Harju Elekter

Interim / Quarterly Report • Jul 28, 2021

CONSOLIDATED UNAUDITED INTERIM REPORT FOR THE II QUARTER AND 6 MONTH OF 2021

Business name: AS Harju Elekter Business registry code: 10029524 Phone: +372 67 47 400 E-mail: info.he@harjuelekter.com Internet homepage: https://harjuelekter.com/ Reporting period: 1 January – 30 June 2021

Address: Paldiski mnt.31, 76606 Keila Auditor: AS PricewaterhouseCoopers Financial year: 1 January – 31 December 2021

TABLE OF CONTENTS

ORGANISATION	3
MANAGEMENT REPORT	5
SUMMARY OF THE SECOND QUARTER AND 6 MONTH RESULTS	5
COMMENTARY FROM THE MANAGEMENT	7
CHANGES IN THE STRUCTURE OF THE GROUP	7
MAIN EVENTS	7
EVENTS AFTER THE REPORTING DATE	8
OPERATING RESULTS	9
Revenue	9
Business segments	9
Markets	10
Operating expenses	11
PERSONNEL	11
ANNUAL GENERAL MEETING OF SHAREHOLDERS	12
SHARES OF AS HARJU ELEKTER AND SHAREHOLDERS	12
CONFIRMATIONS TO THE MANAGEMENT REPORT	14
INTERIM FINANCIAL STATEMENT	15
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	15
CONSOLIDATED STATEMENT OF PROFIT AND LOSS	16
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	16
CONSOLIDATED STATEMENT OF CASH FLOWS	17
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	18
NOTES TO INTERIM FINANCIAL STATEMENT	19
Note 1 Accounting methods and valuation principles used in the consolidated interim report	19
Note 2 Financial investments	19
Note 3 Investment properties	20
Note 4 Property, plant and equipment; intangible assets	20
Note 5 Borrowings	21
Note 6 Segment reporting	21
Note 7 Basic and diluted earnings per share	23
Note 8 Information on the statement of cash flows line items	23
Note 9 Transactions with related parties	24
THE MANAGEMENT BOARD DECLARATION FOR THE UNAUDITED FINANCIAL STATEMENTS	25

ORGANISATION

AS Harju Elekter's share in its subsidiaries is 100%, unless otherwise stated in the chart.

ESTONIA AS HARJU ELEKTER

The Parent company of the Group, focused on coordination of co-operation within the Group's companies and managing industrial real estate holdings. Located in Keila

AS HARJU ELEKTER ELEKTROTEHNIKA

Manufacturer of electrical equipment for energy distribution, industrial and construction sectors, located in Keila

AS HARJU ELEKTER TELETEHNIKA

Producer of customer-based sheet metal products for the electrical engineering and telecom sector, located in Keila

ENERGO VERITAS OÜ (81%)

A company trading in electrical materials and equipment in Estonia

FINLAND

SATMATIC OY*

Manufacturer of industrial control and automation devices, located in Ulvila, Kerava and in Kurikka

TELESILTA OY

Electrical engineering company specializing in electrical contracting for the shipbuilding industry, located in Uusikaupunki

HARJU ELEKTER KIINTEISTÖT OY

Industrial real estate holding company

LITHUANIA HARJU ELEKTER UAB

Engineering and contract manufacturing of multidrive, MCC's and distribution systems, located in Panevžys

SWEDEN

HARJU ELEKTER AB

Engineering company for MV/LV power and distribution solutions for the construction, infrastructure, and renewable energy sector; manufacturer of prefabricated technical houses located in Malmö, Borlänge, Stockholm, Grytgöl, Borås, Luleå and Västerås

HARJU ELEKTER SERVICES AB Sales office in Stockholm

* A more detailed overview of the changes in the Group structure can be found on page 7

STRATEGICAL INVESTMENTS (30 June 2021)

OÜ SKELETON TECHNOLOGIES GROUP (7.22%) SIA ENERGOKOMPLEKSS (14%) IGL-Technologies Oy (5.5%)

ESTONIA LATVIA FINLAND

Developer and manufacturer of ultra-capacitors MV/LV equipment sales organisation Technology company developing in Riga parking and electric vehicles

charging systems

Main activities

Harju Elekter is an international industrial group with more than 50 years of experience, being engaged in the development and production of electricity equipment and automation solutions. The customers of Harju Elekter are predominantly large distribution network, industrial and maritime companies in the Nordic Countries. An increasing portion of Harju Elekter's technical solutions are aimed at the renewable energy sector, with offering complete solutionsfor solar power plants, electric vehicle charging stations and other related solutions. The main activities are supported by a modern company producing sheet metal details and products.

The business activities of the Group are divided into three main areas:

• Production designing, selling, manufacturing, and after-sales servicing of power distribution, switching and converting devices and automation, process control and industrial control equipment.
• Industrial real estate developing of industrial real estate, project management, renting and the accompanying services to rental partners and to the Harju Elekter Group companies.
• Other operations financial investment management, retail and project-based sale of electrical products, and electrical installation works in shipbuilding.

Mission

As a responsible industrial group, Harju Elekter provides customers and partners with expert, high-quality and environmentally friendly electrical and automation solutions.

Goal

We want to be successful in the long term, adding value for shareholders and being the first choice for our customers and partners and providing to our international team motivating work and development opportunities.

Vision

To grow into one of the largest electrical and automation equipment designers and manufacturers in the Nordic countries.

Values

Development - We are keen to learn and innovative Cooperation - We operate as a team Reliability - No bargaining in quality

Risks

• Increase in competition
• Market risk
• Currency risk
• Lack of highly skilled specialists
• Rapid growth of wages
• Price and availability of raw materials
• Occupancy rate of rental premises
• Future of financial investments
• Information systems unplanned downtime and loss of data

SUPERVISORY AND MANAGEMENT BOARDS

The Supervisory Board of AS Harju Elekter has 5 members with the following membership: Mr. Endel Palla (Chairman and R&D manager of AS Harju Elekter), Mr. Arvi Hamburg (Member of the Estonian Association of Engineers and Committee of Energy of the Academy of Sciences), Mr. Aare Kirsme (Member of the Supervisory Board of AS Harju KEK), Mrs. Triinu Tombak (financial consultant, Managing Director of TH Consulting OÜ) and Mr. Andres Toome (consultant, Managing Director of OÜ Tradematic).

Management Board of AS Harju Elekter has two members as of the reporting date: Mr. Tiit Atso (Chairman of the Group), and Mr. Aron Kuhi-Thalfeldt (Member of the Management Board, Head of the Real Estate and Energy Division).

Information about the education and career of the members of the management and Supervisory Boards as well as their membership in the management bodies of companies and their shareholdings have been published on the home page of the company at http://www.harjuelekter.com/.

MANAGEMENT REPORT

SUMMARY OF THE SECOND QUARTER AND 6 MONTH RESULTS

Revenue

The revenue for the second quarter of 2021 was 36.3 (Q2 2020: 39.0) million euros and the revenue for the first half of the year was 67.0 (6M 2020: 74.0) million euros.

Financial result

The gross profit for the reporting quarter was 4,306 (Q2 2020: 5,468) thousand euros and the gross profit margin was 11.9% (Q2 2020: 14.0%). Quarterly operating profit (EBIT) amounted to 651 (Q2 2020: 2,156) thousand euros. The operating margin for the second quarter was 1.8% (Q2 2020: 5.5%). The net profit for the reporting quarter was 488 (Q2 2020: 1,971) thousand euros of which the share of the owners of the parent company was 485 (Q2 2020: 1,979) thousand euros. The earnings per share were 0.03 (Q2 2020: 0.11) euros.

The gross profit for the first half of the year was 8,151 (6M 2020: 10,391) thousand euros and the gross profit margin was 12.2% (6M 2020: 14.0%). In the first six months, the operating profit (EBIT) was 1,168 (6M 2020: 3,209) thousand euros. In total, the Group's net profit for the first half of the year was 785 (6M 2020: 2,674) thousand euros and net profit per share was 0.04 (6M 2020: 0.15) euros. Compared to the previous year, the low profitability of the reporting period was mainly affected by lower-than-planned sales, the continuing global shortage of materials, the rapid rise in the price of production materials and the increase in labor costs.

Investments

During the reporting period, the Group invested a total of 3.9 (6M 2020: 2.2) million euros in non-current assets, incl 0.2 (6M 2020: 1.3) million euros in investment properties, 3.5 (6M 2020: 0.8) million euros in property, plant, and equipment and 0.2 (6M 2020: 0.1) million euros in intangible assets. The majority of the investments during the reporting period, i.e. 2.5 million euros, was directed to the expansion of the fourth phase of the production and office building of the Lithuanian subsidiary. The total cost of the investment was 5.5 million euros. In addition, preparations for the construction of the production and storage complex in the Allika Industrial Park, Laohotell III, were launched and investments were made in production technology.

As of the reporting date, the total value of the Group's non-current financial investments was 21.3 (31.12.20: 11.9) million euros. The main part of the increase was provided by the investment of 1.2 million euros in the equity raising round of OÜ Skeleton Technologies Group and the estimated change in the fair value of the entire holding by 7.9 million euros to 18.0 million euros. Furthermore, the Finnish-based subsidiary Harju Elekter Oy acquired a holding of 5.5% in the technology company IGL-Technologies Oy. The transaction price was 0.25 million euros. One million euros was received from the partial sale of securities in the first half of the year, of which the realized profit was 0.3 million euros. The fair value of securities increased by 0.4 million euros during the first half of the year compared to a decrease of 0.8 million euros in the comparable period.

The value of non-current assets in the statement of financial position comprised 58.5% of total assets, i.e., 77.3 (30.06.2020: 65.7) million euros.

Current assets

The Group's current assets increased by 5.0 million euros to 54.8 million euros during the reporting period, including a decrease in cash by 1.3 million to 1.6 million. The decrease in cash was mainly due to the dividends, in the amount of 2.8 million euros, paid out on May 25. Inventories increased by 5.8 million to 24.6 million euros due to delays in deliveries and higher material prices. While in 2020 the Group was able to proactively supply itself with all the necessary materials and components during the crisis, this year the availability of raw materials has become scarce. The employees of the manufacturing company strive to find new opportunities and partners for the acquisition of materials.

Liabilities

As at the reporting date, the Group had liabilities in total of 52.0 million euros, of which current part accounted for 81.7%. During the first half of the year current liabilities increased by 7.5 million euros to 42.4 million euros, incl. increase in trade and other payables by 6.4 million euros and prepayments from customers decreased 2.3 million euros. Borrowings increased by a total of 5.7 million euros during the six months, with current borrowings and noncurrent borrowings being at the end of the period 15.3 and 9.5 million euros, respectively. Non-current loans and leasing have been used in connection with real estate developments in Estonia and Lithuania and for investments in an automatic production equipment.

million euros (6M 2020: 2.7)

Consolidated 6 months REVENUE CHANGE

-9.4%

Consolidated 6 months EBIT CHANGE

-64%

Key indicators	Q2	Q2	+/-	6 months	6 months	+/-
(EUR´000)	2021	2020		2021	2020
Revenue	36,310	39,014	-6.9%	67,028	74,012	-9.4%
Gross profit	4,306	5,468	-21.3%	8,151	10,391	-21.6%
EBITDA	1,638	3,084	-46.9%	3,124	5,027	-37.9%
Operating profit (EBIT)	651	2,156	-69.8%	1,168	3,209	-63.6%
Profit for the period	488	1,971	-75.2%	785	2,674	-70.6%
Incl. attributable to owners of the parent company	485	1,979	-75.5%	795	2,708	-70.6%
Earnings per share (EPS) (euros)	0.03	0.11	-75.5%	0.04	0.15	-70.6%
Ratios	Q2	Q2		6 months	6 months
(%)	2021	2020	+/-	2021	2020	+/-
Distribution cost to revenue	3.6	3.0	0.6	3.8	3.4	0.4
Administrative expenses to revenue	6.7	6.0	0.7	6.9	6.6	0.3
Labour cost to revenue	21.1	17.3	3.8	22.3	18.1	4.2
Gross margin (gross profit / revenue)	11.9	14.0	-2.1	12.2	14.0	-1.8
EBITDA marginal (EBITDA / revenue)	4.5	7.9	-3.4	4.7	6.8	-2.1
Operating margin (EBIT / revenue)	1.8	5.5	-3.7	1.7	4.3	-2.6
Net margin (profit for the period / revenue)	1.3	5.1	-3.8	1.2	3.6	-2.4
Return of equity ROE (profit for the period/average equity)	0.6	3.0	-2.4	1.0	3.0	-2.0
				30.06.2021	30.06.2020	+/-
Equity ratio (equity / total assets) (%)					59.2	1.4
Current ratio (current assets / short-term liabilities)				60.6 1.3	1.5	-0.2
Quick ratio ((current assets - inventories) / current liabilities)				0.7	0.9	-0.2

COMMENTARY FROM THE MANAGEMENT

The second quarter of Harju Elekter can be characterised by forward-looking investments and the intensification of the global raw material deficit.

The Group's financial results and profitability were inevitably affected by the global crisis in raw materials and rising material prices. These factors intensified compared to the previous quarter and it reflected in higher production costs as well as inefficiencies associated with uncertainty. Based on forecasts, supply problems and rising prices of sheet metal and electrical components will continue in the third quarter, affecting the performance of procurement contracts and the work of the sector in general.

Execution of orders for new framework contracts has begun, and sales volumes in Estonia and Sweden are on an upward trend. Orders for the Lithuanian unit have not yet returned to pre-crisis levels, but the number of incoming inquiries has grown to a record high, giving reason to hope for a recovery in the maritime industry in the near future.

In the second quarter, Harju Elekter laid the foundation for several forward-looking cooperation and development projects. Together with the technology company IGL-Technologies Oy, we plan to offer complete packages of electric vehicle charging systems in both the Nordic and Baltic markets even more widely than before. Laohotell III in the Allika Industrial Park will be constructed in cooperation with AS Ehitusfirma Rand ja Tuulberg by May next year. Also, Harju Elekter continues to perceive the attractiveness of the investment in terms of both the growth of the value of OÜ Skeleton Technologies Group and cooperation in the development, production, and use of modular systems of supercapacitors in electricity control and switching systems. To increase renewable energy solution capacity, it was decided to invest in new solar power plants.

CHANGES IN THE STRUCTURE OF THE GROUP

The new business name of Satmatic Oy, a 100% Finnish subsidiary of AS Harju Elekter, is Harju Elekter Oy as of 14 January 2021. The name change of the Finnish subsidiary was carried out with the purpose of combining the business names with the brand used daily. Harju Elekter Oy will continue with all existing business lines and offering solutions for the energy, industry, and construction sectors.

MAIN EVENTS

Q1

On 19 January Harju Elekter Group concluded an agreement with Caruna Oy, Finland's largest distribution network company. The contract is for the period 2021-2023 and its estimated total volume for next three years is 14 million euros. According to the terms of the frame agreement Harju Elekter's subsidiaries AS Harju Elekter Elektrotehnika and Harju Elekter Oy will manufacture and deliver to Caruna Oy about 1,000 prefabricated substations over a period of three years. For the contract there is an extension option of two years, which will be done after 2023 for each year separately.

On 10 February, Harju Elekter Group's Swedish subsidiary Harju Elekter AB signed a framework agreement with E.ON Energidistribution AB, the largest distribution network company in Sweden. According to the agreement, approximately 1,500 substations will be supplied over the period of three years, and the total volume of the agreement is nearly 15 million euros. The substations will be manufactured in the factory of AS Harju Elekter Elektrotehnika in Estonia.

In March Energo Veritas OÜ, a subsidiary of Harju Elekter Group, was successful in the tender held by Enefit Connect

OÜ for the supply of hermetic transformers. A framework contract with the total volume of 12 million euros was signed for a period of three years with the possibility of a two-year extension.

The Swedish subsidiary of Harju Elekter Group, Harju Elekter AB, signed electricity project contracts with Region Stockholm, the administrative body responsible for public transport. These contracts will serve as the basis for the upgrading of the electrical systems of the Albano and Rådhuset metro stations in Stockholm by April and September 2022, respectively. The approximate volume of the contracts is 3.1 million

euros. The new projects of Harju Elekter with Region Stockholm, which manages the Stockholm metro, represent the continuation of cooperation that already started with the modernisation of the Slussen metro last autumn.

Q2

In the second quarter, the construction of the stage four extension of the plant of the Group's Lithuanian subsidiary was completed. The office and production premises increased from 8,765 m² to 16,761 m². The investments of 5.5 million euros in the expansion of the plant will enable Harju Elekter UAB to double the company's revenues.

On 22 April, AS Harju Elekter signed a construction contract with AS Ehitusfirma Rand ja Tuulberg for the

construction of Laohotell III in the Allika Industrial Park. Pursuant to the contract, the cost of construction is 2.1 million euros. Harju Elekter's third complex of production and warehouse spaces will be completed by May 2022.

On 29 April 2021, the AGM of shareholders of AS Harju Elekter was held. It amended the Articles of Association of AS Harju Elekter and it approved the 2020 annual report and the proposal for distribution of the profit and decided to pay shareholders a dividend of 0.16 euro per share for 2020, totalling 2.8 million euros. Dividends were transferred to shareholders' bank accounts on 25 May 2021. At the same meeting, the shareholders appointed AS PricewaterhouseCoopers as the auditor of AS Harju Elekter on the years 2021-2023 as well as approved the stock option program 2021-2022.

On 28 June 2021, Harju Elekter Oy, a subsidiary of AS Harju Elekter, signed a contract for the acquisition of a 5.5% holding in the technology company IGL-Technologies Oy, engaged in the development of parking, and charging systems for electric vehicle charging stations. The transaction price was approximately 0.25 million euros. With the investment in the technology development company, Harju Elekter sees an opportunity to strengthen the Group's activities in the field of e-mobility and, in cooperation with IGL-Technologies Oy, to offer in the near future complete electric vehicle charging system packages in the Nordic and in the Baltic markets even more widely.

AS Harju Elekter participated in the additional round of equity raising for Skeleton Technologies Group OÜ with an investment of 1.24 million euros. Following the increase in the share capital of OÜ Skeleton Technologies, the registered holding of AS Harju Elekter is 7.22%. AS Harju Elekter continues to perceive the attractiveness of the given investment in terms of the growth of the value of Skeleton and in cooperation in the development, production, and use of modular systems of supercapacitors in electricity control and switching systems.

EVENTS AFTER THE REPORTING DATE

The Supervisory Board of AS Harju Elekter decided to increase the share capital of the company by 175,565.25 euros by issuing new ordinary shares. The increase of the share capital was triggered by the need to issue new shares to the key persons of Harju Elekter Group, incl. the members of the governing bodies, leading specialists, and engineers, participating in the option program approved with the resolution of the general meeting on 3 May 2018. A total of 96 current and former employees participated in the share issue, subscribing for a total of 278,675 shares. After the increase of the share capital, Harju Elekter has a total of 18,018,555 ordinary shares without nominal value and the share capital amounts to 11,352,689.65 euros.

In July, AS Harju Elekter increased its portfolio of solar power plants by investing in eight solar power plants with an installed capacity of 64.8 kW. With the investment, in the amount of 0.5 million euros, the Group's renewable energy production capacity will increase from 1,737 kW to 2,255 kW. It is forecasted, that this year the production of renewable energy will increase at least by 15% to 1,500 MWh.

OPERATING RESULTS

Revenue

The revenue of the Group was 36.3 million euros in the second quarter, which was 2.7 million euros more modest compared to the second quarter of 2020. Sales of electrical equipment decreased the most in a quarterly comparison, by 3.1 million euros. As in the first quarter, revenue from the manufacturing and sales of electrical equipment in the second quarter was affected by deferred orders, supply difficulties and material shortages. As a positive sign, the revenue of electrical works from the shipbuilding sector increased by 1.0 million to 1.6 million euros in a quarterly comparison. In the first six months, the revenue was 67.0 (6M 2020: 74.0) million euros, which is below the record result of the previous year but is comparable to the normal sales two years ago before the crisis. Despite the uncertainty in the economic environment, the volume of new orders and cooperation with important customers with framework agreements have persisted.

Revenue by business activities (EUR´000)	Q2 2021	Q2 2020	+/-	6M 2021	6M 2020	+/-	% 6M 2021	% 6M 2020
Manufacturing and sale of electrical equipment	30,006	33,062	-9.2%	55,857	63,309	-11.8%	83.3%	85.5%
Retail and project-based sale of	2,456	3,306	-25.7%	4,031	5,274	-23.6%	6.0%	7.1%
electrical products
Other products	1,087	845	28.6%	1,886	1,378	36.9%	2.8%	1.9%
Lease income	657	689	-4.6%	1,541	1,409	9.4%	2.3%	1.9%
Electrical works	1,603	625	156.5%	2,861	1,714	66.9%	4.3%	2.3%
Other services	501	487	2.9%	852	928	-8.2%	1.3%	1.3%
Total	36,310	39,014	-6.9%	67,028	74,012	-9.4%	100.0%	100.0%

Business segments

The Group's operations are divided into three segments: Production, Real estate, and Other activities. The activities in the Production segment are design, sale, production, and after-sale service of electricity distribution, switching and transformation equipment as well as automatics, process management and engine control equipment. The Real estate segment covers development, project management, leasing and other related services of industrial real estate property to leasing partners and Group companies. Other activities encompass all other non-segmented operating areas where each area is not large enough to form a separate segment. Such activities are, for example, management of financial investments, retail and project sale of electrical goods and electricity installation works for shipbuilding.

Revenue by segment (EUR´000)	Q2 2021	Q2 2020	+/-	6M 2021	6M 2020	+/-	% 6M 2021	% 6M 2020
Production	31,631	33,144	-4.6%	58,843	63,216	-6.9%	87.8%	85.4%
Real Estate	910	774	17.6%	1,848	1,607	15.0%	2.8%	2.2%
Other activities	3,769	5,096	-26.0%	6,337	9,189	-31.0%	9.4%	12.4%
Total	36,310	39,014	-6.9%	67,028	74,012	-9.4%	100.0%	100.0%

Production

Delays in beginning with new framework contract orders, the postponement of planned volumes and limited availability of raw materials reduced the revenue of the production segment by 1.5 million euros to 31.6 million euros on a quarterly comparison and by 4.4 million euros to 58.8 million euros on a six-month comparison. The Group's core business, Production, accounted for 88% of the Group's revenue.

Real estate

The revenue of the Real estate segment increased in a quarterly and in a half-year comparison, with the new rental space in Allika Industrial Park completed at the end of year 2020, being 0.9 (Q2 2020: 0.8) and 1.8 (6M 2020: 1.6) million euros, respectively. The Real estate segment accounts for 3% of the Group's six-month revenue.

Other activities

The revenue from Other activities decreased by 1.3 million euros to 3.8 euros in a quarterly comparison and by 2.9 million euros to 6.3 million euros in a 6-month comparison. This is mainly due to lower retail and project-based sale of electrical products, as the operation of the stores was disrupted due to COVID-19 restrictions. In addition, the revenue was affected by the restructuring of the electrical sales organization in Sweden. Other activities accounted for 9% of the Group's six-month revenue.

Markets

Revenue by markets (EUR´000)	Q2 2021	Q2 2020	+/-	6M 2021	6M 2020	+/-	% 6M 2021	% 6M 2020
Estonia	6,890	5,748	19.9%	11,958	9,350	27.9%	17.8%	12.6%
Finland	18,388	18,990	-3.2%	32,987	38,457	-14.2%	49.2%	52.0%
Sweden	6,122	5,919	3.4%	11,465	10,907	5.1%	17.1%	14.7%
Norway	2,001	4,359	-54.1%	3,870	9,789	-60.5%	5.8%	13.2%
Other	2,909	3,998	-27.2%	6,748	5,509	22.5%	10.1%	7.5%
Total	36,310	39,014	-6.9%	67,028	74,012	-9.4%	100.0%	100.0%

Estonia

Quarterly sales to the Estonian market increased by 1.1 million to 6.9 million euros in a year-on-year comparison. During the reporting quarter the Group continued the production and delivery of prefabricated substations that began in Q2 2020 under the Elektrilevi OÜ framework procurement. The retail and project-based sale of electrical products have decreased in the Estonian market due to the COVID-19 restrictions in force in the spring. Estonian companies continue to contribute to the home market activities by participating in procurements and offering different industrial rental spaces for corporate customers. Sales to the Estonian market have increased by 2.6 million euros to 12.0 million euros in six months comparison, accounting for 18% (6M 2020: 13%) of the six-month revenue.

Finland

Sales to the Finnish market are recovering. Compared to the second quarter of the previous year, the revenue decreased only by 0.6 million euros, amounting to 18.4 million euros. Compared to the first half of last year, the change is larger, revenue decreased by 5.5 million euros to 33.0 million euros. This was mostly affected by the decrease in orders caused by the snowy and cold winter, commencing with new long-term orders, but also some supply difficulties and shortage in materials. In the first half of the year, 49% (6M 2020: 52%) of the Group's products and services were sold to the Group's largest market, Finland.

Sweden

The revenue earned from the Swedish market showed an upward trend in the reporting quarter and in the half year as compared to previous year, amounting 6.1 (Q2 2020: 5.9) and 11.5 (Q2 2020: 10.9) million euros, respectively. Sweden accounted for 17% (6M 2020: 15%) of revenue in the first half of the year, being the third largest market in the Group.

Norway

In the second quarter, the Group's products and services worth 2.0 (Q2 2020: 4.4) million euros were sold to the Norwegian market. In the first six months, 3.9 million euros were earned from the Norwegian market, which was 60.5% or 5.9 million euros less than in the same period of the previous year. The decrease in Norwegian revenue was due to record high orders in the reference period, as well as the slow pace of recovery in the maritime industry. The Norwegian market accounted for 6% (6M 2020: 13%) of the six-month revenue.

Others

When comparing the quarters, revenue from Other markets decreased by 1.1 million euros to 2.9 million euros. Among them, sales to the Danish and Netherlands markets fell the most in the reporting quarter. In a six-month comparison, revenue from other markets increased by 1.2 million euros to 6.7 million euros, accounting for 10% (6M 2020: 7%) of revenue. The majority of the growth in revenue was generated by sales to the German market, which generated 3.8 (6M 2020: 0.3) million euros in the first half of the quarter. In addition, revenue from the Netherlands amounted to 2.3 (6M 2020: 3.1) million euros.

Operating expenses

(EUR´000)	Q2 2021	Q2 2020	+/-	6M 2021	6M 2020	+/-	% 6M 2021	% 6M 2020
Cost of sales	32,004	33,546	-4.6%	58,877	63,621	-7.5%	89.5%	89.6%
Distribution costs	1,315	1,180	11.4%	2,529	2,488	1.6%	3.8%	3.5%
Administrative expenses	2,437	2,333	4.5%	4,654	4,895	-4.9%	6.7%	6.9%
Total operating expenses	35,756	37,059	-3.5%	66,060	71,004	-7.0%	100.0%	100.0%
incl. depreciation and amortization	987	928	6.4%	1,957	1,818	7.6%	3.0%	2.6%
incl. total labour cost	7,644	6,738	13.4%	14,929	13,378	11.6%	22.6%	18.8%
incl. inclusive salary cost	5,930	5,344	11.0%	11,545	10,302	12.1%	17.5%	14.5%

The total operating expenses for the reporting quarter were 35.8 (Q2 2020: 37.1) million euros. Costs of sales decreased by 1.5 million euros to 32.0 million euros year-on-year, accounting for 89.5% of the operating expenses. The gross profit margin decreased by 2.1 percentage points to 11.9% compared to the comparable quarter. The global crisis in raw materials, raising prices of materials and logistics, and in turn the resulting inefficiencies in operations, where products cannot be delivered on time, reduced profitability. The additional work incurred in maintaining sales volumes and finding materials increased marketing and general administrative expenses in the second quarter compared to the same period last year, amounting to 1.3 (Q2 2020: 1.2) and 2.4 (Q2 2020: 2.3) million euros, respectively. The distribution costs in the reporting quarter accounted for 3.7% (Q2 2020: 3.2%) of the Group's operating expenses and 3.6% (Q2 2020: 3.0%) of the revenue. Administrative expenses accounted for 6.8% (Q2 2020: 6.3%) of the Group's operating expenses and 6.7% (Q2 2020: 6.0%) of the revenue.

Overall, compared to the first half of the previous year the decrease in operating expenses was 1.9 percentage points lower than the decrease in revenue. Operating expenses for the first half of the year totaled 66.1 (6M 2020: 71.0) million euros, and the largest decrease was in the cost of sales - 4.7 million euros. The gross profit margin decreased by 1.8 percentage points to 12.2 compared to the comparable period. The share of marketing costs and administrative expenses accounted for 3.8% (6M 2020: 3.4%) and 6.9% (6M 2020: 6.6%) of the Group's six-month revenue, respecttively.

Labour costs increased with quarterly and half-year comparison, amounting to 7.6 (Q2 2020: 6.7) and 14.9 (6M 2020: 13.4) million euros, respectively. The ratio of labor costs to the Group's revenue was 21.1% (Q2 2020: 17.3%) in the reporting quarter and 22.3% (6M 2020: 18.1%) in the first half of the year. The average annual monthly salary per employee of the Group was 2,406 (6M 2020: 2,195) euros. The majority of the increase in labour costs was due to the increase in additional work, the constant readiness to continue the production cycle, and in terms of Lithuania, working in several shifts in production as a measure to prevent the spread of coronavirus. The increase in labour costs and average remuneration was affected most by the increase of the proportion of Swedish and Finnish employees in the Group, since wage levels are significantly higher in Scandinavian countries than they are in Estonia and Lithuania.

Depreciation of non-current assets totalled 1.0 million euros in the second quarter, and 2.0 million euros in the first half of the year, increasing by 59 and 139 thousand euros, respectively, compared to the comparable period. The increase in depreciation is due to the addition of several investments, including the completion of Laohotell II at the end of 2020.

PERSONNEL

At the end of the reporting period, the group employed 868 people, which was 39 employees more than a year ago. In the second quarter, the Group employed an average of 818 people, which was on average 29 employees more than in the comparable period. In the reporting quarter, 5.9 (Q2 2020: 5.3) million euros were paid to employees as salaries and remuneration. In relation with the global health crisis, the top priority for Harju Elekter and for its companies in every country were the activities related to health promotion of employees and their occupational safety, which has resulted in additional costs.

Sweden 71 (30.06.20: 59)

	Average numbers of employees				Numbers of employees	%	%
	Q2 2021	Q2 2020	6M 2021	6M 2020	30.06.2021	30.06.2020	+/-	30.06.21	30.06.20
Estonia	376	353	366	343	414	397	17	47.7%	47.9%
Finland	149	138	141	137	159	141	18	18.3%	17.0%
Lithuania	220	239	221	244	224	232	-8	25.8%	28.0%
Sweden	73	59	72	58	71	59	12	8.2%	7.1%
Total	818	789	800	782	868	829	39	100.0%	100.0%

ANNUAL GENERAL MEETING OF SHAREHOLDERS

On April 29, 2021, the Annual General Meeting (AGM) of Shareholders of AS Harju Elekter was held, in which 36 shareholders and their authorized representatives participated, representing a total of 10,601,232 votes, being 59.76% of the total votes.

The AGM approved the 2020 annual report and profit distribution and decided to pay dividends amounting to 0.16 euros per share, totalling 2.8 million euros. The list of the shareholders entitled to the dividends was fixed as at 18 May 2021 at the end of the business day of the settlement system. The dividends were transferred to the shareholders' bank accounts on May 25, 2021.

The general meeting also approved an amendment to the Articles of Association of AS Harju Elekter, providing the Supervisory Board with the right to increase the share capital by no more than 1/10 of the share capital by making monetary contributions within three years from the date of entry into force of the amended Articles of Association. The aim of the amendment is to simplify the exercise of the option programme approved by the 2018 general meeting of shareholders. In addition, AS PricewaterhouseCoopers was appointed as the company's auditor for the years 2021– 2023 and a share option programme was adopted for the members of the Management Board and key persons of the companies belonging to the Group to motivate them to act in order to achieve better financial results of AS Harju Elekter. The terms of the option programme is two years, plus the term for exercising share options of 36 and 48 calendar months of the conclusion of the option agreement. The issue price of the shares acquired with the share option is the average of the closing prices as of the three calendar years preceding the conclusion of the option agreement on the Nasdaq Tallinn Stock Exchange as of 31 December, amounting to 4.50 euros. In June, option agreements were signed with ten members of the Management Boards of AS Harju Elekter and its subsidiaries, for a total of 100,000 share subscription rights.

Security trading history	6M 2021	2020	2019	2018	2017
Opening price (euros)	5.24	4.26	4.12	5.00	2.85
Highest price (euros)	10.50	5.26	5.20	6.68	5.08
Lowest price (euros)	5.20	3.20	4.01	3.89	2.80
Closing price (euros)	8.18	5.18	4.21	4.12	5.00
Traded shares (pcs)	1,418,708	1,160,598	531,415	1,100,773	1,349,617
Turnover (in million euros)	10.80	4.99	2.35	5.98	5.46
Capitalisation (in million euros)	145.11	91.89	74.68	73.09	88.70
Average number of the shares (pcs)	17,739,880	17,739,880	17,739,880	17,739,880	17,739,880
EPS (euros)	0.04	0.31	0.14	0.09	1.64

SHARES OF AS HARJU ELEKTER AND SHAREHOLDERS

Price of AS Harju Elekter share (in euros) on Nasdaq Tallinn Stock Exchange between 31 December 2016 – 30 June 2021 (Nasdaq Tallinn. http://www.nasdaqbaltic.com/)

Division of shareholders by size of holding and list of shareholders with more than 5% holding as of 30 June 2021:

Holding	No of shareholders	% of all shareholders	% of votes held	Shareholders	Holding (%)
> 10%	2	0.0	42.1	AS Harju KEK	31.39
1.0 – 10.0%	8	0.1	21.6	ING Luxembourg S.A.	10.71
0.1 – 1.0 %	52	0.7	14.9	Endel Palla	7.04
< 0.1%	7,921	99.2	21.4	Shareholders holding under 5%	50.86
Total	7,983	100.0	100.0	Total	100.00

As at 30 June 2021, AS Harju Elekter had 7,983 shareholders. The number of shareholders increased during the reporting quarter by 596 persons. The largest shareholder of AS Harju Elekter is AS Harju KEK, a company based on local capital which held 31.39% of AS Harju Elekter's share capital. At 30 June 2021, the members of the Supervisory and Management Boards owned, in accordance with their direct and indirect ownerships, in total of 12.65% of AS Harju Elekter shares. The complete list of shareholders of AS Harju Elekter is available on the website of the Nasdaq CSDhttps://nasdaqcsd.com/statistics/en/shareholders.

Number of shareholders

CONFIRMATIONS TO THE MANAGEMENT REPORT

The Management Board confirms that the management report provides, in the best knowledge of the management board, a true and fair view of the significant events, results and their impact on the unaudited consolidated interim report during the reporting period.

Tiit Atso Chairman of the Management Board 27 July 2021

Aron Kuhi-Thalfeldt Member of the Management Board 27 July 2021

INTERIM FINANCIAL STATEMENT

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

ASSETS	Note	30 June 2021	31 December 2020	30 June 2020
Current assets
Cash and cash equivalents		1,576	2,843	3,906
Trade and other receivables		27,215	27,226	26,788
Prepayments		1,366	820	1,879
Inventories		24,623	18,856	21,958
Total current assets		54,780	49,745	54,531
Non-current assets
Deferred income tax assets		575	514	517
Non-current financial investments	2	21,259	11,918	8,047
Investment properties	3	23,328	23,605	22,173
Property, plant and equipment	4	24,879	22,494	19,918
Intangible assets	4	7,224	7,199	7,199
Total non-current assets		77,265	65,730	57,854
TOTAL ASSETS	6	132,045	115,475	112,385
LIABILITIES AND EQUITY
Liabilities
Borrowings	5	15,292	12,056	6,772
Prepayments from customers		1,919	4,182	2,824
Trade and other payables		22,208	15,837	24,202
Tax liabilities		2,946	2,871	3,559
Current provisions		73	34	160
Total current liabilities		42,438	34,980	37,517
Borrowings	5	9,469	7,032	8,264
Other non-current liabilities		65	66	97
Total non-current liabilities		9,534	7,098	8,361
Total liabilities		51,972	42,078	45,878
Equity
Share capital		11,176	11,176	11,176
Share premium		804	804	804
Reserves		15,173	6,709	2,673
Retained earnings		53,080	54,858	52,003
Total equity attributable to the owners of the parent company		80,233	73,547	66,656
Non-controlling interests		-160	-150	-149
Total equity		80,073	73,397	66,507
TOTAL LIABILITIES AND EQUITY		132,045	115,475	112,385

CONSOLIDATED STATEMENT OF PROFIT AND LOSS

		1 April – 31 June		1 January – 30 June
	Note	2021	2020	2021	2020
Revenue	6	36,310	39,014	67,028	74,012
Cost of sales		-32,004	-33,546	-58,877	-63,621
Gross profit		4,306	5,468	8,151	10,391
Distribution costs		-1,315	-1,180	-2,529	-2,488
Administrative expenses		-2,437	-2,333	-4,654	-4,895
Other income		188	275	360	327
Other expenses		-91	-74	-160	-126
Operating profit	6	651	2,156	1,168	3,209
Finance income		51	71	68	108
Finance costs		-60	-46	-158	-147
Profit before tax		642	2,181	1,078	3,170
Income tax	8	-154	-210	-293	-496
Profit for the period		488	1,971	785	2,674
Profit attributable to:
Owners of the parent company		485	1,979	795	2,708
Non-controlling interests		3	-8	-10	-34
Earnings per share
Basic earnings per share (EUR)	7	0.03	0.11	0.04	0.15
Diluted earnings per share (EUR)	7	0.03	0.11	0.04	0.15

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

		1 April – 31 June		1 January – 30 June
	Note	2021	2020	2021	2020
Profit for the period		488	1,971	785	2,674
Other comprehensive income
Items that may be reclassified to profit or loss Net gain on revaluation of financial assets		19	34	-4	-14
Items that will not be reclassified to profit or loss
Gain on sales of financial assets	2	221	46	265	80
Impact of exchange rate changes	2	7,954	490	8,319	-845
Total comprehensive income for the period		8,194	570	8,580	-779
Other comprehensive income		8,682	2,541	9,365	1,895
Total comprehensive income attributable to:
Owners of the Company		8,680	2,550	9,375	1,929
Non-controlling interests		2	-9	-10	-34

CONSOLIDATED STATEMENT OF CASH FLOWS

	1 January – 30 June
	Note	2021	2020
Cash flows from operating activities
Profit for the period		785	2,674
Adjustments
Depreciation and amortization	3,4	1,957	1,817
Gain on sale of property, plant and equipment		-12	-8
Loss on liquidation of property, plant and equipment		0	2
Share-based payments	9	149	120
Finance income		-68	-108
Finance costs		158	147
Income tax	8	293	496
Changes
Changes in trade and other receivables		-538	-4,671
Changes in inventories		-6,001	-2,799
Changes in trade and other payables		4,227	6,383
Corporate income tax paid	8	-369	-642
Interest paid		-176	-109
Total cash flow (-outflow) from operating activities		405	3,302
Cash flows from investing activities
Payments for investment properties	8	-106	-1,066
Payments for property, plant and equipment	8	-3,519	-771
Payments for intangible assets		-207	-105
Acquisition of financial investments	2	-1,737	0
Proceeds from sale of investment property		0	93
Proceeds from sale of property, plant and equipment		28	20
Dividends received		66	66
Dividends income tax paid		-10	-10
Received interests		7	0
Proceeds from sale of other financial investments		981	1,681
Total cash flow (-outflow) from investing activities		-4,497	-92
Cash flows from financing activities
Change in overdraft balance	5	4,671	-3,224
Proceeds from borrowings	5	2,821	185
Repayment of borrowings	5	-1,448	-556
Repayments of lease liabilities	5	-547	-590
New lease liabilities		165	0
Dividends paid		-2,838	0
Total cash flow (-outflow) from financing activities		2,824	-4,185
Total net cash flow (-outflow)		-1,268	-975
Cash and cash equivalents at the beginning of the period		2,843	4,878
Changes in cash and cash equivalents		-1,268	-975
Effect of exchange rate fluctuations on cash and cash equivalents		1	3
Cash and cash equivalents at the end of the period		1,576	3,906

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Attributable to owners of the parent company				Non
1 January - 31 June	Share capital	Share premium	Reser ves	Retained earnings	Total	controlling interests	Total equity
Balance at 1 January 2020	11,176	804	3,412	51,699	67,091	-115	66,976
Comprehensive income
Profit for the period	0	0	0	2,708	2,708	-34	2,674
Other comprehensive income	0	0	-859	80	-779	0	-779
Total comprehensive income	0	0	-859	2,788	1,929	-34	1,895
Transactions with owners recognized directly in equity
Share-based payments (Note 7,9)	0	0	120	0	120	0	120
Dividends	0	0	0	-2,484	-2,484	0	-2,484
Total transactions with owners	0	0	120	-2,484	-2,364	0	-2,364
Balance at 31 June 2020	11,176	804	2,673	52,003	66,656	-149	66,507
Balance at 1 January 2021	11,176	804	6,709	54,858	73,547	-150	73,397
Comprehensive income
Profit for the period	0	0	0	795	795	-10	785
Other comprehensive income	0	0	8,315	265	8,580	0	8,580
Total comprehensive income	0	0	8,315	1,060	9,375	-10	9,365
Transactions with owners recognized directly in equity
Share-based payments (Note 7,9)	0	0	149	0	149	0	149
Dividends	0	0	0	-2,838	-2,838	0	-2,838
Total transactions with owners	0	0	149	-2,838	-2,689	0	-2,689
Balance at 31 June 2021	11,176	804	15,173	53,080	80,233	-160	80,073

On April 29, 2021, the Annual General Meeting of shareholders of AS Harju Elekter was held; it approved the 2020 annual report and the proposal for distribution of the profit and decided to pay shareholders a dividend of 0.16 euro per share for 2020, totalling 2,838 thousand euros. The dividends were paid to the shareholders on 25 May 2021 by a transfer to the bank account of the shareholder.

NOTES TO INTERIM FINANCIAL STATEMENT

Note 1 Accounting methods and valuation principles used in the consolidated interim report

AS Harju Elekter is a company registered in Estonia. The interim report prepared as of 31 June 2021 comprises AS Harju Elekter (the "Parent Company") and its subsidiaries AS Harju Elekter Elektrotehnika, AS Harju Elekter Teletehnika, Energo Veritas OÜ, Harju Elekter Oy, Harju Elekter Kiinteistöt Oy, Telesilta Oy, Harju Elekter AB, Harju Elekter Services AB and Harju Elekter UAB (the "Group"). AS Harju Elekter has been listed on Tallinn Stock Exchange since 30 September 1997; 31.39% of its shares are held by AS Harju KEK.

The consolidated interim financial statements of AS Harju Elekter and its subsidiaries have been prepared in accordance with International Reporting Standards (IFRS) as adopted by the European Union. This consolidated interim report is prepared in accordance with the requirements for international accounting standard IAS 34 "Interim Financial Reporting" on condensed interim financial statements. The interim report is prepared on the basis of the same accounting methods as used in the annual report concerning the period ending on 31 December 2020. The interim report should be read in conjunction with the Group's annual report of 2020, which is prepared in accordance with International Financial Reporting Standards (IFRS).

According to the assessment of the Management Board, the interim report for the second quarter and 6 month of 2021 of AS Harju Elekter presents a true and fair view of the financial result of the consolidation Group guided by the going-concern assumption. This interim report has been neither audited nor reviewed by auditors and only includes the consolidated reports of the Group.

The financial statements are presented in euros, which is the Group's functional and presentation currency. The consolidated interim financial statement has been drawn up in thousands of euros and all the figures have been rounded to the nearest thousand, unless indicated otherwise.

	30.06.2021	31.12.2020	30.06.2020
Listed securities (fair value through other comprehensive income)	2,748	2,822	2,571
Other equity investments (fair value through other comprehensive income)	18,503	9,089	5,469
Other financial assets through profit or loss	8	7	7
Total	21,259	11,918	8,047
Changes	6M 2021	12M 2020	6M 2020
1. Financial assets at fair value through other comprehensive
income
Carrying amount at the beginning of the period	11,911	10,486	10,486
Acquisitions	1,737	104	0
Sale of financial investment	-716	-1,601	-1,601
Change in fair value through other comprehensive income	8,319	2,922	-845
Carrying amount at the end of the period	21,251	11,911	8,040
2. Financial assets at fair value through profit and loss
Carrying amount at the beginning of the period	7	8	8
Change in fair value through profit and loss	1	-1	-1
Carrying amount at the end of the period	8	7	7
Total carrying amount at the end of the period	21,259	11,918	8,047

Note 2 Financial investments

A total of 981 thousand euros was received from the partial sale of the listed securities in the first half of the year. Realized gain on sale of financial assets in the amount of 265 thousand euros was recognized through other comprehensive income. The fair value of securities increased by 394 thousand euros during the first half of the year and compared to a decrease of 845 thousand euros during the first six months of 2020.

As of 30 June 2021, other equity investments include an investment in the shares of OÜ Skeleton Technologies Group in the amount of 18.0 (30.06.2020: 5.3) million euros, in the shares of SIA Energokomplekss in the amount of 0.3 (30.06.2020: 0.2) million euros and in the shares of IGL-Technologies Oy in the amount of 0.2 million euros.

Harju Elekter Oy, a subsidiary of AS Harju Elekter, signed on 28 June 2021 a contract for the acquisition of a 5.5% holding in the technology company IGL-Technologies Oy, engaged in the development of parking, and charging systems for electric vehicle charging stations. The transaction price was 0.25 million euros.

AS Harju Elekter acquired an 10% stake in OÜ Skeleton Technologies Group on 3 June 2015. The company is engaged in the development and production of supercapacitors and is gradually increasing production. The assessment of future cash flows of the OÜ Skeleton Technologies Group includes significant uncertainty. During the additional financing round, AS Harju Elekter invested 1.2 million euros in the company in the reporting quarter. The Group's management assessed the fair value of the holding in the company based on the issue price of the new shares used in the financing round, the economic indicators disclosed by OÜ Skeleton Technologies Group, the associated investment risk, and the marketability of the weighted instrument. The measurement of fair value is a complex process in the absence of an active market and when this is the case, this kind of measurement involves making assumptions and decisions. After the investment round, the registered holding of AS Harju Elekter in OÜ Skeleton Technologies Group decreased to 7.22%, while the fair value of the financial investment increased by 7.9 million euros to 18.0 million euros due to the revaluation.

Note 3 Investment properties

	Note	6M 2021	12M 2020	6M 2020
Balance at the beginning of the period		23,605	21,259	21,259
Additions	6	208	3,103	1,338
Depreciation	6	-485	-851	-425
Reclassification from property, plant and equipment	4	0	94	1
At the end of the period		23,328	23,605	22,173

Note 4 Property, plant and equipment; intangible assets

	Note	6M 2021	12M 2020	6M 2020
1. Property, plant and equipment
Balance at the beginning of the period		22,494	20,402	20,402
Additions to right-of-use assets		0	150	0
Additions	6	3,485	4,642	772
Sales and write-off in carrying amount		-17	-31	-22
Depreciation	6	-1,308	-2,570	-1,232
Reclassification from inventories		233	0	0
Reclassification to investment properties	3	0	-94	-1
Impact of exchange rate changes		-8	-5	-1
At the end of the period		24,879	22,494	19,918
2. Intangible assets
Balance at the beginning of the period		7,199	7,260	7,260
Additions	6	189	313	99
Amortization	6	-164	-373	-160
Impact of exchange rate changes		0	-1	0
At the end of the period		7,224	7,199	7,199

Note 5 Borrowings

	30.06.2021	31.12.2020	30.06.2020
Current borrowings
Current bank loans	12,227	7,738	5,645
Current portion of long-term bank loans	2,355	3,191	557
Current portion of lease liabilities	564	1,100	550
Other current loans	146	27	20
Total current borrowings	15,292	12,056	6,772
Non-current borrowings
Non-current bank loans	7,464	4,461	4,582
Non-current lease liabilities	2,005	1,839	2,840
Other non-current loans	0	732	842
Total non-current borrowings	9,469	7,032	8,264
Total borrowings	24,761	19,088	15,036
Changes	6M 2021	12M 2020	6M 2020
Loans and borrowings at the beginning of the period	19,088	19,206	19,206
Change in overdraft balances	4,671	-1,131	-3,224
Received non-current loans	2,821	3,070	0
Repayments of non-current loans	-835	-1,112	-556
Other received loans	-613	81	185
New lease liabilities	165	149	0
Repayments of non-current lease liabilities	-547	-1,175	-590
Impact of exchange rate changes	11	0	15
Loans and borrowings at the end of the period	24,761	19,088	15,036

Note 6 Segment reporting

In the consolidated financial statements, three segments are distinguished: Production, Real Estate and Other activities.

Production – manufacturing and sale of electricity distribution and control equipment as well associated activities. This segment includes the Group's companies AS Harju Elekter Elektrotehnika, AS Harju Elekter Teletehnika, Harju Elekter Kiinteistöt Oy, Harju Elekter Oy, Harju Elekter UAB, Harju Elekter AB and Harju Elekter Services AB.

Real estate - real estate development, maintenance and leasing, services related to the maintenance of real estate and production capacity and intermediation of services. Real estate has been identified as a reportable segment because its result and assets are more than 10% of the total result and assets of all segments. The entity in this business segment is the Parent company.

Other activities - sales of the products of the Group and its related companies as well as products needed for electrical installation works mainly to retail customers and smaller and medium-sized electrical installation companies; management services, project management for installation works and electrical engineering for shipbuilding. Other activities are of less importance to the Group and none of them constitutes a separate segment for reporting purposes. This segment includes the Parent Company and the Group's subsidiaries Energo Veritas OÜ and Telesilta Oy. Other activities are of less importance to the Group and none of them constitutes a separate segment for reporting purposes.

The Group assesses the performance of its operating segments on the basis of revenue and operating profit. Based on the assessment of the Parent company's Management Board, inter-segment transactions are carried out on ordinary market terms that do not differ substantially from the terms agreed in transactions conducted with third parties. Unallocated assets comprise the Parent company's other receivables, prepayments, and other financial investments. Unallocated liabilities consist of the Parent company's (in Estonia) interest-bearing loans and borrowings, tax liabilities and accrued expenses.

1 January – 30 June	Note	Production	Real Estate	Other activities	Elimi nation	Consoli dated
2021
Revenue from external customers		58,843	1,848	6,337	0	67,028
Inter-segment revenue		199	908	94	-1,201
Segment revenue		59,042	2,756	6,431	-1,201	67,028
Operating profit		281	919	-186	154	1,168
Segment assets Unallocated assets incl. Financial investments incl. Other receivables and prepayments Total assets		79,109	25,289	26,261	-19,694	110,965 21,080 21,004 76 132,045
Capital expenditure	3,4	3,441	208	233	0	3,882
Depreciation and amortization	3,4	1,053	485	430	-11	1,957
2020
Revenue from external customers		63,216	1,607	9,189	0	74,012
Inter-segment revenue		2,490	891	68	-3,449
Segment revenue		65,707	2,498	9,257	-3,449	74,012
Operating profit		3,139	795	-566	-159	3,209
Segment assets Unallocated assets incl. Financial investments incl. Other receivables and prepayments Total assets		70,561	25,049	23,457	-14,792	104,275 8,110 8,040 70 112,385
Capital expenditure	3,4	766	1,338	105	0	2,209
Depreciation and amortization	3,4	943	425	460	-11	1,817

Revenue by geographic regions (customer location)

1 January – 30 June	2021	2020
Estonia	11,958	9,350
Finland	32,987	38,457
Sweden	11,465	10,907
Norway	3,870	9,789
Other	6,748	5,509
Total revenue	67,028	74,012

Revenue by business activities

1 January – 30 June	2021	2020
Manufacturing and sale of electrical equipment	55,857	63,309
Retail and project-based sale of electrical products	4,031	5,274
Other products	1,886	1,378
Lease income	1,541	1,409
Electrical works	2,861	1,714
Other services	852	928
Total	67,028	74,012

Note 7 Basic and diluted earnings per share

Basic earnings per share are calculated by dividing the net profit for the reporting period with the weighted average number of shares issued during the period.

Diluted earnings per share are calculated by taking into account the shares that will be potentially issued. As at 30 June 2021, the Group had a total of 1,039,493 potentially issuable ordinary shares. In accordance with the resolution of the general meeting of shareholders held on 3 May 2018, the issue price of the shares acquired under share option was fixed at the average closing price of the share on the Nasdaq Tallinn Stock Exchange in the preceding three calendar years as at 31 December. The price in the 2018 round was 3.49 euros, in the 2019 round 3.98 euros and in the 2020 round 4.44 euros.

The resolution of the general meeting of shareholders held on 29 April 2021 approved the new 2021–2022 share option programme, under which the members of the Management Boards and key personnel of AS Harju Elekter and its subsidiaries are entitled to receive share options. The issue price of the shares to be acquired on the basis of the option is the average of the closing prices of the shares for the calendar years of 2018, 2019, and 2020 on the Nasdaq Tallinn Stock Exchange as of 31 December, i.e., 4.50 euros per share.

As to share-based compensation to which IFRS 2 requirements apply, the subscription price of shares will continue to include the cost of the services provided by employees for the share-based compensation. The value of the service was estimated by an independent expert at 1.55 euros per share in the 2018 round, 0.73 euros in the 2019 round, 0.55 euros in the 2020 round and 3.55 euros in the 2021. Thus, the share subscription prices within the meaning of IFRS 2 are 5.04 euros, 4.71 euros, 4.99 euros and 8.05 euros. The potential shares will only become dilutive after their average market price for the period exceeds these values. During the period from 1 April to 30 June 2021, the average market price of the shares was 8.40 (Q2 2020: 4.18) euros and in the period 18 June to 30 June 2021 the average market price of the shares of this year's round was 8.11 euros. During the period from 1 January to 30 June 2021, the average market price of the 2018 to 2020 round shares was 7.61 euros.

1 April – 30 June	Unit	2021	2020
Profit attributable to equity holders of the parent company	EUR '000	485	1,979
Average number of shares outstanding	Pc '000	17,740	17,740
Basic earnings per share	EUR	0.03	0.11
Adjusted number of shares during the period	Pc '000	17,838	17,740
Diluted earnings per share	EUR	0.03	0.11
1 January – 30 June	Unit	2021	2020
Profit attributable to equity holders of the parent company	EUR '000	795	2,708
Average number of shares outstanding	Pc '000	17,740	17,740
Basic earnings per share	EUR	0.04	0.15
Adjusted number of shares during the period	Pc '000	17,829	17,740
Diluted earnings per share	EUR	0.04	0.15

Note 8 Information on the statement of cash flows line items

1 January – 30 June	Note	2021	2020
Corporate income tax
Income tax expense in the statement of profit or loss		-293	-496
Decrease (+)/increase (-) in prepayment and decrease (-)/increase (+) in liability		-25	-156
Dividend income tax expense		10	10
Income tax expense on dividends		-61	0
Corporate income tax paid		-369	-642
Paid for investment properties
Acquisitions of investment properties	3	-208	-1,338
Liability decrease (-)/ increase (+) incurred by the acquisitions		102	272
Paid for investment properties		-106	-1,066

1 January – 30 June Note	2021	2020
Paid for property, plant and equipment
Acquisitions of investment properties 4	-3,485	-772
Liability decrease (-)/ increase (+) incurred by the acquisitions	-34	-13
Impact of exchange rate changes	0	14
Paid for property, plant and equipment	-3,519	-771

Note 9 Transactions with related parties

The related parties of AS Harju Elekter include members of the Management and Supervisory Boards and their close family members and AS Harju KEK which owns 31.39% of the shares of AS Harju Elekter. The Group's management comprises members of the Parent company's Supervisory and Management Boards. During the reporting period, the Group has made transactions with related parties as follows:

	30.06.2021	31.12.2020	30.06.2020
Balances with related parties:
- Payables for goods and services	63	47	153
	6M 2021	12M 2020	6M 2020
Purchase of goods and services from related parties:
- Lease of property, plant and equipment from AS Harju KEK	77	101	52
- Purchase of property, plant and equipment from AS Harju KEK	0	0	0
- Other services from AS Entek	195	506	267
Sale of goods and services to related parties:
- Other services for AS Harju KEK	2	4	2
- Sale of goods to AS Entek	3	10	0
Remuneration of the Management and Supervisory Boards:
- Salary, bonuses, additional other remuneration (incl. severance pay)	235	486	316
- Social security tax	78	160	104

The members of the Management Board receive remuneration in accordance with the contract and are also entitled to receive a severance payment: up to 8 months of the remuneration of the Member of the Management Board. The chairman of the supervisory board has the right to receive severance pay in the amount of 6 months' salary of the development director. Members of the Management Board have no rights related to pension. During the reporting quarter and 6-month period, no other transactions were made with members of the Group's directing bodies and the persons connected with them.

Share-based payments

In June 2018, 124 option agreements were concluded with the Group's employees and members of the Company's management bodies on subscription rights for a total of 351,925 shares. and each of the members of the Supervisory and Management Boards of the Company were issued an option for subscribing to 7,500 shares, comprising 52,500 shares in total.

In June 2019, 94 option agreements were concluded with the Group's employees and members of the Company's management bodies on subscription rights for a total of 339,100 shares, and each of the members of the Supervisory and Management Boards of the Company were issued an option for subscribing to 8,000 shares, comprising 64,000 shares in total.

In June this year, additional 66 option agreements were concluded with the Group's employees and members of the Company's management bodies on subscription rights for a total of 347,468 shares, and each of the members of the Supervisory and Management Boards of the Company were issued an option for subscribing to 10,000 shares, comprising 60,000 shares in total.

In June 2021, ten more option agreements were concluded with the members of the management board of the Group company on subscription rights for a total of 100,000 share. As at the reporting date, the total number of potential ordinary shares to be issued was 944,593. During the reporting quarter, share-based payments recognized as labour costs totalled to 72 (Q1 2020: 59) thousand euros, of which the share of the members of the Management and Supervisory Boards was 12 (Q1 2020: 11) thousand euros. The pricing of the option is disclosed in Note 7.

THE MANAGEMENT BOARD DECLARATION FOR THE UNAUDITED FINANCIAL STATEMENTS

The Management Board acknowledges its responsibility for the preparation, integrity and fair presentation of the consolidated interim financial statements for the first quarter of 2021 as set out on pages 15 to 24 and confirms that to the best of its knowledge, information and belief that:

• the management report presents true and fair view of significant events that took place during the accounting period and their impact to financial statements; and includes the description of major risks and doubts for the Parent company and consolidated companies as a Group; and reflects significant transactions with related parties;
• the accounting principles and presentation of information used in preparing the interim financial statements are in compliance with the International Financial Reporting Standards as adopted by the European Union;
• the interim financial statements give a true and fair view of the assets, liabilities, financial position of the Group and of the results of its operations and its cash flows; and
• AS Harju Elekter and its subsidiaries are going concerns.

Tiit Atso	Chairman of the Management Board	27 April 2021
Aron Kuhi-Thalfeldt	Member of the Management Board	27 April 2021