profit for the financial year	Effect on other equity items	Effect on goodwill
EUR/SEK 10% increase	-224	-1,104	-2,423
EUR/SEK 10% decrease	274	1,350	2,962
EUR/PLN 10% increase	-83	-275	-377
EUR/PLN 10% decrease	101	336	461
EUR/CNY 10% increase	-155	-288	-185
EUR/CNY 10% decrease	189	352	226
EUR/DKK 10% increase	-45	-127	-284
EUR/DKK 10% decrease	55	155	347
2020 EUR 1,000	Effect on profit for the financial year	Effect on other equity items	Effect on goodwill
---	---	---	---
EUR/SEK 10% increase	-171	-901	-2,475
EUR/SEK 10% decrease	209	1,102	3,025
EUR/PLN 10% increase	-20	-173	0
EUR/PLN 10% decrease	25	212	0
EUR/CNY 10% increase	-21	-111	-166
EUR/CNY 10% decrease	25	136	203

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4.1.2 Interest risk

The Group is exposed to interest risk in two ways: because of changes in value for balance sheet items (i.e. price risk) and cash flow risk caused by changes in market interest rates.

On the balance sheet date, the total amount of interest-bearing debt excluding lease liabilities was EUR 55,803 thousand (2020: EUR 40,483 thousand) covered with contracts in which the interest range is between 0.55 and 0.80 percent (2020: between 0.65 and 2.0 percent). All of the Group's loans have variable interest rates.

The Group monitors the interest risk by calculating the effect of one percentage point change in interest rates on the Group's next twelve months' interest expenses. The sensitivity of the interest position to changes in interest rates is determined by calculating how much an equal one percentage point change in interest rates throughout the Group's interest rate range would change yearly interest expenses. Only interest bearing loans from financial institutions are included in the calculation. Lease liabilities are not included in the calculation. At the balance sheet date, the Group's sensitivity to an increase in interest rates of one percentage point was approximately EUR 330 thousand (2020: EUR 271 thousand).

4.1.3 Financing and liquidity risk

The Group aims to guarantee solid liquidity in all market conditions through efficient cash management. Credit limits tied to cash pool arrangements are used for short-term financing. On the balance sheet date, the Group had EUR 14,497 thousand (2020: EUR 16,534 thousand) of available credit limits, of which none (2020: none) was in use. Refinancing risk is attempted to be minimized by applying a balanced maturity schedule to the loan portfolio, ensuring sufficient maturity of loans, and using several banks as sources of financing. The level of financing is increased through additional loans when necessary.

The Group has financial covenants, which are tied to the equity ratio of the Group and to the debt/EBITDA ratio of the Group. In case the Group's equity ratio at the time of the Financial Statement is below 25% or the debt/EBITDA ratio is higher than 3.5, the financier has the right to demand immediate payment of all the Group's loans. According to the Consolidated Financial Statements in 2021, the terms of these covenants were not breached.

To balance the cash effect of the long payment terms typical to design business, the Group sells a part of its key customer receivables to a finance institution. There is no credit risk related to the sold receivables and these receivables are not included in the Consolidated Statement of Financial Position.

Maturity analysis of financial liabilities

| 2021
EUR 1,000 | Less than
1 year | 1–5 years |
| --- | --- | --- |
| Borrowings | 25,453 | 30,350 |
| Lease liabilities | 13,894 | 8,777 |
| Interest payments | 277 | 367 |
| Liabilities from acquisitions | 0 | 800 |
| Trade and other payables | 13,180 | 20 |
| Total | 52,804 | 40,314 |
| 2020
EUR 1,000 | Less than
1 year | 1–5 years |
| --- | --- | --- |
| Borrowings | 27,583 | 12,900 |
| Lease liabilities | 15,883 | 8,608 |
| Interest payments | 217 | 103 |
| Liabilities from acquisitions | 132 | 0 |
| Trade and other payables | 11,938 | 20 |
| Total | 55,753 | 21,631 |

Non-monetary changes in interest-bearing liabilities

EUR 1,000	2021	2020
Interest-bearing liabilities Jan 1	64,974	56,255
Financing cash flow	2,900	-13,346
Non-monetary changes
Changes in lease agreements	8,893	18,589
Loans and lease liabilities assumed in business combinations	1,547	3,558
Translation differences and other changes	160	-81
Non-monetary changes, total	10,599	22,065
Interest-bearing liabilities Dec 31	78,474	64,974

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4.1.4 Counterparty and credit risk

Financing contracts have the associated risk of the counterparty being unable to fulfill its obligations under the contract. To minimize the counterparty risk financing contracts are concluded with leading Nordic banks that have a good credit rating.

Credit risk related to business operations arises out of a customer's inability to perform its contractual obligations. A considerable proportion of the Group's business operations focus on large, financially solid companies that operate internationally. Credit risk is also reduced by the customer companies being divided among several different sectors of operation. The Group aims to ensure that services are sold only to such customers that have an appropriate credit rating. Credit risk is controlled systematically, and overdue sales receivables are assessed on a weekly basis. The Company strives to control the effects of increased financial uncertainty by actively monitoring its receivables and by an efficient debt collection process. The maximum customer credit risk exposure at the end of the financial year is the book value of accounts receivable.

Expected credit loss allowance

To measure expected credit losses the Group applies the IFRS 9 simplified approach which uses a lifetime expected loss allowance for all trade receivables and contract assets ("Work in progress") including amounts not due.

As described in the table below, trade receivables and contract assets are grouped based on shared credit risk characteristics and the days past due. The measurement of the expected credit losses includes forward-looking information in the form of the estimated growth of the EU gross domestic product. In addition to the lifetime expected credit loss allowance, the Group's management estimates expected credit losses case-by-case according to management judgment. Generally, the Group recognizes a 50 percent provision for impairment for receivables that are more than 60 days past due and a 100 percent provision for receivables that are more than 90 days past due.

2021	EUR 1,000	Not due	1-30 d	31-60 d	61-90 d	> 90 d	Total
Expected loss rate		0.0%	0.0%	0.9%	4.6%	6.6%
Trade receivables		38,056	3,353	802	36	649	42,896
Work in progress		26,810	0	0	0	0	26,810
Lifetime expected credit loss allowance		20	1	7	2	43	73
Case-by-case credit loss allowance						286	286
Expected credit loss allowance							359
2020	EUR 1,000	Not due	1-30 d	31-60 d	61-90 d	> 90 d	Total
---	---	---	---	---	---	---	---
Expected loss rate		0.1%	0.1%	3.9%	10.3%	9.1%
Trade receivables		29,277	2,716	1,045	443	1,149	34,631
Work in progress		17,764	0	0	0	0	17,764
Lifetime expected credit loss allowance		47	3	41	46	105	241
Case-by-case credit loss allowance						123	123
Expected credit loss allowance							364
Movements of the expected credit loss allowance:
---	---	---
EUR 1,000	2021	2020
Expected credit loss allowance Jan 1	-364	-413
Payments received	44	44
Expected credit loss allowance in acquires	3	-12
Expected credit loss allowance, decrease (+) / increase (-)	-43	17
Expected credit loss allowance Dec 31	-359	-364

Trade receivables and contract assets are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group.

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4.2 Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets.

Consistent with other companies in the industry, the Group monitors capital on the basis of the net gearing ratio. This ratio is calculated as net debt divided by equity. Net debt is calculated as total gross interest-bearing debt less cash and cash equivalents. To ensure sufficient flexibility, the goal is to keep the net gearing ratio within 30–100%. The following table sets out the Group's net gearing ratio:

EUR 1,000	2021	2020
Gross interest-bearing debt	78,474	64,974
Less: Cash and cash equivalents	-30,356	-24,407
Net debt	48,118	40,567
Total equity	98,914	87,075
Net gearing ratio	48.6%	46.6%

5 BUSINESS COMBINATIONS

Business combinations in financial year 2021

TekPartner A/S (100%)

Etteplan expanded its business in the Nordics and opened up a new country, Denmark, by acquiring TekPartner, an engineering and IT company specialized in electronics and software on January 7, 2021. TekPartner, founded 2009, covers development of all core disciplines within embedded software, intelligent electronics, FPGA (field-programmable gate array) and IoT (Internet of things). In 2019 TekPartner's revenue was approximately EUR 8 million.

TekPartner delivers its services through a combination of its own team of 19 highly qualified engineering professionals and a vast network of international project partners and over 30 freelancers working in Denmark. TekPartner is located in Herlev and Odense in Denmark.

The acquisition consideration recognized at the time of the acquisition, paid in cash, was EUR 5,833 thousand in total. In addition to this payment a contingent consideration of EUR 0–1,900 thousand (undiscounted amount) is agreed upon. The contingent consideration will be paid in full provided that TekPartner A/S's result in the financial years 2021 and 2022 reaches the thresholds set in the share transfer agreement. The fair value of the contingent consideration is estimated by applying the income approach. At the time of the acquisition the fair value of the contingent consideration was EUR 800 thousand.

The goodwill of EUR 3,121 thousand arising from the acquisition is attributable to the technical know-how of the acquiree's personnel, and the company's operating model. None of the goodwill recognized is expected to be deductible for income tax purposes.

Costs related to the acquisition, EUR 99 thousand, were included in other operating expenses in the consolidated statement of comprehensive income for the financial year 2020.

F.I.T. Fahrzeug Ingenieurtechnik GmbH (100%)

Etteplan strengthened its position in technical documentation in Germany through the acquisition of F.I.T. Fahrzeug Ingenieurtechnik GmbH on May 17, 2021. Founded in 1972, F.I.T. specializes in technical documentation solutions for governmental utility vehicles and the defense industry. It is located in Koblenz and employs some 15 technical documentation specialists.

The acquisition consideration recognized at the time of the acquisition, paid in cash, was EUR 560 thousand in total.

The provisional goodwill of EUR 456 thousand arising from the acquisition is attributable to the technical know-how of the acquiree's personnel, and the company's operating model. None of the goodwill recognized is expected to be deductible for income tax purposes.

Costs related to the acquisition, EUR 16 thousand, are included in other operating expenses in the consolidated statement of comprehensive income.

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Skyrise.tech Sp. z o.o. sp.k. (100%)

Etteplan acquired Skyrise.tech, a Polish software development company on June 14, 2021. Through the acquisition, Etteplan will significantly strengthen its capability to deliver applications and cloud software solutions. Skyrise.tech, founded in 2008, is a fast-growing modern software development company working mostly with customers in logistics, mobility, healthcare and enterprise industries. In 2020 Skyrise.tech's revenue was some EUR 3.5 million. The acquired company has some 80 software specialists in Katowice and Gdansk in Poland.

The acquisition consideration recognized at the time of the acquisition, paid in cash, was EUR 7,105 thousand in total. The provisional goodwill of EUR 4,226 thousand arising from the acquisition is attributable to the technical know-how of the acquiree's personnel, and the company's operating model. None of the goodwill recognized is expected to be deductible for income tax purposes.

Costs related to the acquisition, EUR 196 thousand, are included in other operating expenses in the consolidated statement of comprehensive income.

Adina Solutions Oy (100%)

Etteplan strengthened its know-how in technical documentation of software by acquiring Adina Solutions Oy from Finland on August 2, 2021. Adina Solutions Oy, founded in 2016 specializes on planning and implementation of technical documentation of software, localization of the content as well as consulting and training. Originating from Tampere, Finland, Adina Solutions Oy employs a total of 13 content producers and technical communications professionals. Its clientele consists of software companies and equipment manufacturers.

The acquisition consideration recognized at the time of the acquisition, paid in cash, was EUR 941 thousand in total. The provisional goodwill of EUR 457 thousand arising from the acquisition is attributable to the technical know-how of the acquiree's personnel, and the company's operating model. None of the goodwill recognized is expected to be deductible for income tax purposes.

Costs related to the acquisition, EUR 20 thousand, are included in other operating expenses in the consolidated statement of comprehensive income.

BST Buck Systemtechnik GmbH (100%)

Etteplan acquired BST Buck Systemtechnik GmbH in Brunsbüttel in the Northern part of Germany on September 29, 2021. The company specializes in Software Development, Process Automatization & Hardware Engineering and employs slightly more than 30 specialists. BST Buck Systemtechnik GmbH's customers operate in Chemical, Pharmaceutical, Energy and Food & beverage industries.

The acquisition complements our current operations in industrial automation and process engineering and creates a stronger and wider growth platform for us in the important engineering market in Germany.

The acquisition consideration recognized at the time of the acquisition, paid in cash, was EUR 990 thousand in total.

The provisional goodwill of EUR 873 thousand arising from the acquisition is attributable to the technical know-how of the acquiree's personnel, and the expected synergies arising from the acquisition. None of the goodwill recognized is expected to be deductible for income tax purposes.

Costs related to the acquisition, EUR 63 thousand, are included in other operating expenses in the consolidated statement of comprehensive income.

Acquisitions in total

The following table summarizes the provisional values of acquisition considerations, assets acquired and liabilities assumed for the acquisitions in total.

Consideration transferred:	EUR 1,000
Cash payment	15,428
Contingent consideration	800
Total consideration transferred	16,228
Assets and liabilities
Tangible assets	858
Intangible assets	7
Customer relationships (intangible assets)	7,466
Non-competition agreements (intangible assets)	355
Trade and other receivables	2,818
Cash and cash equivalents	1,249
Total assets	12,753

Non-current liabilities	917
Current liabilities	3,020
Deferred tax liability	1,720
Total liabilities	5,657

Total identifiable net assets	7,096

Formation of Goodwill:
Consideration transferred	16,228
Total identifiable net assets	-7,096
Goodwill	9,132

Trade and other receivables comprise gross contractual amounts and equal fair value amounts of EUR 2,818 thousand.

The revenue included in the income statement contributed by the acquired companies was EUR 10,238 thousand and profit for the financial year EUR 1,450 thousand. Had all the companies been consolidated from January 1, 2021, the income statement would show revenue of EUR 302,873 thousand and profit for the financial year of EUR 19,581 thousand.

Business combinations in financial year 2020

Tegema (100%)

Etteplan strengthened its production related competences and know-how by acquiring Tegema in the Netherlands on September 9, 2020. Tegema provides production solutions, production cells and equipment for customers in the field of semiconductors, electronics, mobility, photonics and medical. Tegema is a production system integrator specializing in customized precision mechanics and mechatronics. It combines this experience with the latest robotics, software and assembly technologies. 100 experts work for Tegema in Eindhoven and Arnhem. In 2019 the company's revenue was approximately EUR 11 million.

The acquisition was another step in Etteplan's international growth and marked the start for engineering services in the Netherlands. Previously Etteplan was offering services for technical documentation in the country.

The acquisition consideration recognized at the time of the acquisition, paid in cash, was EUR 4,730 thousand in total.

The goodwill of EUR 3,613 thousand arising from the acquisition is attributable to the technical know-how of the acquiree's personnel, and the company's operating model. None of the goodwill recognized is expected to be deductible for income tax purposes.

The following table summarizes the values of acquisition consideration, assets acquired and liabilities assumed for the acquisition.

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Consideration transferred: EUR 1,000
Cash payment 4,730
Total consideration transferred 4,730

Assets and liabilities
Tangible assets 2,682
Intangible assets 255
Customer relationships (intangible assets) 1,750
Non-competition agreements (intangible assets) 220
Trade and other receivables 1,710
Cash and cash equivalents 492
Total assets 7,108

Non-current liabilities 3,171
Current liabilities 2,328
Deferred tax liability 492
Total liabilities 5,991

Total identifiable net assets 1,117

Formation of Goodwill:
Consideration transferred 4,730
Total identifiable net assets -1,117
Goodwill 3,613

Trade and other receivables comprise gross contractual amounts and equal fair value amounts of EUR 1,710 thousand.

Costs related to acquisition, EUR 148 thousand, were included in other operating expenses in the consolidated statement of comprehensive income.

The revenue included in the income statement contributed by the acquired company was EUR 3,450 thousand and profit for the financial year EUR 191 thousand. Had the company been consolidated from January 1, 2020, the income statement would show revenue of EUR 266,114 thousand and profit for the financial year of EUR 17,237 thousand.

Changes in contingent considerations in financial year 2020
A profit of EUR 652 thousand in total was recognized in the income statement from premeasurements of contingent considerations related to previous acquisitions.

6 SEGMENT REPORTING

The Group has three reportable segments, the revenue of which consist mainly of rendering of services.

Engineering Solutions refer to the innovation, engineering and calculations of the technical attributes of machinery or equipment for the purpose of product development and manufacturing. Assignments are typically product development projects for a new product, plant engineering projects or Engineering-to-Order projects, involving the customization of the product in accordance with end customer requirements and the market area's legislation.

Software and Embedded Solutions refer to product development services and technology solutions that allow the controlling of machines and equipment and enable their digital connectivity as part of the Internet of Things.

Technical Documentation Solutions refer to the documentation of a product's technical attributes, such as manuals and service instructions for the users of a product, as well as related content management and distribution in print or digital form.

EUR 1,000	Engineering Solutions	Software and Embedded Solutions	Technical Documentation Solutions	Reportable segments total	Eliminations and other	Total
2021
External revenue	167,433	80,123	51,650	299,206	905	300,111
Operating profit (EBITA)	16,555	8,316	5,879	30,750	-611	30,139
Personnel at end of the period	2,062	771	669	3,502	127	3,629

EUR 1,000	Engineering Solutions	Software and Embedded Solutions	Technical Documentation Solutions	Reportable segments total	Eliminations and other	Total
2020
External revenue	148,884	63,694	46,531	259,110	593	259,702
Operating profit (EBITA)	14,679	7,101	4,583	26,363	-192	26,172
Personnel at end of the period	1,922	628	616	3,166	101	3,267

Reconciliation of Operating profit (EBITA) and Profit before taxes

EUR 1,000	2021	2020
Operating profit (EBITA)	30,139	26,172
Amortization on fair value adjustments at acquisitions	-4,385	-3,791
Operating profit (EBIT)	25,754	22,380
Financial income	593	422
Financial expenses	-1,480	-1,722
Profit before taxes	24,867	21,080

Segments' non-current assets

Segments' non-current assets exclude financial instruments and deferred tax assets. Non-current assets are presented according to the location of the asset, because the Group's chief operating decision-maker follows asset items at country level.

EUR 1,000	2021	2020
Finland	63,609	66,989
Scandinavia	39,820	34,185
China	2,931	2,565
Central Europe	39,640	31,710
Total	146,001	135,449

Disaggregation of revenue by geographical area is presented in note 7.

7 REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregation of revenue

The table below presents the disaggregation of revenue by geographical area and timing of revenue recognition. The external revenue of each geographical area is presented according to the location of the seller. The Group's operations in China sell their services both locally and through other Group companies, thus this revenue is partly included in the revenue from other areas. Revenue by service area is presented in note 6.

EUR 1,000	2021	2020
Primary geographical location
Finland	169,996	159,277
Scandinavia	70,153	57,519
Central Europe	47,747	35,705
China	12,216	7,201
Total	300,111	259,702
Timing of revenue recognition
Transferred at a point in time	2,241	2,044
Transferred over time	297,871	257,658
Total	300,111	259,702

Assets and liabilities related to contracts with customers

The Group recognized the following contract assets and liabilities related to contracts with customers. For details on impairment loss allowance, please see note 4.1.4. Trade receivables are specified in note 24.

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EUR 1,000	2021	2020
Contract assets (Work in progress)
Work in progress Jan 1	17,764	22,498
Business combinations	6	425
Additions	262,259	238,754
Invoicing	-252,290	-242,592
Netting work in progress and advances received	-785	-1,528
Other changes	-144	208
Contract assets Dec 31	26,810	17,764
Contract liabilities (Advances received)
Advances received Jan 1	2,770	5,378
Additions	37,922	23,434
Revenue recognized that was included in the contract liability at the beginning of the period	-35,967	-24,690
Netting work in progress and advances received	-785	-1,528
Other changes	-50	177
Contract liabilities Dec 31	3,891	2,770

8 OTHER OPERATING INCOME

EUR 1,000	2021	2020
Premeasurement of contingent considerations in business combinations	0	652
Covid compensations received (part included in other operating income)*	132	1 613
Insurance compensations received	158	177
Other compensations received	60	187
Other operating income	938	994
Total	1,289	3,622

*Direct Covid compensations were included in other operating income and cost support type compensations in employee benefits expenses (note 11) in 2020.

9 NON-RECURRING ITEMS

Items that are material either because of their size or their nature, and that are non-recurring are considered as non-recurring items. These items are presented within the line items to which they best relate, and are not deducted from other items in the income statement. The amount of non-recurring items and the line items in which they are included are specified in the table below as additional information. Non-recurring items relate to acquisitions and restructuring.

EUR 1,000	2021	2020
Other operating income	0	652
Employee benefits expenses and other operating expenses	-656	-1,568
Operating profit (EBIT)	-656	-916

10 MATERIALS AND SERVICES

EUR 1,000	2021	2020
Materials	8,481	6,494
Services from others	23,204	16,823
Total	31,685	23,317

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11 NUMBER OF PERSONNEL AND EMPLOYEE BENEFITS EXPENSES

	2021	2020
Personnel
Personnel at year-end	3,629	3,267
Personnel, average	3,480	3,320
Personnel by category
Design personnel	3,436	3,099
Administrative personnel	193	168
Total	3,629	3,267
EUR 1,000	2021	2020
---	---	---
Employee benefits expenses*
Wages and salaries	160,810	144,598
Pension costs - defined contribution plans	20,021	17,920
Other indirect employee benefits expenses	16,765	14,783
Total	197,596	177,301

COVID compensations were partly included in other operating income (note 8) and partly in employee benefits expenses in 2020.
COVID compensations included in employee benefits expenses in the financial year 2020 were EUR 709 thousand in total.

Compensation of the Board of Directors and top management are disclosed in note 32 Related party transactions.

In Sweden and the Netherlands, a part of the pension arrangements are multi-employer defined benefit plans, which are secured through an insurance. The plans pool the assets contributed by various entities that are not under common control. The assets provide benefits to employees of more than one entity. Sufficient information for the calculation of obligations and asset by employer is not available from the insurers. Therefore, these plans are treated in accounting as defined contribution plans. Etteplan's share of the total premiums paid to the arrangement and the share of employees participating in the arrangements is less than

0.0 percent. Total amount paid to the insurer in 2021 in Sweden was EUR 1,191 thousand (2020: EUR 1,276 thousand) and in the Netherlands EUR 594 thousand (2020: EUR 645 thousand). The payment level is not expected to change materially in the next financial period compared to the period under review.

12 OTHER OPERATING EXPENSES

EUR 1,000	2021	2020
Software and telecommunication expenses	9,430	8,236
Travel expenses	3,549	4,080
Premises expenses	1,891	417
Epenses related to leases of low-value assets	944	862
Voluntary personnel expenses	5,432	4,098
Change in credit loss allowance	36	151
Loss on disposals of fixed assets	1	362
Insurances	492	454
Costs related to acquisitions	296	248
Legal services	375	195
Other expenses	6,080	3,198
Total	28,527	22,300

13 AUDIT FEES

EUR 1,000	2021	2020
Auditing, KPMG-network	110	95
Auditor's statements based on laws and regulations, KPMG Oy Ab	0	2
Other services (tax services), KPMG Oy Ab	46	51
Other services (other services), KPMG-network	150	51
Total	306	199

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14 FINANCIAL INCOME

EUR 1,000	2021	2020
Dividend income from investments	9	9
Interest income from loans and other receivables	70	70
Foreign exchange gain	513	343
Total	593	422

15 FINANCIAL EXPENSES

EUR 1,000	2021	2020
Interest on borrowings	622	853
Leasing interest expenses	267	134
Foreign exchange loss	266	577
Other financial expenses	325	158
Total	1,480	1,722

16 TRANSLATION DIFFERENCES RECOGNIZED IN INCOME STATEMENT

EUR 1,000	2021	2020
Foreign exchange gain included in financial income	513	343
Foreign exchange loss included in financial expenses	-266	-577
Total	246	-234

17 INCOME TAXES

EUR 1,000	2021	2020
Tax on income from operations	-5,793	-4,814
Tax corrections for previous accounting periods	-47	109
Change in deferred tax asset	232	159
Change in deferred tax liability	786	541
Total	-4,823	-4,003

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Reconciliation between income taxes in the income statement and the theoretical amount of tax that would arise using the Group's domestic tax rate (2021: 20.0%, 2020: 20.0%)

EUR 1,000	2021	2020
Accounting profit before tax	24,867	21,080
Income tax expense
Tax based on parent company's tax rate	-4,973	-4,216
Differences (net)
Effect of different tax rates in Group companies	40	73
Effect of change in tax rate on deferred taxes	38	0
Calculated tax based on non-deductible items on unit's tax rate	-190	-356
Calculated tax based on non-taxable items on unit's tax rate	233	254
Tax corrections for previous accounting periods	-47	109
Use of previously unrecognized tax on confirmed losses	88	62
Use of recognized tax on confirmed losses	0	15
Unrecognized tax on loss for the period	-5	27
Other tax difference	-5	28
Income tax expense	-4,823	-4,003

Tax charge (-) / credit (+) relating to components of other comprehensive income

EUR 1,000	Before tax	Tax charge / credit	After tax
2021
Change in fair value of equity investments at fair value through other comprehensive income	40	-8	32
Currency translation differences	-589	0	-589
Other comprehensive income for the year, net of tax	-549	-8	-557
2020
Change in fair value of equity investments at fair value through other comprehensive income	-8	1	-7
Currency translation differences	1,415	0	1,415
Other comprehensive income for the year, net of tax	1,407	1	1,409

18 EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the profit for the financial year attributable to equity holders of the Parent Company by the weighted average number of externally owned shares during the financial year.

The shares to be paid out as rewards of the share-based incentive plan will be transferred from the shares held by the Company or shares acquired from the market, and therefore the incentive plan will have no diluting effect on the share value.

	2021	2020
Profit attributable to equity holders of the Parent Company (EUR 1,000)	20,044	17,077
Issue adjusted weighted average number of shares (1,000 pcs) Jan 1	24,862	24,832
Effect of own shares	-31	30
Effect of shares issued	73	0
Issue adjusted weighted average number of shares (1,000 pcs) Dec 31	24,904	24,862
Basic earnings per share (EUR/share)	0,80	0,69
Diluted earnings per share (EUR/share)	0,80	0,69

19 INTANGIBLE ASSETS

Goodwill

EUR 1,000	2021	2020
Acquisition cost Jan 1	83,685	79,044
Translation difference	-387	1,028
Acquisition of subsidiaries (note 5)	9,082	3,613
Book value Dec 31	92,380	83,685

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Other intangible assets

EUR 1,000	Intangible rights	Internally created intangible assets	Fair value adjustments in acquisitions	Leased software	Advance payments	Total
2021
Acquisition cost Jan 1	12,114	2,945	38,362	6,661	129	60,211
Translation difference	141	0	-88	-9	0	44
Acquisition of subsidiaries	7	0	7,782	0	0	7,789
Additions	373	20	0	895	188	1,475
Disposals	-50	0	0	0	0	-50
Reclassifications	90	0	0	0	-44	46
Acquisition cost Dec 31	12,674	2,965	46,056	7,547	273	69,516
Cumulative amortization Jan 1	-10,417	-2,504	-16,306	-4,974	0	-34,200
Translation difference	-139	0	11	7	0	-121
Disposals	41	0	0	0	0	41
Amortization for the financial year	-762	-187	-4,385	-1,094	0	-6,428
Cumulative amortization Dec 31	-11,278	-2,690	-20,679	-6,060	0	-40,709
Book value Dec 31	1,396	274	25,377	1,487	273	28,807
EUR 1,000	Intangible rights	Internally created intangible assets	Fair value adjustments in acquisitions	Leased software	Advance payments	Total
---	---	---	---	---	---	---
2020
Acquisition cost Jan 1	11,460	2,858	36,210	4,818	113	55,460
Translation difference	-21	0	182	14	0	174
Acquisition of subsidiaries	601	298	1,970	0	0	2,869
Additions	401	87	0	1,828	51	2,368
Disposals	-435	-861	0	0	0	-1,296
Reclassifications	109	562	0	0	-35	637
Acquisition cost Dec 31	12,114	2,945	38,362	6,661	129	60,211
Cumulative amortization Jan 1	-9,440	-2,110	-12,454	-3,985	0	-27,988
Translation difference	21	0	-60	-13	0	-52
Acquisition of subsidiaries	-599	-45	0	0	0	-644
Disposals	435	522	0	0	0	957
Reclassifications	0	-562	0	0	0	-562
Amortization for the financial year	-835	-308	-3,791	-977	0	-5,911
Cumulative amortization Dec 31	-10,417	-2,504	-16,306	-4,974	0	-34,200
Book value Dec 31	1,697	442	22,056	1,687	129	26,011

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20 TANGIBLE ASSETS

EUR 1,000	Land and water	Buildings	Machinery and equipment	Other tangible assets	Right-of-use assets
					Machinery and equipment	Premises	Total
2021
Acquisition cost Jan 1	19	495	14,386	1,261	18,623	32,554	67,339
Translation difference	0	0	94	5	-47	0	51
Acquisition of subsidiaries	0	0	7	86	23	754	870
Additions	0	0	1,331	245	3,840	5,951	11,366
Disposals	0	0	-1	0	-378	-1,427	-1,806
Reclassifications	0	0	44	0	0	0	44
Acquisition cost Dec 31	19	495	15,860	1,597	22,061	37,832	77,864
Cumulative depreciation Jan 1	0	-11	-12,089	-1,110	-14,436	-13,995	-41,641
Translation difference	0	0	-85	-5	36	0	-55
Disposals	0	0	1	0	0	0	1
Depreciation for the financial year	0	-11	-938	-88	-3,008	-7,365	-11,410
Cumulative depreciation Dec 31	0	-22	-13,111	-1,204	-17,408	-21,360	-53,105
Book value Dec 31	19	473	2,749	394	4,652	16,472	24,759
EUR 1,000	Land and water	Buildings	Machinery and equipment	Other tangible assets	Right-of-use assets
---	---	---	---	---	---	---	---
					Machinery and equipment	Premises	Total
2020
Acquisition cost Jan 1	19	495	12,426	979	15,855	16,017	45,792
Translation difference	0	0	-2	0	82	0	80
Acquisition of subsidiaries	0	0	1,145	211	495	1,968	3,819
Additions	0	0	1,030	70	2,442	15,267	18,809
Disposals	0	0	-211	0	-251	-698	-1,161
Acquisition cost Dec 31	19	495	14,386	1,261	18,623	32,554	67,339
Cumulative depreciation Jan 1	0	0	-10,496	-878	-11,321	-5,833	-28,528
Translation difference	0	0	13	1	-62	0	-47
Acquisition of subsidiaries	0	0	-966	-171	0	0	-1,137
Disposals	0	0	186	0	0	0	186
Depreciation for the financial year	0	-11	-826	-63	-3,053	-8,162	-12,115
Cumulative depreciation Dec 31	0	-11	-12,089	-1,110	-14,436	-13,995	-41,641
Book value Dec 31	19	484	2,297	150	4,187	18,559	25,698

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Tangible and intangible right-of-use assets in total

EUR 1,000	2021	2020
Book value Jan 1	24,434	15,552
Translation difference	-13	22
Acquisition of subsidiaries	777	2,463
Additions	10,685	19,538
Disposals and reclassifications	-1,805	-949
Depreciation for the financial year	-11,467	-12,192
Book value Dec 31	22,611	24,434

The total cash outflow for leases in financial year 2021 was EUR 12,702 thousand (2020: EUR 13,078 thousand).

Additional information on right-of-use assets and lease liabilities in notes 2.1.1 and 2.15

21 FINANCIAL INSTRUMENTS BY MEASUREMENT CATEGORY

Financial assets 2021 EUR 1,000	Note	Amortized cost	Fair value through OCI	Book value total	Fair value
Quoted and unquoted shares	21		418	418	418
Trade and other receivables	24	43,542		43,542	43,542
Cash and cash equivalents		30,356		30,356	30,356
Financial assets Dec 31		73,898	418	74,316	74,316
Financial liabilities 2021 EUR 1,000	Note	Amortized cost	Fair value through OCI	Book value total	Fair value
---	---	---	---	---	---
Loans from financial institutions	27	55,803		55,803	55,803
Lease liabilities	27	22,670		22,670	22,670
Liabilities from acquisitions	5,28		800	800	800
Trade and other payables	29	13,200		13,200	13,200
Financial liabilities Dec 31		91,674	800	92,474	92,474
Financial assets 2020 EUR 1,000	Note	Amortized cost	Fair value through OCI	Book value total	Fair value
---	---	---	---	---	---
Quoted and unquoted shares	21		378	378	378
Trade and other receivables	24	35,226		35,226	35,226
Cash and cash equivalents		24,407		24,407	24,407
Financial assets Dec 31		59,633	378	60,011	60,011
Financial liabilities 2020 EUR 1,000	Note	Amortized cost	Fair value through OCI	Book value total	Fair value
---	---	---	---	---	---
Loans from financial institutions	27	40,483		40,483	40,483
Lease liabilities	27	24,491		24,491	24,491
Liabilities from acquisitions	5,29		132	132	132
Trade and other payables	29	11,958		11,958	11,958
Financial liabilities Dec 31		76,932	132	77,064	77,064

Fair value hierarchy

The tables below analyze financial instruments carried at fair value, by valuation method. The different levels are defined as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly as prices or indirectly, derived from prices.

Level 3: Unobservable inputs that are not based on observable market data.

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Financial assets recognized at fair value through OCI

2021 EUR 1,000	Quoted shares (Level 1)	Premises shares (Level 2)	Unquoted shares (Level 3)	Total
Opening balance at Jan 1	235	120	24	378
Gain/loss recognized in other comprehensive income	40	0	0	40
Closing balance Dec 31	275	120	24	418
2020 EUR 1,000	Quoted shares (Level 1)	Premises shares (Level 2)	Unquoted shares (Level 3)	Total
---	---	---	---	---
Opening balance at Jan 1	237	120	30	387
Gain/loss recognized in other comprehensive income	-5	0	-3	-8
Reclassification (stock listing)	3	0	-3	0
Closing balance Dec 31	235	120	24	378

Financial liabilities recognized at fair value through profit or loss

Contingent liability in acquisitions (Level 3)

EUR 1,000	2021	2020
Opening balance at Jan 1	132	2,430
Additions	1,209	0
Revaluation	-409	-652
Payment	-132	-1,646
Closing balance Dec 31	800	132

Additional information regarding contingent liabilities in acquisitions is provided in note 5 Business combinations.

22 IMPAIRMENT TESTING

Goodwill is allocated to cash-generating units (CGUs) for determination of impairment. In impairment testing, the recoverable amount is defined as value-in-use. Value-in-use is defined as the discounted estimated future net cash flows generated by the asset or cash-generating unit.

The Group's management has defined the CGUs to be the three service areas in which the Group's operations are organized.

The impairment test is done in the fourth quarter after budgets for the next year were done and it is based on goodwill as per September 30. Cash flows after tax are based on budget figures for year one and financials approved by management for the next five-year period. The management makes estimations on the market demand and market environment, which are checked against external information sources. When defining the cash flow, attention is paid to anticipated price and margin development as well as costs, net working capital and investment needs. The management determines these based on past performance and expectations for market development.

The discount rate applied to cash flow projections is determined based on the post-tax weighted average cost of capital (WACC) that depicts the overall costs of shareholders' equity and liabilities. The discount rate is based on the weighted average of 30-year government bond rates in the countries where the CGUs operate. The bond rates are adjusted for the general market risk and the business risk of the CGUs.

The recoverable amount is compared with the book value of the cash-generating unit. An impairment loss is booked as cost in the income statement, if the recoverable amount is lower than the book value. No impairment loss has been booked during the financial year or the comparison year.

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Goodwill Sep 30

MEUR	2021	2020
Engineering Solutions	55.8	53.5
Software and Embedded Solutions	30.8	23.1
Technical Documentation Solutions	6.4	5.4
Total	93.0	82.0

Key assumptions used for value-in-use calculations

	2021	2020
Aggregate growth percentage year 2–5	1.0%	1.0%
Growth rate after 5 years	1.0%	1.0%
Discount rate before tax
Engineering Solutions	9.5%	9.4%
Software and Embedded Solutions	9.1%	10.2%
Technical Documentation Solutions	8.9%	9.6%
Discount rate after tax
Engineering Solutions	7.6%	7.7%
Software and Embedded Solutions	7.4%	8.2%
Technical Documentation Solutions	7.1%	7.5%

The recoverable amount exceeds the book value as follows:

MEUR	2021	2020
Engineering Solutions	141.1	122.5
Software and Embedded Solutions	94.3	50.5
Technical Documentation Solutions	60.0	45.4
Total	295.4	218.4

Sensitivity analysis

In connection with impairment testing, sensitivity analyses were performed using the following variables:
- 0-growth in net sales
- Decrease of profitability (EBIT) by 4 percentage points
- Increase of discount rate by 4 percentage points

According to management's understanding, realization of the variables used in the sensitivity analysis would not lead to impairment losses in cash-generating units.

23 INVENTORY

EUR 1,000	2021	2020
Inventory at the beginning of the financial year	336	313
Additions/Deductions	41	23
Total	376	336

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24 TRADE AND OTHER RECEIVABLES

EUR 1,000	2021	2020
Trade receivables	42,896	34,631
Credit loss allowance	-359	-364
Other receivables	951	904
Prepayments and accrued income	4,500	3,712
Total	47,988	38,883

Main items included in prepayments and accrued income

Accruals of employee benefits expenses	19	35
Prepaid rents	470	458
Other prepayments and accrued income on expenses	4,011	3,219
Total	4,500	3,712

Analysis of receivables by currency

EUR	31,682	26,203
SEK	9,454	9,277
CNY	3,864	2,664
PLN	740	554
DKK	1,921	0
Other currencies	327	185
Total	47,988	38,883

25 EQUITY

Shareholder's equity

Shareholders' equity consists of share capital, share premium account, unrestricted equity fund, own shares, cumulative translation adjustment, other reserves and retained earnings. Share premium account contains the emission gain from the original stock listing as well as funds raised in bonus issues. Unrestricted equity fund includes funds raised in share issues and decided to be recorded in the Unrestricted equity fund. Translation differences contain translation differences arising from the conversion of financial statements of foreign units and the foreign subsidiary net investment hedge. The aggregate amount of the net investment hedge (EUR 149 thousand) related to the Swedish unit is recorded in the profit and loss statement upon disposal of the unit. Other reserves include the fair value reserve, which consists of fair value adjustments of investments at fair value through other comprehensive income amounting to EUR 133 thousand (2020: EUR 101 thousand). The aggregate amount of fair value adjustments are recorded in Retained earnings upon disposal of the investments.

Shares and share capital

The fully paid and registered share capital of the Company at the end of the financial year was EUR 5,000,000 and the number of shares was 25,083,308 (2020: 24,963,308). No changes in share capital occurred during the financial year. The Company has one series of shares. Each share entitles its holder to one vote in the shareholders' meeting and gives an equal right to dividends. Shares are listed on Nasdaq Helsinki Ltd under the ETTE ticker. The share has no nominal value and there is no maximum number of shares. All issued shares are fully paid. The number of company-held shares at the end of the financial year was 159,046 (2020: 79,046). The Board of Directors' authorization to acquire and dispose own shares and to increase the share capital through a rights issue is disclosed in the Board of directors' review. The Board of Directors has proposed to the Annual General Meeting a dividend of EUR 0.40 to be paid for the financial year 2021.

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SHARE-BASED PAYMENTS

Key personnel incentive plan 2020–2022

The Board of Directors of Etteplan Oyj resolved on February 5, 2020, to establish a new share-based incentive plan for the Group key personnel. The aim of the Plan is to combine the objectives of the shareholders and the key personnel in order to increase the value of the Company, to commit the key personnel to the Company, and to offer them a competitive reward plan based on holding the Company shares. The Plan includes one earning period which includes calendar years 2020–2022. The earning period covers the same years as Etteplan's strategy update published in December 2019. The Plan is in line with Etteplan's strategy and supports the achievement of the Company's financial targets. The earnings criteria are the Group's revenue increase and the development of Total Shareholder Return (TSR). The potential reward will be paid partly in the Company's shares and partly in cash after the end of the earning period. The proportion to be paid in cash is intended to cover taxes and tax-related costs arising from the reward to the key personnel. Approximately 25 people belong to the Plan, including the Management Group of Etteplan. The rewards to be paid on the basis of the plan will correspond to the value of an approximate maximum total of 390,000 Etteplan Oyj shares (including also the proportion to be paid in cash). The shares to be paid out as potential rewards will be transferred from the shares held by the Company or shares acquired from the market, and therefore the incentive plan will have no diluting effect on the share value.

The number of shares expected to be granted to the key personnel at measurement date was 104,049. The fair value of the services provided by the key personnel are determined indirectly from the fair value of the Company's share. The fair value at measurement date was EUR 17.29. Expected dividends or any other features of the shares are excluded from the calculation of fair value.

Employee benefits expenses include share-based payments related to the key personnel incentive plans:

EUR 1,000	2021	2020
To be settled in equity in future financial periods	819	558
To be settled in cash in future financial periods	1,315	778
Total	2,134	1,336

INTEREST-BEARING LIABILITIES

Analysis by currency

EUR 1,000	2021	2020
Non-current loans from financial institutions
EUR	30,350	12,900
Total	30,350	12,900
Non-current lease liabilities
EUR	6,187	6,016
SEK	1,980	1,783
CNY	369	421
PLN	115	388
DKK	124	0
Total	8,777	8,608
Current loans from financial institutions
EUR	23,996	25,752
CNY	1,458	1,831
Total	25,454	27,583
Current lease liabilities
EUR	11,208	13,682
SEK	1,809	1,608
CNY	286	214
PLN	500	380
DKK	91	0
Total	13,894	15,883

Etteplan

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INVESTOR INFORMATION

FINANCIAL REVIEW | 43

28 OTHER NON-CURRENT LIABILITIES

EUR 1,000	2021	2020
Liability from acquisitions	800	0
Pension liabilities	7	7
Other non-current liabilities	20	20
Total	827	27

29 TRADE AND OTHER PAYABLES

EUR 1,000	2021	2020
Trade payables	13,180	11,938
Accrued liabilities	33,353	29,420
Tax payables	15,174	13,065
Liability from acquisitions	0	132
Other payables	-55	36
Total	61,652	54,592
Main items included in accrued expenses and income
Interest liabilities	95	117
Accrued employee benefits expenses	29,984	27,406
Other accrued expenses and income	3,273	1,898
Total	33,353	29,420
Analysis by currency
EUR	46,219	42,434
SEK	11,692	9,649
CNY	1,863	1,648
PLN	1,050	813
DKK	773	0
Other	55	48
Total	61,652	54,592

30 DEFERRED TAXES

Deferred taxes 2021

Deferred tax assets

EUR 1,000	Jan 1, 2021	In income statement	Acquisitions	Dec 31, 2021
Confirmed loss	32	103	0	134
Leases	12	0	0	12
Share-based incentive plan	211	133	0	345
Other timing differences	238	-4	6	240
Total	493	232	6	731

Deferred tax liabilities

EUR 1,000	Jan 1, 2021	Translation difference	In income statement	In equity	Acquisitions	Dec 31, 2021
Discretionary provisions	1,205	-25	103	0	0	1,282
Fair value adjustments in acquisitions	4,876	1	-990	0	1,709	5,596
Other timing differences	422	0	101	8	0	531
Total	6,502	-25	-786	8	1,709	7,409

Etteplan

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Deferred taxes 2020

Deferred tax assets

EUR 1,000	Jan 1, 2020	In income statement	Acquisitions	Dec 31, 2020
Confirmed loss	0	-43	75	32
Leases	9	2	0	12
Share-based incentive plan	250	-38	0	211
Other timing differences	0	238	0	238
Total	259	159	75	493

Deferred tax liabilities

EUR 1,000	Jan 1, 2020	Translation difference	In income statement	In equity	Acquisitions	Dec 31, 2020
Discretionary provisions	898	46	260	0	0	1,205
Fair value adjustments in acquisitions	5,125	26	-767	0	492	4,876
Other timing differences	458	0	-35	-2	0	422
Total	6,481	72	-541	-2	492	6,502

At the end of the financial year the Group had gross losses carried forward of EUR 1,400 thousand (2020: EUR 1,817 thousand) of which a deferred tax asset has not been recognized. These losses are usable to offset future taxable gains a minimum of five years.

31 PLEDGES, MORTGAGES AND GUARANTEES

EUR 1,000	2021	2020
Business mortgages	320	320
Pledged shares	120	120
Other contingencies	418	379
Total	858	818

32 RELATED-PARTY TRANSACTIONS

The Group's related party includes such persons that have control, joint control or significant influence over the Group. Also, the Group's key management personnel is included in the related party. Key management personnel refers to persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any director (whether executive or otherwise) of the Group. Spouses, wards and companies in control or joint control of the before mentioned persons are considered as other related parties. The ultimate controlling party, Ingman Group Oy Ab, and its group companies are also included in related parties.

Related party transactions are priced according to Group's normal pricing basis and purchase conditions, which are equivalent to those that prevail in arm's length transactions.

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Group companies Dec 31, 2021

Company	Domicile	Group's / Parent company's holding
Parent company Etteplan Oyj	Espoo, Finland
Adina Solutions Oy	Tampere, Finland	100% / 100%
Etteplan Germany GmbH	Leverkusen, Germany	100% / 100%
BST Buck systemtechnik GmbH	Brunsbüttel, Germany	100% / 0%
Etteplan Finland Oy	Lahti, Finland	100% / 100%
Etteplan Embedded Finland Oy	Espoo, Finland	100% / 100%
Etteplan Poland sp.z.o.o.	Wroclaw, Poland	100% / 0%
Etteplan MORE Oy	Tampere, Finland	100% / 100%
Etteplan Sweden AB	Västerås, Sweden	100% / 100%
Etteplan Technology Center Ltd.	Kunshan, China	100% / 0%
Etteplan Consulting (Shanghai) Co., Ltd.	Shanghai, China	100% / 100%
Etteplan B.V.	Eindhoven, the Netherlands	100% / 100%
Etteplan Netherlands B.V.	Eindhoven, the Netherlands	100% / 0%
Etteplan Deutschland GmbH	Neukirchen-Vlyun, Germany	100% / 0%
F.I.T. Fahrzeug Ingenieurtechnik GmbH	Koblenz, Germany	100% / 0%
Etteplan USA Inc.	Austin (TX), USA	100% / 0%
Skyrise.tech S.A.	Katowice, Poland	100% / 100%
Tegema Eindhoven B.V.	Eindhoven, the Netherlands	100% / 100%
MA3 solutions B.V.	Eindhoven, the Netherlands	100% / 0%
Etteplan Denmark A/S	Herlev, Denmark	100% / 100%

The following group companies have been merged in 2021:

Company	Domicile	Merged to
Triview Technical Communication B.V.	Soesterberg, the Netherlands	Etteplan Netherlands B.V.
EMP-8 Planungsgesellschaft für Prozessautomation mbH	Berlin, Germany	Etteplan Germany GmbH
EMP Prozessautomation GmbH	Frankfurt am Main, Germany	Etteplan Germany GmbH
Tegema Beheer B.V.	Eindhoven, the Netherlands	Tegema Eindhoven B.V.
Tegema Holding B.V.	Eindhoven, the Netherlands	Tegema Eindhoven B.V.
Tegema Engineering Services B.V.	Eindhoven, the Netherlands	Tegema Eindhoven B.V.
Tegema Arnhem B.V.	Arnhem, the Netherlands	Tegema Eindhoven B.V.

The following transactions were carried out with related parties:

EUR 1,000	2021	2020
Sales and purchases of services and related receivables and payables
Sales of services to other related parties	94	226
Purchases of services from other related parties	36	155
Trade receivables from other related parties	0	92

Key management compensation

Key management of Etteplan Oyj includes the Board of Directors, CEO and Management Group.

Salaries, fees and fringe benefits paid to key management

EUR 1,000	2021	2020
Members of the Board
Robert Ingman, Chairman of the Board	85	92
Cristina Andersson (until Apr 2, 2020)	0	11
Matti Huttunen	45	50
Päivi Lindqvist (Apr 2, 2020 onwards)	44	34
Leena Saarinen	49	59
Mikko Tepponen	44	46
CEO and other members of the Management Group
Juha Näkki, salaries and fees paid	519	805
Juha Näkki, statutory pension costs	88	74
Other members of the Management Group, salaries and fees paid	1,913	2,195
Other members of the Management Group, statutory pension costs	382	312
Management compensation total	3,169	3,679*

Fees paid to management in 2020 include non-recurring payments of rewards of share-based incentive plans accumulated over years 2017–2019, of which EUR 491 thousand were share-based payments.

The Annual General Meeting annually resolves the remuneration for the members of the Board of Directors.

Stock options to the key management

Stock options have not been granted to the Company's management during 2021.

Etteplan

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33 EVENTS AFTER THE BALANCE SHEET DATE

In January 2022 Etteplan acquired the entire share base of Cognitas GmbH, a German technical information lifecycle management company from Canon Germany GmbH. The acquisition strengthens Etteplan's position in Germany and continues our strategic investments in Central Europe. With the acquisition we become a market leading company in technical documentation in Germany and reinforce our leading position in Europe. Cognitas is a leading German consulting and services company in with an annual turnover around EUR 15 million with 200 professionals in consulting and technical information authoring and management.

Etteplan strengthened its position in Sweden and on February 2, 2022 acquired the entire share base of Syncore Technologies AB, a technology services company focusing on embedded systems. Founded in 2000, Syncore is specialized in advanced embedded systems projects such as design, hardware and software development, and product lifecycle services, especially for customers in the industrial systems, aerospace and defense industries. In 2020, Syncore's net sales were approximately EUR 5 million and it employs 46 embedded systems experts in Linköping, Sweden.

The initial accounting for these business combinations is incomplete and therefore the other disclosures required by IFRS 3 standard cannot yet be made.

34 KEY FIGURES FOR FINANCIAL TRENDS

EUR 1,000	Jan 1–Dec 31, 2021	Jan 1–Dec 31, 2020	Jan 1–Dec 31, 2019
Revenue	300,111	259,702	263,292
Change in revenue, %	15.6	-1.4	11.3
Operating profit (EBITA)	30,139	26,172	25,964
% of revenue	10.0	10.1	9.9
Operating profit (EBIT)	25,754	22,380	22,819
% of revenue	8.6	8.6	8.7
Profit before taxes	24,867	21,080	21,924
% of revenue	8.3	8.1	8.3
Profit for the financial year	20,044	17,077	17,387
Return on equity, %	21.6	20.8	24.1
ROCE, %	16.0	16.0	19.9
Equity ratio, %	39.7	40.5	38.9
Gross investments	30,582	29,697	36,908
% of revenue	10.2	11.4	14.0
Net gearing, %	48.6	46.6	52.6
Personnel, average	3,480	3,320	3,305
Personnel at year end	3,629	3,267	3,447
Employee benefits expenses	197,596	177,301	172,520

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35 KEY FIGURES FOR SHARES

EUR 1,000	Jan 1–Dec 31, 2021	Jan 1–Dec 31, 2020	Jan 1–Dec 31, 2019
Earnings per share, EUR	0.80	0.69	0.70
Equity per share, EUR	3.97	3.50	3.09
Dividend per share, EUR (Proposal by the Board of Directors)	0.40	0.34	0.35
Dividend per earnings per share, %	50	49	50
Effective dividend return, %	2.4	2.6	3.4
P/E-ratio, EUR	21.1	18.8	14.5
Share price, EUR: lowest	12.95	6.50	7.46
highest	19.45	13.30	11.90
average for the year	16.33	9.46	8.99
closing	16.90	12.95	10.15
Market capitalization, EUR 1,000	421,220	322,251	251,792
Number of shares traded, 1,000 pcs	1,540	1,564	1,472
Shares traded, %	6	6	6
Adjusted average number of externally owned shares during the financial year, 1,000 pcs	24,904	24,862	24,832
Adjusted number of externally owned shares at year end, 1,000 pcs	24,924	24,884	24,807

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FORMULAS FOR THE KEY FIGURES

IFRS KEY FIGURES

Basic earnings per share = $\frac{\text{(Profit for the financial year attributable to equity holders of the parent company)}}{\text{(Issue adjusted average number of shares during the financial year)}} \times 100$

Diluted earnings per share = $\frac{\text{(Profit for the financial year attributable to equity holders of the parent company adjusted with dilutive effect)}}{\text{(Issue adjusted average number of shares during the financial year adjusted with dilutive effect)}} \times 100$

Return on equity (ROE), % = $\frac{\text{(Profit for the financial year } \times 100 \text{ (Equity, total) average)}}{\text{(Equity, total) average}}$

Return on capital employed (ROCE), before taxes, % = $\frac{\text{(Profit before taxes + Financial expenses)}}{\text{(Total equity and liabilities - non-interest bearing liabilities)}} \times 100$ average

Equity ratio, % = $\frac{\text{(Equity, total)}}{\text{Total equity and liabilities - Advances received}} \times 100$

NON-IFRS KEY FIGURES

Operating profit (EBITA) = Operating profit (EBIT) + amortization on fair value adjustments in acquisitions

Organic growth = $\frac{\text{(Revenue current year - Revenue comparison year - Revenue from acquires current year)}}{\text{(Revenue comparison year)}} \times 100$

Revenue growth from key accounts = $\frac{\text{(Revenue from key accounts current year - Revenue from key accounts comparison year)}}{\text{(Revenue from key accounts comparison year)}} \times 100$

The share of revenue represented by Managed Services = $\frac{\text{(Revenue from Managed Services)}}{\text{(Revenue)}} \times 100$

Gross investments = Total investments made to non-current assets including acquisitions and capitalized development costs

Net gearing, % = $\frac{\text{(Interest-bearing liabilities - Cash and cash equivalents)}}{\text{(Equity, total)}} \times 100$

Equity per share = $\frac{\text{(Equity, total)}}{\text{(Adjusted number of shares at the end of the year)}}$

Market capitalization = Number of outstanding shares at the end of the year x last traded share price of the year

Dividend per share = $\frac{\text{(Dividend for the financial year)}}{\text{(Adjusted number of shares during the financial year)}}$

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Etteplan
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Dividend as percentage of earnings = Dividend per share X 100
Earnings per share

Effective dividend yield, % = Dividend per share X 100
Adjusted last traded share price

Price/earnings ratio (P/E) = Adjusted last traded share price
Earnings per share

Share price trend = For each financial year, the adjusted low and high actual traded prices are given as well as the average price for the financial year adjusted for share issues..

Average price = Total turnover of shares in euros
Number of shares traded during the financial year

Trend in share turnover, in volume and percentage figures = The trend in turnover of shares is given as the number of shares traded during the financial year and as the percentage of traded shares relative to issued stock during the year.

Parent Company's Financial Statements

PARENT COMPANY'S INCOME STATEMENT

EUR 1,000	Note	Jan 1–Dec 31, 2021 FAS	Jan 1–Dec 31, 2020 FAS
Revenue	1	16,265	15,228
Other operating income	2	15	46
Staff costs	3	-6,299	-4,979
Depreciation and amortization	10, 11	-469	-523
Other operating expenses	5	-8,503	-7,256
Operating profit/loss		1,009	2,517
Financial income and expenses	6.7	783	26
Profit/loss before appropriations and taxes		1,792	2,543
Appropriations	8	12,980	10,987
Income taxes	9	-2,916	-2,529
Profit for the financial year		11,856	11,001

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PARENT COMPANY'S BALANCE SHEET

EUR 1,000	Note	Dec 31, 2021 FAS	Dec 31, 2020 FAS
ASSETS
Non-current assets
Intangible assets	10	1,209	1,454
Tangible assets	11	169	131
Shares in group companies	12	140,104	125,110
Other investments	12	20	20
Non-current receivables	13	4,455	1,835
Non-current assets, total		145,956	128,550
Current assets
Current receivables	14	21,397	22,535
Cash and cash equivalents	15	23,718	16,989
Current assets, total		45,115	39,524
TOTAL ASSETS		191,071	168,074
EUR 1,000	Note	Dec 31, 2021 FAS	Dec 31, 2020 FAS
---	---	---	---
EQUITY AND LIABILITIES
Equity
Share capital	16	5,000	5,000
Share premium account	16	6,701	6,701
Unrestricted equity fund	16	22,150	20,215
Own Shares	16	-2,064	-682
Retained earnings	16	25,802	23,261
Profit for the financial year	16	11,856	11,001
Equity, total		69,445	65,496
APPROPRIATIONS	17	282	261
Liabilities
Non-current liabilities	18	30,800	12,500
Current liabilities	19	90,544	89,816
Liabilities, total		121,344	102,316
TOTAL EQUITY AND LIABILITIES		191,071	168,074

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PARENT COMPANY'S CASH FLOW STATEMENT

EUR 1,000	Jan 1-Dec 31, 2021 FAS	Jan 1-Dec 31, 2020 FAS
OPERATING CASH FLOW
Cash receipts from Group companies	16,614	15,530
Operating expenses paid	-14,374	-11,871
Operating cash flow before financial items and taxes	2,240	3,659
Interest and payment paid for financial expenses	-451	-399
Dividends and interest received	1,021	880
Income taxes paid	-3,529	-2,957
Operating cash flow (A)	-717	1,183
INVESTING CASH FLOW
Purchase of tangible and intangible assets	-261	-165
Acquisition of subsidiaries	-14,326	-6,504
Loans granted to Group companies	-2,620	-635
Repayment of loans granted to Group companies	0	6,209
Change of internal bank account receivables	3,897	-2,044
Investing cash flow (B)	-13,310	-3,140
EUR 1,000	Jan 1-Dec 31, 2021 FAS	Jan 1-Dec 31, 2020 FAS
---	---	---
FINANCING CASH FLOW
Proceeds from directed share issue	1,936	0
Purchase of own shares	-1,382	0
Issue of new current loans	6,653	10,000
Repayments of current loans	-28,653	-8,696
Change of internal bank account liabilities	2,163	6,635
Issue of new non-current loans	37,500	0
Dividend paid	-8,461	-8,682
Group contribution	11,000	13,000
Financing cash flow (C)	20,756	12,256
Variation in cash (A+B+C) increase (+) / decrease (-)	6,729	10,299
Assets at the beginning of the period	16,989	7,072
Exchange gains or losses on cash and cash equivalents	0	-383
Assets at the end of the period	23,718	16,989

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NOTES TO THE FINANCIAL STATEMENTS OF THE PARENT COMPANY

BASIS OF PREPARATION OF PARENT COMPANY FINANCIAL STATEMENTS

The financial statements of the parent company, Etteplan Oyj, are prepared in accordance with Finnish accounting and company legislation (FAS).

Etteplan Oyj's revenue consists of software and management fees from Group companies.

Activated development costs

Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Company are recognized as intangible assets when the following criteria are met:

it is technically feasible to complete the software product so that it will be available for use
management intends to complete the software product and use or sell it
there is an ability to use or sell the software product
it can be demonstrated how the software product will generate probable future economic benefits
adequate technical, financial and other resources to complete the development and to use or sell the software product are available, and
the expenditure attributable to the software product during its development can be reliably measured.

Directly attributable costs, which are capitalized as part of the software product, include the software development employee costs and an appropriate portion of relevant overheads. Other development expenditures, that do not meet these criteria, are recognized as an expense as incurred. Development costs previously recognized as an expense are not recognized as an asset in a subsequent period. Computer software development costs recognized as assets are amortized over their estimated useful lives.

Measurement of non-current assets

Non-current assets are capitalized in the balance sheet at historical cost less depreciation according to plan and possible impairment loss. Depreciation according to plan is based on the estimated useful life of the asset. Land areas are considered to have an unlimited useful life. The useful lives of other non-current assets are:

software	5 years
computers	3 years
office furniture	5 to 10 years
renovation of premises	5 years
goodwill	5 to 10 years
internally created software	3 to 5 years

Maintenance and repair costs are expensed. Major basic improvement investments are capitalized and depreciated over their useful life. Capital gains and losses arising on the retirement and sale of non-current assets are included either in other operating income or under other operating expenses.

Income taxes

Taxes in the income statement include taxes based on taxable earnings for the financial period as well as corrections to taxes for previous periods. Taxes based on taxable earnings are calculated using the tax rate in force at the time of the financial statement.

Accumulated appropriations in the parent company

There were no postponed depreciations of machinery and equipment at the end of the financial year.

Pension agreements

Pension security for the employees of the parent company is arranged with external pension insurance companies. Pension expenses are recorded as expenses in the year in which they are incurred.

Lease agreements

Contractual lease payments are expensed over the lease period.

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NOTES TO THE INCOME STATEMENT, PARENT COMPANY

1 REVENUE

EUR 1,000	2021	2020
Finland	16,265	15,228

Revenue consists of software and management fees from Etteplan Group companies..

2 OTHER OPERATING INCOME

EUR 1,000	2021	2020
Other operating income	15	46
Total	15	46

3 NUMBER OF PERSONNEL AND STAFF COSTS

	2021	2020
Personnel
Personnel at year-end	64	56
Personnel, average	63	57
Personnel by category
Administration personnel	64	56
Total	64	56
EUR 1,000	2021	2020
---	---	---
Staff costs
Wages and salaries	5,435	4,309
Pension costs - defined contribution plans	737	573
Other indirect employee costs	127	97
Total	6,299	4,979

Employee benefits of the Board of Directors and top management are disclosed in point 32 "Related party transactions" of the notes to the consolidated financial statements.

4 AUDIT FEES

EUR 1,000	2021	2020
Auditing, KPMG Oy Ab	39	34
Auditor's statements based on laws and regulations, KPMG Oy Ab	5	2
Other services (tax services), KPMG Oy Ab	38	51
Other services (other services), KPMG Oy Ab	8	2
Total	89	90

5 OTHER OPERATING EXPENSES

EUR 1,000	2021	2020
Leasing and rents	1,885	1,514
IT costs	4,144	3,411
Services from Group companies	620	511
Other operating expenses	1,854	1,820
Total	8,503	7,256

6 FINANCIAL INCOME

EUR 1,000	2021	2020
Intra-Group dividend income	1,000	700
Dividend and interest income from others	10	7
Interest and other financial income, Intra-Group	40	85
Foreign exchange gain	181	14
Total	1,230	806

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7 FINANCIAL EXPENSES

EUR 1,000	2021	2020
Intra-Group interest expense	-2	0
Interest expense on borrowings from others	433	375
Foreign exchange loss	16	404
Total	447	779

8 APPROPRIATIONS

EUR 1,000	2021	2020
Group contributions received	13,000	11,000
Increase (-) / decrease (+) in depreciation in excess of plan	-20	-13
Total	12,980	10,987

9 INCOME TAXES

EUR 1,000	2021	2020
Tax on income from operations	2,915	2,599
Tax corrections for previous accounting periods	1	-70
Total	2,916	2,529

NOTES TO THE BALANCE SHEET, PARENT COMPANY

10 INTANGIBLE ASSETS, PARENT COMPANY

2021 EUR 1,000	Intangible rights	Internally created intangible assets	Other intangible assets	Advance payments	Goodwill	Total
Acquisition cost Jan 1	5,514	0	153	0	2,500	8,167
Additions	116	0	0	77	0	193
Acquisition cost Dec 31	5,631	0	153	77	2,500	8,360
Cumulative amortization Jan 1	-5,033	0	-153	0	-1,527	-6,713
Amortization for the financial year	-226	0	0	0	-212	-438
Cumulative amortization Dec 31	-5,260	0	-153	0	-1,739	-7,151
Book value Dec 31, 2021	371	0	0	77	761	1,209
2020 EUR 1,000	Intangible rights	Internally created intangible assets	Other intangible assets	Advance payments	Goodwill	Total
---	---	---	---	---	---	---
Acquisition cost Jan 1	5,451	84	153	28	2,500	8,217
Additions	28	0	0	6	0	35
Disposals	0	-84	0	0	0	-84
Reclassifications between items	35	0	0	-35	0	0
Acquisition cost Dec 31	5,514	0	153	0	2,500	8,167
Cumulative amortization Jan 1	-4,768	-28	-153	0	-1,314	-6,263
Cumulative amortization on disposals	0	56	0	0	0	56
Amortization for the financial year	-266	-28	0	0	-212	-506
Cumulative amortization Dec 31	-5,033	0	-153	0	-1,527	-6,713
Book value Dec 31, 2020	481	0	0	0	973	1,454

Etteplan

BOARD OF DIRECTORS' REVIEW

FINANCIAL STATEMENTS

INVESTOR INFORMATION

FINANCIAL REVIEW

11 TANGIBLE ASSETS, PARENT COMPANY

2021 EUR 1,000	Machinery and equipment	Other tangible assets	Total
Acquisition cost Jan 1	1,288	59	1,347
Additions	62	6	68
Acquisition cost Dec 31	1,350	64	1,414
Cumulative depreciation Jan 1	-1,160	-55	-1,215
Depreciation for the financial year	-30	-1	-31
Cumulative depreciation Dec 31	-1,190	-56	-1,246
Book value Dec 31, 2021	160	8	169
2020 EUR 1,000	Machinery and equipment	Other tangible assets	Total
---	---	---	---
Acquisition cost Jan 1	1,161	55	1,217
Additions	127	3	130
Acquisition cost Dec 31	1,288	59	1,347
Cumulative depreciation Jan 1	-1,143	-55	-1,198
Depreciation for the financial year	-17	0	-17
Cumulative depreciation Dec 31	-1,160	-55	-1,215
Book value Dec 31, 2020	128	3	131

12 INVESTMENTS, PARENT COMPANY

2021 EUR 1,000	Shares in Group companies	Other investments	Total
Acquisition cost Jan 1	125,110	20	125,129
Increases	14,994	0	14,994
Acquisition cost Dec 31	140,104	20	140,124
Book value Dec 31, 2021	140,104	20	140,124
2020 EUR 1,000	Shares in Group companies	Other investments	Total
---	---	---	---
Acquisition cost Jan 1	120,883	20	120,903
Increases	4,878	0	4,878
Decreases	-652	0	-652
Acquisition cost Dec 31	125,110	20	125,129
Book value Dec 31, 2020	125,110	20	125,129

The parent company's direct holdings in Group companies are listed in point 32 "Related-party transactions" of the notes to the consolidated financial statements.

13 NON-CURRENT RECEIVABLES

EUR 1,000	2021	2020
Non-current receivables from Group companies
Loan receivables	4,455	1,835
Non-current receivables, total	4,455	1,835

Etteplan
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FINANCIAL STATEMENTS
INVESTOR INFORMATION
FINANCIAL REVIEW | 57

CURRENT RECEIVABLES

EUR 1,000	2021	2020
Current receivables from Group companies
Trade receivables	2,117	2,323
Internal bank account receivables	2,777	6,675
Group contribution receivables	13,000	11,000
Other receivables	1,556	1,487
Current receivables from others
Current prepayments and accrued income	1,822	1,043
Tax receivables	124	0
Other short-term receivables	0	8
Current receivables from others	21,397	22,535
Current prepayments and accrued income
Tax receivables	1,531	830
Other short-term receivables	291	213
Current receivables, total	1,822	1,043

CASH AND CASH EQUIVALENTS

EUR 1,000	2021	2020
Bank accounts and cash	23,718	16,989
Total	23,718	16,989

Cash and cash equivalents in the balance sheet correspond with the financial assets in the cash flow statement.

EQUITY

EUR 1,000	2021	2020
Restricted equity
Share capital Jan 1	5,000	5,000
Share capital Dec 31	5,000	5,000
Share premium account Jan 1	6,701	6,701
Share premium account Dec 31	6,701	6,701
Restricted equity, total	11,701	11,701
Unrestricted equity
Unrestricted equity fund Jan 1	20,215	20,215
Share issue	1,936	0
Unrestricted equity fund Dec 31	22,150	20,215
Treasury shares Jan 1	-682	-1,323
Additions	-1,382	0
Share-based incentive plan	0	641
Treasury shares Dec 31	-2,064	-682
Retained earnings Jan 1	34,262	31,989
Dividends paid	-8,461	-8,682
Share-based incentive plan	0	-45
Retained earnings Dec 31	25,802	23,261
Profit for the financial year	11,856	11,001
Unrestricted equity total	57,744	53,795
Shareholders' equity, total	69,445	65,496

Etteplan

BOARD OF DIRECTORS' REVIEW

FINANCIAL STATEMENTS

INVESTOR INFORMATION

FINANCIAL REVIEW

EUR 1,000	2021	2020
Distributable funds Dec 31
Retained earnings	25,802	23,261
Treasury shares	-2,064	-682
Unrestricted equity fund	22,150	20,215
Profit for the financial year	11,856	11,001
Distributable funds Dec 31	57,744	53,795
Number of shares Jan 1 (1,000 pcs)	25,083	24,963
Number of shares Dec 31 (1,000 pcs)	25,083	24,963

Additional information regarding the shares is presented in point 25 "Shares and share capital" of the notes to the consolidated financial statements.

17 ACCUMULATED APPROPRIATIONS

EUR 1,000	2021	2020
Depreciation in excess of plan	282	261
Total	282	261

18 NON-CURRENT LIABILITIES

EUR 1,000	2021	2020
Loans from financial institutions	30,000	12,500
Accrued liabilities on acquisitions	800	0
Total	30,800	12,500

19 CURRENT LIABILITIES

EUR 1,000	2021	2020
Current liabilities to group companies
Trade payables	96	85
Other payables	0	15
Internal bank account liabilities	60,701	58,538

Current liabilities to others
Trade payables	1,760	1,712
Other liabilities	366	340
Accrued expenses	4,121	3,005
Income tax liability	0	489
Accrued liability on acquisitions	0	132
Loans from financial institutions	23,500	25,500
Current liabilities total	90,544	89,816

Main items included in accrued expenses
Interest liabilities	55	63
Accrued employee expenses	3,657	2,514
Other accrued expenses	408	428
Total	4,121	3,005

Etteplan

BOARD OF DIRECTORS' REVIEW

FINANCIAL STATEMENTS

INVESTOR INFORMATION

FINANCIAL REVIEW

20 PLEDGES, MORTGAGES AND GUARANTEES

EUR 1,000	2021	2020
Guarantees given
Other contingencies	320	320
Guarantees for Group companies	155	91

Finance Lease liabilities
For payment in next financial year	2,995	2,736
For payment later	2,680	2,317

Operating Lease liabilities
For payment in next financial year	556	444
For payment later	707	1,148

Credit limits
Total credit limit available	8,439	8,491
Pledges, mortgages and guarantees total	15,853	15,547

Etteplan Oyj has given a Parent Company guarantee totalling EUR 663 thousand for loans, of which EUR 0 is in use, for Etteplan Poland sp.z.o.o.

Etteplan

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INVESTOR INFORMATION

FINANCIAL REVIEW | 60

Shares and shareholders

Share capital and shares

On December 31, 2021, Etteplan Oyj's share capital, entered in the trade register and paid in full, was EUR 5,000,000 and the number of shares was 25,083,308. The Company has one series of shares. Each share confers the right to one vote at the General Meeting and the same right to a dividend.

Share quote

Etteplan's shares are listed on Nasdaq Helsinki Ltd's Mid Cap market capitalization group in the Industrials sector under the ETTE ticker (FI0009008650).

Share price trend and turnover

The number of Etteplan Oyj shares traded in 2021 was 1,539,757 (2020: 1,564,244), for a total value of EUR 25.15 (14.80) million. The share price low was EUR 12.95, the high EUR 19.45, the average EUR 16.33 and the closing price EUR 16.90. Market capitalization on December 31, 2021, was EUR 421,22 (322.25) million.

Etteplan Oyj and Lago Kapital Ltd have a market making agreement in compliance with the Liquidity Providing (LP) requirements issued by Nasdaq Helsinki Ltd, under which the market making began on February 17, 2020. According to the agreement, Lago Kapital Ltd will provide Etteplan Oyj's share with bids and offers so that the maximum spread is 4 percent, calculated from the bid quotation. Both bid and offer side shall include a number of shares corresponding to the value of at least EUR 3,000. Lago Kapital Ltd undertakes to submit bids and offers for the share of Etteplan Oyj on the trading system maintained by Nasdaq Helsinki Ltd on each trading day for at least 85 percent of the time of continuous trading. The market making agreement aims at increasing the share's liquidity and decreasing the share price volatility, thus facilitating trading for private investors in particular.

Shareholders

At the end of 2021, the Company had 3,604 (3,323) registered shareholders. In total, 557,449 shares, or 2.22 (1.70) percent of all shares, were nominee-registered.

Flaggings

Etteplan Oyj received no flagging notices during year 2021.

Treasury shares

In its meeting on May 21, 2021, Etteplan Oyj's Board of Directors decided to initiate a share repurchase program of Etteplan's own shares in accordance with the authorization given to it by the Annual General Meeting on April 8, 2021. The shares were repurchased in order to be used to fulfill obligations pertaining to the share-based incentive plan for the Group's key personnel. The number of repurchased shares did not exceed 80,000 shares and the corresponding number of voting rights, which corresponded to approximately 0.32 percent of the total number of Etteplan's shares. According to the Board's decision, the maximum repurchase price was EUR 19.00 per share. Shares were repurchased on Nasdaq Helsinki Ltd at the market price quoted at the time of the repurchase, as provided by the regulations on public trading of shares.

The repurchasing of shares began on May 21, 2021, and ended on October 12, 2021, when the maximum amount of repurchased shares was reached.

The Company does not have a share repurchase program in effect.

Etteplan

BOARD OF DIRECTORS' REVIEW

FINANCIAL STATEMENTS

INVESTOR INFORMATION

FINANCIAL REVIEW

Board authorizations

The repurchase of the Company's own shares will reduce the non-restricted equity of the Company.

The authorization is valid for two (2) years from the date of the resolution of the Annual General Meeting, starting on April 8, 2021, and ending on April 7, 2023.

Directed share issue to the owners of Skyrise.tech S.A. in 2021

Etteplan
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INVESTOR INFORMATION
FINANCIAL REVIEW | 62

The shares were conveyed, and they bear all shareholder rights starting from their entry into the trade register. However, trading in the new shares will only be possible after the expiration of the three-year lock-up period agreed upon at the time of the transaction.

Directed share issue to the owners of Syncore Technologies AB in 2022

As part of the financing of the transaction, Etteplan Oyj's Board of Directors, at its meeting held on February 1, 2022, made a conditional decision on the share issue based on the share issue authorization given to the Board of Directors by the Annual General Meeting on April 8, 2021. The directed share issue was related to the acquisition of Syncore Technologies AB. In accordance with the terms of the transaction, the purchase price was paid through a share issue to the sellers and cash. The contract of sale, which was a condition of the decision, was signed on February 2, 2022, and at the same time the sellers subscribed for 117,485 Etteplan new shares as a part payment for the purchase amount. The subscription price per share to be paid for the shares was EUR 16.42.

After the share issue the number of Etteplan shares will be 25,200,793.

Option rights

The Company does not currently have a share option program.

Etteplan Oyj's incentive plan for key personnel 2020-2022

The plan includes one earning period which comprises calendar years 2020-2022. The earning period covers the same years as Etteplan's strategy update published in 2019. The plan is in line with Etteplan's strategy and supports the achievement of the Company's financial targets.

The earnings criteria are Etteplan Group's revenue increase and the development of Total Shareholder Return (TSR). The potential reward will be paid partly in the Company's shares and partly in cash after the end of the earning period. The proportion to be paid in cash is intended to cover taxes and tax-related costs arising from the reward to the key personnel.

Etteplan

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INVESTOR INFORMATION

FINANCIAL REVIEW | 63

Major shareholders, December 31, 2021

Name	Number of shares	Proportion of shares and votes, %
Ingman Group Oy Ab	16,580,000	66.10
Oy Fincorp Ab	2,517,000	10.03
Varma Mutual Pension Insurance Company	985,593	3.93
SEB Gyllenberg Finland Small Cap Fund	480,000	1.91
Tuori Klaus Tapani	309,134	1.23
Tuori Aino Mirjami	308,275	1.23
Ilmarinen Mutual Pension Insurance Company	288,311	1.15
Elo Mutual Pension Insurance Company	209,662	0.84
VAS Invest Oy	194,035	0.77
Taaleritehdas Mikro Markka Fund	164,048	0.65
Etteplan Oyj	159,046	0.63
Näkki Juha Antti Ilmari	110,848	0.44
OP-Finland Micro Cap	103,387	0.41
Mäkelä Esa Tapio	58,818	0.23
Kylänpää Osmo Olavi	53,200	0.21
Ingman Robert Carl	50,000	0.20
Säästöpankki Small Cap Mutual Fund	49,241	0.20
Kurra Jorma	41,841	0.17
Burmeister Dorrit Elisabeth	32,313	0.13
Hemholmen Oy Ab	31,200	0.12
Other shareholders	1,799,907	7.18
Nominee-registered shares	557,449	2.22
Total	25,083,308	100.00

Breakdown of shareholdings by size class, December 31, 2021

Number of shares, pcs	Number of shareholders	Proportion of shareholders, %	Number of shares	Proportion of shares and votes, %
1–100	1,736	48.17	64,850	0.26
101–1,000	1,505	41.76	567,333	2.26
1,001–10,000	320	8.88	881,028	3.51
10,001–100,000	29	0.80	803,811	3.20
100,001–1,000,000	12	0.33	3,669,286	14.63
> 1,000,000	2	0.06	19,097,000	76.13
Total	3,604	100.00	25,083,308	100.00

Breakdown of shareholdings by owner group, December 31, 2021

Name of the sector	Number of shareholders	Number of shares	Proportion of shares and votes, %
National economy total (domestic sector)
Companies	115	17,146,011	68.36
Financial and insurance institutions	19	3,356,776	13.38
Public sector entities	5	1,487,279	5.93
Households	3,432	2,489,506	9.92
Non-profit institutions	12	25,639	0.10
Foreigners	21	20,648	0.08
Nominee-registered shares		557,449	2.22
Total	3,604	25,083,308	100.00

Etteplan
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INVESTOR INFORMATION
FINANCIAL REVIEW | 64

Board of Directors' dividend proposal

On December 31, 2021, the parent company's distributable shareholders' equity amounted to EUR 57.7 million, of which the net profit for the financial year was EUR 11.9 million.

The Board of Directors proposes that from the distributable funds at the disposal of the Annual General Meeting, a dividend of EUR 0.40 per share be paid on the Company's externally owned shares, for a maximum amount of EUR 10.0 million. Dividend will not be paid out to shares that are company-held on the record date of dividend payout, April 8, 2022.

No substantial changes have occurred in the financial position of the Company since the end of the financial year. The Company's liquidity is good and the Board of Directors judges that the proposed distribution of dividend will not endanger the Company's solvency.

It is proposed that the dividend be paid on April 19, 2022.

Espoo, February 10, 2022

Robert Ingman
Chairman of the Board

Matti Huttunen
Member of the Board

Päivi Lindqvist
Member of the Board

Leena Saarinen
Member of the Board

Mikko Tepponen
Member of the Board

Etteplan
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FINANCIAL REVIEW | 65

Auditor's Report

To the Annual General Meeting of Etteplan Oyj

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Etteplan Oyj (business identity code 0545456-2) for the year ended December 31, 2021. The financial statements comprise the consolidated statement of financial position, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including a summary of significant accounting policies, as well as the parent company's balance sheet, income statement, statement of cash flows and notes.

In our opinion

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

Our opinion is consistent with the additional report submitted to the Board of Directors.

Basis for Opinion

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

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

In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in note 13 to the consolidated financial statements.

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

Materiality

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

Etteplan
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INVESTOR INFORMATION
FINANCIAL REVIEW | 66

Key Audit Matters

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

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

THE KEY AUDIT MATTER

HOW THE MATTER WAS ADDRESSED IN THE AUDIT

Valuation of goodwill – Accounting Policies and Note 22 to the Consolidated Financial Statements

Goodwill, totaling EUR 92.4 million, has increased by EUR 9.1 million during the financial period as a result of acquisitions, and is a significant individual item in the consolidated balance sheet.
Goodwill is tested for impairment when indicators of impairment exist, or at least annually. Goodwill impairment testing is conducted by comparing the carrying value with the recoverable amount using a discounted cash flow model. Estimating future cash flows underlying the impairment tests involves a significant element of management judgment, particularly in respect of growth in net sales, profitability and discount rates.
Valuation of goodwill is considered a key audit matter due to the significant carrying value and high level of management judgement involved.
We critically analyzed the management's assumptions that form the basis on which the cash flow projections for future years are prepared.
We involved KPMG valuation specialists to assess the appropriateness of the discount rate used and the technical integrity of calculations as well as for comparison of the assumptions used to the market and industry-specific data.
In addition, we assessed the adequacy of the sensitivity analyses and the appropriate presentation of notes related to impairment tests in the consolidated financial statements.

THE KEY AUDIT MATTER

HOW THE MATTER WAS ADDRESSED IN THE AUDIT

Revenue Recognition – Accounting Policies and Note 7 to the Consolidated Financial Statements

Revenue recognition consists mainly of revenue from rendering of services. Total revenue amounted to EUR 300.1 million.
Revenue recognition is a key audit matter due to the significance of revenue when assessing the size of business, growth and profitability of Etteplan. Revenue recognition involves a risk of revenue being recognized in the incorrect period and at inaccurate amount due to related management estimates and large volumes of transaction data.
For projects, where either a fixed price or a target price has been determined, revenue is recognized over time based on the percentage of completion method. The percentage of completion is determined as the proportion of actual costs to the total estimated project costs. Inaccurate cost estimates lead to erroneous revenue recognition.
We evaluated the company's revenue recognition and accounting policies by reference to the principles of revenue recognition determined under IFRS.
We tested the effectiveness of key internal controls in place over the completeness and accuracy of revenue. We also assessed the operative effectiveness of relevant IT systems for financial reporting purposes.
We compared total revenue estimates to customer contracts for projects where revenue is recognized over time based on the project's percentage of completion. In addition, we analyzed working hours recorded for work in progress projects in comparison to total hours estimated by the management. We also considered the appropriateness of the process for updating estimated project costs and percentages of completion.
In addition, we performed substantive audit procedures to evaluate the completeness and accuracy of revenue recorded and assessed the effect of other events which require management judgment.

Etteplan

BOARD OF DIRECTORS' REVIEW

FINANCIAL STATEMENTS

INVESTOR INFORMATION

FINANCIAL REVIEW

Responsibilities of the Board of Directors and the Managing Director for the Financial Statements

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

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

Auditor's Responsibilities for the Audit of the Financial Statements

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

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

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company's or the group's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of the Board of Directors' and the Managing Director's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company's or the group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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

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

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

Other Reporting Requirements

Information on our audit engagement

KPMG Oy Ab was first appointed as auditors by the Annual General Meeting on April 4, 2017, and our appointment represents a total period of uninterrupted engagement of 5 years.

Other Information

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

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

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

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Helsinki, February 28, 2022

KPMG OY AB

Kim Järvi

Authorized Public Accountant, KHT

Etteplan

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FINANCIAL STATEMENTS

INVESTOR INFORMATION

FINANCIAL REVIEW | 69

Investor information

Etteplan's shares are listed on Nasdaq Helsinki Ltd's Mid Cap market capitalization group in the Industrials sector under the ETTE ticker.

Etteplan's investor relations principles

According to the Disclosure Policy approved by Etteplan's Board of Directors, Etteplan is committed to active and open communication with all parties, regardless of whether the information in question is positive or negative for the Company. The Company's communications are transparent, credible, proactive and consistent in all circumstances. The principle is to be open, truthful and quick in all communications. The aim is to provide truthful, sufficient and up-to-date information on the Company's strategy, businesses, markets and financial situation to provide the capital markets with relevant information on Etteplan as an investment. Etteplan's Disclosure Policy is available on the Company's website at www.etteplan.com. Investor relations are always part of the Company's other communications. Investor relations are based on the same core messages and values as the Company's other operations and communications. In all of its communications, Etteplan emphasizes consistency and a high standard of ethics and complies with the guidelines and regulations concerning listed companies.

A stable dividend payer

Etteplan's aim is to increase shareholder value and to be a stable dividend payer. The dividend has been approximately 50 percent of earnings per share.

The Annual General Meeting on April 8, 2021, resolved, in accordance with the proposal of the Board of Directors, to pay a dividend of EUR 0.34 per share for the financial year 2020. The remaining funds were to be left in unrestricted equity. The dividend was paid to the shareholders registered on the record date, April 12, 2021, in the shareholders' register maintained by Euroclear Finland Ltd. The dividend was paid on April 19, 2021.

Earnings per share and Dividend

Share price development 2017-2021

The Board of Directors proposes to the Annual General Meeting of April 6, 2022 that a dividend of EUR 0.40 per share be paid for the financial year 2021. If the Annual General Meeting approves the Board's proposal on the payment of dividend, the dividend shall be paid to the shareholders registered on the record date of the payment of dividend, April 8, 2022, in the shareholders' register maintained by Euroclear Finland Ltd. The dividend payment date proposed by the Board of Directors is April 19, 2022.

Outlook

Etteplan may issue estimates of its market outlook and the development of the Company's revenue and result in its Financial Statement Review, Half Year Financial Report and Interim Reports. Etteplan issues guidance for revenue and operating profit (EBIT) as a numerical range. Outlook statements are approved by Etteplan's Board of Directors. Etteplan does not publish quarterly forecasts. Future outlook statements and result estimates may be numerical or verbal and they may concern the development of revenue, the result, the balance sheet or the cash flow. The estimates published by the Company are based on the views of future development at the time of publication and they are generally issued for the current financial year.

Etteplan

BOARD OF DIRECTORS' REVIEW

FINANCIAL STATEMENTS

INVESTOR INFORMATION

FINANCIAL REVIEW

Periodic fluctuation

Etteplan's business is subject to periodic fluctuation due to the number of working days, holiday seasons and the timing of product development and investment projects in customer companies, which mainly take place in the spring and the latter part of the year. The revenue in the third quarter is typically lower than that of other quarters. Only the key figures in the Financial Statements for the entire year provide an appropriate description of the Company's financial situation.

Silent period

Etteplan observes a silent period of 30 days prior to the announcement of financial results. During this period, the Company's representatives do not meet or otherwise make contact with shareholders, investors, analysts, other market participants or the financial media. The Company's representatives do not comment on financial development, the market situation or the future outlook during the silent period. At other times, we are pleased to respond to inquiries and arrange meeting.

Analysts following Etteplan

Evli Bank Plc, Jerker Salokivi, tel. +358 9 4766 9149
Inderes Oy, Juha Kinnunen, tel. +358 40 778 1368
Nordea Bank Plc, Pasi Väisänen, tel. +358 9 5300 5192

Upon request, the Company will review analyses or reports compiled by an analyst for factual errors, insofar as the reports and analyses are based on materials released by the Company. Etteplan does not comment on or take any responsibility for estimates or forecasts published by capital market representatives.

Investor relations contacts

Juha Näkki, President and CEO, tel. +358 10 307 2077
Outi Torniainen, Senior Vice President, Communications and Marketing, tel. +358 10 307 3302
Helena Kukkonen, CFO, +358 10 307 2003

Important dates in 2022:

Financial Statement Review: February 10, 2022
Record date for participation in the General Meeting: March 25, 2022
Annual Review: week 11/2022 at the latest
Deadline for registration for the General Meeting: April 1, 2022, at 10 a.m.
General Meeting: April 6, 2022, at 9 a.m.
Record date for the payment of dividend: April 8, 2022
Dividend payment date: April 19, 2022
Interim Report 1-3/2022: Thursday, May 5, 2022
Half Year Financial Report 1-6/2022: Wednesday, August 10, 2022
Interim Report 1-9/2022: Friday, October 28, 2022

Etteplan Oyj publishes its Annual Review and other financial reports and stock exchange releases in Finnish and English. Financial reports, webcasts of the announcement of financial results and releases are made available at www.etteplan.com immediately after their publication.

Etteplan
BOARD OF DIRECTORS' REVIEW
FINANCIAL STATEMENTS
INVESTOR INFORMATION
FINANCIAL REVIEW | 71

General meeting of shareholders

Etteplan Oyj's Annual General Meeting will be held on Wednesday, April 6, 2022, starting at 9 a.m. in Espoo, Finland at Innopoli 1 (Leonardo auditorium), Tekniikantie 12, 02150 Espoo. The invitation to the General Meeting of Shareholders will be published according to Etteplan Oyj's Articles of Association on the Company website www.etteplan.com.

Right to attend

Every shareholder who, on March 25, 2022, is registered in the shareholder's register maintained by Euroclear Finland Ltd has the right to participate in the Annual General Meeting.

Notification of attendees

To be able to participate in the Annual General Meeting, the shareholder must register for this no later than 10 a.m. on April 1, 2022, either by e-mail at [email protected] or by telephone at +358 10 307 3222. Shareholders may also register by sending a registration letter to Etteplan Oyj, Yhtiökokous 2022, Tekniikantie 4, 02150 Espoo, Finland. The letter must arrive before the registration deadline. Any proxy documents, identified and dated, must be delivered to the Company for inspection to the address mentioned above prior to the expiry of the registration period.

Shareholder register information

Shareholders should notify the bank, brokerage firm or other account operator with which they have a book-entry securities account about changes in address or account numbers for the payment of dividends and other matters related to their holdings in the share.

Etteplan
BOARD OF DIRECTORS' REVIEW
FINANCIAL STATEMENTS
INVESTOR INFORMATION
FINANCIAL REVIEW | 72

AI assistant

Etteplan Oyj — Annual Report 2021

3264_rns_2022-03-11_3220705e-a40c-4f92-81ac-2a4ff28bb979.pdf

Financial Review

Content

Board of Directors' review January 1–December 31, 2021

Operating environment

Development of demand by customer industry

Development of demand in Etteplan's operating countries

Revenue

Result

Cash flow and financial position

Capital expenditure

Personnel

Business review

Acquisitions

Governance

Simplifying the Group structure

General meeting

Board authorizations

Shares

Trading in shares

Share repurchase program

Flaggings

Etteplan Oyj’s incentive plan for key personnel 2020–2022

Event after the review period: Change in Etteplan’s Management Group

Event after the review period: Etteplan acquired Cognitas from Canon and becomes a market-leading company in technical documentation in Germany

Annual General Meeting 2021

Corporate Governance statement

Statement of non-financial information

Non-IFRS key figures

Operating profit (EBITA) and EBITA, %

Organic/un-organic growth and growth in comparable currencies

The share of revenue represented by Managed Services

Etteplan Oyj

Consolidated Financial Statements

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 GENERAL INFORMATION

2 A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis for preparation

2.6 Tangible assets

2.7 Impairment of non-financial assets

2.8 Financial instruments

Recognition

Classification

Categories of financial assets:

Categories of financial liabilities:

Subsequent measurement

Impairment

2.9 Inventory

2.10 Equity

2.11 Current and deferred income tax

2.12 Employee benefits

Pension obligations

Bonus plans

Share-based incentive plans

2.13 Revenue recognition

Government grants

2.14 Interest and dividend income

2.15 Lease agreements

4 MANAGEMENT OF FINANCIAL RISKS

4.1 Financial risk factors

4.1.1 Foreign-currency risk

Transaction risk

Translation risk

4.1.2 Interest risk

4.1.3 Financing and liquidity risk

Maturity analysis of financial liabilities

Non-monetary changes in interest-bearing liabilities

4.1.4 Counterparty and credit risk

Expected credit loss allowance

4.2 Capital risk management

5 BUSINESS COMBINATIONS

Business combinations in financial year 2021

TekPartner A/S (100%)

F.I.T. Fahrzeug Ingenieurtechnik GmbH (100%)

Skyrise.tech Sp. z o.o. sp.k. (100%)

Adina Solutions Oy (100%)

Etteplan Oyj Annual Report 2021