Lassila & Tikanoja Oyj

743700Z9Z54VGHZA00282022-01-012022-12-31743700Z9Z54VGHZA00282021-01-012021-12-31743700Z9Z54VGHZA00282022-12-31743700Z9Z54VGHZA00282021-12-31743700Z9Z54VGHZA00282020-12-31743700Z9Z54VGHZA00282020-12-31ifrs-full:IssuedCapitalMember743700Z9Z54VGHZA00282020-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember743700Z9Z54VGHZA00282020-12-31ifrs-full:ReserveOfCashFlowHedgesMember743700Z9Z54VGHZA00282020-12-31las:InvestedUnrestrictedEquityReserveMemberiso4217:EURiso4217:EURxbrli:shares743700Z9Z54VGHZA00282020-12-31ifrs-full:RetainedEarningsMember743700Z9Z54VGHZA00282021-01-012021-12-31ifrs-full:RetainedEarningsMember743700Z9Z54VGHZA00282021-01-012021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember743700Z9Z54VGHZA00282021-01-012021-12-31ifrs-full:ReserveOfCashFlowHedgesMember743700Z9Z54VGHZA00282021-12-31ifrs-full:IssuedCapitalMember743700Z9Z54VGHZA00282021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember743700Z9Z54VGHZA00282021-12-31ifrs-full:ReserveOfCashFlowHedgesMember743700Z9Z54VGHZA00282021-12-31las:InvestedUnrestrictedEquityReserveMember743700Z9Z54VGHZA00282021-12-31ifrs-full:RetainedEarningsMember743700Z9Z54VGHZA00282022-01-012022-12-31ifrs-full:RetainedEarningsMember743700Z9Z54VGHZA00282022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember743700Z9Z54VGHZA00282022-01-012022-12-31ifrs-full:ReserveOfCashFlowHedgesMember743700Z9Z54VGHZA00282022-12-31ifrs-full:IssuedCapitalMember743700Z9Z54VGHZA00282022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember743700Z9Z54VGHZA00282022-12-31ifrs-full:ReserveOfCashFlowHedgesMember743700Z9Z54VGHZA00282022-12-31las:InvestedUnrestrictedEquityReserveMember743700Z9Z54VGHZA00282022-12-31ifrs-full:RetainedEarningsMember LEADER OF THE REGENERATIVE SOCIETY Financial review 2022 Lassila & Tikanoja plc Contents Report by the Board of Directors . . . . . 3 Key ﬁgures . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Key ﬁgures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Calculation of the key ﬁgures . . . . . . . . . . . . . . . . . . . . 21 Financial statements . . . . . . . . . . . . . . . 23 Consolidated income statement . . . . . . . . . . . . . . . . . 23 Consolidated statement of comprehensive income 23 Consolidated statement of ﬁnancial position . . . . 24 Consolidated statement of cash ﬂows . . . . . . . . . . 25 Consolidated statement of changes of equity . . . 26 Notes to the consolidated ﬁnancial statements . 27 Financial statements of the parent company . . . . 57 Proposal by the Board of Directors for proﬁt distribution and the Auditor's Note . . . . . . . . . . . . . . . 64 Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Corporate Governance Statement 2022 . . . . . . . . . . . . . . . . . . . . 70 Remuneration Report 2022 . . . . . . . . . 77 Corporate Governance Statement 2022 p. 3 p. 23 p. 77 p. 70 Report by the Board of Directors Financial statements Remuneration Report 2022 Lassila & Tikanoja Financial review 2022 2 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 3 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Business model ..............................................4 Business environment .......................................4 Strategy .....................................................4 Financial performance and a review of the divisions .......6 Sustainability and the statement of non-ﬁnancial information ....................................7 Changes in the company’s management ...................14 Changes in Group structure ................................14 Shares and shareholders ...................................15 Risk management and risks ................................16 Events after the balance sheet date .......................18 Future outlook ...............................................16 TCFD reporting ..............................................18 Report of the Board of Directors 4 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Report by the Board of Directors Business model L&T is a service company that is making the circular economy a reality. The Group operates in the circular economy and facil- ity services businesses. All of L&T’s business operations build future sustainable growth for the circular economy and are based on the opportunities it creates. • Environmental Services keeps its customers’ materials in circulation as eﬃciently as possible and with the highest possible degree of processing. • Industrial Services develops ways to eﬀectively utilise the side streams of industry and society according to the principles of the circular economy. Industrial Services also includes process cleaning and sewer maintenance services. The division operates in Finland and Sweden. • Facility Services in Finland and Sweden improve the value of our customers’ properties and aim for the continuous improvement of energy eﬃciency in line with the goal of a circular economy. By investing in the sustainable solutions of the circular eco- nomy, L&T aims to create increasing value for all of its key stake- holders. L&T’s business environment The sickness rate rose to a record-high level in the early part of the year due to COVID-19, and sickness-related absences increased again towards the end of the year. COVID-19 and the general uncertainty it has created in the job market led to unprecedented employee turnover, especially in the cleaning business. Labour availability challenges increased compared to the preceding years, and the competition for com- petent employees intensiﬁed. Russia’s unlawful invasion of Ukraine pushed the prices of transport fuels to a new level. The higher prices of liquid fuels and energy, paired with the tighter labour market situation, sparked inﬂation that subsequently spread during the year to other goods and services as well as the ﬁnancial markets. The acute energy crisis and widespread market disruptions caused by the war shifted the focus of policymakers to the short-term business environment. For example, the distribution obligation for biocomponent in fuel was reduced following a brief legisla- tive drafting process. In spite of these challenges – and partly for these reasons – the preparation of the European Green Deal continued, and increased emphasis was placed on measures aimed at ending the dependence on fossil energy. The EU is committed to achieving climate neutrality by 2050, and the EU’s Fit for 55 climate package aims to accomplish emission reductions of at least 55 per cent by 2030. The legisla- tive proposals in the package will have an extensive impact on L&T’s business environment. They concern areas such as the reform of emissions trading, eﬀort-sharing between countries, energy eﬃciency, renewable energy, the role of the land use sector and carbon sinks, emissions limits for cars, energy taxes and carbon border taxes. The green transition relies heavily on low-carbon and biodi- versity-promoting solutions, in which the circular economy plays a central role. Slowing down biodiversity loss has emerged as an important goal alongside the mitigation of climate impacts. Sus- tainability principles, particularly the principle of due diligence, are gradually becoming increasingly important factors in ﬁnanc- ing and investment decisions as well as procurement. The EU is promoting the circular economy within the frame- work of an updated action plan, the priorities of which include preventing waste, designing sustainable products and strength- ening the market for recycled raw materials. The new priorities shift the focus of circular economy policy towards the sustaina- ble use of natural resources. Finland seeks to establish a leading position for itself in Europe by setting ambitious climate and circular economy tar- gets. The aim of the Finnish Government’s strategic circular economy programme is to achieve a transition that makes the circular economy the new foundation of the economy by 2035. The programme aims to curb the use of natural resources by doubling resource productivity and the circularity rate of mate- rials by 2035. The reform of the Waste Act entered into eﬀect in Finland on 19 July 2021 and the implementation of the new leg- islation has begun. The reform sets out the measures by which Finland will achieve the even more ambitious targets set by the EU regarding the recycling of municipal waste and packaging waste. New obligations relating to the separate collection of waste fractions, considerably stricter than the current ones, will be adopted in order to achieve the recycling objectives. The reform of the Waste Act will see municipalities take on a larger role in organising the collection of packaging materials and biowaste from housing properties. As a consequence of the reform, L&T’s direct customer agreements with housing properties on the separate collection of packaging waste and biowaste will be transferred to municipalities for competitive bidding. With regard to mixed waste, the possibility of a dual waste transport system for housing properties will remain in place, but its importance will decrease with the increase in the separate collection of packaging and biowaste. The amendments will enter into force in stages between 1 July 2022 and 1 July 2024. Initiatives and measures related to the green transition will play a signiﬁcant role in L&T’s business environment in the com- ing years. On the one hand, they will lead to even more ambitious targets for the sustainability of the Group’s own operations. On the other hand, they will present many business opportunities for a company whose operations are focused on circular econ- omy solutions. L&T broadly supports the reforms related to the green tran- sition and puts them into practice through the solutions it pro- vides. From the perspective of business impacts, the key issue is how the reforms related to the green transition will be managed and implemented in Finland. Strategy Lassila & Tikanoja’s mission is to make the circular economy a reality, and the company helps its customers achieve their sus- tainability goals. Climate change and biodiversity loss are megatrends that create business opportunities for L&T. Mitigating climate change and biodiversity loss requires circular economy actions from society, businesses and individuals. Businesses need responsi- ble partners to support the transition to a circular economy and to improve the energy eﬃciency of properties. Cities continue to grow, and the expectations concerning the built environment are increasing, which creates demand for L&T’s services. Prop- erties are expected to have long life spans, and changes in the needs and in the use of buildings over the years must be taken into account in maintenance and new construction. L&T’s strategy, “A leader of the regenerative society”, guides the Group’s operations during the 2022–2026 strategy period. L&T seeks growth in its core businesses by strengthening its market share. The Group’s strong balance sheet and increased contract portfolio in all business segments create excellent conditions for organic and inorganic growth during the strategy period. L&T wants to be the best sustainability partner for its customers and an excellent workplace for the best experts in its ﬁeld. During the strategy period, L&T will invest in the renewal of operating models, which will enable even more cost-eﬃcient service production. Targets for the strategy period L&T measures the success of its strategy by ﬁnancial, sustaina- bility and stakeholder targets. Financial targets Indicator Target 2022 2021 Annual growth in net sales, % 5 3.9 8.1 Return on capital employed, % 15 10.4 10.8 Gearing, % Less than 125 75.9 79.4 Sustainability and stakeholder targets Indicator Target 2022 2021 Net Promoter Score, NPS >50 by 2026 26 40 Employee Net Promoter Score, eNPS >50 by 2026 24 28 Carbon handprint intensity (tCO 2 -ekv./ MEUR) Grows faster than net sales -633 -646 Carbon footprint (Scope 1 and 2 per kilo- metre driven) -50% by 2030, using 2018 as the baseline -32% -19% The distribution obligation for renewable transport fuel was adjusted in July. Read more about the impacts of this change on page 13. 5 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT L&T’S VALUE CREATION IN 2022 RESOURCES OUTPUTS IMPACTS People and management • 8,371 L&T employees in Finland and Sweden • 15,7 million hours worked • Investments in safety, work ability and well-being • Beneﬁts paid from the sickness fund MEUR 1.9 • Quality and management systems and certiﬁcates (ISO 9001, ISO 14001 and ISO 45001) • Comprehensive training opportunities • Employment opportunities for special groups Environment and production • 52 recycling plants, terminals and transfer stations • Development of methods and new recycling solutions • 728,000 tonnes of material collected from customers • 8,600 properties under maintenance (Finland) • Climate targets throughout the chain Finances and governance • Promoting human rights and a responsible supply chain • 96% of purchases from Finnish and Swedish suppliers • Equity MEUR 220.4 • Net interest-bearing liabilities MEUR 167.3 • Capital expenditure MEUR 58.2 • 24,556 shareholders Healthy personnel • Employee Net Promoter Score (eNPS) 24 • Sickness-related absences 5.6% • Retirement age 63.8 years • Health rate 40% • Accident frequency (TRIF) 23 • over 20,100 hours of training on average per year • Code of Conduct training for employees Responsible products and services • Reuse and recycling rate of customer materials 59.4%. • Containers emptied nearly 13 million times • More than 778,000 maintenance actions and over 3,000 energy eﬃciency proposals in Finland • 41,000 tonnes of waste rendered non- hazardous • Over 210,000 tonnes of soil and side streams delivered for material recycling • Promoting biodiversity in the built environment Emissions • Carbon footprint intensity of own operations per kilometre driven 646 gCO2e, -32% compared to the previous year • Water treated by the Industrial Services division 128,000 m Employment and prevention of marginalisation • Salaries, fees and social security contributions paid MEUR 353.1 • Employees with a high level of well- being and commitment as well as a capable organisation • Impacts of well-being, injuries and illnesses • Providing a ﬁrst job for people regardless of their background • 37% of supervisors and managers are women Mitigating climate change and biodiversity loss • Carbon handprint of operations -633 million tCO2e • Conservation of virgin raw materials • Promoting sustainability and the external recognition of these eﬀorts, e.g. EcoVadis Platinum, CDP, Financial Times Diversity Leaders and Climate Leaders reports Economic prosperity • Added value created MEUR 450 • Taxes: MEUR 6.3 • Dividends MEUR 17.5 ACTIVITIES WE MAKE THE CIRCULAR ECONOMY A REALITY We are a partner that helps society as a whole advance towards full circularity. Builder and developer of the circular economy We help in developing business operations and ﬁnding new solutions. A performer of day-to-day services We make eﬀective day-to-day operations possible and provide day-to-day services. 6 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT proﬁt was EUR 0.9 million. The business is no longer reported as part of the Environmental Services division after the second quarter of 2022. The net proﬁt of the joint venture is consoli- dated in one line item under operating proﬁt. Industrial Services The full-year net sales of the Industrial Services division grew to EUR 132.0 million (105.1). Adjusted operating proﬁt was EUR 13.6 million (9.2). Operating proﬁt was EUR 12.7 million (9.2). Operating proﬁt was reduced by a change of EUR 0.8 million in the fair value of the deferred consideration related to the acquisition of Sand & Vattenbläst i Tyringe AB (“SVB”) recog- nised in the ﬁnal quarter of 2022, due to the positive develop- ment of the acquired company’s business. The Industrial Services division strengthened its position in hazardous and non-hazardous waste recycling services during the period under review by acquiring Fortum’s hazard- ous waste SME business in Finland at the beginning of Febru- ary 2022. The takeover of the business acquired from Fortum went according to plan, and the demand for hazardous waste services was strong. In the environmental construction business line, several demanding industrial soil decontamination projects were carried out. At the beginning of the year, a new material treat- ment centre started its operations in Pori, Finland. The treat- ment centre focuses particularly on processing industrial side streams. In February, Industrial Services expanded into the Swed- ish process cleaning services market by acquiring 70% of the shares of Sand & Vattenbläst i Tyringe AB (“SVB”), a provider of process cleaning services in Sweden. Operating in southern Sweden, SVB had net sales of approximately EUR 10 million in the previous ﬁnancial year and has approximately 60 employ- ees. The integration of the Swedish business progressed according to plan, and several successful industrial water treatment projects were carried out in the process cleaning business in Sweden. In the process cleaning business in Fin- land, resource allocation for annual maintenance breaks was successful in spite of maintenance breaks originally scheduled for the early part of the year being postponed to the autumn due to the COVID-19 pandemic and labour action. Fuel prices rose sharply at the end of February due to the war in Ukraine. The higher fuel costs were passed on to customer prices through cost increases carried out in February–April. Facility Services Finland The full-year net sales of Facility Services Finland grew to EUR 256.3 million (243.1). Operating proﬁt declined to EUR -0.5 million (1.8). Several signiﬁcant new customer accounts were acquired and started in the cleaning business, and the demand for data- driven cleaning services increased. The demand for energy eﬃciency services increased during the review period. The COVID-19 pandemic and other respiratory infections signiﬁcantly increased sickness-related absences in the ﬁrst and fourth quarters, which increased production costs in all service lines, especially in cleaning. Production costs were increased by higher fuel prices and general cost inﬂation. The increased production costs could not be fully passed on to customer prices. In the cleaning business, the availability of labour declined and employee turnover increased signiﬁcantly, which drove costs higher. Several new projects were launched to improve the availability of labour. Co-operation with municipal employ- ment services and government organisations was intensi- ﬁed to ensure that jobs oﬀered by L&T are better known by job seekers. L&T joined forces with Staﬀpoint to oﬀer jobs to Ukrainian refugees. A group of workers from the Philippines was recruited for full-time cleaning work under contracts valid until further notice. The employees in question will start work in the ﬁrst quarter of 2023. Measures were taken in Facility Services Finland to improve operational eﬃciency and proﬁtability throughout the period under review. Local and business line-speciﬁc change negotiations were conducted in the division in the second half of the year, leading to the termination of employ- ment for approximately 70 white-collar employees and approximately 30 employees. Facility Services Sweden Facility Services Sweden’s full-year net sales decreased to EUR 140.4 million (149.8). Operating proﬁt declined to EUR 0.4 million (3.9). Operating proﬁt before the amortisation of purchase price allocations of acquisitions was EUR 2.2 million (6.0). Production costs were increased by higher fuel prices and general cost inﬂation from February onwards. The COVID-19 pandemic increased sickness-related absences, particularly in the ﬁrst quarter. Customer agreements in the Swedish business are mostly ﬁxed-price contracts, and the increased production Financial performance Group net sales and ﬁnancial performance Net sales for 2022 totalled EUR 844.1 million (812.5), an increase of 3.9% year-on-year. Net sales growth excluding the eﬀect of the renewable energy sources business was 7.0%. Organic growth was 3.7%. Adjusted operating proﬁt was EUR 40.9 million (42.4), representing 4.8% (5.2%) of net sales. Operating proﬁt was EUR 42.9 million (42.2), representing 5.1% (5.2%) of net sales. Earnings per share were EUR 0.83 (0.90). Net sales increased in Environmental Services, Industrial Services and Facility Services Finland. Net sales decreased in Facility Services Sweden. Operating proﬁt improved in Environ- mental Services and Industrial Services, and declined in Facility Services in Finland and Sweden. The Group’s adjusted operating proﬁt was negatively aﬀected by increased fuel prices and the higher general cost level. The sickness rate was exceptionally high during the review period, which had a negative impact particularly on the labour-intensive facility services business. The Group's operat- ing proﬁt was increased by a gain of EUR 4.3 million recognised on the sale of the share of the renewable energy sources busi- ness to a newly established joint venture. Net ﬁnancial expenses rose to EUR -5.8 million (-3.3) and the eﬀective tax rate increased to 16.7 per cent (11.8 per cent). Division reviews Environmental Services The full-year net sales of the Environmental Services division grew to EUR 321.2 million (320.5). Operating proﬁt was EUR 30.3 million (29.8). Excluding the renewable energy sources business, the net sales of the Environmental Services divi- sion amounted to EUR 287.1 million (265.5) and operating proﬁt was EUR 30.0 million (28.9). In Environmental Services, growth was derived particu- larly from corporate customers and producer responsibil- ity organisations. The producer responsibility organisation Suomen Pakkaustuottajat Oy chose L&T as its recycling partner for consumer plastic packaging in December. The agreement covers approximately 20,000 tonnes of con- sumer packaging plastic waste, which corresponds to approximately half of the packaging plastic waste collected in Finland each year. From the beginning of 2023, L&T will be responsible for the intermediate storage of plastic packaging waste as well as its collection and transport to Quantafuel ASA’s mechanical and chemical recycling plants in Denmark. During the period under review, the organisational struc- ture and operating model were reformed by assigning more commercial responsibility to the local organisation. The envi- ronmental responsibility management and consulting organi- sation grew and its competencies were expanded. The ERP system and related information system renewal programme continued in the division and progressed to the implementation stage. The system is scheduled to enter the deployment stage in the ﬁrst half of 2024. The total invest- ment in the system projects under the programme is esti- mated at approximately EUR 16.9 million, of which approxi- mately EUR 6.2 million was realised by the end of 2022, with expenses of EUR 1.3 million recognised in 2022. Due to the reform of the Waste Act in 2021, direct cus- tomer agreements with housing properties were transferred to municipal operators during the period under review, but the impact of these changes on net sales was compensated for by growth in the corporate customer segment. The prices of recycled raw materials increased in the ﬁrst half of the year. The prices of recycled raw materials subsequently stabilised and, in the case of certain fractions, began to decrease in the latter half of the year. The market prices of recycled cardboard and paperboard falling to less than half of the level seen in the early part of the year was particularly reﬂected in the net sales of the Environmental Services division. The reduced level of activity in the con- struction industry was also reﬂected in declining volumes towards the end of the year. Fuel prices rose sharply at the end of February due to the war in Ukraine. The higher fuel costs were passed on to customer prices through cost increases carried out in Feb- ruary–April. The merger of the Environmental Services division’s renew- able energy sources business with Neova Oy’s correspond- ing business was approved by the Finnish Competition and Consumer Authority, and the joint venture Laania Oy became operational on 1 July 2022. In the ﬁrst half of the year, the net sales of the renewable energy sources business amounted to EUR 35.4 million, and the operating proﬁt was EUR 0.3 million. In the ﬁnancial year 2021, the net sales of the renewable energy sources business totalled EUR 56.9 million, and the operating 7 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT MEUR 2022 2021 Change % Net sales Environmental Services 321.2 320.5 0.2 Industrial Services 132.0 105.1 25.6 Facility Services Finland 256.3 243.1 5.4 Facility Services Sweden 140.4 149.8 -6.2 Interdivisional net sales -6.0 -6.1 Total 844.1 812.5 3.9 Operating proﬁt Environmental Services 30.3 29.8 1.6 Industrial Services 12.7 9.2 38.8 Facility Services Finland -0.5 1.8 -129.0 Facility Services Sweden 0.4 3.9 -89.8 Group administration and other 0.1 -2.4 Total 42.9 42.2 1.7 Adjusted operating proﬁt Environmental Services 30.3 29.8 1.6 Industrial Services 13.6 9.2 48.0 Facility Services Finland -0.5 1.8 -129.0 Facility Services Sweden 0.4 3.9 -89.8 Group administration and other -2.8 -2.2 Total 40.9 42.4 -3.5 % 2022 2021 Operating margin Environmental Services 9.4 9.3 Industrial Services 9.6 8.7 Facility Services Finland -0.2 0.7 Facility Services Sweden 0.3 2.6 Total 5.1 5.2 Adjusted operating margin Environmental Services 9.4 9.3 Industrial Services 10.3 8.7 Facility Services Finland -0.2 0.7 Facility Services Sweden 0.3 2.6 Total 4.8 5.2 MEUR 2022 2021 Gross capital expenditure Environmental Services 20.3 41.7 Industrial Services 34.6 14.5 Facility Services Finland 1.5 13.6 Facility Services Sweden 0.4 1.8 Group administration and other 1.3 0.6 Total 58.2 72.3 MEUR 2022 2021 Capital employed Environmental Services 172.3 225.3 Industrial Services 90.7 68.2 Facility Services Finland 34.3 28.4 Facility Services Sweden 62.1 67.1 Group administration and other 77.9 17.0 Total 437.2 406.0 % 2022 2021 Return on capital employed (ROCE) Environmental Services 15.3 14.7 Industrial Services 16.1 14.0 Facility Services Finland -0.8 6.6 Facility Services Sweden 0.8 6.5 Total 10.4 10.8 costs could not be passed on to customers in the form of price increases. The proﬁt performance of Facility Services Sweden was lowered not only by inﬂation but also the weaker-than-ex- pected sales of additional services. Adaptation measures were initiated in the division in the second quarter. The eﬀort to sim- plify operating models and adapt them to the rapidly changing business environment will continue in 2023. Financing and capital expenditure In 2022, cash ﬂow from operating activities amounted to EUR 71.8 million (65.6). Net cash ﬂow after investments came to EUR 41.1 million (1.7). Net cash ﬂow from operating activities after investments was reduced by acquisitions, which had a total impact of approximately EUR -13 million (approxi- mately EUR -23 million). Net cash ﬂow after investments was increased by the repayment of a loan receivable of EUR 16.4 million by the joint venture in the ﬁnal quarter of 2022. A total of EUR 6.2 million in working capital was committed (EUR 15.1 million committed). At the end of the ﬁnancial year, interest-bearing liabilities amounted to EUR 216.8 million (195.6). Net interest-bearing liabilities totalled EUR 167.3 million (167.1). The average inter- est rate of long-term loans, excluding lease liabilities, with interest rate hedging, was 2.5% (1.1%). Of the company’s ﬂoating rate loans totalling EUR 50 million, EUR 30 million have been converted into ﬁxed rate loans by means of an interest rate swap. The EUR 100.0 million commercial paper programme was unused at the end of the ﬁnancial year as in the comparison period. The account limit totalling EUR 10.0 million as well as the committed credit limit totalling EUR 40.0 million were not in use, as was the case in the comparison period. The Group signed a credit limit linked to responsibility targets in May 2022. The credit limit will mature in the ﬁrst quarter of 2025. The company issued senior unsecured sustainability-linked notes in the amount of EUR 75 million in May. The new notes will mature in the second quarter of 2028 and bear ﬁxed annual interest at the rate of 3.375 per cent. Net ﬁnancial expenses amounted to EUR -5.8 million (-3.3). The increase in net ﬁnancial expenses was attributable to higher interest-bearing liabilities due to acquisitions, an expense of EUR 0.3 million associated with the redemption of a bond, and the higher general interest rate level. The eﬀect of exchange rate changes on net ﬁnancial expenses was EUR -0.2 million (0.3). Net ﬁnancial expenses were 0.7% (0.4%) of net sales. The equity ratio was 34.3% (34.2%) and the gearing ratio was 75.9% (79.4%). The Group’s total equity was EUR 220.4 million (210.4). Translation diﬀerences caused by the depreci- ation of the Swedish krona aﬀected equity by EUR -5.6 million and changes in the fair value of hedging instruments by EUR 1.3 million. Cash and cash equivalents at the end of the period amounted to EUR 49.5 million (28.6). Overdue trade receiva- bles and credit losses have not increased as a result of the COVID-19 pandemic or the war in Ukraine. Loans, liabilities and contingent liabilities to related parties Related-party transactions are accounted for in Note 5.4 Related-party transactions. Sustainability and the statement of non-ﬁnancial information Sustainability is an integral aspect of Lassila & Tikanoja’s strategy, decision-making and day-to-day business. Through sustainable circular economy solutions, L&T strengthens its competitiveness and creates diverse value for its key stake- holders. Lassila & Tikanoja’s business model, value creation and strategy are described in more detail on pages 4-5. Managing sustainability At L&T, sustainability is integrated into the Group’s strategy. The Board of Directors monitors the progress of the sustainability programme annually through the Personnel and Sustaina- bility Committee of the Board of Directors. The Committee discusses sustainability issues at least three times per year. The Personnel and Sustainability Committee met four times in 2022. The Group Executive Board steers the implementation of the sustainability programme and monitors it quarterly. Development primarily takes place in business-driven work- ing groups, but the Director of Corporate Relations and Sus- tainability and the communications and sustainability organ- 8 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT isation operating under their supervision are in charge of the practical coordination and reporting of sustainability eﬀorts. The businesses and other functions are in charge of the responsibility and compliance of their operations in accord- ance with the Group’s management system. L&T’s manage- ment system has been certiﬁed in accordance with the ISO 9001, ISO 14001 and ISO 45001 standards. L&T’s policies and principles cover the environmental, eth- ical and social perspectives that the Group observes in both its own operations as well as in the services it produces for customers. The policies and principles are available to stake- holders on L&T’s website. L&T takes an uncompromising approach to ensuring the compliance and sustainability of its operations. L&T observes its obligations regarding the environment and as an employer, and minimises the negative environmental impacts of its oper- ations. L&T requires that its suppliers operate in accordance with laws, regulations and its sustainability principles. Sustainability programme The development of L&T’s sustainability is driven by the Group’s sustainability programme. Approved by the Board of Directors, the programme takes into account the material aspects of L&T’s sustainability and sets measurable targets to be monitored. The programme was updated in 2022 and its focus areas were determined based on the impacts of the Group’s operations, the expectations of key stakeholders and the Group’s strategic priorities. L&T has also taken into account the special characteristics of the operations and the business environment of a service company in the environ- mental sector as well as the UN’s sustainable development principles and the objectives of the Global Compact initiative. The key sustainability targets laid out in the sustainability programme, meaning the Group’s climate impacts, customer satisfaction and the employee recommendation rate, have been incorporated into L&T’s long-term strategic goals. More information on the sustainability programme and the key tar- gets is provided in L&T’s annual report. Operating principles concerning sustainability In its decision-making and administration, Lassila & Tikanoja complies with the Finnish Companies Act, other regulations governing listed companies, the Articles of Association of Lassila & Tikanoja plc, the charter of L&T’s Board of Directors and its committees, and the rules and guidelines of Nasdaq Helsinki Ltd. L&T’s operations are also guided by the policies and operating principles approved by the Board of Directors or the Group Executive Board. To ensure compliance in its operations, L&T has docu- mented its sustainable business principles in its Code of Con- duct, which applies to all L&T employees as well as contract suppliers. Supervisors are responsible for ensuring the per- sonnel’s familiarity with the Code of Conduct and monitoring compliance with the guidelines. Violations of the Code of Conduct are primarily reported to the immediate supervisor, who assists in the interpretation of the Code in ambiguous situations. Employees can also use a conﬁdential whistleblowing channel by phone or e-mail. The channel is available in all of the Group’s operating countries. L&T responds to all incidents of non-compliance without delay, in accordance with a jointly agreed process. Managing sustainability-related risks is part of L&T’s com- prehensive risk management. The risk management process is described in the Corporate Governance Statement, and the key risks are explained under “Risks and risk management” on page 16-17. Sustainability reporting L&T reports on its sustainability eﬀorts and related progress quarterly in connection with interim reports and more exten- sively on an annual basis in the sustainability report published as part of the Annual Review. The sustainability report for 2022 has been drawn up in accordance with GRI (Global Reporting Initiative) standards. The key performance indicators for environmental responsibility and responsibility for personnel reported in the sustainability report are veriﬁed by a third party. L&T’s sustainability report is availa- ble at vuosikertomus.lt.ﬁ/en. EU taxonomy BACKGROUND In this section, Lassila & Tikanoja will publish information in accordance with the following regulations: Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facili- tate sustainable investment, and amending Regulation (EU) External recognition Rating Compared to benchmarks CDP B The rating was reduced in 2022 to the second-highest rating, “Management level”. From 2014 to 2021, L&T received a rating of Leadership “A-” . CDP supplier engagement A The highest leadership rating for climate eﬀorts in the supply chain. Kiwa Excellent, 713 points Our total score of 713 put us in 4th place among nearly 400 audits. Ecovadis Platinum L&T was rated among the top 1% of all 90,000 companies assessed by EcoVadis in 2022. 2019/2088 (Taxonomy Regulation). The EU Taxonomy Regulation sets out six environmental objectives: 1. Climate change mitigation 2. Climate change adaptation 3. Sustainable use and protection of water and marine resources 4. Transition to a circular economy, prevention and recycling of waste 5. Pollution prevention and control 6. Protection and restoration of biodiversity and ecosystems The implementation of the Taxonomy Regulation is taking place over several stages. The ﬁrst Delegated Act, namely the Climate Act, was implemented in 2021, and it sets out tech- nical screening criteria for two environmental objectives: climate change mitigation and climate change adaptation, which have been described in the taxonomy. In their report- ing on 2021, companies were required to publish information on taxonomy-eligible economic activities’ share of net sales, capital expenditure (investments) and operating expenditure. Taxonomy eligibility applies to activities that are within the scope of the Climate Act. In their reporting on 2022, companies are required to assess the taxonomy alignment of their activities. Taxonomy alignment requires that axonomy-eligible activities meet detailed technical screening criteria, do not have adverse impacts on other environmental objectives (Do No Signiﬁcant Harm criteria) and meet the minimum social safeguards set out in the Taxonomy Regulation. L&T AND THE EU TAXONOMY According to the Taxonomy Regulation, the companies that are required to report in accordance with the Non-Finan- cial Reporting Directive (2014/95/EU) must comply with the reporting requirements of the Taxonomy Regulation. This requirement applies to L&T. L&T has assessed the taxonomy eligibility and taxonomy alignment of its activities. The EU taxonomy assessment has been conducted for net sales generated by business operations (Note 1.2 to the ﬁnancial statements), capital expenditure and operating expenditure related to climate change mitigation. L&T reports on taxon- omy at the Group level. L&T’s Renewable Energy Sources business operations are not included in the taxonomy calcu- lation. L&T’s taxonomy eligibility has been assessed on the basis of the descriptions of economic activities and related NACE codes set out in Annex 1 (Climate change mitigation) of the Taxonomy Regulation. Taxonomy alignment assessment is based on the indus- try-speciﬁc technical screening criteria described in the Tax- onomy Regulation and the Do No Signiﬁcant Harm require- ments. The technical screening criteria have been examined side by side in order to achieve the greatest possible consist- ency in reporting and to avoid double accounting. In addition to separate technical requirements, the Taxonomy Regulation provides for minimum safeguards that L&T has assessed at the Group level. L&T’s taxonomy alignment has been assessed on the basis of the technical screening criteria and related NACE codes set out in Annex 1 (Climate change mitigation) of the Taxonomy Regulation. The assessment was carried out in cooperation with environmental specialists of the divisions. 9 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT The ﬁnancial indicators concerning the taxonomy are based on ﬁgures extracted from L&T’s ﬁnancial management systems and ERP systems. For capital expenditure and oper- ating expenditure, data from 2022 was analysed and com- pared to the screening criteria. Some of L&T’s measures, such as installing solar panels in oﬃces, could fall within the scope of the taxonomy. However, this capital expenditure does not represent a signiﬁcant proportion of the total investment. L&T does not have separate capital or operating expenditure plans for the taxonomy. The business operations of the Environmental Services division include, for example, the collection and transport of non-hazardous waste in waste fractions and the recovery of materials from non-hazardous waste. The business operations of the Industrial Services division include, for example, the renewal of wastewater collection and treatment as well as the transport of soil in connection with environmental construction. The business operations of the Facility Services division include, for example, the installa- tion, maintenance and repair of energy eﬃciency equipment and renewable energy technology, as well as the installa- tion, maintenance and repair of instruments and devices for measuring, regulating and controlling the energy perfor- mance of buildings. FUTURE OUTLOOK The circular economy is a key way of mitigating climate change. L&T’s mission is to make the circular economy a reality. All of the Group’s businesses build future sustaina- ble growth for the circular economy and are based on the opportunities it creates. The Board of Directors has set L&T a long-term goal of increasing the carbon handprint faster than net sales. L&T also continues to invest in the achievement of climate targets by purchasing zero-emission vehicles, for example. The EU taxonomy is still a work in progress, and L&T’s assessment may change when new parts of the taxon- omy are completed. In particular, the criteria related to a cir- cular economy are closely linked to L&T’s business. 10 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Taxonomy-aligned activities, share of net sales Substantial contribution criteria DNSH criteria Taxonomy-aligned share of turnover Economic activities Code(s) Absolute turnover Share of turnover Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Minimum safeguards 2022 2021 Category TAXONOMY-ELIGIBLE ACTIVITIES MEUR % % % % % % % Y/ N Y/ N Y/ N Y/ N Y/ N Y/ N Y/ N % % E/T Taxonomy-aligned activities Installation and operation of electric heat pumps 4.16 0.50 0.1% 100.00% Y Y Y Y Y Y 0.1% Collection and transport of non-hazardous waste in source segregated fractions 5.5 49.81 5.9% 100.00% Y Y Y Y Y Y 5.9% Material recovery from non-hazardous waste 5.9 35.65 4.2% 100.00% Y Y Y Y Y Y 4.2% Installation, maintenance and repair of energy eﬃciency equipment 7.3 10.27 1.2% 100.00% Y Y Y Y Y Y 1.2% E Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) 7.4 0.07 0.0% 100.00% Y Y Y Y Y Y 0.0% E Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings 7.5 4.21 0.5% 100.00% Y Y Y Y Y Y 0.5% E Installation, maintenance and repair of renewable energy technologies 7.6 4.97 0.6% 100.00% Y Y Y Y Y Y 0.6% E Professional services related to energy performance of buildings 9.3 3.43 0.4% 100.00% Y Y Y Y Y Y 0.4% E Turnover of Taxonomy-aligned activities 108.91 12.9% 12.9% Taxonomy-non-aligned activities Renewal of waste water collection and treatment 5.4 0.65 0.1% Collection and transport of non-hazardous waste in source segregated fractions 5.5 1.75 0.2% Material recovery from non-hazardous waste 5.9 3.34 0.4% Installation, maintenance and repair of energy eﬃciency equipment 7.3 3.57 0.4% Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings 7.5 3.57 0.4% Turnover of Taxonomy-non-aligned activities 12.87 1.5% 1.5% N/A Total Taxonomy-eligible activities 121.78 14.4 % 14.4% NA TAXONOMY-NON-ELIGIBLE ACTIVITIES Absolute turnover, MEUR Share of turnover Turnover of Taxonomy-non-eligible activities 720.9 85.6% Total Taxonomy-eligible and non-eligible turnover 844.1 100.0% 11 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Taxonomy-aligned activities, share of capital expenditure Substantial contribution criteria DNSH criteria Taxonomy-aligned share of capital expen- diture Economic activities Code(s) Capital expendi- ture Share of capital expendi- ture Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Minimum safeguards 2022 2021 Category TAXONOMY-ELIGIBLE ACTIVITIES MEUR % % % % % % % Y/ N Y/ N Y/ N Y/ N Y/ N Y/ N Y/ N % % E/T Taxonomy-aligned activities Collection and transport of non-hazardous waste in source se- gregated fractions 5.5 3.5 6.0% 100.00% Y Y Y Y Y Y 6.0% Material recovery from non-hazardous waste 5.9 2.1 3.6% 100.00% Y Y Y Y Y Y 3.6% Professional services related to energy performance of buildings 9.3 0.1 0.1% 100.00% Y Y Y Y Y Y 0.1% E CapEx of Taxonomy-aligned activities 5.6 9.7% 9.7% Taxonomy-non-aligned activities Renewal of waste water collection and treatment 5.4 1.2 2.1% Collection and transport of non-hazardous waste in source se- gregated fractions 5.5 0.1 0.2% Material recovery from non-hazardous waste 5.9 0.2 0.3% CapEx of Taxonomy-non-aligned activities 1.5 2.6% 2.6% N/A Total Taxonomy-eligible activities 7.1 12.3% 12.3% N/A TAXONOMY-NON-ELIGIBLE ACTIVITIES Capital expen- diture, MEUR Share of capital expendi- ture Turnover of Taxonomy-non-eligible activities 51.1 87.7% Total Taxonomy-eligible and non-eligible capital expenditure 58.2 100.0% 12 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Taxonomy-aligned activities, share of operating expenditure Substantial contribution criteria DNSH criteria Taxonomy-aligned share of operating expenditure Economic activities Code(s) Operating expendi- ture Share of operating expendi- ture Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Climate change mitigation Climate change adaptation Water and marine resources Circular economy Pollution Biodiversity and ecosystems Minimum safeguards 2022 2021 Category TAXONOMY-ELIGIBLE ACTIVITIES MEUR % % % % % % % Y/ N Y/ N Y/ N Y/ N Y/ N Y/ N Y/ N % % E/T Taxonomy-aligned activities Installation and operation of electric heat pumps 4.16 0.5 0.1% 100.00% Y Y Y Y Y Y 0.1% Collection and transport of non-hazardous waste in source se- gregated fractions 5.5 47.8 5.9% 100.00% Y Y Y Y Y Y 5.9% Material recovery from non-hazardous waste 5.9 34.2 4.2% 100.00% Y Y Y Y Y Y 4.2% Installation, maintenance and repair of energy eﬃciency equipment 7.3 9.9 1.2% 100.00% Y Y Y Y Y Y 1.2% E Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) 7.4 0.1 0.0% 100.00% Y Y Y Y Y Y 0.0% E Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings 7.5 4.0 0.5% 100.00% Y Y Y Y Y Y 0.5% E Installation, maintenance and repair of renewable energy technologies 7.6 4.8 0.6% 100.00% Y Y Y Y Y Y 0.6% E Professional services related to energy performance of buildings 9.3 3.3 0.4% 100.00% Y Y Y Y Y Y 0.4% E Turnover of Taxonomy-aligned activities 104.5 12.9% 12.9% Taxonomy-non-aligned activities Renewal of waste water collection and treatment 5.4 0.6 0.1% Collection and transport of non-hazardous waste in source segregated fractions 5.5 1.7 0.2% Material recovery from non-hazardous waste 5.9 3.2 0.4% Installation, maintenance and repair of energy eﬃciency equipment 7.3 3.4 0.4% Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings 7.5 3.4 0.4% OpEx of Taxonomy-non-aligned activities 12.9 1.6% 1.6% N/A Total Taxonomy-eligible activities 117.4 14.5% 14.5% N/A The sum of the individual ﬁgures does not add up to the total due to rounding. TAXONOMY-NON-ELIGIBLE ACTIVITIES Operating expenditure, MEUR Share of operating expenditure Turnover of Taxonomy-non-eligible activities 692.5 85.5 % Total Taxonomy-eligible and non-eligible operating expenditure 809.9 100.0 % 13 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT TCFD reporting is provided on page 18. Environmental risks and their management are described in more detail under “Risks and risk management”. Personnel and other social responsibility issues Full-time and part-time, total 2022 2021 Finland 7,020 7,003 Sweden 1,351 1,168 Total 8,371 8,171 As a major employer and service enterprise, the focus of L&T’s social responsibility is on the Group’s employees. The material aspects of L&T’s responsibility for its employees include increasing job satisfaction, strengthening the work ability of the personnel, developing diversity and improving occupational safety. The Group also wants to actively work to Non-ﬁnancial performance indicators Indicator Target 2022 2021 Environmental matters Carbon footprint (SBt) Scope 1&2 -50% by 2030, using 2018 as the baseline -32% -19% Carbon handprint intensity, tCO 2 -ekv/milj.€ Grows faster than net sales -633 -646 Recycling rate (reporting covers municipal waste collected from corporate customers, hazardous waste, industrial waste and construction waste in Finland. 60% by 2026 59.4% 58.4% Social responsibility Employee Net Promoter Score, eNPS >50 by 2026 24 (October 2022) 28 (October 2021) Sickness-related absences, % 4.5% by 2026 5.6 5.0 Average retirement age (old-age pension and disability pension) 65 years by 2026 63.8 (Finland) 63.9 years (Finland) Total recordable incident frequency (TRIF) 20 by 2026 23 24 Governance Code of Conduct training for the Group’s personnel All new L&T employees complete Code of Conduct training during their trial period or, at the latest, within one year of the start of the employment relationship. 58% of salaried employees (Fin- land), 675 persons (Sweden) 63% of salaried employees and 71% of employees (Finland and Sweden). The distribution obligation for renewable transport fuel was reduced by 7.5 per cent in July. This change has not been taken into account in the emissions calculations in this report, as Statistics Finland has yet to update its fuel classiﬁ- cation data in accordance with the change. Statistics Finland is expected to publish updated fuel classiﬁcation data during spring 2023, and L&T will subsequently calculate and report its carbon dioxide emissions for 2022 on its website using the updated emission factors. Environmental responsibility L&T’s environmental responsibility is realised particularly through the services it produces for customers. The primary goal is always to direct materials collected from customers towards reuse or recycling, guided by the order of priority as stipulated by law and the circular economy approach. L&T requires the sustainable management of environ- mental issues of its partners and suppliers. This require- ment is factored into the procurement process, e.g. in the form of self-assessments. Waste is only handed over to operators that are authorised to receive or process it. Acquisitions are subject to detailed due diligence pro- cesses. L&T’s strategic goal is to improve its customers’ energy and material eﬃciency and to increase the carbon hand- print of its operations. This is achieved when customers replace primary raw materials with secondary raw materi- als as well as fossil fuels with solid recovered fuels (SRF). As the carbon handprint of L&T’s operations increases, the carbon footprint of its customers decreases. L&T thereby supports its customers in reaching their environmental goals. In 2022, the focus of L&T’s environmental eﬀorts was on the climate impacts of the supply chain. The Group updated the climate targets for the supply chain in spring 2022 and set separate emission reduction targets for subcontracted transport operations. The target is to reduce the transport emissions of subcontracted operations by 30 per cent by 2030, using 2020 as the baseline. At the same time, L&T continued to engage the supply chain in the pursuit of the science-based emission reduction target. The target is for 70 per cent of the largest suppliers and subcontractors (based on spending) to set targets for reducing their emis- sions by 2025. Good progress was made towards the Group’s climate targets for its own operations in spite of the challenging business environment. During the year, investments were made in low-emission vehicles, and route optimisation and driving style training were continued. The use of renewable fuels was signiﬁcantly increased. Transport operations account for 95 per cent of the emissions generated by L&T’s own operations. The fuel dis- tribution obligation was adjusted in 2022 by reducing the biofuel component by 7.5 per cent in July. This change has not been taken into account in the emissions calculations in this report, as Statistics Finland has yet to update its fuel classiﬁcation data in accordance with the change. Statis- tics Finland is expected to publish updated fuel classiﬁca- tion data during spring 2023. L&T will subsequently calcu- late and report its carbon dioxide emissions for 2022 on its website using the updated emission factors. The total emis- sions of L&T’s own operations for 2022, calculated with the updated emission factors, are likely to be higher than those indicated in this report. Professional waste treatment operations are subject to environmental permits and regulatory compliance. In 2022, L&T had 53 (65) environmental permits that determined how the Group managed and monitored environmental mat- ters. Environmental permits related to the renewable energy sources business are no longer included in this ﬁgure fol- lowing the merger of L&T’s renewable energy sources busi- ness with Neova’s corresponding business into Laania Oy at the beginning of July. Facilities subject to environmental permits have con- tingency plans and rescue plans that specify how they are prepared for signiﬁcant environmental incidents. Envi- ronmental issues are also covered in regularly conducted internal audits. L&T’s objective is that no serious incidents of environmental damage result from the Group’s own oper- ations. This target was achieved in 2022. To reduce the environmental impact of the materials collected from customers and to promote the circular economy, L&T continuously strives to ﬁnd new solutions to recover materials at the highest possible reﬁning rate and in accordance with the order of priority in waste man- agement. 14 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT promote the employment of special groups, such as people with reduced work ability. L&T does not tolerate any kind of discrimination, harassment, bullying, racism or inappropriate treatment or the use of child labour, any form of forced labour or any other practices in violation with basic human rights in its own operations or as part of its supply chain. L&T observes the Universal Declaration of Human Rights, workers’ rights as deﬁned by the International Labour Organ- isation, and international agreements. National legislation, agreements and other obligations are applied in employ- ment relationships. L&T respects the employees’ freedom to unionise. L&T monitors compliance with collective agree- ments, environmental legislation, labour law, occupational safety legislation and regulations pertaining to ﬁnancial management. L&T is also compliant with the applicable legislation governing contractors’ obligations and liability, and requires the same of its suppliers. The operations are guided by the Group’s personnel policy, the ISO 45001-cer- tiﬁed management system, and the principles governing occupational safety management and sustainability (Code of Conduct). L&T’s strategic objective is to increase the Employee Net Promoter Score (eNPS) to 50 by 2026. Employee sat- isfaction is measured by means of a personnel satisfac- tion survey which goes by the name Fiilinki in Finland and Pulsen in Sweden. As part of work ability management, L&T’s targets are to reduce sickness-related absences to 4.5 per cent, achieve an employee health rate of 45 per cent and increase the average retirement age to 65 years in the long term. The COVID-19 pandemic aﬀected the Group’s health-related indicators, particularly in the early part of the year and the ﬁnal months of the year. In order to turn the development of sickness-related absences to a decrease, the purpose- ful implementation of the action plan for promoting health will continue. In occupational safety, L&T pursues continuous improvement with an ultimate goal of zero accidents. L&T will continue its purposeful development eﬀorts to engage employees in the promotion of safety. There were no reported fatal accidents at L&T in 2022. There was one case of diagnosed occupational disease at L&T in 2022. There have been no conﬁrmed grievances related to human rights or incidents of discrimination in the Group. Risks related to human rights are assessed as part of the risk management process. Risks and their manage- ment are described in more detail under “Risks and risk management” on pages 16-17. Anti-corruption and bribery L&T’s procurement processes are transparent, and pro- curement decisions are based on competitive supply con- tracts. Procurement is guided by the Group’s procurement principles and the more detailed procurement guidelines. Mandates and the limits for decision-making in terms of procurement are deﬁned in L&T’s guidelines on authorisa- tion on the basis of position. In the case of potential con- ﬂicts of interests in procurement processes, the persons concerned are disqualiﬁed from the decision-making. Sup- plier co-operation must not involve any bribery or the kind of hospitality or exchange of gifts that could inﬂuence pro- curement decisions. L&T is committed to supporting the UN Global Compact initiative and its anti-corruption principles. The prevention of corruption and bribery is based on national legislation and agreements. Internally, operations are guided by L&T’s sustainable business principles (Code of Conduct), which include anti-bribery and corruption guidelines related to, among other things, accepting and oﬀering gifts and hos- pitality, as well as the avoidance of conﬂicts of interest. L&T also adheres to a separately deﬁned permit procedure to ensure that all customer events are appropriate and that all sponsorships and supporting marketing operations are transparent. L&T mainly operates with local partners in Finland and Sweden, which improves visibility with respect to its part- ners’ sustainability. L&T’s purchases in 2022 were focused on domestic companies. In Finland, 96 per cent of purchases were made from companies operating in Finland. The corre- sponding ﬁgure for Sweden was also 96 per cent. Operations with signiﬁcant suppliers are managed through regular supplier co-operation and monitored accord- ing to separately agreed performance indicators. Contract suppliers are required to comply with L&T’s Code of Conduct. We ensure the sustainability of our suppliers’ operating methods through self-assessment surveys, supplier audits, analyses of suppliers’ ﬁnancial circumstances and other appropriate means. Our primary assurance measures are targeted at our most signiﬁcant suppliers. There were no reported incidents of bribery or corruption at L&T in 2022. Changes in the Group Executive Board Tina Hellstadius, (M.Sc/Technology) was appointed Senior Vice President, Facility Services Sweden and a member of the Group Executive Board eﬀective from 19 April 2022. Hell- stadius succeeded Erik Sundström, who retired on 30 June 2022. In December 2022, L&T’s CIO Edward Skärström was appointed as a member of the Group Executive Board eﬀec- tive from 1 January 2023. The members of L&T’s Group Execu- tive Board are listed in the Corporate Governance section. Changes in Group structure The renewable energy sources businesses of Lassila & Tikanoja and Neova were merged on 1 July 2022, forming an independent limited company named Laania Oy. L&T owns 55 per cent of the joint venture and Neova Oy owns 45 per cent, but the owners have joint control of the company pursuant to the joint venture agreement. In 2022, Lassila & Tikanoja’s Industrial Services division acquired 70 per cent of the shares of Sand & Vattenbläst i Tyringe AB (“SVB”), a company that provides process clean- ing services in Sweden. L&T Relations Oy was merged with Lassila & Tikanoja plc during the fourth quarter of 2022. 15 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Major shareholders on 31 December 2022, excluding nominee-registered shares Shareholder Number of shares Percentage of shares and votes 1 Evald and Hilda Nissi Foundation 3,346,487 8.6 2 Mandatum Life Insurance Company Limited 3,028,547 7.8 3 Nordea investment funds 1,706,466 4.4 4 Maijala Juhani 1,529,994 3.9 5 Åbo Akademi University Foundation 1,066,282 2.8 6 Bergholm Heikki 875,000 2.3 7 Ilmarinen Mutual Pension Insurance Company 790,000 2.0 8 Varma Mutual Pension Insurance Company 729,791 1.9 9 Maijala Mikko 720,000 1.9 10 Lassila & Tikanoja Plc 653,256 1.7 11 Elo Mutual Pension Insurance Company 572,738 1.5 12 Turjanmaa Kristiina 521,465 1.3 13 The State Pension Fund 512,000 1.3 14 Kaleva Mutual Insurance Company 400,000 1.0 15 Oy Chemec Ab 356,320 0.9 16 Maijala Eeva 346,000 0.9 17 Seligson & Co. investment funds 341,995 0.9 18 Samfundet folkhälsan i Svenska Finland rf 336,800 0.9 19 Veritas Pension Insurance 289,396 0.8 20 Lassila Juha 196,461 0.5 Total 18,318,998 47.2 Shares and shareholders Share capital and number of shares There were no changes in Lassila & Tikanoja’s share capital and number of shares in 2022. The registered share capi- tal of the company is EUR 19,399,437. The number of shares is 38,798,874. The average number of shares excluding the shares held by the company was 38,116,180. Each share car- ries one vote. The Articles of Association do not set an upper limit on the share capital and number of shares. A share has neither a nominal value nor a book equivalent value. The com- pany’s shares are included in the book-entry system of secu- rities maintained by Euroclear Finland Ltd. Euroclear Finland maintains the company’s oﬃcial list of shareholders. Shareholders At the end of the ﬁnancial year, the company had 24,556 (23,087) shareholders. Nominee-registered holdings accounted for 7.0% (9.6) of the total number of shares. Holdings of the Board of Directors, the President and CEO and the Executive Board The members of the Board, the President and CEO and the Executive Board, and organisations under their control held a total of 175,670 shares in the company on 31 December 2022, representing 0.5 per cent of the total number of shares and votes. Lassila & Tikanoja plc transferred 8,618 shares to the members of the Board of Directors as a part of their annual fee based on a decision made by the Annual General Meeting on March 17, 2022. Share-based incentive plans Lassila & Tikanoja plc transferred 24,522 shares to 9 persons in key roles as part of the Group’s share-based incentive plan. The transferred shares form the share-based reward part of the 2021 share-based incentive plan. In December 2022, the Board of Directors of Lassila & Tikanoja plc decided to establish two new long-term share- based incentive plans for the Group’s key employees. The aim of the new plans is to align the objectives of the com- pany, shareholders and key employees in order to increase the value of the company in the long term, to retain the key Number of shareholders Percentage Number of shares Percentage of shares and votes Breakdown of shareholding by sector on 31 December 2022 Non-ﬁnancial corporations and housing corporations 944 3.8 3,945,893 10.2 Financial and insurance corporations 51 0.2 6,088,709 15.7 General Government 19 0.1 3,109,862 8.0 Households 23,237 94.6 16,343,112 42.1 Non-proﬁt institutions serving households 231 0.9 6,398,151 16.5 Foreign shareholders 75 0.3 150,016 0.4 Of which nominee-registered 10 2,722,603 7.0 Shares not transferred to the book-entry securities system 40,528 0.1 Own shares 1 653,256 1.7 Total 24,557 100 38,798,874 100 Breakdown of shareholding by size of holding Number of shares 1–1,000 22,081 89.9 4,811,281 12.4 1,001–5,000 2,010 8.2 4,273,425 11.0 5,001–10,000 240 1.0 1,713,051 4.4 10,001–100,000 189 0.8 5,125,068 13.2 100,001–500,000 22 0.1 4,313,321 11.1 over 500,000 14 0.1 17,868,944 46.1 of which nominee-registered 10 2,722,603 7.0 Shares not transferred to the book-entry securities system 40,528 0.1 Own shares 1 653,256 1.7 Total 24,557 100 38,798,874 100 employees at the company and to oﬀer them competitive reward plans that are based on earning and accumulating the company’s shares as well as on appreciation of the share price. The Performance Share Plan 2023–2027 comprises three (3) three-year (3) performance periods covering the calendar years 2023–2025, 2024–2026 and 2025–2027. During the performance period 2023–2025, the earning of rewards is based on the following performance criteria: return on capital employed (ROCE), total shareholder return (TSR) and reduction of the carbon footprint (ESG). The target group of the Performance Share Plan during the performance period 2023–2025 consists of approxi- mately 50 key employees, including the Group’s President and CEO and the Group Executive Board. The transitional share-based incentive scheme 2023– 2026 consists of two (2) earnings periods of one (1) year each, corresponding to the calendar years 2023 and 2024. The earnings period is followed by a two-year commitment period. The aim of the scheme is to support the transition from the old share-based incentive scheme to the new share-based incentive scheme. The target group of the transitional share-based incentive scheme for the earnings period 2023 consists of approximately 10 key employees, including the Group’s President and CEO and the Group Exec- utive Board. Trading in shares in 2022 The company’s shares are quoted on the mid-cap list of Nasdaq Helsinki Oy in the Industrials sector. The trading code is LAT1V and the ISIN code is FI0009010854. The volume of trading dur- ing the year 2022 was 9.4 million shares, which is 24.7% (25.2) of the average number of outstanding shares. The value of trading was EUR 104.9 million (137.3). The highest share price was EUR 13.62 and the lowest EUR 9.72. The closing price was EUR 10.64. At the end of the period, the market capitalisation excluding the shares held by the company was EUR 405.9 mil- lion (512.2). Own shares At the end of the ﬁnancial year, the company held 653,256 of its own shares, representing 1.7% of all shares and votes. 16 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT or other special rights entitling to shares, referred to in Chapter 10, Section 1 of the Finnish Companies Act, so that under the authorisation a maximum of 2,000,000 shares (5.2% of the total number of shares) may be issued and/or conveyed. The authorisation is eﬀective for 18 months. Dividend policy The amount of dividend is tied to the results for the ﬁnancial year. Proﬁts not considered necessary for ensuring the healthy development of the company are distributed to shareholders. Proposal for proﬁt distribution In 2022, the Group’s earnings per share were EUR 0.83 (0.90) and net cash ﬂow from operating activities after investments per share amounted to EUR 1.08 (0.05). The Board of Directors will propose a dividend of EUR 0.47 per share to the Annual General Meeting to be held on 23 March 2023. A dividend of EUR 0.46 per share was paid for the ﬁnancial year 2021. Risks and risk management L&T has a deﬁned risk management process that includes a review of ﬁnancial, strategic, operational and damage-related risks. L&T has also assessed climate-related risks and oppor- tunities as part of the risk management system in accordance with TCFD reporting. Key risk management principles Risk management at L&T aims to identify signiﬁcant risk fac- tors, prepare for them and manage them in an optimal way so that the Group’s strategic and ﬁnancial objectives are achieved. Comprehensive risk management endeavours to manage the Group’s risk as a whole and not just individual risk factors. The risk management process also aims to assess the opportuni- ties associated with risks. Responsibilities The principles of L&T’s risk management are approved by the company’s Board of Directors. The Board monitors the imple- mentation of risk management and assesses the eﬃciency of the methods employed. The President and CEO is responsible for the organisation and implementation of risk management. Risk management at L&T Group is controlled by the risk man- agement policy conﬁrmed by L&T’s Board of Directors. The pol- icy speciﬁes the objectives and principles, organisation and responsibilities, and procedures of the Group’s risk manage- ment. The Group’s ﬁnancing policy conﬁrmed by L&T’s Board of Directors is followed in the management of ﬁnancial risks. The principles for insurance risk management are speciﬁed in the Insurance Policy. Identiﬁcation, assessment and reporting of risks Risks are surveyed regularly and systematically at both the division and the company level and in central functions con- sidered to be critical. The signiﬁcance of risks is assessed using a risk matrix. Measures for managing and minimising the identiﬁed risks are prepared, and responsibility for these measures is allocated to speciﬁed individuals or units. The most signiﬁcant risks identiﬁed and the preparations for them are regularly reported to the President and CEO and the Board of Directors. Risk analysis The section Strategic and operative risks describes the most important strategic, operational and damage-related risks of L&T’s business which, if realised, can endanger or prevent the achievement of business objectives. Financial risks and their management are described in Note 4.2 to the consolidated ﬁnancial statements. Near-term uncertainties General economic uncertainty may aﬀect the level of eco- nomic activity among customers, which may reduce the demand for L&T’s services. Higher costs, such as fuel and energy, potential interest rate hikes and wage-related decisions in the labour market, may have a negative impact on the company’s ﬁnancial per- formance. The company has several ERP system renewal projects under way. Temporary additional costs arising from system deployments and the establishment of the operating model may weigh down the company’s result. Production costs may be increased by challenges related to employee turnover, labour availability and higher sick- ness rates. As the company has no operations or holdings in Rus- sia, Belarus or Ukraine, and there are no signiﬁcant Rus- sian-owned companies in the customer base, the direct impacts of the war in Ukraine are expected to be minor. However, indirect impacts on overall economic activity in Finland and Sweden may have a negative impact on net sales and proﬁt. Events after the balance sheet date On 11 January 2023, the company announced that Lassila & Tikanoja’s Shareholders’ Nomination Board proposes to the Annual General Meeting to be held on 23 March 2023 that the Board of Directors have six (6) members. The Nomination Board proposes that Teemu Kangas-Kärki, Laura Lares, Sakari Lassila, Jukka Leinonen and Pasi Tolppanen be re-elected to the Board of Directors and that Anni Ronkainen be elected as a new mem- ber. Of the current members, Laura Tarkka has announced that she is no longer available for the election of the members of the Board of Directors. In addition, the Nomination Board proposes that Jukka Leinonen is elected as Chairman of the Board of Directors and Sakari Lassila as Vice Chairman. Resolutions by the Annual General Meeting The Annual General Meeting, which was held on 17 March 2022, adopted the ﬁnancial statements and consolidated ﬁnancial statements for 2021, released the members of the Board of Directors and the President and CEO from liability as well as approved the Remuneration Report for the Gov- erning Bodies. The Annual General Meeting resolved that a dividend of EUR 0.46 per share, totalling EUR 17.5 million, be paid on the basis of the balance sheet adopted for the ﬁnancial year 2021. It was decided that the dividend be paid on 28 March 2022. The Annual General Meeting conﬁrmed the number of members of the Board of Directors as six. Teemu Kan- gas-Kärki, Laura Lares, Sakari Lassila, Jukka Leinonen, Laura Tarkka and Pasi Tolppanen were re-elected to the Board until the end of the following Annual General Meeting. The Annual General Meeting elected Pricewaterhouse- Coopers Oy, Authorised Public Accountants, as the auditor until the close of the next Annual General Meeting. Price- waterhouseCoopers Oy announced that it will name Samuli Perälä, Authorised Public Accountant, as the principal auditor. The Annual General Meeting resolved to amend the third sentence of Section 4 of the Articles of Association so that the General Meeting elects the Chairman and the Vice-Chair- man of the Board. The resolutions of the Annual General Meeting were announced in more detail in a stock exchange release on 17 March 2022. Authorisations for the Board of Directors The Annual General Meeting held on 17 March 2022 author- ised Lassila & Tikanoja plc’s Board of Directors to decide on the repurchase of the company’s own shares using the company’s unrestricted equity. In addition, the Annual General Meeting authorised the Board of Directors to decide on a share issue and the issuance of special rights entitling their holders to shares. The Board of Directors is authorised to purchase a max- imum of 2,000,000 company shares (5.2% of the total number of shares). The repurchase authorisation is valid for 18 months. The Board of Directors is authorised to decide on the issuance of new shares or shares possibly held by the com- pany through a share issue and/or issuance of option rights 17 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Strategic and operative risks Risk Risk description Risk management Markets and renewal • The general economic development, functioning of the ﬁnancial markets and the political environment of L&T’s operating countries have an impact on the Group’s business operations. • Geopolitical conﬂicts may cause uncertainty, which can have an eﬀect on the general level of economic activity and industrial production capacity. • Changes in markets and the market environment, such as municipalisation and market changes pertaining to recy - cled raw materials may have an unfavourable eﬀect on the Group’s business operations and business growth. • The development of the market prices of emission rights, secondary raw materials, electricity and oil products may increase production costs. • New COVID-19 variants may lead to new orders or recommendations by the authorities, resulting in customer-spe - ciﬁc production restrictions and adjustment measures. • Creating and regularly updating scenarios, regular assessment, sharpening and updating of the strategy, taking indus - try changes into account and recognising the need for renewal as part of the continuous strategy process. • Active monitoring of the market situation and legislative developments, and dialogue with the public authorities and legislators. • L&T is independent of large individual customers and has a diverse service oﬀering. • Development of new service product. Climate change • Extreme weather phenomena, such as substantial increases in annual rainfall and snowfall, may lead to higher costs due to complications in service production. • More information is provided in the TCFD report on page 18. • A proactive approach and careful planning of production and operations. • Development of new service products and processes. • More details on the risks associated with climate change are provided in the TCFD report on page 18. Human rights • Risks related to human rights, such as deﬁciencies in working conditions, harassment, racism, discrimination and other unethical conduct. • Careful compliance with legislation and collective agreements. • L&T mainly operates in Finland and Sweden with local partners, and the risk of human rights violations is low in these countries. • Exercising particular care with regard to employment relationships with employees who are in a vulnerable position. ICT systems, data security and data protection • Disruptions, delays and functional challenges related to information and communications systems and their deployment may aﬀect L&T’s operations and customer service. • The renewal of business-critical systems may cause disruptions in service production. • Cyber crime may pose risks to L&T’s data security and business continuity. • Developing the systems environment and ensuring the reliability of the ICT environment by, for example, identifying which sys- tems are critical to operations and deﬁning the allocation of responsibilities between the system vendors and L&T. • Comprehensive planning of the deployment of new systems and related operating models. • Data security guidelines and employee training. Acquisitions • The success of acquisitions may aﬀect the achievement of the Group’s growth and proﬁtability targets. Failures in acquisitions may impact the Group’s competitiveness and proﬁtability and change the Group’s risk proﬁle. • Acquisition agreements, the strategic and ﬁnancial analysis of potential acquirees’ business operations, comprehen- sive due diligence. • Eﬀectively executed business integration programmes. Reputation • Topics discussed in mass media or social media concerning the industry or L&T’s operations may reduce trust in the company and have a negative impact on its reputation. • Continuous development of the company’s governance model, proactive risk management and monitoring practices. • Quick, reliable and open communication with stakeholders. • Crisis communication principles. Personnel • Challenges related to the availability of labour and employee turnover may complicate service production. • The potential reduction of employee satisfaction may aﬀect L&T’s competitive advantage, which is largely based on the work of skilled and motivated personnel. • COVID-19 and other highly contagious respiratory infections increase the number of sickness-related absences, which causes disruptions in L&T’s service production. • A permanent increase in sickness rates and the personnel’s disability and accident pension costs may aﬀect L&T’s competitiveness and proﬁtability. • Improving the employee experience by developing induction training and supervisory work as well as by promoting job rotation and career advancement opportunities for employees. • Co-operation with municipal employment services, central government organisations and various educational institu - tions to ensure the availability of labour. • Promoting work-based immigration and the employment of special groups. • Regularly conducted job-speciﬁc and site-speciﬁc risk assessments and workplace surveys, and supporting the employees’ work ability and capacity to cope with the demands of work through activities that promote work ability, • L&T’s own sickness fund, which supports L&T’s work ability management and complements occupational health care. • The Suitable Work model, which supports the rehabilitation and employment of people at risk of disability pension. Damage- related risks • A ﬁre at a recycling plant may result in a momentary or extended interruption of the plant’s operations. The sig- niﬁcance of the risk of ﬁre is reduced by the fact that individual plants or production lines have no substantial impact on L&T’s overall proﬁtability. • Business continuity planning, developing ﬁrst-hand ﬁre extinguishing preparedness and training employees on how to respond to a ﬁre or other hazardous situations. • Continuous insurance cover that extends to all of the Group’s operating countries and subsidiaries and that includes policies for injuries, property damage, business interruption, third-party liability, environmental damage and transport damage, for example. Risk of environmental damage • L&T’s business includes the collection and transport of hazardous waste as well as processing at the Group’s own plants. Incorrect handling of hazardous waste or damage to equipment may result in harmful substances being released into the environment. L&T may become liable for damages due to this. • The most signiﬁcant environmental risks involved in L&T’s operations are related to waste storage and process - ing as well as chemical safety. • Systematic environmental surveys of plants, preventive maintenance plans for equipment, audits and the long-term training of personnel. • Insurance. Financing risks • Potential interest rate hikes may increase the company’s interest costs. • More detailed information on the management of ﬁnancing risks is provided in the notes to the consolidated state- ments, on page 49. 18 Lassila & Tikanoja Financial review 2022 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Outlook Net sales and adjusted operating proﬁt in 2023 are estimated to be at the same level as in the previous year even though the comparison period includes net sales from the renewable energy sources business in the amount of EUR 35.4 million. Report of the risks and opportunities of climate change in accordance with TCFD L&T reports on the risks and opportunities related to climate change in accordance with the TCFD (Task Force for Cli- mate-related Financial Disclosures) recommendations. Due to the nature of our operations, L&T plays a signiﬁcant role in the mitigation of climate change and the transition towards a low-carbon circular economy. Our operations have a large carbon handprint, which means that we generate signiﬁcant emission reductions for our customers. TCFD reporting has been taken into account in our review in accordance with the table on this page. Climate-related risks and opportunities Climate-related risks and opportunities The mitigation of climate change is a strategic priority for L&T. Our businesses produce solutions that facilitate the tran- sition towards a low-carbon circular economy, promote the sustainable use of materials, energy and natural resources as well as reduce the volume of waste generated and energy consumed. We support our customers by enhancing the use of energy and materials and by replacing fossil fuels with renewable energy sources. Furthermore, we support our cus- tomers in the mitigation of climate impacts by optimising the use of properties and their technical systems. L&T has the strong market position required for the implementation of such changes in all of its business areas. In assessing climate-related risks, L&T has evaluated its transition risks (regulatory, technology-related and reputa- tional risks) and physical risks, as well as their impacts on the Group’s operations. The most signiﬁcant transition risks con- cern changes that aﬀect carbon neutrality targets for trans- port or the promotion of the circular economy. The assess- ment takes into account, for example, the development of prices for emission rights and carbon emissions, diﬀerent scenarios of the integration of bioeconomy and low-carbon economy, the EU’s circular economy package, changes in national waste legislation, national recycling and reuse goals by industrial sector and waste fraction as well as the planned investments in the energy sector. The impacts of changes in weather on occupational safety, for example, have been assessed in general as part of physical risks. L&T’s mission is to make the circular economy a reality. Transitioning to a resource-eﬃcient circular economy is essential for the mitigation of global warming. We support this transition by improving the material, energy and cost eﬃciency of our customers and by ensuring that materials and the built environment retain their value. Our solutions enable our customers to reduce their waste volumes, extend the life-cycle of their properties, recycle and reuse materials, reduce the consumption of natural resources, fossil fuels and energy, and thereby reduce their emissions. We research new technologies and solutions that allow our customers to reduce their climate impacts even more eﬃciently. New projects that increase the processing rate of various material ﬂows promote the circular economy and improve the carbon handprint of L&T’s operations. Scenario analysis is part of the strategy process The monitoring of the outcomes of climate change related to our business operations is integrated in L&T’s strategy process. We have assessed the impacts of climate change on L&T’s business operations both during the ﬁve-year strat- egy period and in the long term until 2035. The assessment method is based on the qualitative evaluation of uncertain- ties in our business environments and the creation of quali- tative scenarios about our business environment based on the changes with the highest degree of uncertainty and the ﬁnancial impact. In addition, we have applied the IPCC scenarios of climate warming of 1.5°C, less than 2°C and 4°C by the end of the cen- tury. The scenarios have been assessed in relation to the latest climate research information on weather changes in Finland. L&T is able to change its business model ﬂexibly accord- ing to the diﬀerent climate scenarios. The reference sce- nario was a business environment where the status quo remains unchanged. The business eﬀects of climate change were assessed in the diﬀerent scenarios through aspects of change in the industry related to regulation, the business model and technological development. The assessment indicated that L&T’s own climate targets, the actions aimed at achieving the targets and the separate climate targets set for the supply chain are in line with the observations made in the scenario analysis. L&T manages transition risks by assessing market changes and respond- ing to them in a timely manner. In addition, we take a proac- tive approach to inﬂuencing regulatory developments in their preparatory stages through the industry’s key advocacy organisations, for example. The alternative strategic scenarios were presented to the Board of Directors as a part of the strategy process. The miti- gation of climate change provides L&T’s business operations with strategic development opportunities. TCFD information Report contents Governance The Board of Directors’ duties related to managing risks and opportunities related to climate change. Risks and risk management, p. 16-17 Scenario analysis is part of the strategy process, p. 18 The management’s duties related to assessing and managing risks and opportunities related to climate change. Sustainability management, p. 8 Risks and risk management, p. 16-17 Strategy Climate-related risks and opportunities in the short, medium and long term. Climate-related risks and opportunities, p. 18 The impacts of climate-related risks and opportuni- ties on business operations, strategy and ﬁnancial planning. Strategy, p. 4 Climate-related risks and opportunities, p. 18 The ﬂexibility of the strategy with regard to diﬀe- rent climate scenarios. Scenario analysis is part of the strategy process, p. 18 Risk management Processes for the identiﬁcation and assessment of climate-related risks. Scenario analysis is part of the strategy process, p. 18 Climate risk management methods. Scenario analysis is part of the strategy process, p. 18 How are the identiﬁcation, assessment and mana- gement of climate-related risks connected to the organisation’s other risk management activities? Climate-related risks and opportunities, p. 16-17 Indicators and targets Indicators used to assess climate risks and oppor- tunities. Report by the Board of Directors, p. 7 Separate Sustainability report Key ﬁgures Key ﬁgures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Calculation of the key ﬁgures. . . . . . . . . . . . . . . . . .22 Lassila & Tikanoja Taloudellinen katsaus 2022 19 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Lassila & Tikanoja Taloudellinen katsaus 2022 20 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Key ﬁgures on shares Key ﬁgures on ﬁnancial performance Key ﬁgures 2022 2021 2020 2019 2018 Earnings per share (EPS), EUR 0.83 0.90 0.50 0.90 0.89 Earnings per share (EPS), diluted, EUR 0.83 0.90 0.50 0.90 0.89 Equity per share, EUR 5.78 5.52 5.05 5.33 5.44 Dividend per share, EUR 0.47 0.46 0.40 0.92 0.92 Payout ratio, % 56.9 51.0 79.7 101.7 103.7 Eﬀective dividend yield, % 4.4 3.4 2.7 5.8 6.1 P/E ratio, % 12.9 14.9 30.0 17.4 16.9 Net cash ﬂow from operating activities after investments per share, EUR 1.08 0.05 1.15 1.81 1.70 Share price adjusted for issues: lowest, EUR 9.72 12.82 10.06 12.92 14.34 highest, EUR 13.62 16.10 16.76 16.40 20.00 average, EUR 11.16 14.31 13.55 14.41 16.78 closing, EUR 10.64 13.44 15.06 15.74 14.96 Market capitalisation 31 December, MEUR 405.9 512.2 573.9 610.7 580.4 Number of shares adjusted for issue, 1,000 pcs average during the year 38,116 38,111 38,103 38,354 38,405 at year end 38,146 38,112 38,105 38,094 38,406 average during the year, diluted 38,128 38,127 38,118 38,368 38,419 Adjusted number of shares traded during the year, 1,000 pcs 9,397 9,615 12,266 8,172 4,995 As a percentage of the average 24.7 25.2 32.2 21.3 13.0 Volume of shares traded, MEUR 104.9 137.6 166.1 122.3 83.8  2022 proposal by the Board of Directors 2022 2021 2020 2019 2018 Net sales, MEUR 844.1 812.5 751.9 784.3 802.2 Operating proﬁt, MEUR 42.9 42.2 28.2 45.0 47.6 % of net sales 5.1 5.2 3.8 5.7 5.9 Adjusted operating proﬁt, MEUR 40.9 42.4 39.7 40.5 - % of net sales 4.8 5.2 5.3 5.2 - EBITDA, MEUR 98.3 95.1 85.2 99.4 90.1 % of net sales 11.6 11.7 11.3 12.7 11.2 Result before taxes, MEUR 37.8 39.0 23.3 42.0 42.7 % of net sales 4.5 4.8 3.1 5.4 5.3 Result for the period, MEUR 31.5 34.4 19.0 34.7 34.1 % of net sales 3.7 4.2 2.5 4.4 4.2 EVA, MEUR 14.5 15.9 3.7 19.8 24.2 Cash ﬂow from operating activities, MEUR 71.8 65.6 83.0 94.5 90.1 Balance sheet total, MEUR 660.5 632.3 596.6 583.6 561.3 Return on equity, % (ROE) 14.6 17.1 9.6 16.8 16.1 Capital employed, MEUR 437.2 406.0 379.2 380.5 361.1 Return on capital employed, % (ROCE) 10.4 10.8 7.5 12.4 12.8 Equity ratio, % 34.3 34.2 33.0 35.6 38.1 Gearing, % 75.9 79.4 70.9 66.8 46.8 Net interest-bearing liabilities, MEUR 167.3 167.1 136.5 135.6 97.8 Gross capital expenditure, MEUR 58.2 72.3 48.2 46.1 37.8 % of net sales 6.9 8.9 6.4 5.9 4.7 Average number of employees in full-time equivalents 7,364 7,319 7,197 7,308 7,566 Total number of full-time and part-time employees at year end 8,371 8,171 8,139 8,207 8,600  In 2022, the unrecognised rental income of compactors and bales in Environmental services was reclassiﬁed from accrued expenses to current and non-current advances received. In addition, the process for netting the deferred tax assets and liabilities was re-deﬁned. The ﬁgures for 2021 have been adjusted accordingly. Lassila & Tikanoja Taloudellinen katsaus 2022 21 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Reconciliation of alternative performance measures Reconciliation of the adjusted operating proﬁt to the operating proﬁt 1 January - 31 December MEUR 2022 2021 Operating proﬁt 42.9 42.2 Items aﬀecting comparability: - costs arising from the discontinuation of business  -0.2 -2.1 - costs arising from business restructurings - 0.6 - gains or losses arising from divestments -4.3 - - costs arising from acquisitions 2.5 1.7 Adjusted operating proﬁt 40.9 42.4  In 2020, Lassila & Tikanoja decided on the discontinuation of its Russian operations. In 2021, L&T sold its shares in Russian subsidiaries. The costs related to the discontinuation were revised by EUR +2.1 million in 2021 and by EUR +0.2 million in 2022.  In 2022, Lassila & Tikanoja ja Neova merged their fuel wood businesses into a joint venture named Laania. The transaction was ﬁnalised in the fourth quarter of year 2022 and L&T recognised a gain totalling EUR 4.3 million from the transaction. Reconciliation of the EVA result to the operating proﬁt 1 January - 31 December MEUR 2022 2021 Operating proﬁt 42.9 42.2 Capital employed (rolling 12-month quarterly average) 430.4 391.4 Cost calculated on capital employed -28.5 -26.3 EVA 14.5 15.9 Reconciliation of gross capital expenditure 1 January - 31 December MEUR 2022 2021 Intangible and tangible assets from business acquisitions 22.9 31.4 - increases to right-of-use assets excl. heavy vehicles from business acquisitions -1.4 -0.3 Other increases to intangible and tangible assets 55.4 64.4 - increases to right-of-use assets excl. heavy vehicles -15.8 -19.1 - other adjustments -2.7 -3.9 Gross capital expenditure 58.2 72.3 Return on capital employed (ROCE), %, by segment 1 January - 31 December 2022 2021 Environmental Services Capital employed (MEUR), average of the beginning and the end of the period 198.8 202.8 Operating proﬁt 30.3 29.8 + ﬁnancial income 0.1 0.1 Return on capital employed, MEUR 30.4 29.9 Return on capital employed (ROCE), % 15.3 14.7 Industrial Services Capital employed (MEUR), average of the beginning and the end of the period 79.4 65.7 Operating proﬁt 12.7 9.2 + ﬁnancial income 0.0 0.0 Return on capital employed, MEUR 12.8 9.2 Return on capital employed (ROCE), % 16.1 14.0 Facility Services Finland Capital employed (MEUR), average of the beginning and the end of the period 31.4 30.6 Operating proﬁt -0.5 1.8 + ﬁnancial income 0.3 0.2 Return on capital employed, MEUR -0.2 2.0 Return on capital employed (ROCE), % -0.8 6.6 Facility Services Sweden Capital employed (MEUR), average of the beginning and the end of the period 64.6 62.8 Operating proﬁt 0.4 3.9 + ﬁnancial income 0.1 0.2 Return on capital employed, MEUR 0.5 4.1 Return on capital employed (ROCE), % 0.8 6.5 Key ﬁgures on shares Earnings per share (EPS) = Result attributable to equity holders of the parent company Adjusted average basic number of shares Earnings per share (EPS), diluted = Result attributable to equity holders of the parent company Adjusted average diluted number of shares Equity per share = Equity attributable to equity holders of the parent company Adjusted basic number of shares at the balance sheet date Dividend per share = Dividend for the ﬁnancial period Adjusted basic number of shares at the balance sheet date Payout ratio, % = Dividend per share Earnings per share Eﬀective dividend yield, % = Dividend per share Closing price of the ﬁnancial period P/E ratio, % = Closing price of the ﬁnancial period Earnings per share Cash ﬂow from operating activities after investments per share = Cash ﬂows from operating activities after investments as in the cash ﬂow statement Adjusted average basic number of shares Market capitalization, MEUR = Basic number of shares at the balance sheet date x closing price of the ﬁnancial period  The calculations are also applied with capital repayment. Key ﬁgures on ﬁnancial performance Adjusted operating proﬁt, MEUR = Operating proﬁt +/- items aﬀecting comparability Items aﬀecting comparability = Substantial costs arising from business restructurings or acquisitions, gains and losses from divestments and costs arising from the discontinuation of businesses EBITDA, MEUR = Operating proﬁt + depreciation + impairment EVA, MEUR = Operating proﬁt - cost calculated on capital employed (average of four quarters) before taxes The cost of capital emlpoyed is calculated using the Group's weighted average cost of capital (WACC 2022: 6.62%, WACC 2021: 6.72%, WACC 2020: 6.64%, WACC 2019: 6.55%, WACC 2018: 6.60%). Return on equity, % (ROE) = Result for the period Equity (average) Capital employed, MEUR = Equity + Interest-bearing ﬁnancial liabilities Return on capital employed, % (ROCE) = Operating proﬁt + ﬁnancial income + share of results in associated com- panies and joint ventures Equity + Interest-bearing ﬁnancial liabilities (average of the end of the period and at the end of comparison period) Equity ratio, % = Equity Balance sheet total - advances received Gearing, % = Net interest-bearing liabilities Equity Net interest-bearing liabilities, MEUR = Interest-bearing liabilities - cash and cash equivalents Gross capital expenditure, MEUR = Investments in intangible and tangible assets excluding right-of-use as- sets and other adjustments including leased heavy vehicles and assets acquired through acquisitions x 100 x 100 Lassila & Tikanoja Taloudellinen katsaus 2022 22 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Calculation of the key ﬁgures Lassila & Tikanoja Taloudellinen katsaus 2022 23 Financial statements of the parent companyPrimary ﬁnancial statements of the Group Notes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Proposal by the Board of Directors 23 Financial statements Consolidated income statement . . . . . . . . . . . . . . .24 Consolidated statement of comprehensive income . . . . . . . . . . . . . . . . . . . . .24 Consolidated statement of ﬁnancial position 25 Consolidated statement of cash ﬂows . . . . . . . .26 Consolidated statement of changes of equity . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Notes to the consolidated ﬁnancial statements. . . . . . . . . . . . . . . . . . . . . . . . . . .28 Financial statements of the parent company 58 Proposal by the Board of Directors for the use of the proﬁt shown on the balance sheet and the Auditor's Note . . . . . . . . . . . . . . . . . .65 1 Financial result 1.1 Segment reporting . . . . . . . . . . . . . . . . . . . . . . . .30 1.2 Revenue from contracts with customers. . 31 1.3 Employee beneﬁt expenses. . . . . . . . . . . . . . . 32 1.4 Other operating income and expenses. . .32 1.5 Share-based payments . . . . . . . . . . . . . . . . . .33 1.6 Lease expenses. . . . . . . . . . . . . . . . . . . . . . . . . . .33 1.7 Financial income and expenses. . . . . . . . . . .34 1.8 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 1.9 Earnings per share. . . . . . . . . . . . . . . . . . . . . . . .35 2 Operational assets and liabilities 2.1 Trade and other receivables. . . . . . . . . . . . . . 37 2.2 Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2.3 Trade and other current payables . . . . . . .38 2.4 Other non-current liabilities . . . . . . . . . . . . . .38 2.5 Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 2.6 Retirement beneﬁt obligations . . . . . . . . . .39 3 Intangible and tangible assets and other non-current assets 3.1 Goodwill and other intangible assets . . . . . .41 3.2 Goodwill impairment testing . . . . . . . . . . . . . . 42 3.3 Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 3.4 Right-of-use assets. . . . . . . . . . . . . . . . . . . . . . . . 44 3.5 Other non-current assets. . . . . . . . . . . . . . . . . 44 4 Financial risks and capital structure 4.1 Financial assets and liabilities. . . . . . . . . . . . . 47 4.2 Financial risk management. . . . . . . . . . . . . . . . 49 4.3 Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 4.4 Dividend per share. . . . . . . . . . . . . . . . . . . . . . . . . 52 4.5 Contingent liabilities . . . . . . . . . . . . . . . . . . . . . . 52 5 Consolidation and other notes 5.1 Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 5.2 Group companies. . . . . . . . . . . . . . . . . . . . . . . . . . 54 5.3 Business acquisitions and disposals and assets and liabilities classiﬁed as held for sale 55 5.4 Related-party transactions. . . . . . . . . . . . . . . 56 5.5 Auditing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 5.6 Disputes and litigation. . . . . . . . . . . . . . . . . . . . . 57 5.7 Events after the balance sheet date. . . . . . 57 Lassila & Tikanoja Financial review 2022 24 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Consolidated income statement Consolidated statement of comprehensive income 1 January - 31 December MEUR 2022 2021 Note Net sales 844.1 812.5 1.2 Other operating income 8 .7 3.8 1.4 Materials and services -286. 7 -282.5 Employee beneﬁt expenses -353.1 -342.6 1.3 Other operating expenses -114. 7 -95.9 1.4 Depreciation, amortisation and impairment -55.4 -52.9 3.1, 3.3, 3.4 Operating proﬁt 42.9 42.2 Financial income 0.4 0.3 Financial expenses -6.0 -3.8 Exchange rate diﬀerences (net) -0.2 0.3 Financial income and expenses -5.8 -3.3 1.7 Share of the result of associated companies and joint ventures 0 .7 0.0 Result before taxes 3 7. 8 39.0 Income taxes -6.3 -4.6 1.8 Result for the period 31.5 34.4 Attributable to: Equity holders of the company 31.5 34.4 Earnings per share attributable to the equity holders of the parent company: Earnings per share, EUR 0.83 0.90 1.9 Diluted earnings per share, EUR 0.83 0.90 1 January - 31 December MEUR 2022 2021 Note Result for the period 31.5 34.4 Items not to be recognised through proﬁt or loss Items arising from re-measurement of deﬁned beneﬁt plans 0.2 -0.0 2.6 Items not to be recognised through proﬁt or loss, total 0.2 -0.0 Items potentially to be recognised through proﬁt or loss Hedging reserve, change in fair value 1.3 0.3 4.2 Currency translation diﬀerences -5. 7 -1.6 Currency translation diﬀerences recognised through proﬁt or loss 0.1 - Items potentially to be recognised through proﬁt or loss, total -4.3 -1.3 Other comprehensive income, total -4.1 -1.4 Total comprehensive income, after tax 27 .4 33.0 Attributable to: Equity holders of the company 27 .4 33.0 More information on taxes in consolidated statement of comprehensive income is presented in Note 1.8. Lassila & Tikanoja Financial review 2022 25 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Consolidated statement of ﬁnancial position 31 December MEUR 2022 2021 Note ASSETS Non-current assets Intangible assets 3.1 Goodwill 180. 7 1 72.1 Other intangible assets 36.5 32.5 21 7 .2 204.6 Tangible assets 155.3 153.0 3.3 Right-of-use assets 71.2 69.8 3.4 226.6 222.8 Other non-current assets Shares in associated companies and joint ventures 14.0 0.0 3.5 Other shares and holdings 0.2 0.2 3.5 Deferred tax assets 1.9 2 .7 1.8 Other receivables 1.9 2.0 3.5 17. 9 4.9 Total non-current assets 461. 7 432.3 Current assets Inventories 7. 8 5.9 2.2 Trade receivables 91.0 86.8 2.1, 4.1 Contract assets 30.8 22.8 1.2, 2.1, 4.1 Income tax receivables 8 .7 7. 3 2.1 Other receivables 11.0 10.4 2.1, 4.1 Cash and cash equivalents 49.5 28.6 4.1 198.8 161.8 Assets classiﬁed as held for sale - 38.3 5.3 Total current assets 198.8 200.0 TOTAL ASSETS 660.5 632.3 31 December MEUR 2022 2021 Note EQUITY AND LIABILITIES Equity Equity attributable to equity holders of the parent company 4.3 Share capital 19.4 19.4 Other reserves -1 0.6 -6.3 Invested unrestricted equity reserve 0.6 0.6 Retained earnings 211.0 196. 7 Total equity 220.4 21 0.4 Liabilities Non-current liabilities Deferred tax liabilities 28.1 27 .2 1.8 Retirement beneﬁt obligations 1.2 1.4 2.6 Provisions 7. 4 8.1 2.5 Financial liabilities 17 7. 5 1 75.8 4.1 Other liabilities 13.3 7. 5 2.4 227 .5 220.0 Current liabilities Financial liabilities 39.3 19.9 4.1 Trade and other payables 1 70.5 1 64.9 2.3, 4.1 Income tax liabilities 1.0 3.3 2.3 Provisions 1.7 2.7 2.5 212.6 190.8 Liabilities related to assets classiﬁed as held for sale - 11.2 5.3 Total liabilities 440.1 422.0 TOTAL EQUITY AND LIABILITIES 660.5 632.3 Lassila & Tikanoja Financial review 2022 26 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Consolidated statement of cash ﬂows 1 January - 31 December MEUR 2022 2021 Note Cash ﬂows from operating activities Result for the period 31.5 34.4 Adjustments Income taxes 6.3 4.6 1.8 Depreciation, amortisation and impairment 55.4 52.9 3.1, 3.3, 3.4 Financial income and expenses 5.8 3.3 1.7 Gains and losses on sale of tangible and intangible assets -1.2 -1 .7 Share of the result of associated companies and joint ventures -0. 7 -0.0 3.5 Gain from sale of subsidiary's net assets to joint venture -4.3 - 5.3 Impact of the discontinuation of Russian operations -0.2 -2.1 Other Net cash generated from operating activities before -0. 7 -0.4 change in working capital 91.9 90.9 Change in working capital Change in trade and other receivables -7. 0 -12.1 Change in inventories -0.8 -1.9 Change in trade and other payables 1 .7 -1.0 Change in working capital -6.2 -15.1 Interest and other ﬁnancial expenses paid -4.8 -3 .7 Interest and other ﬁnancial income eceived 0.4 0.3 Income taxes paid -9.6 -6. 7 Net cash from operating activities 71.8 65.6 1 January - 31 December MEUR 2022 2021 Note Cash ﬂows from investing activities Acquisitions of subsidiaries and businesses, net of cash acquired -13.2 -23.2 5.3 Proceeds from sale of subsidiaries and businesses, net of sold cash -2.0 - 5.3 Purchases of property, plant and equipment and intangible assets -33.8 -42.3 Proceeds from sale of property, plant and equipment and intangible assets 2.0 1 .7 Repayment of loan receivables from joint venture 16.4 - Change in other non-current investments 0.0 -0.1 Net cash from investing activities -30.6 -63.9 Net cash from operating and investing activities 41.1 1 .7 Cash ﬂows from ﬁnancing activities Proceeds from short-term borrowings 35.0 40.0 4.1 Repayments of short-term borrowings -35.0 -55.0 4.1 Proceeds from long-term borrowings 75.0 25.0 4.1 Repayments of long-term borrowings -58.1 - 4.1 Repayments of lease liabilities -19.4 -18.1 Dividends paid -1 7. 5 -15.2 Net cash from ﬁnancing activities -20.1 -23.4 Net change in cash and cash equivalents 21.0 -21. 7 Cash and cash equivalents at the beginning of the period 28.6 50.2 Eﬀect of changes in foreign exchange rates -0.1 -0.0 Cash and cash equivalents at the end of the period 49.5 28.6 4.1 Lassila & Tikanoja Financial review 2022 27 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Consolidated statement of changes in equity Currency translation Invested unrestricted MEUR Share capital diﬀerences Hedging reserve equity reserve Retained earnings Total equity Note Equity on 1 January 2021 19.4 -4.3 -0. 7 0.6 17 7. 5 192.6 Total comprehensive income Result for the period 34.4 34.4 Other comprehensive income items -1.6 0.3 -0.0 -1.4 Total comprehensive income - -1.6 0.3 - 34.3 33.0 Transactions with shareholders Share-based beneﬁts 0.0 0.0 1.5 Dividends paid -15.2 -15.2 Returned dividends 0.0 0.0 Transactions with shareholders, total - - - - -15.2 -15.2 Equity on 31 December 2021 19.4 -5.9 -0.4 0.6 196. 7 210.4 Total comprehensive income Result for the period 31.5 31.5 Other comprehensive income items -5.6 1.3 0.2 -4.1 Total comprehensive income - -5.6 1.3 - 31.7 27 .4 Transactions with shareholders Share-based beneﬁts 0.2 0.2 1.5 Dividends paid -17. 5 -17. 5 Returned dividends 0.0 0.0 Transactions with shareholders, total - - - - -1 7. 3 -1 7. 3 Equity on 31 December 2022 19.4 -11.5 0.9 0.6 211.0 220.4 For more information on equity please refer to Note 4.3 Equity, and on taxes recognised in equity to Note 1.8 Income taxes. 28 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Notes to the consolidated ﬁnancial statements General information The Lassila & Tikanoja Group specialises in environmental management and property and plant support services. The Group has business operations in Finland and Sweden. The Group's parent company is Lassila & Tikanoja plc. Las- sila & Tikanoja plc is a Finnish public limited liability company domiciled in Helsinki, Finland. The registered address of the Company is Valimotie 27, 00380 Helsinki, Finland. Lassila & Tikanoja plc is listed on the Nasdaq Helsinki. The consolidated ﬁnancial statements are available on the company website at www.lt.ﬁ/en or from the parent compa- ny’s head oﬃce, address Valimotie 27, 00380 Helsinki, Finland. These consolidated ﬁnancial statements have been approved for issue by the Board of Directors of Lassila & Tikanoja plc on 8 February 2023. Basis of preparation The consolidated ﬁnancial statements have been prepared in accordance with the International Financial Reporting Stand- ards (IFRS), with application of the IFRS and IAS standards as well as IFRIC and SIC interpretations in eﬀect on 31 December 2022. In the Finnish Accounting Act and regulations enacted by virtue of it, International Financial Reporting Standards refer to standards and related interpretations approved for adoption within the EU according to the procedure described in regulation (EC) 1606/2002. The notes to the consolidated ﬁnancial statements also comply with the Finnish accounting and community legislation supplementing the IFRS regula- tions. From year 2022 onwards, the change in inventory is not presented separately in the consolidated income statement, it is included in line Materials and services. In 2022, the unrecognised rental income of compactors and bales in Environmental services was reclassiﬁed from accrued expenses to current and non-current advances received. In addition, the process for netting the deferred tax assets and liabilities was re-deﬁned. The ﬁgures for 2021 have been adjusted accordingly . Figures in these ﬁnancial statements are presented in millions of euros, unless otherwise stated. Application of new or amended IFRS standards New and amended standards adopted in 2022 The Group has applied the new standards and interpreta- tions published by IASB with the eﬀective date 1 January 2022. These standards, amendments and interpretations did not have material impact on the entity in the current pe- riod, and they are not expected to have any material impact on the entity in the future reporting periods and on foresee- able future transactions. New or amended IFRS standards and interpretations to be applied in future ﬁnancial periods The Group applies new standards and interpretations from the eﬀective date. If the eﬀective date is other than the ﬁrst day of a ﬁnancial year, the Group applies the standard or interpretation from the beginning of the following ﬁnan- cial year. The impact from other new and amended stand- ards issued but not yet eﬀective is not considered to be material to the Group's ﬁnancial reporting. Critical judgements by Management In drawing up IFRS ﬁnancial statements, the Group manage- ment must make estimates and assumptions concerning the future, the outcome of which may diﬀer from the estimates and assumptions made. The management also employs judgement when making decisions on the selection and ap- plication of accounting principles. Considerations based on discretion apply, in particular, to cases where the applicable IFRS standards provide for alternative methods of recognition, measumerement or presentation. The preparation of ﬁnancial statements requires the management to make estimates and assumptions that aﬀect the carrying amounts on the balance sheet date for assets and liabilities and the amounts of income and expenses. The estimates and assumptions reﬂect the man- agement’s best understanding on the closing date, based on previous experience and assumptions about the future that are considered to have the highest probability on the closing date. The most signiﬁcant area where management has used the judgement described above relates to the recognition of assets and liabilities for acquired business operations and to fair value measurement. Key assumptions regarding the future and key uncertainty factors related to estimates on the closing date that involve a signiﬁcant risk of causing a material adjustment to the car- rying amounts of the Group’s assets and liabilities within the next ﬁnancial year are described in the following notes: 1.2 Revenue from contracts with customers 1.8 Income taxes 2.5 Provisions 3.2 Goodwill impairment testing 3.4 Right-of-use assets 5.3 Business acquisitions and disposals and assets and lia- bilities classiﬁed as held for sale 29 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 1.1 Segment reporting. . . . . . . . . . . . . . . . . . . . . . . . . .30 1.2 Revenue from contracts with customers. . 31 1.3 Employee beneﬁt expenses. . . . . . . . . . . . . . . .32 1.4 Other operating income and expenses. . . . .32 1.5 Share-based payments . . . . . . . . . . . . . . . . . . . .33 1.6 Lease expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . .33 1.7 Financial income and expenses. . . . . . . . . . . . .34 1.8 Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 1.9 Earnings per share. . . . . . . . . . . . . . . . . . . . . . . . . .35 1 Financial result 1.1 Segment reporting The Group's operating segments The Group has four reportable segments, which are the Group's business divisions - Environmental Services, Industrial Ser- vices, Facility Services Finland and Facility Services Sweden. Environmental Services division consists of the waste management and recycling business, selling of waste con- tainers and their maintenance, and new circular economy solutions. The division operates only in Finland. On December 17, 2021, Lassila & Tikanoja Plc and Neova Oy signed an agreement to merge their fuel wood busi- nesses. According to the agreement, Neova's fuel wood business will be transferred to L&T Biowatti Oy. On 1 July 2022, Neova's fuel wood business was transferred to L&T Biowatti Oy. With the merger the company continued as an independent limited company called Laania Oy. L&T Biowatti Oy was reported as part of Environmental Services segment until the merger. For more information on the joint venture, please refer to note 3.5 Other long-term assets. Industrial Services division covers solutions for industrial material ﬂows and their utilisation, industrial process clean- ing solutions, collection and disposal of hazardous waste and sewer system maintenance and repair. The division has operations both in Finland and in Sweden. Facility Services Finland division provides cleaning and other support services for facilities, property maintenance and technical maintenance, including energy management. Facility Services Sweden division provides cleaning and other support services for cleaning facilities and technical maintenance. Geographical segments Accounting policy Segment information is reported to the highest operational decision-maker, consistent with internal reporting. The highest operational decision-maker is Lassila & Tikanoja plc’s President and CEO. Segment assets are those operating assets that are employed by a segment in its operating activities and that can be allocated to the segment on a rea- sonable basis. Items reported under Group adminis- tration and other include items related to Group level functions such as expenses associated with Group management, as well as costs incurred from oper- ating as a public company and the corresponding assets and liabilities. Lease liabilities and elimina- tions are also included in Group Administration and other. Accounting policy The Group operates in Finland and Sweden. Net sales of geographical areas are reported based on the ge- ographical location of the customer, and assets are reported by geographical location. MEUR 2022 2021 Net sales Finland 682.3 647.2 Sweden 156.6 154.3 Other countries 5.2 11.0 Total 844.1 812.5 Assets Finland 604.4 590.6 Sweden 56.1 41.7 Total 660.5 632.3 Capital expenditure Finland 41.6 70.5 Sweden 16.6 1.8 Total 58.2 72.3 2022 MEUR Environmental Services Industrial Services Facility Services Finland Facility Services Sweden Group adminis- tration and other Group External net sales 319.7 129.8 254.1 140.4 - 844.1 Inter-division net sales 1.5 2.2 2.2 0.0 -6.0 - Total net sales 321.2 132.0 256.3 140.4 -6.0 844.1 Operating proﬁt 30.3 12.7 -0.5 0.4 0.1 42.9 Operating margin, % 9.4 9.6 -0.2 0.3 5.1 Adjusted operating proﬁtﬁt¹ 30.3 13.6 -0.5 0.4 -2.8 40.9 Adjusted operating margin, % %¹ 9.4 10.3 -0.2 0.3 4.8 Financial income and expenses -5.8 Share of result in associated companies and joint ventures 0.7 Proﬁt before tax 37.8 Income taxes -6.3 Proﬁt for the period 31.5 Assets 278.6 145.3 90.5 88.4 57.7 660.5 Liabilities 106.3 56.7 56.2 26.4 194.5 440.1 Capital expenditure 20.3 34.6 1.5 0.4 1.3 58.2 Depreciation, amortisation and impairments 26.9 12.3 9.1 5.9 1.3 55.4 2021 MEUR Environmental Services Industrial Services Facility Services Finland Facility Services Sweden Group adminis- tration and other Group External net sales 318.8 102.8 241.1 149.8 - 812.5 Inter-division net sales 1.7 2.3 2.0 0.0 -6.1 - Total net sales 320.5 105.1 243.1 149.8 -6.1 812.5 Operating proﬁt 29.8 9.2 1.8 3.9 -2.4 42.2 Operating margin, % 9.3 8.7 0.7 2.6 5.2 Adjusted operating proﬁtﬁt¹ 29.8 9.2 1.8 3.9 -2.2 42.4 Adjusted operating margin, % %¹ 9.3 8.7 0.7 2.6 5.2 Financial income and expenses -3.3 Share of result in associated companies and joint ventures 0.0 Proﬁt before tax 39.0 Income taxes -4.6 Proﬁt for the period 34.4 Assets 314.5 110.5 83.9 94.5 29.1 632.3 Liabilities 89.1 42.3 55.4 27.4 207.8 422.0 Capital expenditure 41.7 14.5 13.6 1.8 0.6 72.3 Depreciation, amortisation and impairments 26.7 9.4 9.1 6.5 1.2 52.9 1 Unaudited 30 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 1.2 Revenue from contracts with customers Accounting policy Revenue from contracts with customers is recognised when or as the performance obligation is satisﬁed by transferring a promised good or service to the customer. A good or a service is transferred when the customer obtains control of the good or service. Revenue is rec- ognised based on the transaction price to which L&T expects to be entitled in exchange for transferring the good or service. The Group acts as a principal in all of its contracts with customers. The Group applies the practical expedient and does not disclose the aggregate amount of the transaction price allocated to the performance obligations that are unsatisﬁed (or partially unsatisﬁed) at the end of the reporting period. This is because the contract period in the Group's customer contracts for project deliveries, is typically short. However, in long-term service agree- ments the contract period can be several years. For these contracts the Group applies the practical exedient according to which the Group is entitled to a consider- ation from the customer that corresponds directly with the value to the customer from Groups performance completed to date. In these contracts the Group recog- nises revenue for the amount that it is entitled to invoice. Services business Services business comprises of long-term service agree- ments and separately ordered services. Long-term service agreements include for example waste management and recycling services which is part of Envi- ronmental Services as well as cleaning and property main- tenance services included in Facility Services. Long-term service agreements include one or more performance obliga- tions depending on the amount of distinct services provided to the customer. A typical characteristic of long-term services is that services are delivered evenly throughout the contract term. With one contract customer can order for example inside cleaning services, outside cleaning and upkeep services and property maintenance services that are distinct performance obligations. Each service is a distinct performance obligation as the customer can beneﬁt from the services on its own and could order the services from diﬀerent service providers. If a contract contains more than one distinct performance obli- gation, the transaction price is allocated to each performance obligation based on the stand-alone selling prices. In addition to the long-term service agreements, L&T oﬀers services which are separately ordered as part of Industrial Services and Facility Services. Compared to the long-term service agreements, services that are ordered separately are typically short-term in nature and they are provided either occasionally or on a non-recurring basis. Revenue from services business is recognised over time, as the customer simultaneously receives and consumes the beneﬁts provided by the Group performance. Revenue from services that are invoiced with a ﬁxed monthly fee is recog- nised evenly over the contract term as also the work is per- formed evenly over the term. Revenue from services that are invoiced based on hourly fees is recognised based on the work performed. The management has identiﬁed that there may be seasonal ﬂuctuation especially in the long-term service agreements of Facility Services as the work performed diﬀers between seasons during the year. Management has estimated that the costs for these services incur evenly throughout the period and, thus, revenue is recognised evenly over the period Industrial Services receives contaminated soil from cus- tomers, for which the performance obligation is the receipt and processing of soil. Measuring progress towards complete sat- isfaction of the performance obligation is based on the output method. Revenue is recognised based on the amount of pro- cessed soil. Customer is invoiced when soil is received and the payment received from the customer is treated as a contract liability. Project business Project business includes for example projects for indus- trial process cleaning and closing of landﬁlls which are part of Industrial Services business and renovation and building technology projects as well as refrigeration and cooling ser- vice projects for retailers and energy management projects included in Facility Services. In project business the customer orders the entire project at once and the project is considered as a single performance obligation. In some cases, a contract can also consist of several diﬀerent locations and each loca- tion creates a distinct performance obligation. If the contract contains more than one distinct performance obligation, the transaction price is allocated to each performance obligation based on the stand-alone selling prices. Revenue from project business is recognised over time as the projects mainly relate to enhancing an asset that the cus- tomer controls. In project business the input method based on costs incurred is used for measuring the progress towards complete satisfaction of the performance obligation. The man- agement has estimated that the costs incurred for a project can be determined reliably. Also, due to the contract structure in project business the management has determined that L&T has an enforceable right to payment for performance com- pleted to date. In project business invoicing is typically made based on a predetermined payment schedule. Sale of equipment and materials Sale of equipment consists of sale of compactors and balers to customers included in Environmental Services business. Sale of materials consists of sale of wood-based fuels, recy- cled fuels and delivery of wood raw materials and of sale of recycled raw materials in Environmental Services business. Each equipment or material delivery creates a distinct perfor- mance obligation in the sale of equipment and materials. The equipment delivered by the Group does not involve any addi- tional warranties that would be considered as a distinct per- formance obligation. Control of the delivered product is transferred when the physical possession of the product has been transferred to the customer, which typically occurs at delivery. Environmental Services business delivers wood-based fuels, recycled fuels and wood raw materials to customers. The consideration received from a customer is based on the amount of delivered fuel and the energy level of the fuel or on the amount of the delivered material. In some cases, the ﬁnal transaction price is determined after the customer has measured the fuel’s energy value or amount of fuel delivered, and, thus, there is uncertainty relating to the amount of ﬁnal transaction price. Management has estimated that the level of uncertainty related to the transaction price is low and any adjustments to be made to the transaction price when the uncertainty is resolved are not considered to be material. Lease income In addition to the sale of compactors and balers, customers can also lease the equipment through an external ﬁnancing company. The agreement made between the Group and the ﬁnancing company includes a repurchase obligation at the end of the lease period with a predetermined residual value. Due to the repurchase obligation management has determined that all the risks and rewards incidental to ownership of the assets are not transferred substantially to the customer and, thus, the leased equipment is treated as tangible assets. At the inception of the lease, advances received from the ﬁnanc- ing company as well as the residual value of the asset are recognised as a liability in the balance sheet. Lease income is recognised monthly during the lease term. Management has estimated that the amount of payment received from the ﬁnancing company does not Include a signiﬁcant ﬁnancing component. Estimating variable consideration The contracts with customers may include components of variable considerations, such as bonuses and penalties for delay. Management has determined that the level of uncer- tainty relating to the variable consideration is typically low. The estimate of the amount of variable considerations is reas- sessed at the end of each reporting period. Contract balances Contract assets and trade receivables A contract asset is a right to consideration in exchange for goods or services that are transferred to a customer. If goods or services are transferred to a customer before the invoice is sent to the customer, the amount is presented as a contract asset. If the company has an unconditional right to the con- sideration, a trade receivable is presented in the statement of ﬁnancial position. Contract assets and trade receivables are assessed for impair- ment in accordance with IFRS 9. The general payment term for cus- tomers is 14 days, but it can vary depending on the specific case . 31 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Critical judgements by Management The amount and timing of revenue recognition in- volves management’s judgement especially in the following areas: • Identiﬁcation of performance obligations for ser- vices business • Timing of revenue recognition in services and project business • Treatment of repurchase agreements relating to compactors and balers in Environmental Services business including the assessment of the exist- ence of a signiﬁcant ﬁnancing component • Measurement of a variable consideration These judgements have been described in more detail in the description relating to revenue recognition . 1.3 Employee beneﬁt expenses 1.4 Other operating income and expenses Contract liabilities A contract liability is an obligation to transfer goods or ser- vices to a customer for which L&T has received consideration from the customer. If a customer pays consideration before goods or services are transferred to the customer, a contract liability is presented in the statement of ﬁnancial position when the payment is made by the customer. Incremental costs of obtaining a contract The company does not have material incremental costs to obtain a contract. The company applies a practical expedient which allows the costs to obtain a contract to be recognised when they occur. Disaggregation of revenue Net sales consist of services for which revenue is recognised over time, products for which revenue is recognised at a point in time as well as lease income. Services for which revenue is rec- ognised over time include sales revenue from long-term service agreements, separately ordered services and the project busi- ness. Services for which revenue is recognised at a point in time include revenue from the sale of equipment and materials. 2022 MEUR Long-term service agreements Separately ordered services Project business Sales of equipment and materials Lease income Total net sales Environmental Services 225.3 92.7 3.3 321.2 Industrial Services 57.7 59.0 9.7 5.6 132.0 Facility Services Finland 182.3 68.8 5.2 256.3 Facility Services Sweden 61.1 74.9 4.4 140.4 Total 526.4 202.7 19.4 98.3 3.3 850.0 Interdivision -6.0 External net sales 844.1 2021 MEUR Long-term service agreements Separately ordered services Project business Sales of equipment and materials Lease income Total net sales Environmental Services 207.8 109.5 3.2 320.5 Industrial Services 47.5 49.7 3.5 4.4 105.1 Facility Services Finland 170.6 66.3 6.3 243.1 Facility Services Sweden 64.5 80.4 4.9 149.8 Total 490.4 196.4 14.6 113.9 3.2 818.6 Interdivision -6.1 External net sales 812.5 Contract balances MEUR 2022 2021 Trade receivables 91.0 86.8 Contract assets 30.8 22.8 Contract liabilitiesact liabilities¹ 7.2 8.1  ¹ The ﬁgures of the comparison period have been adjusted. Contract liabilities are mainly related to the long-term service agreements and are recognised as revenue entirely during the following period. Contract liabilities are included in the balance sheet item Trade and other payables. No revenue was recognised in the reporting period from performance obligations satisﬁed (or partially satisﬁed) in previous periods. Accounting policy The Group's employee beneﬁts include wages, sala- ries and bonuses paid to employees, post-employment beneﬁts (deﬁned contribution plans and deﬁned bene- ﬁt plans), share-based payments and other personnel expenses (statutory social security costs). Details on share-based payments are presented in Note 1.5 Share-based payments. The employee beneﬁts of the top management are presented in Note 5.4 Relat- ed-party transactions. Details on the items of deﬁned beneﬁt pension plans in the consolidated statement of ﬁnancial position are presented in Note 2.6 Retirement beneﬁt obligations . MEUR 2022 2021 Wages and salaries 282.4 274.6 Pension costs Deﬁned contribution plans 60.9 58.7 Deﬁned beneﬁt plans 0.0 0.0 Share-based payments 0.1 0.4 Other personnel expenses 9.7 8.9 Total 353.1 342.6 Average number of employees in full-time equivalents 2022 2021 White collar 1,264 1,298 Blue collar 6,100 6,021 Total 7,364 7,319 Finland 6,199 5,953 Sweden 1,165 1,366 Total 7,364 7,319 Accounting policy Other operating income includes items that are not considered as being directly related to the Group's nor- mal business, such as gains from sales of assets and business activities and received compensations. Other operating expenses include, for instance, fees for expert and consulting services, losses from sales of assets and business activities, bad debts and changes in allow- ances for credit losses, expenses related to the use of vehicles and machinery, ICT costs, voluntary social secu- rity costs, travel costs, real estate costs and implementa- tion costs of cloud computing arrangements. Government grants Government grants or other grants relating to actual costs are recognised in the income statement when the Group complies with the conditions attached to them and there is reasonable assurance that the grants will be received. They are presented in other operating income. Government grants directly associated with the recruit- ment of personnel, such as employment grants, appren- ticeship grants and the like, are recognised as reductions in personnel expenses. Grants for acquisition of property, plant and equip- ment are recognised as deductions of historical cost. The grant is recognised as revenue over the economic life of a depreciable asset, by way of a reduced depreci- ation charge . 32 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 1.5 Share-based payments Other operating income MEUR 2022 2021 Gains on sales of property, plant and equipment 1.7 2.0 Gain from sale of subsidiary's net assets to joint venture 4.3 - Reimbursements and government grants 0.6 0.8 Other 2.1 1.0 Total 8.7 3.8 Other operating expenses MEUR 2022 2021 ICT costs 16.6 16.3 Travel costs 10.3 8.6 Bad debts and changes in allowances for expected credit losses 0.4 0.2 Vehicles and machinery 56.8 48.5 Rents and real estate costs 5.0 3.6 Expert fees 7.6 6.1 Voluntary social security costs 7.6 5.3 Discontinuation of Russian operations -0.2 -2.1 Other 10.5 9.4 Total 114.7 95.9 Accounting policy The Group has several incentive arrangements for which payments are made either as equity instruments or cash. The beneﬁts granted under the arrangements are measured at fair value on the grant date and recognised as expense evenly over the vesting period. The eﬀect of the arrangement on proﬁt and loss is recognised under employee beneﬁt expenses. Share-based incentive programme 2019 Lassila & Tikanoja plc’s Board of Directors decided at a meeting held on 12 December 2018 on a new share-based incentive programme. Potential rewards were based on the EVA result of Lassila & Tikanoja Group. ing held on 14 December 2022 on a new share-based incentive programme. The Performance Share Plan 2023–2027 comprises three (3) three-year (3) performance periods covering the cal- endar years 2023–2025, 2024–2026 and 2025–2027. The Board of Directors decides on the performance criteria of the plan and the performance levels to be set for each performance criterion at the beginning of a performance period. Potential rewards of performance period 2023-2025 will be based on return on cap- ital employed (ROCE), total shareholder return (TSR) and reduc- tion of the carbon footprint (ESG) during the period 2023-2025. The rewards to be paid based on the performance period 2023–2025 correspond to the value of approximately 237,300 Lassila & Tikanoja plc shares in maximum total, also including the portion to be paid in cash. The target group of the Performance Share Plan during the performance period 2023–2025 consists of approximately 50 key employees, including the Group's Presi- dent and CEO and the Group Executive Board. Bridge plan 2023-2026 Lassila & Tikanoja plc’s Board of Directors decided at a meeting held on 14 December 2022 on a new share-based incentive pro- gramme. The Bridge Plan 2023–2026 has two (2) one-year (1) performance periods covering the calendar years 2023 and 2024. A performance period is followed by a two-year retention period. The aim of the plan is to support the transition from the old Perfor- mance Share Plan to the new Performance Share Plan.The Board of Directors decides on the performance criteria of the plan and the performance levels to be set for each performance criterion at the beginning of a performance period. Potential rewards of per- formance period 2023 will be based on return on capital employed (ROCE) and reduction of the carbon footprint (ESG) in 2023. Based on the programme a maximum of 32,850 shares of the company could be granted. Under the programme, a total of 1,092 Lassila & Tikanoja plc's shares were granted in 2020. The shares paid out as rewards were transferred from the shares held by the com- pany. The programme covered 8 persons. Share-based incentive programme 2020 Lassila & Tikanoja plc’s Board of Directors decided at a meet- ing held on 28 January 2020 on a new share-based incentive programme. Potential rewards were based on the EVA result of Lassila & Tikanoja Group. Based on the programme a maximum of 40,050 shares of the company could be granted. Based on the decision by the board of directors no Lassila & Tikanoja plc's shares were granted in 2021 from the share- based incentive programme of year 2020. The programme cov- ered 9 persons. Share-based incentive programme 2021 Lassila & Tikanoja plc’s Board of Directors decided at a meeting held on 27 January 2021 on a new share-based incentive pro- gramme. Potential rewards were based on the EVA result and the carbon handprint of the Group. Based on the programme a maximum of 37,300 shares of the company could be granted. Based on the decision by the board of directors a total of 24,522 Lassila & Tikanoja plc's shares were granted in 2022 from the share-based incentive programme of year 2021. The pro- gramme covered 9 persons. Share-based incentive programme 2022 Lassila & Tikanoja plc’s Board of Directors decided at a meeting held on 26 January 2022 on a new share-based incentive pro- gramme. Potential rewards are based on the EVA result and the carbon handprint of the Group. Based on the programme a maximum of 37,300 shares of the company can be granted. The performance criteria for the share-based incentive pro- gramme 2022 were not met, and no Lassila & Tikanoja Plc's shares will be granted in 2023. The programme covered 9 persons. Performance share plan 2023-2027 Lassila & Tikanoja plc’s Board of Directors decided at a meet- Share-based incentive programme 2023-2027 2023-2026 2022 2021 2020 2019 Grant date - - 26 Jan 2022 27 Jan 2021 28 Jan 2020 12 Dec 2018 Start of the earnings period 1 Jan 2023 1 Jan 2023 1 Jan 2022 1 Jan 2021 1 Jan 2020 1 Jan 2019 End of the earnings period 31 Dec 2025 31 Dec 2023 31 Dec 2022 31 Dec 2021 31 Dec 2020 31 Dec 2019 Average share price at grant date - - 13.06 15.40 15.18 16.16 Maximum number of shares 237,300 83,800 37,300 37,300 40,050 32,850 Realisation on closing date, shares - 24,522 - 1,092 Returned shares - - - - Obligation to hold shares, years - 2 2 2 2 2 Release date of shares - 31 Mar 2026 31 Mar 2025 31 Mar 2024 31 Mar 2023 31 Mar 2022 Number of persons included 50 10 9 9 9 8 Accounting policy The Group leases production and oﬃce premises includ- ing related land areas, vehicles and ICT equipment. At the commencement date of the lease contract, a right-of-use asset and a lease liability, measured at the present value of the remaining lease payments, is recognised in the statement of ﬁnancial position. The right-of use asset is subsequently measured at cost less accumulated depreciation and less any accu- mulated impairment losses and adjusted for any remeas- urements of the lease liability. Depreciation is calculated 1.6 Lease expenses The rewards to be paid based on the performance period 2023 correspond to the value of approximately 83,800 Las- sila & Tikanoja plc shares in maximum total, also including the portion to be paid in cash. The target group of the Bridge Plan during the performance period 2023 consists of approxi- mately 10 key employees, including the Group's President and CEO and the Group Executive Board. Expenses arising from share-based incentive programmes, MEUR 2022 2021 Share component 0.1 0.1 Cash component - 0.3 Total 0.1 0.4 33 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT MEUR 2022 2021 Depreciation expense of right-of-use assets -19.5 -19.1 Interest expense of lease liabilities -1.5 -1.4 Expenses related to leases of low-val- ue assetsue assets¹ -4.3 -3.5 Total -25.3 -24.0 1 The ﬁgures of the comparison period have been adjusted . using the straight-line method from the commencement date to the earlier of the end of the lease term or the end of the useful life of the right-of-use asset. The deprecia- tions of right-of-use assets are presented in depreciation, amortisation and impairments in the income statement. The lease liability is measured at amortised 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 price level or if the Group changes its assessment of whether it will exercise a purchase, extention or termination option. The interest expense on the lease liability is included in the ﬁnancial income and expenses in the income statement. In the statement of cash ﬂow, the amortisation of lease liabilites is presented in the cash ﬂows from ﬁnancing activities and the inter- est paid in the cash ﬂows from operating activities. The cash ﬂows related to leases in 2022 totalled EUR -25.3 million (-23.1). The Group applies the exemption for short-term leases to production and oﬃce premises leases and the exemption for low-value assets to leases of ICT equip- ment. For these leases, the right-of-use asset and lease liability is not recognised. The lease payments of low- value assets and short-term leases are presented in Other operating expenses and Materials and services in the income statement. 34 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 1.7 Financial income and expenses 1.8 Income taxes Accounting policy Exchange rate gains and losses arising from for- eign-currency transactions and the translation of monetary items are recognised in the income state- ment. Foreign exchange gains and losses on business transactions are included in the respective items above operating proﬁt. Foreign exchange gains and losses on ﬁnancial assets and liabilities are included in ﬁnancial income and costs. Borrowing costs are recognised as expenses in the period in which they arise. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are included in the acquisition cost of that asset. There were no such assets at the end of the reporting period. Transaction costs directly attributable to borrow- ing are included in the historical cost of the liability and recognised as an interest expense during the expected life of the liability applying the eﬀective inter- est method. MEUR 2022 2021 Financial income Interest income on loans and other receivables 0.2 0.3 Interest income from joint ventures 0.2 - Foreign exchange gains - 0.3 Total ﬁnancial income 0.4 0.6 Financial expenses Interest expenses on borrowings measured at amortised cost 5.2 3.5 Other ﬁnancial expenses 0.8 0.3 Losses on foreign exchange 0.2 - Total ﬁnancial expenses 6.2 3.8 Financial income and expenses -5.8 -3.3 Accounting policy The Group’s income taxes consist of current tax and deferred tax. Tax expenses are recognised in the income statement, with the exception of items directly recognised in equity or comprehensive result, in which case the tax eﬀect is recognised in the corresponding item. Current tax is determined for the taxable proﬁt for the period according to prevailing tax rates in each country. Taxes are adjusted by current taxes related to previous periods, if any. Deferred tax assets and liabilities are recognised for all temporary diﬀerences between the tax bases of assets and liabilities and their carrying amounts. The deferred taxes are determined using tax rates enacted by the balance sheet date and that are expected to apply when the deferred tax asset is real- ised or liability settled. No deferred tax is recognised for impairment of goodwill that is not tax-deductible. A deferred tax asset is recognised only to the extent that it is probable that taxable proﬁt will be available against which the deferred tax asset can be utilised. The most signiﬁcant temporary diﬀerences arise from fair value measurements related to acquisitions and new intangible assets. Tax eﬀects of components of other comprehensive income 2022 2021 MEUR Before tax Tax expense/ beneﬁt After tax Before tax Tax expense/ beneﬁt After tax Items arising from re-measurement of deﬁned beneﬁt plans 0.2 -0.0 0.2 -0.1 0.0 -0.0 Hedging reserve, change in fair value 1.7 -0.3 1.3 0.3 -0.1 0.3 Currency translation diﬀerences -5.7 - -5.7 -1.6 - -1.6 Currency translation diﬀerences recognised through proﬁt or loss 0.1 - 0.1 - - - Components of other comprehen- sive income -3.7 -0.4 -4.1 -1.3 -0.1 -1.4 Income tax in the income statement MEUR 2022 2021 Income tax for the period -5.7 -5.6 Income tax for previous periods -0.0 0.2 Change in deferred tax -0.6 0.8 Total -6.3 -4.6 The reconciliation of income tax expense recognised in the income statement and income tax calculated at the statutory tax rate in Finland MEUR 2022 2021 Proﬁt before tax 37.8 39.0 Income tax at Finnish tax rate 20% -7.6 -7.8 Diﬀerence between tax rate in Finland and in other countries -0.0 -0.0 Expenses not deductible for tax pur- poses -0.3 -0.2 Tax exempt income 1.6 0.6 Income tax for previous periods 0.0 0.5 Deferred taxes on tax losses generat- ed in previous periods - 1.8 Unrecognised deferred tax on loss for the period -0.0 -0.3 Utilisation of previously unrecognised tax losses 0.1 0.3 Other items -0.2 0.4 Total -6.3 -4.6 35 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 1.9 Earnings per share Deferred tax assets and liabilities MEUR At 1 Jan 2022 Recognised in income statement Recognised in equity Other changes Business acquisitions At 31 Dec 2022 Deferred tax assets Tax losses 1.8 -0.0 -0.2 1.6 Pension beneﬁts 0.2 -0.0 0.2 Provisions 2.2 -0.4 1.7 Fair value adjustments 0.1 -0.1 - Unused depreciation 1.3 0.1 1.4 Other temporary diﬀerences 0.1 2.0 2.0 Netting of deferred taxes -2.9 -5.1 Total 2.7 1.6 -0.2 -0.2 - 1.9 Deferred tax liabilities Acquisitions -23.9 -1.2 0.3 -0.9 -25.7 Depreciation diﬀerences -5.6 -0.3 -5.9 Fair value adjustments - -0.2 -0.2 Other temporary diﬀerences -0.7 -0.7 0.0 -1.4 Netting of deferred taxes 2.9 5.1 Total -27.2 -2.2 -0.2 0.3 -0.9 -28.1 MEUR At 1 Jan 2021 Recognised in income statement Recognised in equity Other changes Business acquisitions At 31 Dec 2021 Deferred tax assets Tax losses ax losses¹ 0.7 1.2 -0.0 1.8 Pension beneﬁts 0.2 0.2 Provisions 2.0 0.1 2.2 Fair value adjustments 0.2 -0.1 0.1 Unused depreciation 1.3 0.1 1.3 Other temporary diﬀerences 0.2 -0.1 0.1 Netting of deferred taxes - -2.9 Total 4.5 1.2 -0.1 -0.0 - 2.7 Deferred tax liabilities Acquisitions -22.9 0.4 0.1 -1.5 -23.9 Depreciation diﬀerences -4.7 -0.9 -5.6 Other temporary diﬀerences -0.6 0.1 -0.2 -0.7 Netting of deferred taxes - 2.9 Total -28.3 -0.4 - 0.1 -1.6 -27.2 1 The increase in deferred tax asset on tax losses in 2021 is related to a Swedish subsidiary, whose ability to generate taxable income has improved accord- ing to the management's latest assesments, and thus the subsidiary will be able to utilise the tax losses. Accounting policy Basic earnings per share is calculated by dividing the result for the period attributable to equity holders of the parent company by the adjusted weighted aver- age number of ordinary shares outstanding during the period excluding ordinary shares purchased by the company and held as treasury shares. Diluted earnings per share is calculated by adjust- ing the weighted average number of ordinary shares outstanding to asume conversion of all dilutative potential ordinary shares. 2022 2021 Result attributable to equity holders of the company, MEUR 31.5 34.4 Adjusted weighted average number of ordinary shares outstanding during the year, million shares 38.1 38.1 Earnings per share, EUR 0.83 0.90 Dilutive eﬀect of the share-based incentive programme, million shares 0.0 0.0 Adjusted average number of shares during the period, diluted, million shares 38.1 38.1 Earnings per share, diluted, EUR 0.83 0.90 Deferred taxes in the statement of ﬁnancial position MEUR 2022 2021 Deferred tax assets 1.9 2.7 Deferred tax liabilities -28.1 -27.2 Deferred taxes, net -26.3 -24.5 The Group companies have a total of EUR 0.4 million (1.5) tax losses, on which no deferred tax asset has been recognised as the realisation of the tax beneﬁt is not considered proba- ble. Deferred tax is recognised in the statement of ﬁnancial position as tax assets and tax liabilities. Deferred tax assets and deferred tax liabilities are set oﬀ when there is a legally enforceable right to oﬀset current tax assets against cur- rent tax liabilities and when the deferred taxes relate to the same ﬁscal authority . Critical judgements by Management The recognition of deferred tax assets involves signif- icant management’s judgement. The appropriateness for recognising deferred tax assets is assessed at each balance sheet date. For this purpose, the Group estimates the probability of subsidiaries generating recoverable taxable income against which unused tax losses and unused tax compensations can be utilised. The factors used in the estimates may diﬀer from the actuals, which may lead to write-down of deferred tax assets . 36 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 2.1 Trade and other receivables. . . . . . . . . . . . . . . . 37 2.2 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37 2.3 Trade and other current payables . . . . . . . . .38 2.4 Other non-current liabilities. . . . . . . . . . . . . . . .38 2.5 Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38 2.6 Retirement beneﬁt obligations. . . . . . . . . . . . .39 2 Operational assets and liabilities 37 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 2.1 Trade and other receivables 2.2 Inventories Accounting policy Trade and other receivables are recognised in the balance sheet at historical cost less expected credit losses. The receivables are non-interest bearing and the general payment term for customers is 14 days. Trade receivables are classiﬁed as ﬁnancial assets, that are presented in notes 4.1 Financial assets and liabilities and 4.2 Financial risk management.. A simpliﬁed impairment model allowed by IFRS 9 standard is applied to the recognition of expected credit losses. Expected credit losses are calculated by dividing trade receivables into categories based on maturity and by dividing said categories with the credit loss percentage based on historical data on credit losses realised from trade receivables and the outlook for the short-term future. This impairment model covers the company’s trade receivables and assets based on agreement and the previous recog- nition of their credit losses. Based on historical data and the outlook for the short-term future, an allowance for impairment is recognised as follows (credit loss percentage applied in the previous year in brackets): Trade receivables not past due 0.1 per cent (0.1), past due 1-90 days 0.7 per cent (1.0); past due 91-365 days 8.6-25.0 per cent (25.0-45.0 per cent). Trade receiv- ables due over 360 days are written down com- pletely. If the customer has become insolvent, such as in the case of bankruptcy or debt restructuring, the trade receivable is written down as a ﬁnal credit loss when a payment can no longer be expected with reasonable certainty. MEUR 2022 2021 Trade receivables 91.0 86.8 Contract assets 30.8 22.8 Accrued income 9.3 9.5 Prepayments 0.2 0.4 Tax receivables 8.7 7.3 Derivative receivables 1.2 - Other receivables 0.3 0.4 Total 141.6 127.3 Speciﬁcation of accrued income Employees' health care compensation 1.7 2.4 Licences 0.9 1.8 Other 6.8 5.3 Total 9.3 9.5 Maturity of trade receivables, contract assests and allowance for impairment 2022 2021 MEUR Trade receivables of which the allowance for impairment Trade receivables of which the allowance for impairment Trade receivables and contract assets not past due 106.5 0.1 98.8 0.1 Past due 1-90 days 14.4 0.1 10.7 0.1 Past due 91-365 days 1.4 0.2 0.4 0.1 Past due over 365 days 0.1 0.1 0.1 0.1 Total 122.4 0.5 110.0 0.4 Change in allowance for impairment MEUR 2022 2021 Allowance for impairment, 1 January 0.4 0.6 Change in the income statement 0.1 -0.1 Allowance for impairment, 31 December 0.5 0.4 Impaired trade receivables have been recognised as expenses in the income statement. Impairment losses and reversals of impairment losses recognised in previous periods are shown in Note 1.4 Other operating income and expenses. Financial assets are not collateralised. No impairment was recognised on other ﬁnancial assets. Accounting policy Inventories are measured at the lower of cost and net realisable value. Net realisable value is the esti- mated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The inventories of Environmental Products in Environmental Services are measured using the weighted average cost method. The value of other inventories is determined using the FIFO method. At its recycling plants, recyclable materials are pro- cessesed into secondary raw materials for sale. The cost of the inventories of these materials comprises raw materials, direct labour costs, other direct costs of manufacturing and a proportion of variable and ﬁxed production overheads based on normal operating capacity. MEUR 2022 2021 Raw materials and consumables 3.0 2.6 Finished goods 1.8 1.2 Other inventories 2.9 2.1 Total 7.8 5.9 The carrying value of the inventories was written down to the net realisable value. The expense of EUR 0.0 million (0.1) is included in Materials and services in the income statement . 38 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 2.3 Trade and other current payables 2.5 Provisions 2.4 Other non-current liabilities Accounting policy Trade and other current non-interest-bearing liabilities are recognised in the balance sheet at historical cost. The eﬀect of discounting is not essential considering the maturity of the payables. Trade payables are classiﬁed as ﬁnancial liabilities that are presented in Notes 4.1 Financial assets and liabilities and 4.2 Financial risk management. MEUR 2022 2021 Advances receivedeceived² 9.5 10.2 Trade payables 60.1 58.3 Derivative liabilities - 0.5 Current tax liabilities 1.0 3.3 Other liabilitiesOther liabilities² 25.7 26.7 Accrued expenses and deferred in- comecome² 75.2 69.2 Total 171.5 168.2 Accrued expenses and deferred income: Liabilities related to personnel expensesexpenses¹ 68.0 64.5 Other accrued expenses 7.2 4.7 Total 75.2 69.2  Liabilities rela¹ Liabilities related to personnel expenses include ordinary accruals for salaries, pensions and other statutory personnel expenses.  ² The ﬁgures of the comparison period have been adjusted. The advances received include contract liabilities as well as advances received for rental payments. The fair values of trade and other current payables equal their book values. MEUR 2022 2021 Advances receivedeceived² 7.6 7.4 Deferred considerationation¹ 5.7 - Other liabilities 0.0 0.1 Total 13.3 7.5 1 Deferred consideration is related to the acquisition of 70 per cent share of Sand & Vattenbläst i Tyringe AB (”SVB”) that oﬀers process cleaning services in Sweden. The acquisition took place on 1 February 2022. SVB is consolidated with 100 per cent share in the Group and, in connection with the arrangement, L&T has recognised in ﬁnancial liabilities an estimate of the deferred consideration for the acquisition. The deferred consideration relates to the acquisition of non-controlling interest and is measured at fair value, which is reﬂected in the present value of the estimated liability. It will mature on 1 February 2026 at the earliest. 2 The ﬁgures of the comparison period have been adjusted. Accounting policy A provision is recognised when the Group has a legal or factual obligation towards a third party resulting from an earlier event, fulﬁlment of the payment obli- gation is probable, and its amount can be reliably esti- mated. Provisions are measured at the current value of the expenditure required to settle the obligation. Increase in provisions due to the passage of time is recognised as interest expense. Changes in provisions are recognised in the income statement in the same item in which the provision is originally recognised. Environmental provisions are recognised when the Group has an existing obligation that is likely to result in a payment obligation, the amount of which can be reli- ably estimated. Environmental provisions related to the restoration of sites are made at the commencement of each project. The costs recognised as a provision, as well as the original acquisition cost of assets, are depreciated over the useful life of the asset, and provi- sions are discounted to present value. The most signiﬁ- cant provisions recognised in the statement of ﬁnancial position are the site restoration provisions for landﬁlls and the processing sites for contaminated soil. MEUR Environ- mental provisions Other provisions Total Provisions at 1 Jan 2022 8.1 2.7 10.8 Additions 0.1 0.7 0.8 Used during the year -0.5 -1.3 -1.8 Reversals -0.4 -0.5 -0.8 Eﬀect of discounting 0.1 - 0.1 Provisions at 31 Dec 2022 7.4 1.7 9.1 MEUR Environ- mental provisions Other provisions Total Provisions at 1 Jan 2021 7.0 2.4 9.5 Additions 1.9 1.0 2.9 Used during the year -1.2 - -1.2 Reversals - -0.7 -0.7 Eﬀect of discounting 0.3 0.0 0.3 Provisions at 31 Dec 2021 8.1 2.7 10.8 MEUR 2022 2021 Non-current provisions 7.4 8.1 Current provisions 1.7 2.7 Total 9.1 10.8 Obligations covered by the environmental provisions The Group has leased site that it uses as landﬁll from the city of Kotka. In Varkaus the Group uses a site for intermediate stor- ing, processing and ﬁnal disposal of contaminated soil. At the expiry of the leases or at the discontinuation of operations, the Group is responsible for site restoration comprising landscap- ing and post-closure environmental monitoring called for in the terms and conditions of environmental permits. The Group owns the Munaistenmetsä landﬁll in Uusikau- punki and the land area associated with it. The landﬁll site serves as a ﬁnal disposal area for municipal waste, contami- nated soil and industrial by-products. The material recycling centre in the landﬁll area in Oulu receives, processes and recovers various types of waste and side streams, such as industrial waste, contaminated soil, construction and demolition waste as well as municipal waste. In December 2021, the Group acquired a new landﬁll in Pori. At ﬁrst, the landﬁll area received various types of waste from the seller, including gypsum, construction and demolition waste as well as contaminated soil and other smaller items. The update of the environmental permit was received in September 2022, after which the reception was expanded to cover other vendors of similar waste fractions. Environmental impact assessment is currently ongoing in the area. After the assessment, the landﬁll area will also be licensed for receipt and processing of hazardous waste. Other provisions Other provisions consist mainly of provision for restructuring and accident insurance contribution. Critical judgements by Management Recognition and measurement of provisions require management to assess the best estimate of the expenditure needed to settle the present obligation at the end of the reporting period. The actual amount and timing of the expenditure might diﬀer from the estimates made . 39 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 2.6 Retirement beneﬁt obligations Accounting policy Pension plans are categorised as deﬁned beneﬁt and deﬁned contribution plans. Under deﬁned contribution plans, the Group pays ﬁxed contributions for pensions, and it has no legal or factual obligation to pay further contributions. All pension arrangements that do not fulﬁl these conditions are considered deﬁned beneﬁt plans. Contributions to deﬁned contribution plans are recog- nised in the income statement in the ﬁnancial period to which they relate. The Group operates pension schemes in accordance with local regulations and practices in the countries in which it operates, and these are mainly deﬁned contribution plans. The company operates a few deﬁned beneﬁt plans originating mainly from business acquisitions. The Group is responsible for some of these deﬁned ben- eﬁt pension plans, while others are covered by pen- sion insurance. The obligations have been calculated for each plan separately, using the projected unit credit method. Pension costs are recognised in the income statement over employees’ periods of ser- vice, in accordance with actuarial calculations. When calculating the present value of pension obligations, the discount rate is based on the market yield of the high-quality bonds issued by the company, whose maturity materially corresponds to the estimated maturity of the pension obligation. The risk premium is based on bonds issued by companies with an AA credit rating. The pension plan assets measured at fair value on the balance sheet date are deducted from the pres- ent value of the pension obligation to be recognised in the balance sheet. The net liabilities (or assets) asso- ciated with a deﬁned beneﬁt pension plan are recog- nised in the balance sheet. The expense (pension expense) based on the work performed during the period and the net interest of the deﬁned beneﬁt plan’s net debt are recognised in the proﬁt and loss statement and included in employee beneﬁt expenses. Items (such as actuarial gains and losses and return on funded deﬁned beneﬁt plan assets, except items related to net interest) arising from the redeﬁnition of the net liabilities (or assets) associated with a deﬁned beneﬁt plan are recognised in other comprehensive income in the period in which they arise. Past service costs are recognised as expenses through proﬁt or loss at the earlier of the following: when the plan is rearranged or downsized, or a when the entity recognises the related rearrangement expenses or beneﬁts related to the termination of employment. The Group has in Sweden pension deposits con- cerning a few people. The group has no legal or fac- tual obligation to pay further contributions to these arrangements. The value of the deposits is recognised in other non-current receivables and a corresponding liability is recognised in pension liabilities. MEUR 2022 2021 Amounts recognised in the state- ment of ﬁnancial position Present value of funded obligations 0.3 0.4 Fair value of plan assets -0.3 -0.3 0.0 0.1 Present value of unfunded obligations 0.5 0.7 Liability related to pension deposits 0.7 0.6 Closing net liability 1.2 1.4 Changes in present value of obligation Opening deﬁned beneﬁt obligation 1.7 1.7 Current service cost 0.0 0.0 Interest cost 0.0 0.0 Actuarial gain (-) and loss (+) on obli- gation -0.2 0.0 Beneﬁts paid -0.1 -0.1 Change in liability related to pension deposits 0.0 0.1 Closing value of obligation 1.5 1.7 MEUR 2022 2021 Changes in fair value of plan assets Opening fair value of plan assets 0.3 0.4 Interest income 0.0 0.0 Employers' contributions 0.0 0.0 Actuarial gain (+) and loss (-) -0.0 -0.0 Beneﬁts paid -0.0 -0.0 Closing fair value of plan assets 0.3 0.3 MEUR 2022 2021 Movements in the liability recognised in the statement of ﬁnancial position Opening liability 1.4 1.4 Expense recognised in the income statement 0.0 0.0 Employers' contributions 0.0 0.0 Actuarial gain (-) and loss (+) -0.2 0.0 Contributions paid -0.0 -0.1 Change in liability related to pension deposits 0.0 0.1 Closing liability 1.2 1.4 Amounts recognised in the statement of comprehensive in- come Current service cost 0.0 0.0 Interest cost 0.0 0.0 Interest income -0.0 -0.0 Actuarial gain (-) and loss (+) -0.2 0.0 Total -0.2 0.1 The Group estimates that it will contribute EUR 36 thousand to deﬁned beneﬁt plans in 2023. MEUR 2022 2021 Present value of obligation 1.5 1.7 Fair value of plan assets -0.3 -0.3 Deﬁcit 1.2 1.4 Principal actuarial assumptions used, % Discount rate 3.8 0.7 Expected rate of return on plan assets 2.6 2.1 Expected rate of salary increase 4.9 4.4 Expected rate of inﬂation 2.4 1.9 Deﬁned contribution maturity of the obligation MEUR 2022 2021 Maturity of less than one year 0.1 0.1 1-5 years 0.2 0.2 5-10 years 0.3 0.3 10-15 years 0.2 0.2 15-20 years 0.2 0.1 20-25 years 0.1 0.1 25-30 years 0.1 0.1 over 30 years 0.1 0.1 Total 1.2 1.2 40 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 3.1 Goodwill and other intangible assets. . . . . . . 41 3.2 Goodwill impairment testing. . . . . . . . . . . . . . . .42 3.3 Tangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . .43 3.4 Right-of-use assets. . . . . . . . . . . . . . . . . . . . . . . . .44 3.5 Other non-current assets. . . . . . . . . . . . . . . . . .45 3 Intangible and tangible assets and other non-current assets 41 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 3.1 Goodwill and other intangible assets Accounting policy Goodwill represents the portion of the acquisition cost by which the aggregate of the consideration given, the share of non-controlling owners in the acquired entity and the previously owned share exceed the fair value of the acquired net assets at the time of acquisition. Good- will is not amortised, but is tested annually for impair- ment. Goodwill is presented in the statement of ﬁnancial position at historical cost less impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value. The useful lives of intangible assets are estimated to be either ﬁnite or indeﬁnite. In L&T, the intangible assets recognised in business com- binations include items such as customer relations, non-competition agreements and environmental per- mits. They have ﬁnite useful lives, varying between three and thirteen years . Other intangible assets consist primarily of software and software licences. The costs of software projects are recognised in other intangible assets starting from the time when the projects move out of the research phase into the devel- opment phase and the outcome of a project is an iden- tiﬁable intangible asset. Such an intangible asset must provide L&T with future economic beneﬁt that exceeds the costs of its development. The cost comprises all directly attributable costs necessary for preparing the asset to be capable of operating in the manner intended by the management. The largest cost items are consul- tancy fees paid to third parties, as well as salaries and other expenses for the Group’s personnel. The depreciation period for computer software and software licences is ﬁve to ten years. Depreciation will cease when an intangible asset is classiﬁed as held for sale (or included in a disposal group held for sale). MEUR Goodwill Customer contracts arising from acquisitions Agreements on prohibition of competition Other intangible assets arising from acquisitions Intangible rights Other intangible assets Prepayments and construc- tion in progress Total Acquisition cost, 1 Jan 2022 186.6 55.4 24.1 10.1 9.3 32.7 3.5 321.8 Additions 0.5 0.1 6.5 7.1 Business acquisitions 11.5 5.4 0.1 0.0 17.0 Disposals -0.1 -2.7 -2.8 Transfers between items 1.8 -1.8 -0.0 Exchange diﬀerences -3.6 -1.6 -0.1 -0.0 -0.3 -0.0 -5.7 Acquisition cost, 31 Dec 2022 194.6 59.1 24.2 10.0 9.5 31.8 8.2 337.4 Accumulated depreciation, 1 Jan 2022 -14.6 -37.2 -24.0 -9.8 -5.8 -25.7 -117.1 Accumulated amortisation on disposals and transfers 0.0 2.7 2.7 Amortisation charge -3.5 -0.1 -0.1 -0.9 -3.2 -7.8 Exchange diﬀerences 0.6 1.1 0.1 0.0 0.2 0.0 2.0 Accumulated depreciation, 31 Dec 2022 -13.9 -39.7 -24.0 -9.8 -6.6 -26.2 -120.2 Carrying amount at 31 Dec 2022 180.7 19.4 0.2 0.3 2.9 5.6 8.2 217.2 Other intangible assets arising from acquisitions include mainly environmental permits. Contractual commitments related to intangible assets totalled EUR 1.0 million (0.0). MEUR Goodwill Customer contracts arising from acquisitions Agreements on prohibition of competition Other intangible assets arising from acquisitions Intangible rights Other intangible assets Prepayments and construc- tion in progress Total Acquisition cost, 1 Jan 2021 168.7 48.6 24.0 10.1 8.3 32.4 2.8 295.0 Additions 1.3 0.3 4.1 5.7 Business acquisitions 18.9 7.2 0.1 0.0 26.3 Disposals 0.0 -0.2 -3.1 -0.5 -3.8 Transfers between items 3.1 -2.9 0.2 Exchange diﬀerences -1.0 -0.5 -0.0 -0.0 -0.1 0.0 -1.5 Acquisition cost, 31 Dec 2021 186.6 55.4 24.1 10.1 9.3 32.7 3.5 321.8 Accumulated depreciation, 1 Jan 2021 -14.7 -34.3 -24.0 -9.7 -5.4 -24.0 -112.1 Accumulated amortisation on disposals and transfers 0.2 1.5 1.7 Amortisation charge -3.2 -0.1 -0.1 -0.6 -3.2 -7.1 Exchange diﬀerences 0.2 0.2 0.0 0.0 0.0 0.0 0.5 Accumulated depreciation, 31 Dec 2021 -14.6 -37.2 -24.0 -9.8 -5.8 -25.7 -117.1 Carrying amount at 31 Dec 2021 172.1 18.1 0.2 0.3 3.5 6.9 3.5 204.6 42 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Critical judgements by Management The preparation of value-in-use based calculations used in goodwill impairment testing requires the use of management judgement. The future cash ﬂows are based on forecasts for the strategy period approved by the Board of Directors. These forecasts are based on actual development and management's view on the growth outlook for the industry. The ter- minal growth rate is based on the management's view on the long-term growth outlook for the busi- ness. Though the assumptions used are appropri- ate according to the management’s judgement, the estimated cash ﬂows may diﬀer fundamentally from those realised in the future. Accounting policy The goodwill impairment testing is conducted at least annually or more frequently if there is any indication that goodwill may be impaired. Impairment testing is conducted according to the business structure in force at the time of the impairment testing. In impairment testing, recoverable amounts are estimated on the basis of an asset's value-in-use. Future cash ﬂows are based on annual estimates of income statements and maintenance investments made by the management in connection with the strategy process for a four-year period. The manage- ment bases its estimates on actual development and views on the growth outlook for the industry (general market development and unit proﬁtability, pricing, municipalisation decisions, personnel costs and raw material costs). Approved investment decisions are taken into account in the growth estimates. Cash ﬂows extending beyond the four-year fore- cast period are calculated using the so-called termi- nal value method. The growth rates used in the calcu- lations are based on the management's estimates of long-term growth and development of proﬁtability. 3.2 Goodwill impairment testing Accounting policy On each balance sheet date, the Group assesses the carrying amounts of its assets for any impairment. If any indication of impairment exists, an estimate of the asset’s recoverable amount is made. The recoverable amount is the higher of an asset’s fair value less selling costs and its value-in-use. Val- ue-in-use refers to the estimated future net cash ﬂows available from an asset, discounted to the pres- ent value. The discount rate used is the pre-tax rate, which reﬂects the market view of the time value of money and the risks associated with the asset. An impairment loss is recognised in the income statement when an asset’s carrying amount exceeds its recoverable amount. Impairment losses attributa- ble to a cash-generating unit are used for deducting ﬁrst the goodwill allocated to the cash-generating unit and, thereafter, the other assets of the unit on an equal basis. An impairment loss for an asset other than good- will recognised in prior periods is reversed if there is a change in circumstances and the recoverable amount has changed. An impairment loss recognised for good- will is not reversed. Goodwill is tested for impairment annually or when- ever there is any indication of impairment. Recov- erable amount calculations based on values-in-use are made for the cash-generating units to which the goodwill has been allocated. Intangible assets under construction are soft- ware projects that cannot be tested separately for impairment, as they do not generate separate cash ﬂow. There is no need for impairment if, at the end of the ﬁnancial period, it is clear that the projects will be completed and the software will be introduced. Intan- gible assets under construction are, however, tested for impairment as part of the cash generating unit to which they belong . Goodwill allocation The carrying amounts of goodwill are allocated to cash- generating units in accordance with the table below: MEUR 2022 2021 Environmental Services 87.6 86.9 Industrial Services 30.6 19.8 Facility Services Finland 28.6 28.6 Facility Services Sweden 33.9 36.8 Total 180.7 172.1 The goodwill generated from the acquisition of Sand & Vatten- bläst i Tyringe AB in the ﬁrst quarter of 2022 is included in the goodwill allocated to Industrial Services . In Facility Services Sweden, a decrease of EBITDA per cent by 1.8 percentage points or an increase of discount rate by 3.3 percentage point would result in the value-in-use of Facility Services Sweden equaling the carrying amount of the tested assets. At the time of the testing, the diﬀerence between the value-in-use and the carrying amount of Facil- ity Services Sweden was EUR 36.5 million and the EBITDA per cent in the forecast period was 7.1 per cent. Regarding the other cash-generating units, any change in the key assumptions which would be considered as somewhat likely could not result in the carrying amount of the cash-generating unit exceeding the value-in-use. Goodwill impairment testing in 2022 The goodwill impairment testing has been prepared based on value-in-use calculations in which future cash ﬂows are dis- counted to net present value. The terminal growth rate used in the value-in-use calculations of cash generating units is 1.9 per cent, which corresponds to the mid-term inﬂation goal of the European Central Bank. The same terminal growth rate is used in all cash generating unit based on similar business environment. The discount rates used in calculations are based on the Group's weighted average cost of capital (WACC). Factors in WACC are risk-free income, market risk premium, compa- ny-speciﬁc beta, cost of capital as well as the ratio between equity and liabilities. A discount rate has been deﬁned for each cash generating unit. Discount rates used in the calculations (pre tax) % 2022 2021 Environmental Services 8.5 7.7 Industrial Services 8.5 7.8 Facility Services, Finland 8.4 7.7 Facility Services, Sweden 8.5 7.7 According to the impairment testing, the value-in-use of all the cash generating units in the Group exceeded the carry- ing amounts of the tested assets. Thus, no impairments were recognised in 2022. Sensitivity analyses of impairment testing A sensitivity analysis of each cash-generating unit was performed, during which the key calculation assumptions were tested. The key assumptions used in the testing were discount rate and EBITDA per cent used in calculation of the terminal value. The EBITDA per cent was based on the histor- ical development of the cash-generating unit. In the sensi- tivity analysis, a key assumption was tested by changing the threshold values to a value at which the value-in-use would equal the carrying amount. 3.3 Tangible assets MEUR Land Buildings and constructions Machinery and equipment Other Prepayments and construction in progress Total Acquisition cost, 1 Jan 2022 7.4 138.9 408.9 0.1 10.1 565.4 Additions 0.8 0.6 12.8 0.1 12.4 26.7 Business acquisitions 0.2 4.3 0.1 4.6 Disposals -0.1 -1.7 -19.6 -0.0 -0.1 -21.5 Transfers between items 3.6 9.9 -13.5 0.0 Exchange diﬀerences -0.0 -0.1 -0.0 -0.2 Acquisition cost, 31 Dec 2022 8.2 141.6 416.1 0.3 9.0 575.1 Accumulated depreciation, 1 Jan 2022 -0.5 -103.8 -308.0 -0.1 -412.4 Accumulated depreciation on disposals and transfers 0.6 18.6 0.0 19.3 Depreciation for the period -6.2 -21.8 -0.0 -28.1 Exchange diﬀerences 1.1 0.4 0.0 1.5 Accumulated depreciation, 31 Dec 2022 -0.5 -108.4 -310.8 -0.1 -419.8 Carrying amount at 31 Dec 2022 7.7 33.2 105.3 0.2 9.0 155.3 The carrying amount of machinery and equipment includes EUR 12.6 million (11.5) of compactors and balers sold through an external ﬁnancing company. Due to the repurchase obligation the leased equipment is treated as tangible assets. Contractual commitments related to property, plant and equipment totalled EUR 19.7 million (17.2). MEUR Land Buildings and constructions Machinery and equipment Other Prepayments and construction in progress Total Acquisition cost, 1 Jan 2021 5.8 134.4 393.3 0.1 8.9 542.6 Additions 1.7 2.3 15.4 20.2 39.6 Business acquisitions 2.0 2.0 Disposals -0.1 -1.0 -17.4 -18.5 Transfers between items 3.2 15.6 -19.0 -0.2 Exchange diﬀerences -0.0 -0.0 -0.0 -0.0 Acquisition cost, 31 Dec 2021 7.4 138.9 408.9 0.1 10.1 565.4 Accumulated depreciation, 1 Jan 2021 -0.5 -98.4 -303.8 -0.1 -402.8 Accumulated depreciation on dispos- als and transfers 0.6 16.6 17.1 Depreciation for the period -5.9 -20.8 -26.7 Exchange diﬀerences 0.0 0.0 0.0 0.0 Accumulated depreciation, 31 Dec 2021 -0.5 -103.8 -308.0 -0.1 -412.4 Carrying amount at 31 Dec 2021 6.9 35.1 100.8 0.1 10.1 153.0 Accounting policy Tangible assets are recognised at historical cost less accumulated depreciation and impairment losses. The historical cost includes expenditure that is directly attributable to the acquisition of the asset. Borrowing costs immediately arising from the acquisition, construction or manufacture of tangible assets that meet the conditions are capitalised as part of the asset’s acquisition cost. Possible restora- tion costs are also included in the acquisition cost. In business combinations, tangible assets are measured at fair value on the acquisition date. In the statement of ﬁnancial position, tangible assets are shown less accumulated depreciation and impair- ment, if any. Tangible assets are depreciated using the straight- line method over their expected useful lives, excluding new landﬁlls. The expected useful lives are reviewed on each balance sheet date, and, if expectations diﬀer materially from previous estimates, the depreciation periods are adjusted to reﬂect the changes in expec- tations of future economic beneﬁts. Depreciation in the ﬁnancial statements is based on the following expected useful lives: Buildings and structures 5–30 years Vehicles 6–15 years Machinery and equipment 4–15 years For completed landﬁlls the Group applies the units of production method, which involves depreciation on the basis of the volume of waste received. Land is not depreciated. When an asset included in tangible assets con- sists of several components with diﬀerent estimated useful lives, each component is treated as a sepa- rate asset. Ordinary repair and maintenance costs are recognised in the income statement during the period in which they are incurred. Costs of signiﬁcant modiﬁcation and improvement projects are capital- ised if it is probable that the projects will result in future economic beneﬁts to the Group . When a tangi- ble asset is classiﬁed as held for sales in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, depreciation will no longer be recorded. Gains and losses on sales and disposal of tangible assets are recognised through proﬁt or loss and are presented in other operating income or expenses. At each balance sheet date, the Group assesses the balance sheet values of its assets for any impair- ment. If any indication exists, an estimate of the asset’s recoverable amount is made. The recoverable amount is the higher of an asset’s fair value less selling costs and its value-in- use. Value-in-use refers to the estimated future net cash ﬂows available from an asset discounted to the present value. The discount rate used is the pre-tax rate, which reﬂects the market view of the time value of money and the risks associated with the asset. An impairment loss is recognised in the income statement when an asset’s carrying amount exceeds its recoverable amount. Impairment losses attributa- ble to a cash-generating unit are used for deducting ﬁrst the goodwill allocated to the cash-generating unit and, thereafter, the other assets of the unit on an equal basis. An impairment loss recognised in prior periods is reversed if there is a change in circumstances and the recoverable amount has changed. 43 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 44 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 3.4 Right-of-use assets On the balance sheet date, no new lease agreements are known which will become valid in the coming ﬁnancial years that would have a signiﬁcant impact on the amount of debt resulting from a right-of-use asset or a lease agreement. For more information about the lease agreement expenses, please refer to note 1.7 Lease expenses. Critical judgements by Management The Group has lease contracts relating mainly to real estate and land areas which are valid until further notice. For such contracts, the management eval- uates the lease term on a lease-by-lease basis. In evaluating the lease term the Group considers e.g. any signiﬁcant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to the Group’s operations taking into account, for example, whether the underlying asset is a spe- cialised asset, the location of the underlying asset and the availability of suitable alternatives. The lease term is reassesed in future periods to ensure that the lease term reﬂects the current circumstances. MEUR Land Buildings and con- structions Machinery and equipment Total Acquisition cost, 1 Jan 2022 12.9 47.7 60.4 121.1 Additions 3.4 10.2 9.2 22.7 Disposals 0.1 -2.4 -1.1 -3.5 Exchange diﬀerences - -0.4 -0.7 -1.1 Acquisition cost, 31 Dec 2022 16.4 55.1 67.8 139.2 Accumulated depreciation, 1 Jan 2022 -2.6 -20.5 -28.1 -51.3 Accumulated depreciation on dis- posals and transfers 1.4 0.7 2.2 Depreciation for the period -1.0 -9.4 -9.1 -19.5 Exchange diﬀerences -0.0 0.2 0.5 0.6 Accumulated depreci- ation, 31 Dec 2022 -3.7 -28.3 -36.0 -68.0 Carrying amount at 31 Dec 2022 12.7 26.8 31.8 71.2 MEUR Land Buildings and con- structions Machinery and equipment Total Acquisition cost, 1 Jan 2021 13.5 40.9 52.0 106.4 Additions 1.9 11.6 8.8 22.3 Disposals -2.5 -4.7 -0.3 -7.5 Exchange diﬀerences - -0.1 -0.1 -0.1 Acquisition cost, 31 Dec 2021 12.9 47.7 60.4 121.1 Accumulated depreciation, 1 Jan 2021 -2.2 -14.5 -18.9 -35.6 Accumulated depreciation on dis- posals and transfers 0.6 2.5 0.1 3.2 Depreciation for the period -1.1 -8.6 -9.4 -19.1 Exchange diﬀerences - 0.0 0.1 0.1 Accumulated depreci- ation, 31 Dec 2021 -2.6 -20.5 -28.1 -51.3 Carrying amount at 31 Dec 2021 10.3 27.2 32.3 69.8 Accounting policy A right-of-use asset is recognised from a lease con- tract at the commencement date of the lease, which is the date that the underlying asset is made available for use. Right-of-use assets are measured at cost less any cumulated depreciation and impairment losses and adjusted for any remeasurement of the lease lia- bility. The cost of the right-of-use asset includes the amount of lease liability recognised, any initial direct costs incurred and lease payments made at or before the commencement date less any lease incentives received. Possible restoration obligations are also con- sidered in the cost of the right-of-use asset. At each balance sheet date, the carrying amounts of right- of-use assets are assessed for any impairment, as described in note 3.3. The lessee recognises the lease liability at the inception of the contract by discounting the future minimum lease payments to the present value. Since the interest rate implicit in the lease is not readily avail- able in most of the Group's lease contracts, the future minimum lease payments are discounted using The Group’s incremental borrowing rate. According to the standard, the incremental borrowing rate is the inter- est rate that the lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic situa- tion. The Group has determined the incremental bor- rowing rate taking into consideration the lease term and the ﬁnancial environment of the lease. The Group's lease liability covers the lease lia- bilities of commodities leased through a ﬁnancial company as well as the lease liabilities of other lease agreements excluding the short-term leases or leases for low-value assets, for which the right-of- use asset and lease liability is not recognised . 45 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 3.5 Other non-current assets Accounting policy The Group's other non-current assets consist of shares in associated companies and joint ventures as well as other shares and holdings. The Group’s inter- ests in associated companies and joint ventures are accounted for using the equity method of accounting. Investments in associated companies and joint ven- tures are initially measured at fair value. The Group’s share of its associated companies’ or joint ventures’ post-acquisition proﬁts or losses after tax are recog- nised in the income statement. When the Group’s share of losses in an associated company or a joint venture equals or exceeds its interest in the associated com- pany or joint venture, the Group does not recognise fur- ther losses, unless it has incurred obligations or made payments on behalf of the associated company or joint venture. Other shares and holdings include shares in a few smaller companies as well as golf shares, and they are measured at fair value through proﬁt or loss. Other receivables mainly include deposits related to pension obligations in Sweden as well as non-current advance payments. MEUR Shares in associated and joint venture companies Other shares and holdings Other re- ceivable s Acquisition cost 1 Jan 2022 0.0 0.2 2. 0 Additions 13.3 0.0 0. 5 Disposals - -0.0 -0. 6 Share of the result of as- sociated companies and joint ventures 0.7 - - Exchange diﬀerences - - -0. 1 Acquisition cost 31 Dec 2022 14.0 0.2 1. 9 MEUR Shares in associated and joint venture companies Other shares and holdings Other re- ceivables Acquisition cost 1 Jan 2021 0.0 0.2 1.1 Additions - 0.0 1.7 Disposals - -0.0 -0.8 Share of the result of associated companies and joint ventures 0.0 - - Exchange diﬀerences - - -0.0 Acquisition cost 31 Dec 2021 0.0 0.2 2.0 Information about the substantial joint venture company Domicile Direct ownership (%) Name 2022 2021 Laania Oy Helsinki 55 - Financial information about the substantial joint venture company MEUR 2022 2021 Intangible and tangible assets 3.3 - Right-of-use assets 2.4 - Other non-current receivables 0.0 - Inventories 51.4 - Trade and other receivables 27.3 - Assets total 84.4 - Non-current interest-bearing liabili- ties 32.5 - Trade payables 11.6 - Other payables 15.1 - Liabilities total 59.1 - Net sales 89.7 - Depreciation and amortisation -0.8 - Financial income and expenses -0.5 - Income taxes -0.3 - Result for the period 1.3 - The reconciliation of the joint ven- ture's ﬁnancial information to the Group's book value: The Group's ownership, % 55.0 - The Group's share of net assets 14.0 - The value of the joint venture in the consolidated statement of ﬁnancial position 14.0 - For more information on the joint venture please refer to note 5.3 . 46 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 4.1 Financial assets and liabilities . . . . . . . . . . . . . . 47 4.2 Financial risk management. . . . . . . . . . . . . . . . .49 4.3 Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 4.4 Dividend per share. . . . . . . . . . . . . . . . . . . . . . . . . .52 4.5 Contingent liabilities. . . . . . . . . . . . . . . . . . . . . . . .52 4 Financial risks and capital structure 47 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 4.1 Financial assets and liabilities Accounting policy The Group’s ﬁnancial assets and liabilities include cash and cash equivalents, loan receivables from joint ven- tures, trade and other receivables, trade and other pay- ables, borrowings, lease liabilities and derivatives. Finan- cial assets and liabilities are classiﬁed into following measurement categories: Fair value through proﬁt and loss - Deferred considerations relating to acquisitions Amortised cost - Cash and cash equivalents - Trade and other receivables - Interest-bearing liabilities, such as bank loans, bonds, commercial papers, lease liabilities - Trade and other payables This classiﬁcation is performed when the asset or liabil- ity is acquired. The classiﬁcation of ﬁnancial assets into diﬀerent measurement categories depends on the busi- ness model for managing the ﬁnancial asset and the contractual cash ﬂow characteristics of the ﬁnancial asset acquired. The classiﬁcation of ﬁnancial liabilities into diﬀerent measurement categories depends on the purpose for which the ﬁnancial liabilities were initially acquired. A ﬁnancial asset is derecognised when the rights to the cash ﬂows from the asset expire, or when all mate- rial risks and rewards of the ownership of the asset have been transferred outside the Group. A ﬁnancial liability is derecognised when the obligation speciﬁed in the contract is discharged or cancelled or expires . Financial assets measured at amortised cost Cash and cash equivalents consist of cash on hand, bank deposits redeemable on demand and other short-term liquid investments. Their maturity is no longer than three months from the acquisition date. They are recognised as of the settlement date and measured at historical cost. Foreign currency trans- actions are translated into euros using the exchange rates prevailing on the balance sheet date. The used credit limits are included in current interest-bearing lia bilities. Trade and other receivables are measured at amor- tised cost. Receivables are classiﬁed as current ﬁnan- cial assets unless their maturity date is more than 12 months from the balance sheet date. Trade and other receivables are recognised at historical cost less allowances for impairment. A valuation allowance for impairment of trade receivables is recognised when there is objective evidence that the Group will not be able to collect all amounts due according to the orig- inal terms of the receivables. The Group applies the simpliﬁed approach to providing for expected credit losses, which permits the use of the lifetime expected loss provision for all trade receivables. Impairments are recognised as an expense in the income state- ment. Sold non-recourse trade receivables’ credit risk and contractual rights are transferred from the Group on the selling date and related expenses are recog- nised as ﬁnancial expenses . Financial liabilities measured at fair value through proﬁt or loss Deferred considerations related to acquisitions are measured at fair value through proﬁt and loss. Deferred considerations are recognised in the balance sheet on group level only. They are usually non-current liabilities with maturity more than 12 months. Measurement of fair value of the deferred considerations depends on the sale and purchase agreement. Both realised and unrealised gains and losses arising from the changes in fair value are recognised in the income statement for the ﬁnancial period during which they incurred. Financial liabilities measured at amortised cost Financial liabilities measured at amortised are recog- nised in the statement of ﬁnancial position on the set- tlement date at fair value, on the basis of the consider- ation received. Transaction costs directly attributable to the acquisition or issue of a loan are included in the original carrying amount of ﬁnancial liabilities. Financial liabilities are subsequently measured at amortised cost using the eﬀective interest method. Interest expenses are recognised in the income statement using the eﬀec- tive interest rate method. Financial liabilities that expire within 12 months from the balance sheet date, including bank overdrafts in use, are recognised within current interest-bearing liabilities, and those expiring in a period exceeding 12 months, are recognised within non-cur- rent interest-bearing liabilities . Fair value hierarchy of ﬁnancial assets and liabilities measured at fair value Financial assets and liabilities recognised at fair value must be categorised by using a three-level fair value hierarchy that reﬂects the signiﬁcance of the input data used in fair value measurement. Hierarchy level 1 includes such ﬁnancial instru- ments, whose fair value is directly based on quated prices in active markets. Financial instruments of hierarchy level 2 include over-the-counter (OTC) derivatives as well as loan receivables and loans measured at amortised cost. A ﬁnancial instrument is categorised to level 3 if it’s fair value cannot be determined based on observable market information. In the Group, derivatives and deferred consideration relating to acquisitions are recognised at fair value. Deriva- tives, which comprise interest rate swaps are categorised in hierarchy level 2. The fair values of ﬁnancial instruments are based on prices derived from prices quoted in an active market or generally accepted valuation models that are, to a signiﬁcant degree, based on veriﬁable market data. The fair value of the deferred consideration is categorised in hier- archy level 3. Its valuation is described in more detail on the following page. Derivatives Fair values of interest rate swaps are valued using a tech- nique based on present value of future cash ﬂows, which is supported by market interest rates at the balance sheet date. Fair values describe the prices that the Group would gain or should pay, if the derivative ﬁnancial instruments were can- celled at the balance sheet date. Lease liabilities Fair value of ease liabilities is calculated by discounting future cash ﬂows using the incremental borrowing rate. More information on the accounting policies for lease liabilities is presented in note 3.4. 48 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 2022 2021 MEUR Amortised cost Derivatives under hedge accounting Fair value through proﬁt or loss Carrying amounts by balance sheet item Amortised cost Derivatives under hedge accounting Carrying amounts by bal- ance sheet item Fair value hierarchy level Note Non-current ﬁnancial assets Other receivables 1.4 1.4 1.4 1.4 Current ﬁnancial assets Trade and other receivablesther receivables² 91.3 91.3 87.2 87.2 2.1 Derivative receivables 1.2 1.2 - - 2 4.2 Cash and cash equivalents 49.5 49.5 28.6 28.6 Total ﬁnancial assets 142.1 1.2 - 143.3 117.2 - 117.2 Non-current ﬁnancial liabilities Borrowings 126.0 126.0 124.8 124.8 2 Lease liabilities 51.5 51.5 51.0 51.0 4.2 Deferred considerationation¹ 5.7 5.7 3 Current ﬁnancial liabilities Borrowings 18.3 18.3 0.0 0.0 2 Lease liabilities 21.0 21.0 19.9 19.9 4.2 Trade and other payables 2 65.8 65.8 63.5 63.5 2.3 Derivative liabilities - - 0.5 0.5 2 4.2 Total ﬁnancial liabilities 282.6 - 5.7 288.3 259.2 0.5 259.6  Def¹ Deferred consideration is related to the acquisition of 70 per cent share of Sand & Vattenbläst i Tyringe AB (”SVB”) that oﬀers process cleaning services in Sweden. The acquisition took place on 1 February 2022. SVB is consolidated with 100 per cent share in the Group and, in connection with the arrangement, L&T has recognised in ﬁnancial liabilities an estimate of the deferred consideration for the acquisition. The deferred consideration relates to the acquisition of non-controlling interest and is measured at fair value through proﬁt or loss. It will mature on 1 February 2026 at the earliest. 2 The ﬁgures of the comparison period have been adjusted. Non-current other liabilities do not include advances received. Trade and other receivables do not include tax receivables and accruals, and trade and other payables do not include statutory lia- bilities (e.g. tax liabilities). The fair values of balance sheet items do not diﬀer signiﬁcantly from the carrying amounts of the balance sheet items . Reconciliation of ﬁnancial liabilities recognised at fair value according to the level 3. MEUR 2022 Carrying amount 1 Jan - Deferred consideration at the date of the acquisition 5.1 Change in fair value 0.8 Exchange diﬀerences -0.2 Carrying amount 31 Dec 5.7 The valuation of the deferred consideration is based on the shareholder agreement and is aﬀected by the acquired com- pany's balance sheet structure and EBITDA forecast for 2025. In the ﬁnal quarter of 2022, the forecast was updated and an increase of EUR 0.8 million was recognised in the considera- tion. Net interest-bearing liabilities MEUR 2022 2021 Loans from ﬁnancial institutions 51.4 74.9 Bonds 74.6 49.9 Lease liabilities 51.5 51.0 Non-current interest-bearing liabilities 177.5 175.8 Bonds 17.7 - Lease liabilities 21.0 19.9 Current loans 0.7 0.0 Current interest-bearing liabilities 39.3 19.9 Total interest-bearing liabilities 216.8 195.6 Cash and cash equivalents 49.5 28.6 Net interest-bearing liabilities 167.3 167.1 49 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 4.2 Financial risk management The principles for L&T’s ﬁnancial risk management are deﬁned in the treasury policy approved by the Board of Direc- tors. The purpose of ﬁnancial risk management is to mitigate signiﬁcant ﬁnancial risks and strive to reduce the unfavour- able eﬀects of ﬂuctuations in the ﬁnancial market and other risk factors on the Group’s result. The Group’s ﬁnancing and liquidity management are han- dled centrally by the Group’s ﬁnance function, which is man- aged by the CFO. Transactions related to ﬁnancial risk man- agement are carried out by the Group’s ﬁnance function. Foreign exchange risk The Group consists of a parent company operating in Fin- land and subsidiaries operating in Finland and Sweden. The company ceased operations in Russia and the Russian sub- sidiaries were sold during 2021. The parent company’s and the Finnish subsidiaries’ functional and reporting currency is the euro. The foreign subsidiaries’ functional and report- ing currency is the currency of their country of location. Thus, changes in foreign exchange rates have impact on the Group’s result and equity. Translation risk The exposure to translation risk consists of net investments in foreign subsidiaries, which include equity investments and retained earnings. The position of net investments in foreign subsidiaries is not hedged, as these holdings are considered long-term strategic investments. The company has recog- nised in ﬁnancial liabilities an estimate of a deferred con- sideration related to the acquisition of Sand&Vattenbläst i Tyringe AB. The Swedish krona denominated deferred consid- eration exposes the company to a translation risk. In 2022, translation diﬀerences totalling EUR -5.6 million (-1.6) were accumulated in the equity due to the ﬂuctua- tions of currency rates. The translation diﬀerence in 2022 is totally related to the Swedish business. At the balance sheet date, the Swedish krona denominated translation position was EUR 24.5 million (48.9) . Change in net interest-bearing liabilities 2022 2021 MEUR Loans from ﬁnancial institutions Bonds Lease liabilities Cash and cash equivalents Total Loans from ﬁnancial institutions Bonds Lease liabilities Cash and cash equivalents Total Carrying amount on 1 Jan -74.9 -49.9 -70.9 28.6 -167.1 -64.9 -49.8 -72.0 50.2 -136.5 Change in net interest-bearing liabilities, cash: Proceeds from non-current loans -75.0 -75.0 -25.0 -25.0 Repayments of non-current loans 25.9 32.3 58.1 - Proceeds from current loans -35.0 -35.0 -40.0 -40.0 Repayments of current loans 35.0 35.0 55.0 55.0 Repayments of lease liabilities 19.4 19.4 18.1 18.1 Change in cash and cash equivalents 21.0 21.0 -21.7 -21.7 Total cash ﬂows 25.9 -42.7 19.4 21.0 23.6 -10.0 - 18.1 -21.7 -13.5 Change in net interest-bearing liabilities, non-cash: Change in lease liablities -21.1 -21.1 -17.0 -17.0 Other changes -3.0 0.3 -0.1 -2.8 0.0 -0.1 -0.0 -0.1 Total non-cash movements -3.0 0.3 -21.1 -0.1 -23.9 0.0 -0.1 -17.0 -0.0 -17.1 Carrying amount on 31 Dec -52.0 -92.3 -72.5 49.5 -167.3 -74.9 -49.9 -70.9 28.6 -167.1 50 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Transaction risk The business operations of the Group’s foreign subsidiaries are carried out almost completely in their functional currency and thus does not cause any transaction risk. Group compa- nies operating in Finland use euro as the invoicing currency for sales almost exclusively. Financing for subsidiaries is pro- vided through intra-Group loans that are denominated in the functional currency of each subsidiary. Price risk of investments The Group has not invested in listed securities, the value of which changes as the market prices change, and is thus not exposed to securities price risk. The Group has a 55% holding in Laania Oy, a joint venture established on 1 July 2022 with Neova. The investment in the joint venture is accounted for using the equity method of accounting, and it's carrying value in the balance sheet was EUR 14.0 million at the end of the reporting period. More information on the joint venture and its measurement can be found in note 3.5 Other non-current receivables. The Group's other holdings in unlisted shares are not material, and there is no substantial price risk related to these shares. Commodity price risk The ﬂuctuations of the world market price of crude oil are reﬂected in the price of fuel used in production equipment as well as in the purchase prices of environmental products through oil-based raw materials. In waste management, some customer contracts specify such invoicing periods and contract terms that the sales prices cannot be raised monthly. This means that the rise in fuel prices is passed on to service prices with a delay. The Group manages the raw material price risk for envi- ronmental products through ﬁxing sales prices for a period not exceeding the period for which the suppliers’ purchase prices are valid. Interest rate risk The Group's interest rate risk is primarily related to borrow- ings, which are tied to variable interest rates and create cash ﬂows that vary with the interest rate level. As the demand for the Group’s services or their prices are not signiﬁcantly dependent on ﬂuctuations in economic trends, the Group tries to keep interest costs steady. On account of this, over 50 per cent of the cash ﬂow associated with variable-rate borrowings is hedged against interest rate risk with interest rate swaps. At end of the ﬁnancial period, 86 per cent (64) of the company’s borrowings were either ﬁxed interest rate bor- rowings or hedged with interest rate swaps. Variable-rate borrowings accounted for 14 per cent (36). Therefore changes in the interest rate level will not impact interest costs in full. The average interest rate of long-term loans, excluding lease liabilities, with interest rate hedging, was 2.5 per cent (1.1). All interest rate swaps made to hedge the cash ﬂow are hedges in accordance with the Group’s risk management policy and hedge accounting is applied to them. Most of the Group’s net sales are generated by long-term service agree- ments. Due to good cash ﬂow predictability, the Group’s treasury policy speciﬁes that the company shall seek to minimise the amount of interest-bearing assets in propor- tion to the current short-term ﬁnancing requirements, and to invest in relatively short-term instruments. Credit and counterparty risk Financial instruments involve the risk of the counterparty being unable to fulﬁl its contractual commitments. Counter- party risk is managed by making ﬁnancial and derivative con- tracts with major Nordic banks only and by making invest- ments related to liquidity management only in certiﬁcates of deposit and commercial papers of issuers with a good credit standing. No impairment is expected on any outstanding investments at the balance sheet date. The Group has a wide customer base consisting of com- panies, industrial plants, oﬃce and business properties, institutional property owners, housing corporations, public sector organisations and households. Its accounts receiv- able consist mostly of a high number of relatively small receivables and there are no signiﬁcant concentrations of credit risk.The Group has credit control guidelines to ensure that services and products are sold only to customers with an appropriate credit standing or, if a customer’s creditwor- thiness is inadequate, prepayment is required. Most cus- tomer relationships are based on long-term service con- tracts, and customers are not generally required to provide collateral. A simpliﬁed credit loss model is used for trade receiv- ables and contract assets and the amount of expected credit losses is based on the lifetime expected credit losses of receivables. The model is based on historical observed default amounts over the expected life of the trade receiva- bles and is adjusted for forward-looking estimates depend- ing on the overdue of the receivables. More information on allowance for expected credit losses can be found in note 2.1. With regard to Finnish trade receivables, collection oper- ations are managed centrally by the ﬁnancel function. The foreign subsidiaries manage the collection of their trade receivables locally. Credit risk related to ﬁnancial assets MEUR 2022 2021 Other non-current receivables 1.4 1.4 Trade receivables 91.0 86.8 Other current receivables 0.2 0.4 Derivative receivables 1.2 - Cash and cash equivalents 49.5 28.6 Liquidity and reﬁnancing risk Liquidity risk management ensures that the Group continu- ously will be able to answer for its ﬁnancial obligations asso- ciated with operations at the lowest possible cost. The Group seeks to maintain good liquidity through eﬃcient cash man- agement and by investing in money market instruments that can be realised quickly. The liquidity situation is monitored in real time and predicted using cash ﬂow forecasts. The Group uses a group bank account system which facilitates the management of cash funds. To ascertain the availability of funding, the Group uses several banks in its ﬁnancial opera- tions. Reﬁnancing risk is managed by a broad-based maturity proﬁle of loans and by maintaining the level of the average duration of the loan portfolio for at least two years. The Group seeks to keep its cash assets fairly small, while ensuring suﬃcient credit limits for liquidity man- agement purposes. To meet any temporary need for cash arising from cash ﬂow ﬂuctuations, the Group has EUR 10 million account limit and committed credit limit totalling EUR 40 million. The account limit as well as the committed credit limit were not in use, as was the case in the comparison period. In addition the Group has commercial paper pro- gramme totalling EUR 100 million which was in all unused (comparison period: all unused). At the end of the ﬁnancial period, the Group’s liquid assets amounted to EUR 49.5 mil- lion (28.6). In May 2022, the company issued senior unsecured sus- tainability-linked notes in the amount of EUR 75 million. At the same time, the company repurchased for a total of EUR 32 million the company's outstanding notes maturing on 17 September 2023.The new notes will mature in the second quarter of 2028 and bear ﬁxed annual interest at the rate of 3.375 per cent. The following table shows the Group’s ﬁnancial liabilities classiﬁed according to contractual maturity dates at the balance sheet date. The ﬁgures shown are undiscounted contractual cash ﬂows. The long-term borrowings include ﬁnancial covenants such as equity ratio and net debt to EBITDA ratio, which restrict giving of collaterals to other ﬁnanciers and discontinuance or disposal of present busi- ness. In addition to ﬁnancial covenants, the committed credit limit and the senior unsecured sustainability-linked notes issued in May 2022 are linked to sustainability tar- gets. At the end of the reporting period, the ﬁnancial cove- nants were fulﬁlled . 51 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Maturity of ﬁnancial liabilities MEUR 2022 Carrying amount Contractual cash ﬂows 2023 2024 2025 2026 2027 2028 and later Loans from credit institutions 52.0 52.5 1.6 50.9 - - - - Bonds 92.3 108.2 20.5 2.5 2.5 2.5 2.5 77.5 Lease liabilities 72.5 80.0 21.4 17.9 11.8 4.9 3.0 21.0 Trade and other payables 65.8 65.8 65.8 - - - - - Total 282.6 306.5 109.3 71.4 14.3 7.4 5.6 98.5 MEUR 2021 Carrying amount Contractual cash ﬂows 2022 2023 2024 2025 2026 2027 and later Loans from credit institutions 74.9 76.4 0.5 25.5 50.4 - - - Bonds 49.9 51.3 0.6 50.6 - - - - Lease liabilities 70.9 76.2 20.0 17.8 13.8 7.7 5.6 11.4 Derivative liabilities 0.5 0.5 - - 0.5 - - - Trade and other payables 82.0 82.0 82.0 - - - - - Total 278.1 286.4 103.6 93.9 64.7 7.7 5.6 11.4 Breakdown of borrowings and facilities 2022 2021 MEUR In use Undrawn Total In use Undrawn Total Loans from ﬁnancial institutions and pension loans 52.0 - 52.0 74.9 - 74.9 Bonds 92.3 - 92.3 49.9 - 49.9 Account limit - 10.0 10.0 - 10.0 10.0 Committed credit facility - 40.0 40.0 - 30.0 30.0 Commercial paper programme - 100.0 100.0 - 100.0 100.0 Lease liabilities from ﬁnancial institu- tions 26.0 24.0 50.0 25.3 24.7 50.0 Other lease liabilities 46.5 - 46.5 45.6 - 45.6 Total 216.8 174.0 390.8 195.6 164.7 360.4 Sensitivity to interest rate risks arising from ﬁnancial instruments The following sensitivity analysis illustrates the sensitivity of the Group’s proﬁt for the period and equity to changes in the interest rate level with regard to ﬁnancial instruments in the statement of ﬁnancial position, including ﬁnancial assets and liabilities as well as derivative contracts. Changes in the fair value of derivative contracts under hedge accounting are assumed to be allocated entirely to equity. The following assumptions have been used in calculating sen- sitivity to changes in the interest rate level: • The change in the interest rate level is assumed to be a rise of +0.5 percentage point and a decrease of -0.2 percentage point. • The exposure underlying the calculation includes inter- est-bearing ﬁnancial liabilities and interest rate swaps. Sensitivity analysis of interest rate risk arising from ﬁnan- cial instruments 2022 2021 MEUR Proﬁt after tax Equity Proﬁt after tax Equity Floating rate loans: + 0.5% change in market interest rates -0.4 -0.6 - 0.2% change in mar- ket interest rates 0.4 0.0 Hedging instruments: + 0.5% change in market interest rates 0.3 0.4 - 0.2% change in mar- ket interest rates -0.3 -0.1 Derivative ﬁnancial instruments and hedge ac- counting Accounting policy In accordance with L&T’s ﬁnancing policy, derivative agree- ments are used for the reduction of ﬁnancial risks related to changes in market interest rates. The Group has currently one interest rate swap, which has been implemented to protect the cashﬂows of ﬂoating rate loans from the interest rate risk. Derivatives are recognised in the balance sheet initially at fair value. After the acquisition they will, however, be rec- ognised at the fair value applicable on the balance sheet date. The fair values are based on market prices on the bal- ance sheet date. Any proﬁts and losses from the measure- ment at fair value are processed in the accounting accord- ing to the purpose of use of the derivative agreement. All interest hedges meet the requirements of eﬀective hedging stated in the L&T’s risk management. Any proﬁts and losses resulting from derivatives under hedge account- ing are recognised in line with the underlying asset. Hedge accounting is applied to all interest swap agreements. The eﬃciency of hedging relationships is registered ini- tially and in conjunction with each interim report by evaluat- ing the hedging instrument’s ability to reverse the changes in the cashﬂow of the hedged item. If the hedging is eﬀec- tive, the changes in the fair value of hedging instruments are recognised in the hedging reserve under capital and reserves. When a hedging instrument matures, it is sold or when the criteria for hedge accounting no longer meet the group’s risk management requirements, the proﬁt or loss generated from the hedging instrument remains in equity until the hedged cashﬂow is realised. If the hedged cash- ﬂow is no longer expected to become realised, the proﬁt or loss generated from the hedging instrument is immediately recognised in the income statement. Any ineﬀective part of a hedging relationship is also immediately recognised in the income statement. The positive fair values of all derivatives are recognised in the balance sheet as derivative receivables. Correspond- ingly, the negative fair values of derivatives are recognised as derivative liabilities. All fair values of derivatives are included in short-term assets or liabilities . 4.4 Dividend per share At the Annual General Meeting on 23th March 2023, the Board of Directors will propose that a dividend of EUR 0.4 7 per share be paid for the 2022 ﬁnancial year. On the basis of a decision taken by the Annual General Meeting, the company paid a dividend of EUR 0.46 per share for 2021. 4.5 Contingent liabilities MEUR 2022 2021 Collaterals for own commitments Mortgages on rights of tenancyf tenancy¹ 0.1 0.1 Company mortgagesCompany mortgages¹ 2.0 1.8 Other securities 0.0 0.1 Bank guarantees required for environ- mental permits 17.4 16.7 Other bank guarantees 5.8 11.0 Mortgages under own control Company mortgagesCompany mortgages¹ 0.3 6.3 Liabilities on behalf of the joint ven- ture Account limit 2.8 - Bank guarantees 16.5 - Term loan facility guarantee 16.5 -  ¹ The ﬁgures of the comparison period have been adjusted.. Other securities are guarantee deposits. The Group has a 55% holding in Laania Oy, a joint venture established on 1 July 2022 with Neova. The amount of liability is stated according to the Group's share of ownership of the maximum liability. The Group's leasing commitments related to lease agree- ments for low-value assets amount to EUR 0.9 million (1.0) in the year following the reporting period and after that EUR 0.9 million (0.8) . 52 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 4.3 Equity Accounting policy Ordinary shares are presented as share capital. Any expenses arising from the issue or acquisition of treasury shares are presented as a valuation allowance within equity. If the Group repurchases any equity instruments, the acquisi- tion cost of such instruments is deducted from equity . shares using the company’s unrestricted equity. In addition, the Annual General Meeting authorised the Board of Direc- tors to decide on a share issue and the issuance of special rights entitling their holders to shares. The Board of Directors is authorised to purchase a maxi- mum of 2,000,000 company shares (5.2 per cent of the total number of shares). The repurchase authorisation is eﬀec- tive for 18 months. At the end of the ﬁnancial year 2022, the company held 653,256 treasury shares (686,396) representing 1.7 per cent (1.8) of all shares and votes. Invested non-restricted equity reserve includes other equity type investments and share subscription prices to the extent that they are not expressly designated to be included in the share capital. MEUR Number of outstanding shares, 1,000 shares Share capital Invested non- restrict- ed equity reserve Own shares Total At 1 Jan 2022 38,112 19.4 0.6 -10.6 9.4 25 Feb 2022 Transfer of own shares 25 0.4 0.4 2 May 2022 transfer of own shares 9 0.1 0.1 At 31 Dec 2021 38,146 19.4 0.6 -10.1 9.9 MEUR Number of outstand- ing shares, 1,000 shares Share capital Invested non- restrict- ed equity reserve Own shares Total At 1 Jan 2021 38 105 19.4 0.6 -10.7 9.3 26 March 2021 Transfer of own shares 7 0.1 0.1 At 31 Dec 2021 38 112 19.4 0.6 -10.6 9.4 Other reserves Translation reserve Translation diﬀerences arise from the translation of the equity and earnings of subsidiaries into euros. Hedging reserves Hedging reserve includes eﬀective changes in the fair values of derivative instruments used for hedging of cash ﬂow. Capital management The objective of the Group’s capital management is to secure the continuity of operations and maintain an optimal capital structure to enable investments, taking the cost of capital into account. The capital includes equity and liabilities less advances received. The amount of annual dividend is linked to earnings. Proﬁts not considered necessary for ensuring the healthy develop- ment of the company are distributed to shareholders. The development of the capital structure is monitored quar- terly using the equity ratio and gearing. MEUR 2022 2021 Equity in the consolidated statement of ﬁnancial position 220.4 210.4 Equity and liabilities total 660.5 632.3 Current advances received -9.5 -10.2 Non-current advances received -7.6 -7.4 Capital total 648.5 617.6 Equity ratio, % 34.3 34.2 MEUR 2022 2021 Equity in the consolidated statement of ﬁnancial position 220.4 210.4 Non-current borrowings 177.5 175.8 Current borrowings 39.3 19.9 Cash and cash equivalents -49.5 -28.6 Net interest-bearing liabilities 167.3 167.1 Gearing, % 75.9 79.4 Lassila & Tikanoja plc has one share series. There is no max- imum to the number of the shares and the share capital in the Articles of Association. A share has neither a nominal value nor a book equivalent value. All issued shares have been paid for in full. The Annual General Meeting held on 17 March 2022 authorised Lassila & Tikanoja plc’s Board of Directors to make decisions on the repurchase of the company’s own Interest rate swaps 2022 2021 MEUR Nominal value Fair value Nominal value Fair value Maturity of interest rate swaps under hedge accounting Not later than one year - - - - Later than one year and not later than three years 30.0 1.2 30.0 -0.5 Total 30.0 1.2 30.0 -0.5 The interest rate swap is used to hedge cash ﬂows related to ﬂoating rate loans. The hedge has been eﬀective, and the changes in the fair value are shown in the consolidated statement of comprehensive income for the period. The ﬁxed interest rates of the interest rate swap at 31 December 2022 were 0.8 per cent (0.8). The ﬂoating inter- est rate was 6-month Euribor . 53 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 5.1 Consolidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 5.2 Group companies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 5.3 Business acquisitions and disposals and assets and liabilities classiﬁed as held for sale 55 5.4 Related-party transactions . . . . . . . . . . . . . . . . . .56 5.5 Auditing costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57 5.6 Disputes and litigation. . . . . . . . . . . . . . . . . . . . . . . .57 5.7 Events after the balance sheet date. . . . . . . . .57 5 Consolidation and other notes 5.1 Consolidation Subsidiaries The consolidated ﬁnancial statements include the parent company Lassila & Tikanoja plc and all subsidiaries in which the Group exercises control. The criteria for control are ful- ﬁlled when the Group is exposed, or has rights, to variable returns from its involvement with an entity and has the ability to aﬀect those returns through its power over the entity. Intra-Group shareholdings have been eliminated using the acquisition method. Consideration given and the identiﬁable assets and liabilities of an acquired company are recognised at fair value on the date of acquisition. Any costs associated with the acquisition, with the exception of costs arising from the issuance of debt securities or equity instruments, have been recorded as expenses. Any conditional additional sale price has been measured at fair value on the date of acqui- sition and classiﬁed as a liability or as equity. Additional sale price classiﬁed as a liability is measured at fair value on the closing day of each reporting period, and the resulting gains or losses are recognised through proﬁt or loss. Additional sale price classiﬁed as equity will not be re-measured. Any non-controlling interests in the acquired entity are recog- nised either at fair value or at the proportionate share of non-controlling interests in the acquired entity’s net identi- ﬁable assets. The principle applied in measurement is spec- iﬁed separately for each acquisition. The treatment of good- will from acquisition of subsidiaries is presented in Note 3.1 Goodwill and other intangible assets. The subsidiaries are fully consolidated from the date on which control is transferred to the Group until the date that control ceases. The proﬁt or loss for the period and the comprehensive income are attributed to the parent company’s shareholders and non-controlling interests, even if this would result in the non-controlling interest being negative. Equity attributable to non-controlling interests is presented as a separate item in the statement of ﬁnancial position, as an equity component. Changes in the parent company’s holdings in the subsidiary and not resulting in loss of controlling interest are presented as equity transactions. The Group has no non-controlling interests. In an acquisition achieved in stages, the previous holdings are measured at fair value and the resulting gains or losses are recognised through proﬁt or loss. If the Group loses its controlling interest in the subsidiary, its remaining holdings are measured at fair value on the date when control ceases, and the diﬀerence is recognised through proﬁt or loss. All intra-Group transactions, receivables, liabilities and unrealised gains, as well as distribution of proﬁts within the Group, are eliminated in the consolidated ﬁnancial state- ments. Unrealised losses are not eliminated if the losses are attributable to impairment. The distribution of proﬁt or loss for the period between equity holders of the parent company and the non-controlling interest is presented as a separate item in the income statement and the statement of com- prehensive income, and the share of equity belonging to the non-controlling interest is presented as a separate item in the consolidated statement of ﬁnancial position under equity. Associated companies and joint ventures Associates companies are entities over which the Group has signiﬁcant inﬂuence but no control. L&T has signiﬁcant inﬂuence when it holds more than 20% of the voting rights or otherwise has signiﬁcant inﬂuence but a non-controlling interest. Joint ventures are arrangements in which the Group has joint control. The Group’s interests in associated companies and joint ventures are accounted for using the equity method of accounting. Investments in associated companies and joint ventures are initially measured at fair value. The Group’s share of its associated companies’ or joint ventures’ post-acquisition proﬁts or losses after tax are recognised in the income statement. When the Group’s share of losses in an associated company or a joint venture equals or exceeds its interest in the associated company or joint ven- ture, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associated company or joint venture. Foreign currency translationn Figures indicating the performance and ﬁnancial position of the Group entities are speciﬁed in the currency of the eco- nomic operating environment in which the entity primarily operates (functional currency). The consolidated ﬁnancial statements are presented in euros, which is the parent com- pany's functional and presentation currency. Any transactions in foreign currencies have been recog- nised in the functional currency using the exchange rate in eﬀect on the transaction date. In practice, it is customary to use a rate that is close enough to the transaction day rate. Monetary assets denominated in foreign currency are translated into euros using the exchange rates in eﬀect on the balance sheet date. Non-monetary assets are trans- lated using the exchange rate in eﬀect on the transaction date. The Group has no non-monetary assets denomi- nated in foreign currency that are measured at fair value. Exchange rate gains and losses arising from foreign-cur- rency transactions and the translation of monetary items are recognised in the income statement. Foreign exchange gains and losses on business transactions are included in the respective items above operating proﬁt. Foreign exchange gains and losses on ﬁnancial assets and liabili- ties are included in ﬁnancial income and costs. The income statements of the Group entities whose functional currency is not the euro are translated into euros at average exchange rates for the period, and the state- ments of ﬁnancial position at the exchange rates in eﬀect on the balance sheet date. The diﬀerence in exchange rates applicable to the translation of proﬁt in the income state- ment and statement of comprehensive income result in a translation diﬀerence recognised in the translation reserve within equity. Translation diﬀerences arising from the elim- ination of the acquisition cost of foreign subsidiaries, as well as translation diﬀerences in equity items accumulating after the acquisition, are recognised in the translation dif- ference reserve. Goodwill and fair value adjustments to the carrying amounts of the assets and liabilities arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated into euros at the closing rate. 5.2 Group companies Group holding of shares and votes, % Group's parent company Lassila & Tikanoja plc Finnish subsidiaries L&T Toimi Oy, Helsinki 100.0 L&T Hankinta Ky, Helsinki 100.0 L&T Työllistämispalvelut Oy, Helsinki 100.0 L&T Kiinteistöhuolto Oy, Helsinki 100.0 L&T Kiinteistötekniikka Oy, Helsinki 100.0 L&T Siivous Oy, Helsinki 100.0 L&T Ympäristöpalvelut Oy, Helsinki 100.0 L&T Teollisuuspalvelut Oy, Helsinki 100.0 Sihvari Oy, Jyväskylä Jyväskylä¹ 100.0 Turun Seudun Hyötykuljetus Oy, Masku 100.0 Spectra yhtiöt Oy, Lohja Lohja¹ 100.0 Foreign subsidiaries Lassila & Tikanoja Service AB, Stockholm, Sweden 100.0 Lassila & Tikanoja FM AB, Stockholm, Sweden 100.0 Sand & Vattenbläst i Tyringe AB, Hässleholm, Sweden 70.0 Cisternservice i Hässleholm AB, Hässleholm, Sweden 70.0 Joint ventures Laania Oy, Helsinki 2 55.0 Associated companies Suomen Keräystuote Oy, Helsinki 40.0  In volun¹ In voluntary liquidation  Inf² Information on the joint venture is presented in note 3.5 Other non-current assets 54 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 5.3 Business acquisitions and disposals and assets and liabilities classiﬁed as held for sale Accounting policy In business combinations, all tangible assets acquired are measured at fair value on the basis of the market prices of similar assets, taking into account the age of the assets, wear and tear and similar factors. Tangible assets will be depreciated over their useful life according to the management’s estimate, taking into account the depreciation prin- ciples observed within the Group. Intangible assets arising from business combina- tions are recognised separately from goodwill at fair value at the time of acquisition if they are identiﬁable. In connection with acquired business operations, the Group mostly has acquired agreements on pro- hibition of competition and customer relationships as well as environmental permits. The fair value of customer agreements and customer relationships associated with them has been determined on the basis of estimated duration of customer relationships and discounted net cash ﬂows arising from current customer relationships. The value of agreements on prohibition of competition is calculated in a similar manner through cash ﬂows over the duration of the agreement. Intangible assets are amortised over their useful life according to the agreement or the man- agement’s estimate. Assets and liabilities held for sale are measured at lower of the carrying amount and fair value less costs to sell, if their carrying amount will be recovered principally through a sale transaction rather than through continu- ing use and their sale is highly probable. The non-current assets classiﬁed as held for sale are not depreciated. Critical judgements by Management Assets and liabilities acquired in business combina- tions as well as assets and liabilities classiﬁed as held for sale are measured at fair value. Whenever possible, the management uses available market values when determining the fair values. When this is not possible, the measurement is based on the his- torical income from the asset. In particular, the meas- urement of intangible assets is based on discounted cash ﬂows and requires the management to make estimates on future cash ﬂows. Although these esti- mates are based on the management’s best knowl- edge, actual results may diﬀer from the estimates. The carrying amounts of assets are reviewed con- tinuously for impairment. More information on this is provided in Notes 3.1-3.3. the ﬁnancial liabilities an estimate of the deferred considera- tion related to the acquisition of the non-controlling interest. The deferred consideration is measured at fair value through proﬁt or loss. An increase of EUR 0.8 million was recognised in the deferred consideration in the ﬁnal quarter of 2022. L&T acquired the business operations of Fortum Waste Solutions Oy's small and medium-sized business segment for hazardous and non-hazardous waste on 1 February 2022. Following the acquisition, L&T will have new custom- ers across Finland. Business acquisitions 2021 On 31 March 2021, Lassila & Tikanoja acquired the waste management and recycling business of Someron Kiinteistöhuolto Järvinen Ky. On 30 April 2021, Lassila & Tikanoja acquired the entire share capital of Serveco Oy. On 1 June 2021, Lassila & Tikanoja acquired the entire share capital of Sihvari Oy. The shares of Turun Seudun Hyötykulje- tus Oy, owned by Sihvari, are also included in the acquisition. On 1 July 2021, Lassila & Tikanoja acquired the entire share capital of Spectra Yhtiöt Oy, a company oﬀering support ser- vices for retail sector. Business acquisitions had an EUR 19.9 million (15.0) million impact on the Group’s net sales for the ﬁnancial period and EUR 2.5 million (0.7) on operating proﬁt. If the acquisitions in 2022 had been completed on 1 January 2022, the Groups net sales would be approximately EUR 844.9 million (822.9) and operating proﬁt approximately EUR 43.0 million (42.6). In 2022, expenses totalling EUR 0.4 million (0.9) related to the acquisitions were recognised in the income statement. In the ﬁrst quarter of the year 2022, the fair values of Sih- vari's assets were adjusted by EUR 0.4 million. The adjust- ment is included in the table in column Business acquisi- tions 2022. The initial accounting of the businesses acquired in 2022 is ﬁnal. The ﬁgures for other acquired businesses are stated in aggregate, as none of them is of material importance when considered separately. Fair value, MEUR Business acquisi- tions 2022 Sihvari Oy 2021 Other business acquisi- tions 2021 Intangible assets 5.6 6.0 1.4 Tangible assets 4.9 1.7 0.3 Right-of-use assets 1.4 3.1 - Inventories 0.1 0.5 - Receivables 1.8 2.2 1.4 Cash and cash equivalents 1.2 0.2 2.4 Total assets 15.0 13.8 5.4 Other liabilities 6.4 8.3 2.5 Deferred tax liabilities 1.0 1.2 0.2 Total liabilities 7.4 9.6 2.7 Net assets acquired 7.6 4.2 2.7 Total consideration 19.6 17.0 8.8 Goodwill 11.9 12.8 6.1 Impact on cash ﬂow Total consideration -19.6 -17 -8.8 Deferred consideration 5.1 - - Consideration paid in cash -14.4 -17.0 -8.8 Cash and cash equivalents of the acquired company 1.2 0.2 2.4 Total impact on cash ﬂow -13.2 -16.8 -6.4 Divested businesses and assets and liabilities classiﬁed as held for sale On December 17, 2021, Lassila & Tikanoja plc and Neova Oy signed an agreement to merge their fuel wood businesses. According to the agreement, Neova's fuel wood business will be transferred to L&T Biowatti Oy. L&T's share of the joint venture is 55 per cent and Neova's 45 per cent, but based on the agreement both parties will have joint control over the joint venture. The approval of the Competition and Consumer Authority required for the establishment of the joint venture was received on 29 April 2022. In the ﬁnancial statements for 2021, L&T classiﬁed L&T Biowatti Oy's assets and liabilities as Business acquisitions 2022 On 1 February 2022, Lassila & Tikanoja’s Industrial Services division acquired 70 per cent of the shares of Sand & Vatten- bläst i Tyringe AB (“SVB”), a company that provides process cleaning services in Sweden. The transaction also includes Cisternservice i Hässleholm AB, owned by SVB. Through the acquisition, L&T’s Industrial Services division entered the Swedish process cleaning market. In the fair value meas- urement, intangible assets based on customer relationships with a value of EUR 2.8 million, agreements on prohibition of competition with a value of EUR 0.1 million, as well as good- will with a value of EUR 8.3 million were identiﬁed. The good- will is mainly based on the strong regional position of the acquired business and its future development prospects. 100 per cent share of SVB is consolidated in the L&T Group and, in connection with the arrangement, L&T has recognised in 55 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 5.4 Related-party transactions The related parties of the Lassila & Tikanoja Group are the sen- ior management (members of the Board of Directors, President and CEO of the Lassila & Tikanoja plc and the other members of the Group Executive Board) and the immediate family of the senior management and companies controlled by the afore- mentioned persons, the Group's subsidiaries, the associated company (Suomen Keräystuote Oy), the joint venture (Laania Oy) and the L&T sickness fund. Lists of the Group’s parent and subsidiary relationships, associated companies and joint ventures are presented in Note 5.2. Group companies. The contributions paid by the group companies to the L&T sick- ness fund during the ﬁnancial year amounted to EUR 1.0 million (0.8). Transactions with the joint venture The Group's business transactions with Laania Oy are presented in the following table. In addition to the ordinary business trans- actions, Laania paid loans totalling EUR 16.4 million to L&T in the ﬁnal quarter of 2022. The Group has also provided guarantees for Laania's ﬁnancing arrangements, which are speciﬁed in Note 4.5. MEUR 2022 Net sales 0.6 Other operating income 0.3 Purchases of materials and services -0.7 Trade and other receivables 0.0 Employee beneﬁts to the President and CEO TEUR 2022 2021 Salaries and other short-term em- ployee beneﬁts 458.6 461.6 Bonuses 157.2 - Share-based payments 265.1 - Pension expenses, statutory 53.3 39.9 Total 934.3 501.5 Employee beneﬁts to other members of the Group Executive Board TEUR 2022 2021 Salaries and other short-term em- ployee beneﬁts 1,570.8 1,506.3 Bonuses 225.0 105.4 Share-based payments 304.9 - Pension expenses, statutory 198.8 164.8 Total 2,299.6 1,776.5 Salaries and remunerations paid to members of the Board of Directors TEUR 2022 2021 Jukka Leinonen, Chairman of the Board 73 39 Sakari Lassila, Deputy Chairman of the Board 53 57 Teemu Kangas-Kärki 39 42 Laura Lares 39 43 Pasi Tolppanen 39 40 Laura Tarkka 38 40 Heikki Bergholm 1 20 80 Miikka Maijala 2 - 3  Board member and the Chairman o¹ Board member and the Chairman of the Board until 17 March 2022  Board member un² Board member until 18 March 2021 On 25 February 2022, 24,522 shares were transferred to the President and CEO and the members of the Group Executive Board from the share-based incentive programmes (in 2021 no shares were transferred). On 5 May 2022, 8,618 shares were transferred to the members of the Board of Directors as part of the remunera- tion of the Board (23 March 2021: 7,193). The members of the Board of Directors, the President and CEO or other members of the Group Executive Board have no pension contracts with the company. In 2022, the company sold services included in normal business operations at market price to parties related to the key personnel for a total amount of EUR 25 thousand (5). The members of the Board are not included in the share- based incentive programmes. No loans were granted and no guarantees nor other secu- rities given to persons belonging to the related parties. held for sale. On 1 July 2022, Neova's fuel wood business was transferred to L&T Biowatti Oy. With the merger, the company continued as an independent limited company called Laania Oy. In the ﬁrst half of 2022, the business was reported as part of Environmental Services. Afther this, the Group's share of the joint venture's net result is recognised in the income statement on a separate line. For more information on the joint venture, please refer to note 3.5 Other long-term assets. In the comparison period L&T did not have any business disposals. Net assets disposed of MEUR 2022 Intangible and tangible assets 0.4 Right-of-use assets 0.7 Other non-current receivables 0.3 Inventories 24.7 Trade and other receivables 6.1 Cash and cash equivalents 2.0 Assets Total 34.0 Non-current ﬁnancial liabilities 14.8 Current ﬁnancial liabilities 0.1 Trade and other payables 10.1 Liabilities Total 25.0 Net assets disposed of 9.0 Gain on disposal MEUR 2022 Fair value of the shares in joint venture received 13.3 Net assets disposed of -9.0 Total 4.3 Cash ﬂow impact MEUR 2022 Consideration received in cash - Cash and cash equivalents of the business sold -2.0 Total -2.0 Investment in joint venture Lassila & Tikanoja's investment in joint venture totalled EUR 13.3 million, and it is recognised on line Shares in associated companies and joint ventures in the consolidated statement of ﬁnancial position. The transaction is valued according to the IAS 28. In the last quarter of 2022, the transaction was ﬁnalised and L&T recognised a gain totalling EUR 4.3 million on the transaction. The gain on sale is included in other oper- ating income in the consolidated income statement. In 2022, expenses totalling EUR 0.5 million (0.8) related to the trans- action were recognised in the income statement. The share of the joint venture's net result recognised for the last six months of the reporting period totalled EUR 0.7 million. Assets and liabilities classiﬁed as held for sale MEUR 2021 Intangible and tangible assets 0.4 Right-of-use assets 0.5 Other non-current receivables 0.4 Inventories 25.7 Trade and other receivables 11.3 Assets total 38.3 Non-current ﬁnancial liabilities 0.4 Current ﬁnancial liabilities 0.1 Non-current interest-bearing liabilities 0.0 Trade payables 7.1 Other payables 3.6 Liabilities total 11.2 At the end of the reporting period L&T did not have any assets or liabilities classiﬁed as held for sale. At the end of 2021, Bio- watti Oy’s assets and liabilities were classiﬁed as held for sale . 56 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 5.6 Disputes and litigation Lassila & Tikanoja plc is party to a few disputes related to the Group’s ordinary business operations. The outcome of these disputes are not expected to have a material eﬀect on the Group’s ﬁnancial position. 5.7 Events after the balance sheet date On 11 January 2023, the company announced that Lassila & Tikanoja’s Shareholders’ Nomination Board proposes to the Annual General Meeting to be held on 23 March 2023 that the Board of Directors have six (6) members. The Nomination Board proposes that Teemu Kangas-Kärki, Laura Lares, Sakari Lassila, Jukka Leinonen and Pasi Tolppanen be re-elected to the Board of Directors and that Anni Ronkainen be elected as a new member. Information on Anni Ronkainen is available on L&T’s website. Of the current members, Laura Tarkka has announced that she is no longer available for the election of the members of the Board of Directors. In addition, the Nomination Board proposes that Jukka Leinonen is elected as Chairman of the Board of Directors and Sakari Lassila as Vice Chairman. 5.5 Auditing costs MEUR 2022 2021 PwC Auditing 0.3 - Other assignments in accordance with the auditing act 0.0 - Tax consulting services 0.0 - Other services 0.2 - Total 0.4 - KPMG Auditing 0.1 0.3 Other assignments in accordance with the auditing act 0.0 0.0 Tax consulting services 0.0 0.0 Other services - 0.0 Total 0.1 0.3 Non-audit services performed by the statury auditor Price- waterhouseCoopers Oy in the ﬁnancial year 2022 totalled EUR 166.6 thousand. 57 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Income statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 Balance sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 Cash ﬂow statement. . . . . . . . . . . . . . . . . . . . . . . . . . .59 Accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 Notes to the ﬁnancial statements. . . . . . . . . . . . .60 Financial statements of the parent company 58 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 59 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Income statement of the parent company EUR thousand 2022 2021 Note Net sales 23,281.0 22,781.0 1 Other operating income 141.6 252.7 4 Employee beneﬁt expenses -9,698.4 -9,315.3 2 Other operating expenses -18,658.9 -16,205.5 3, 4 Depreciation, amortisation and impairment -902.7 -878.9 Operating result -5,837.3 -3,366.1 Financial income and expenses -2,541.6 -1,124.9 5 Result before appropria- tions and taxes -8,378.9 -4,490.9 Appropriations Increase/decrease in accumulated depreciation diﬀerence 209.5 257.5 Group contribution 23,550.0 20,540.0 6 Income taxes -3,434.1 -3,053.6 7 Result for the period 11,946.6 13,253.0 Balance sheet of the parent company EUR thousand 2022 2021 Note ASSETS Non-current assets Intangible assets 8 Intangible rights 36.4 62.2 Other intangible assets 1,738.6 1,595.2 Advance payments and construction in progress 832.4 527.1 2,607.4 2,184.5 Tangible assets 9 Buildings and constructions 165.2 185.8 Machinery and equipment 117.2 125.1 Other tangible assets 42.2 22.2 Advance payments and construction in progress - 12.0 324.6 345.1 Investments 10 Shares in group companies 181,590.5 126,129.4 Shares in joint venture 9,946.8 - Other shares and holdings 170.8 170.8 191,708.1 126,300.2 Total non-current assets 194,640.0 128,829.9 Current assets Non-current receivables Loan receivables from group companies - 69,687.8 Prepaid expenses and accrued income 378.8 - Other non-current receivables 299.9 302.3 Deferred tax assets 480.2 344.6 12 1,158.8 70,334.7 Current receivables Receivables from group companies 40,400.8 63,431.0 11 Trade receivables from joint venture 6.6 - Other receivables 114.4 139.2 Prepaid expenses and accrued income 1,827.1 2,581.3 11 42,349.0 66,151.4 Cash and cash equivalents 46,921.0 25,985.4 Total current assets 90,428.8 162,471.6 Total assets 285,068.8 291,301.5 EUR thousand 2022 2021 Note SHAREHOLDERS' EQUITY AND LIABILITIES Shareholders' equity 13 Share capital 19,399.4 19,399.4 Invested non-restricted equity reserve 727.1 727.1 Retained earnings 49,045.9 53,210.7 Proﬁt for the period 11,946.6 13,253.0 81,119.0 86,590.2 Accumulated appropriations Depreciation diﬀerence 450.1 659.6 Obligatory provisions 14 Non-current 273.4 304.5 Current 609.0 1,229.2 882.4 1,533.7 Liabilities 15 Non-current Loans from ﬁnancial intitutions 50,000.0 75,000.0 Bonds 75,000.0 49,853.1 125,000.0 124,853.1 Current Bonds 17,730.0 - Trade payables 2,313.5 2,545.8 Liabilities to group companies 53,069.6 68,787.4 Other liabilities 693.0 596.8 Accrued expenses and deferred income 3,811.1 5,734.7 77,617.3 77,664.8 Total liabilities 202,617.3 202,517.9 Total shareholders' equity and liabilities 285,068.8 291,301.5 60 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Cash ﬂow statement of the parent company EUR thousand 2022 2021 Operating activities Proﬁt (+) / loss (-) before appro- priations and taxes -8,378.9 -4,490.9 Adjustments: Depreciation, amortisation and impairments 902.7 878.9 Gains and losses on sales of non-current assets - -16.9 Financial income and expenses 2,541.6 1,124.9 Provisions -651.3 -182.6 Other adjustments 2,069.1 247.3 Cash ﬂow before change in work- ing capital and change in cash pool account balance -3,516.9 -2,439.4 Change in working capital Increase/decrease in current non-interest-bearing receivables 1,298.1 -238.6 Increase/decrease in current non-interest-bearing liabilities -478.2 -14,208.5 Cash ﬂow from operations before ﬁnancial income/expenses and tax -2,697.0 -16,886.6 Change in cash pool account balance -3,777.6 22,350.1 Interest expenses and other ﬁnancial expenses paid -3,100.5 -1,990.7 Interest received from operations 1,060.1 863.5 Direct taxes paid -6,363.9 419.8 Cash ﬂow from operating activities -14,878.8 4,756.2  Includes an adjustment for merger loss totalling EUR 1,942.5 thousand.  In 2022, the item was reclassiﬁed from cash ﬂow from investing activi- ties to cash ﬂow from operating activities. The ﬁgures of the comparative period have been adjusted accordingly. Accounting policies of the parent company Basis of preparation Lassila & Tikanoja plc is the parent company of the Lassila & Tikanoja Group, domiciled in Helsinki. The Company provides to other group companies administrative services, which are cen- tralised to the parent company. The ﬁnancial statements of Lassila & Tikanoja plc have been prepared in accordance with the Finnish Accounting Standards (FAS). The ﬁnancial statements are prepared in euros and the items in the ﬁnancial statements are meas- ured at historical cost. When appropriate, the ﬁnancial statements of Lassila & Tikanoja plc comply with the Group’s accounting policies based on IFRS. The accounting policies of the consolidated ﬁnancial statements are presented in the notes to the con- solidated ﬁnancial statements. Those accounting policies, in which the ﬁnancial statements of Lassila & Tikanoja plc dif- fer from the accounting policies of the consolidated ﬁnan- cial statements, are described below. Subsidiary shares Subsidiary shares in the balance sheet are measured at historical cost less impairment losses. The carrying amounts of the sub- sidiary shares are assessed as part of the Group’s impairment testing, where cash ﬂow forecasts based on value-in-use cal- culations are prepared for the Group’s cash-generating units. In the impairment testing of subsidiary shares, the cash ﬂows are further allocated to subsidiaries’ recoverable amounts. An impair- ment loss is recognised, if the carrying amount of the subsidiary shares and the amount of net loan receivables from the subsidi- ary exceed the recoverable amount of the corresponding assets. Leases The lease payments of the lease contracts are expensed over the rental period and they are included in other operating expenses. Assets leased and related liabilities are not recognised in the par- ent company’s balance sheet. Research and development expenditure Research and development expenditure is recognised as an expense. Obligatory provisions Obligatory provisions in the balance sheet are based on legal or contractual obligations towards third parties, that have not been realised, are related to the past or current ﬁnancial period and at the balance sheet date it is certain or probable, that the obligation will be realised, but the exact amount and timing are uncertain and the corresponding income from the obligation is neither certain nor probable. The changes in obligatory provisions are included in the income statement. Pensions Most of the company’s pension plans are deﬁned contribution plans, under which the company pays ﬁxed contributions for pen- sions to insurance companies. These payments are recognised to the income statement in the ﬁnancial period to which they relate. The def ined beneﬁt plans operated by the company are small and concern only a few persons. EUR thousand 2022 2021 Investing activities Investments in tangible and in- tangible assets -1,306.3 -894.2 Repayment of loan receivables from joint venture 16,391.3 - Proceeds from sale of tangible and intangible assets - 46.3 Change in other non-current re- ceivables 2.4 -302.3 Cash ﬂow from investing activities 15,087.4 -1,150.2 Financing activities Paid Group contributions -4,300.0 -3,050.0 Received Group contributions 24,840.0 320.0 Proceeds from short-term bor- rowings 35,000.0 40,000.0 Repayments of short-term bor- rowings -35,000.0 -55,000.0 Proceeds from long-term borrowings 75,000.0 25,000.0 Repayments of long-term bor- rowings -57,270.0 - Dividends paid -17,543.0 -15,242.1 Cash ﬂow from ﬁnancing activities 20,727.0 -7,972.1 Change in cash and cash equivalents 20,935.5 -4,366.2 Cash and cash equivalents at 1 January 25,985.4 30,351.6 Cash and cash equivalents at 31 December 46,921.0 25,985.4 Cash and cash equivalents at 31 December Cash and cash equivalents 46,921.0 25,985.4 61 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Notes to the ﬁnancial statements of the parent company 1. Net sales EUR thousand 2022 % 2021 % Net sales Administrative Ser- vices, Group Com- panies 23,281.0 100.0 22,781.0 100.0 Total 23,281.0 100.0 22,781.0 100.0 Net sales by market area Finland 23,281.0 100.0 22,781.0 100.0 Total 23,281.0 100.0 22,781.0 100.0 3. Auditor's fees EUR thousand 2022 2021 PwC Auditing 53.9 - Other assignments in accordance with the auditing act 2.0 - Tax consulting services 6.5 - Other services 154.4 - Total 216.8 - KPMG Auditing 11.0 66.1 Other assignments in accordance with the auditing act 25.7 26.7 Tax consulting services 2.0 5.5 Other services - 17.0 Total 38.7 115.4 4. Other operating income and expenses EUR thousand 2022 2021 Other operating income From joint ventures 71.1 - From others Government grants 37.0 60.3 Other operating income 33.5 192.4 Total 141.6 252.7 Other operating expenses Merger losses 1,942.5 - ICT costs 9,975.6 10,400.1 Travel costs 226.9 60.5 Vehicles and machinery 24.8 34.1 Rents and real estate costs 1,487.5 1,694.9 Expert fees 3,129.0 2,554.3 Voluntary social security costs 924.4 821.9 Other 948.1 639.7 Total 18,658.9 16,205.5 5. Financial income and expenses EUR thousand 2022 2021 Interest and other ﬁnancial income 1,836.7 856.7 Interest and other ﬁnancial expenses -4,378.3 -1,981.5 Total ﬁnancial income and expenses -2,541.6 -1,124.9 Financial income and expenses include: Interest income from group companies 727.3 489.7 from joint ventures 150.8 - from others 185.0 45.9 Foreign exchange gains from others 773.6 321.1 Interest expenses to group companies -869.5 -345.7 to others -2,745.9 -1,433.8 Other ﬁnancial expenses to others -762.9 -202.0 Total -2,541.6 -1,124.9 6. Appropriations EUR thousand 2022 2021 Increase/decrease in accumulated depreciation diﬀerence Intangible assets 209.5 273.1 Tangible assets - -15.6 209.5 257.5 Group contribution Group contribution received 23,550.0 24,840.0 Group contribution paid - -4,300.0 Total group contributions 23,550.0 20,540.0 Total Appropriations 23,759.5 20,797.5 2. Personnel and administrative bodies 2022 2021 Average personnel Salaried employees 117 107 Total 117 107 EUR thousand 2022 2021 Personnel expenses Salaries and bonuses 7,991.0 7 283.3 Pension expenditure 1,439.5 1 743.9 Other salary-related expenses 267.9 288.1 Total 9,698.4 9 315.3 Salaries, bonuses and pension beneﬁts of the management are described in the Note 5.4 Related-party transactions of the consolidated ﬁnancial statements. No loans were granted to the related parties of the Group Companies. 7. Income taxes EUR thousand 2022 2021 Income taxes on operations for the ﬁnancial year 3,303.1 3,188.9 Income taxes from previous ﬁnancial years -2.0 -172.3 Change in deferred taxes 133.0 37.0 Total 3,434.1 3,053.6 62 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 8. Intangible assets EUR thousand Intangible rights Goodwill Other intangible assets Prepayments and construction in progress Total 2022 Acquisition cost, 1 Jan 344.6 85,394.7 21,121.7 527.1 107,388.2 Additions 16.6 1,233.7 1,250.4 Disposals -0.0 -85,394.7 -13.9 -85,408.6 Transfers between items 928.5 -928.5 - Acquisition cost, 31 Dec 344.6 - 22,052.9 832.4 23,229.9 Accumulated amortisation, 1 Jan -282.4 -85,394.7 -19,526.5 -105,203.6 Accumulated amortisation on dis- posals and transfers 0.0 85,394.7 12.5 85,407.2 Amortisation during the period -25.8 -800.3 -826.2 Accumulated amortisation, 31 Dec -308.2 - -20,314.4 -20,622.6 Total carrying amount, 31 Dec 36.4 - 1,738.6 832.4 2,607.4 Other intangible assets includes several ICT projects. EUR thousand Intangible rights Goodwill Other intangible assets Prepayments and construction in progress Total 2021 Acquisition cost, 1 Jan 2,015.9 114,454.6 35,880.3 2,607.1 154,957.9 Transfer between acquisition cost and accumulated amortisation - - 82.3 - 82.3 Transfers in connection with incorporation -1,668.1 -29,059.9 -14,434.8 -1,981.2 -47,144.0 Additions - - 18.3 752.3 770.6 Disposals -3.2 - -1,275.4 - -1,278.6 Transfers between items - - 851.0 -851.0 - Acquisition cost, 31 Dec 344.6 85,394.7 21,121.7 527.1 107,388.2 Accumulated amortisation, 1 Jan -1,163.5 -113,156.9 -27,910.4 -142,230.8 Transfer between acquisition cost and accumulated amortisation 0.0 - -82.3 -82.3 Transfers in connection with incor- poration, accumulated amortisation 923.2 27,762.2 8,483.9 37,169.3 Accumulated amortisation on disposals and transfers 3.2 - 684.5 687.7 Amortisation during the period -45.3 - -702.2 -747.6 Accumulated amortisation, 31 Dec -282.4 -85,394.7 -19,526.5 -105,203.6 Total carrying amount, 31 Dec 62.2 - 1,595.2 527.1 2,184.5 9. Tangible assets EUR thousand Buildings and constructions Machinery and equipment Other tangible assets Advance payments and construction in progress Total 2022 Acquisition cost, 1 Jan 358.7 680.5 22.2 12.0 1,073.4 Additions 35.2 20.0 0.7 56.0 Disposals -304.2 -304.2 Transfers between items 12.8 -12.8 - Acquisition cost, 31 Dec 358.7 424.2 42.2 - 825.1 Accumulated depreciation, 1 Jan -172.9 -555.4 -728.3 Accumulated depreciation on disposals and transfers 304.2 304.2 Depreciation during the period -20.6 -55.9 -76.5 Accumulated depreciation, 31 Dec -193.5 -307.0 -500.6 Total carrying amount, 31 Dec 165.2 117.2 42.2 - 324.6 EUR thousand Land Buildings and constructions Machinery and equipment Other tangible assets Advance payments and construction in progress Total 2021 Acquisition cost, 1 Jan 5,191.9 107,509.7 361,566.8 26.4 8,914.3 483,209.0 Transfer between acquisition cost and accumulated depreciation - 997.9 21.4 - - 1,019.3 Transfers in connection with incorporation -5,191.9 -108,080.8 -360,638.7 -4.2 -8,857.3 -482,772.8 Additions - 6.4 26.9 - 92.8 126.0 Disposals - -212.1 -296.0 - - -508.2 Transfers between items - 137.7 - - -137.7 - Acquisition cost, 31 Dec - 358.7 680.5 22.2 12.0 1,073.4 Accumulated depreciation, 1 Jan -74,628.2 -261,387.5 -336,015.7 Transfer between acquisition cost and accumulated deprecia- tions -997.9 -21.4 -1,019.3 Transfers in connection with incorporation, accumulated de- preciation 75,261.0 260,672.1 335,933.1 Accumulated depreciation on disposals and transfers 208.9 296.0 504.9 Depreciation during the period -16.8 -114.5 -131.3 Accumulated depreciation, 31 Dec -172.9 -555.4 -728.3 Total carrying amount, 31 Dec - 185.8 125.1 22.2 12.0 345.1 63 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 10. Investments EUR thousand Shares in Group companies Shares in joint ventures Other shares and holdings Yhteensä 2022 Acquisition cost, 1 Jan 126,129.4 - 170.8 126,300.2 Additions 75,315.1 9,946.8 - 85,261.9 Disposals -19,854.0 - - -19,854.0 Acquisition cost, 31 Dec 181,590.5 9,946.8 170.8 191,708.1 Total carrying amount, 31 Dec 181,590.5 9,946.8 170.8 191,708.1 2021 Acquisition cost, 1 Jan 31,089.0 - 334.7 31,423.7 Transfers in connection with in- corporation - - -163.9 -163.9 Additions 95,040.4 - 0.0 95,040.4 Disposals - - -0.0 -0.0 Acquisition cost, 31 Dec 126,129.4 - 170.8 126,300.2 Total carrying amount, 31 Dec 126,129.4 - 170.8 126,300.2 Holding of shares and votes, % Holdings in group companies L&T Toimi Oy, Helsinki 100.0 L&T Työllistämispalvelut Oy, Helsinki 100.0 L&T Kiinteistöhuolto Oy , Helsinki 100.0 L&T Kiinteistötekniikka Oy, Helsinki 100.0 L&T Siivous Oy , Helsinki 100.0 L&T Ympäristöpalvelut Oy, Helsinki 100.0 L&T Teollisuuspalvelut Oy, Helsinki 100.0 Lassila & Tikanoja FM AB 100.0 Lassila & Tikanoja Service AB 100.0 Sand & Vattenbläst i Tyringe AB 70.0 Joint ventures Laania Oy, Helsinki 55,0 11. Short-term receivables EUR thousand 2022 2021 From Group Companies Loan receivables 16,844.4 38,038.0 Trade receivables 3.4 552.9 Group contribution receivable 23,550.0 24,840.0 Prepaid expenses and accrued in- come 3.0 - Total 40,400.8 63,431.0 Receivables from joint venture Trade receivables 6.6 - Total 6.6 - Prepaid expenses and accrued income Employees' health care compensation 30.5 48.3 Annual discounts 5.2 - Licences 896.3 1,769.1 Other 895.1 763.9 Total 1,827.1 2,581.3 13. Shareholders' equity EUR thousand 2022 2021 Restricted equity Share capital at 1 Jan / 31 Dec 19,399.4 19,399.4 Restricted equity, total 19,399.4 19,399.4 Non-restricted equity Invested non-restricted equity reserve 1 Jan 727.1 727.1 Invested non-restricted equity reserve 31 Dec 727.1 727.1 Retained earnings at 1 Jan 66,463.7 68,318.4 Dividend distribution -17,543.0 -15,242.1 Expired dividends 37.3 34.5 Transfer of treasury shares 87.9 99.9 Retained earnings at 31 Dec 49,045.9 53,210.7 Proﬁt for the period 11,946.6 13,253.0 Non-restricted equity total 61,719.6 67,190.8 Shareholders' equity at 31 Dec 81,119.0 86,590.2 Distributable funds Retained earnings 49,045.9 53,210.7 Proﬁt for the period 11,946.6 13,253.0 Invested non-restricted equity reserve 727.1 727.1 Total distributable funds 61,719.6 67,190.8 12. Deferred tax assets EUR thousand 2022 2021 Unused depreciation 8.1 10.8 Obligatory provisions 176.5 306.7 Impairment of non-current assets 27.0 27.0 Merger of L&T Relations Oy 268.6 - Total 480.2 344.6 64 Lassila & Tikanoja Financial review 2022 Financial statements of the parent companyNotes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of DirectorsPrimary ﬁnancial statements of the Group KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 14. Obligatory provisions EUR thousand 2022 2021 Pension liabilities 273.4 304.5 Provision for accident insurance contribution 609.0 1,229.2 Total 882.4 1,533.7 17. Derivatives Interest rate swaps EUR thousand 2022 2021 Nominal value 30,000.0 30,000.0 Fair value 1,210.8 -549.7 Interest rate swaps are used for hedging purposes. Their fair values are based on the market prices at the balance sheet date. 16. Contingent liabilities EUR thousand 2022 2021 For own commitments Mortgages on rights of tenancy 121.6 121.6 Liabilities related to leasing and leases (incl. VAT) Maturity within 1 year 694.3 1,535.2 Maturity in subsequent years 745.8 3,363.2 Total 1,440.1 4,898.5 Guarantees for group companies 44,000.0 29,500.0 Guarantees for joint ventures 35,750.0 - Other bank guarantees 264.7 684.7 Mortgages under own control Company mortgages 210.2 210.2 According to the shareholders' agreement, the Company is committed to acquire the remaining 30 per cent share of Sand & Vattenbläst i Tyringe AB in February 2026 at the earli- est. The estimated value of the commitment at the end of the reporting period totalled EUR 5,700.6 thousand. 15. Liabilities Repayments of non-current liabilities in coming years EUR thousand 2023 2024 2025- 2027 After 2027 Loans from credit institutions - 50,000.0 - - Bonds 17,730.0 - - 75,000.0 EUR thousand 2022 2021 Short term liabilities to Group Companies Trade payables 3.8 -0.1 Interest-bearing liabilities 53,065.1 68,787.6 Accrued expenses and deferred income 0.7 - Total 53,069.6 68,787.4 Accrued expenses and deferred income Personnel expenses 1,772.1 2,141.7 Interest expenses 1,912.3 403.2 Taxes 126.1 3,188.9 Other expenses 0.7 0.9 Total 3,811.1 5,734.7 Lassila & Tikanoja Taloudellinen katsaus 2022 65 Financial statements of the parent companyPrimary ﬁnancial statements of the Group Notes to the consolidated ﬁnancial statements 1. 2. 3. 4. 5. Proposal by the Board of Directors KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Proposal by the Board of Directors for proﬁt distribution The Auditor’s Note According to the ﬁnancial statements, Lassila & Tikanoja plc’s unrestricted equity amounts to EUR 61,719,573.87, with the result for the period representing EUR 11,946,564.10 of this total. There were no substantial changes in the ﬁnan- cial standing of the company after the end of the period, and the solvency test referred to in Chapter 13, Section 2 of the Companies Act does not aﬀect the amount of distributable assets. The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.47 per share be paid for the ﬁnancial year 2022. The dividend is to be paid to shareholders included in the company shareholder register maintained by Euroclear Fin- Signatures to the Report of the Board of Directors and the Financial Statements for the year 2022: Helsinki on 8 February 2023 Jukka Leinonen Sakari Lassila Teemu Kangas-Kärki Laura Lares Laura Tarkka Pasi Tolppanen Eero Hautaniemi President and CEO We have today submitted our report on the audit conducted by us. Helsinki on 23 February 2023 PricewaterhouseCoopers Oy Samuli Perälä KHT land Oy on the record date, 27 March 2023. The Board pro- poses to the Annual General Meeting that the dividend be paid on 3 April 2023. No dividend shall be paid on shares held by the company on the record date of dividend payment, 27 March 2023. On the day the proposal for the distribution of assets was made, the number of shares entitling to dividend was 38,145,618, which means the total amount of the dividend would be EUR 17,928,440.46 To be retained and carried forward EUR 43,791,133.41 Total EUR 61,719,573.87 Lassila & Tikanoja Financial Review 2022 66 KEY FIGURES FINANCIAL STATEMENTS REPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Auditor’s Report To the Annual General Meeting of Lassila & Tikanoja Plc Report on the Audit of the Financial Statements Opinion In our opinion • the consolidated ﬁnancial statements give a true and fair view of the group’s ﬁnancial position and ﬁnan- cial 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 the ﬁnan- cial statements in Finland and comply with statutory requirements. Our opinion is consistent with the additional report to the Audit Committee. What we have audited We have audited the ﬁnancial statements of Lassila & Tika- noja Plc (business identity code 1680140-0) for the year ended 31 December 2022. The ﬁnancial statements comp- rise: • the consolidated statement of ﬁnancial position, income statement, statement of comprehensive income, statement of changes in equity, state- ment of cash ﬂows and notes, including signiﬁcant accounting policies • the parent company’s balance sheet, income state- ment, cash ﬂows statement, accounting policies and notes. 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 Responsibili- ties for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is suﬃcient and appropriate to provide a basis for our opinion. Independence 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. To the best of our knowledge and belief, the non-audit services that we have provided to the parent company and to the group companies are in accordance with the appli- cable law and regulations in Finland and we have not provi- ded non-audit services that are prohibited under Article 5(1) of Regulation (EU) No 537/2014. The non-audit services that we have provided are disclosed in note 5.5 to the Financial Statements. Our Audit Approach Overview • We have applied an overall group materiality of 5,000,000 euros. • The group audit scope included the most signiﬁcant group companies and covered a suﬃcient share of group’s revenues, assets, and liabilities. • Revenue recognition • Employee beneﬁt expenses • Valuation of goodwill As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the ﬁnancial statements. In particular, we considered where management made subjective judgements; for example, in respect of signi- ﬁcant accounting estimates that involved making assumpti- ons and considering future events that are inherently uncer- tain. Materiality The scope of our audit was inﬂuenced by our application of materiality. An audit is designed to obtain reasonable assu- rance whether the ﬁnancial statements are free from mate- rial misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggre- gate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of the ﬁnan- cial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall group materiality for the consolidated ﬁnancial statements as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the eﬀect of misstate- ments on the ﬁnancial statements as a whole. Materiality Audit Scope Key Audit Matters Lassila & Tikanoja Financial Review 2022 67 KEY FIGURES FINANCIAL STATEMENTS REPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT How we tailored our group audit scope We tailored the scope of our audit, taking into account the structure of the group, the accounting processes and cont- rols, and the industry in which the group operates. The Group has four reportable segments: Environmental Services, Industrial Services, Facility Services Finland and Facility Ser- vices Sweden, its main markets being Finland and Sweden. We have scoped our audit to obtain suﬃcient audit coverage of Lassila & Tikanoja Group’s consolidated ﬁnancial state- ments. Overall group materiality 5,000,000 euros How we determined it We used a combination of revenue and proﬁt before taxes as benchmarks to determine overall group materiality. Rationale for the materiality benchmark applied We consider that revenue and proﬁt before taxes provide a suitable representation of the volume and proﬁtability of Lassila & Tikanoja’s operations. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most signiﬁcance in our audit of the ﬁnan- cial statements of the current period. These matters were addressed in the context of our audit of the ﬁnancial state- ments as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. Key audit matter in the audit of the consolidated ﬁnancial statements How our audit addressed the key audit matter Revenue recognition (Refer to note 1.1 and 1.2 in the consolidated ﬁnancial statements) The group’s total net sales amounted to EUR 844 million. Revenue from contracts with customers is generated from multi- ple revenue streams as described in note 1.2. Revenue recognition principles vary depending on the nature of the revenue stream. Revenue recognition is considered a key audit matter due to the signiﬁcance of revenue to the ﬁnancial statements and due to management judgement involved in selecting the appropriate rev- enue recognition method for the diﬀerent revenue streams. Our audit procedures included, for example, the following: • We obtained an understanding of the company’s revenue recognition policies and compared these to the respective IFRS standards • We obtained an understanding of the internal controls that the company uses to assess the completeness, accuracy, and timing of revenues • We tested revenue transactions on a sample basis • We tested, on a sample basis, revenue related balance sheet items such as contract assets and liabilities. Employee beneﬁt expenses (Refer to note 1.3 and 5.4 in the consolidated ﬁnancial state- ments) The Group operates in a highly labor-intensive business. Wages, salaries, and other employee beneﬁt expenses form a signiﬁcant part of the Group’s operating expenses. In 2022 employee beneﬁt expenses were EUR 353 million. Employee beneﬁt expenses is considered a key audit matter due to its signiﬁcance to the consolidated ﬁnancial statements. Our audit procedures included, for example, the following: • We obtained an understanding of the company’s payroll process • We evaluated and tested the internal controls that the company uses to assess the accuracy of employee beneﬁt expenses • We performed analytical audit procedures in relation to employee beneﬁt expenses • We tested on a sample basis employee beneﬁt expenses related accruals. Valuation of goodwill (Refer to note 3.1 and 3.2 in the consolidated ﬁnancial state- ments) As of 31.12.2022, Goodwill in the consolidated balance sheet amounted to EUR 181 million. Goodwill is not amortised but is tested at least annually for impair- ment. Goodwill impairment testing has been prepared based on value-in-use calculations in which future cash ﬂows are discount- ed to current value. Value-in-use calculations include signiﬁcant management judgment in respect of proﬁtability levels, long-term growth rates and discount rates. The valuation of goodwill is considered a key audit matter due to its signiﬁcance as well as due to the management judgement involved in the impairment testing. Our audit procedures included, for example, the following: • We obtained an understanding of the methodology and as- sumptions used in the goodwill impairment testing • We tested the mathematical accuracy of the calculations • We assessed the reasonableness of the estimated future proﬁtability levels and their consistency with the budgets and forecasts made by the management in connection with the strategy process • We assessed the reasonableness of the discount rates, long-term growth rates and certain other assumptions by e.g., comparing the inputs to observable market data • We assessed management’s sensitivity analysis to ascer- tain the extent of change in key assumptions that either individually or collectively could result in an impairment of goodwill • We assessed the adequacy of the disclosures. Lassila & Tikanoja Financial Review 2022 68 KEY FIGURES FINANCIAL STATEMENTS REPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Key audit matter in the audit of the parent company ﬁnancial statements How our audit addressed the key audit matter Valuation of shares in group companies and receivables from group companies in the parent company ﬁnancial statements (Refer to the parent company’s accounting policies and Note 10) The investments in shares in group companies amounted to EUR 182 million and current receivables from group compa- nies to EUR 40 million. The valuation of shares in group companies and receivables from group companies is assessed annually and tested for impairment when necessary. Impairment testing is performed using the discounted cash ﬂow model. Valuation of shares in group companies and receivables from group companies is considered a key audit matter in the au- dit of the parent company due to the signiﬁcance of these investments to the ﬁnancial statements and due to manage- ment judgement involved in the impairment testing of these investments. Our audit procedures included, for example, the following: • We assessed the reasonableness of the management estimates by e.g., checking their consistency with the ap- proved budgets and forecasts • We assessed the methodology used in determining the dis- count rates and long-term growth rates by e.g., comparing the inputs to observable market data. There are no signiﬁcant risks of material misstatement referred to in Article 10(2c) of Regulation (EU) No 537/2014 with respect to the consolidated ﬁnancial statements or the parent company ﬁnancial statements. Responsibilities of the Board of Directors and the Managing Director for the Financial Statements The Board of Directors and the Managing Director are res- ponsible for the preparation of consolidated ﬁnancial state- ments that give a true and fair view in accordance with Inter- national 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 pre- paration of ﬁnancial statements that are free from material misstatement, whether due to fraud or error. In preparing the ﬁnancial statements, the Board of Dire- ctors and the Managing Director are responsible for asses- sing the parent company’s and the group’s ability to conti- nue 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 to 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. Rea- sonable 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 econo- mic decisions of users taken on the basis of these 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 misstate- ment 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 collu- sion, forgery, intentional omissions, misrepresenta- tions, 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 eﬀective- ness of the parent company’s or the group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estima- tes 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 uncer- tainty 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 opi- nion. 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 con- tent of the ﬁnancial statements, including the disclos- ures, 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 regar- ding the ﬁnancial information of the entities or busi- ness activities within the group to express an opinion on the consolidated ﬁnancial statements. We are responsible for the direction, supervision and perfor- mance of the group audit. We remain solely respon- sible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and signiﬁcant audit ﬁndings, including any signiﬁcant deﬁciencies in internal control that we iden- tify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may rea- sonably 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 mat- ter 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 rea- sonably be expected to outweigh the public interest bene- ﬁts of such communication. Lassila & Tikanoja Financial Review 2022 69 KEY FIGURES FINANCIAL STATEMENTS REPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Other Reporting Requirements Appointment We were ﬁrst appointed as auditors by the annual general meeting on 17 March 2022. Other Information The Board of Directors and the Managing Director are res- ponsible for the other information. The other information comprises the report of the Board of Directors and the infor- mation included in the ﬁnancial review, but does not include the ﬁnancial statements and our auditor’s report thereon. We have obtained the report of the Board of Directors and the ﬁnancial review prior to the date of this auditor’s report. 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 infor- mation is materially inconsistent with the ﬁnancial state- ments 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 appli- cable laws and regulations. In our opinion • the information in the report of the Board of Directors is consistent with the information in the ﬁnancial sta- tements • the report of the Board of Directors has been prepa- red in accordance with the applicable laws and regu- lations. If, based on the work we have performed on the other infor- mation 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. Other Opinions We support the adoption of the ﬁnancial statements. The proposal by the Board of Directors regarding the treatment of distributable funds is in compliance with the Limited Lia- bility Companies Act. We support that the members of the Board of Directors of the parent company and the President and CEO should be discharged from liability for the ﬁnancial period audited by us. Helsinki 23 February 2023 PricewaterhouseCoopers Oy Authorised Public Accountants Samuli Perälä Authorised Public Accountant (KHT) LEADER OF THE REGENERATIVE SOCIETY Corporate Governance Statement 2022 Lassila & Tikanoja plc Lassila & Tikanoja Financial Review 2022 70 KEY FIGURES FINANCIAL STATEMENTS REPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Corporate Governance Statement 2022 This Corporate Governance Statement complies with the Securities Market Association’s Finnish Corporate Govern- ance Code, which entered into force on 1 January 2020. Las- sila & Tikanoja plc (“L&T” or “the company”) presents this Corporate Governance Statement separately from the Report by the Board of Directors. This statement and other informa- tion disclosed in accordance with the Corporate Governance Code are available on L&T’s website at www.lt.ﬁ/en/inves- tors/corporate-governance. This statement has been reviewed by the Audit Commit- tee of L&T’s Board of Directors and approved by the Board. The company’s auditor has veriﬁed that the descriptions of the main features of the internal control and risk manage- ment systems relating to the ﬁnancial reporting process included in the statement are consistent with the descrip- tions included in the ﬁnancial statements. Descriptions concerning corporate governance General Meeting of Shareholders The Annual General Meeting is the supreme decision-mak- ing body of L&T. The Annual General Meeting decides on the matters stipulated in the Companies Act, such as the accept- ance of the ﬁnancial statements and proposed dividend, the release from liability of members of the Board of Directors and the President and CEO, the election of the members of the Board of Directors and the auditors, and the compensa- tion paid to them. The Annual General Meeting is held by the end of April as determined by the Board of Directors. Each share of Lassila & Tikanoja plc entitles the holder to one vote. The notice to the meeting and other Annual General Meet- ing documents, including the Board of Directors’ proposals to the Annual General Meeting are disclosed to the share- holders at the latest three weeks before the meeting on the company’s website at www.lt.ﬁ/en/investors/corporate-gov- ernance/general-meeting. The notice to the meeting is also disclosed in a stock exchange release. The members of the Board of Directors, President and CEO, principal auditor and prospective directors attend the Annual General Meeting, unless there are well-founded reasons for their absence. The minutes of the Annual General Meeting will be avail- able on the company’s website within two weeks of the Annual General Meeting. The resolutions by the Annual Gen- eral Meeting will be published in a stock exchange release immediately after the meeting. Shareholders’ Nomination Board The Nomination Board is responsible for preparing and pre- senting proposals covering the remuneration and number of members of the Company’s Board of Directors, as well as proposals on the members, Chairman and Vice Chairman of the Board of Directors to the Annual General Meeting and, where needed, to an Extraordinary General Meeting. The Nomination Board shall also be responsible for identifying successors to existing Board members. The Nomination Board consist of four (4) members, three (3) of whom are appointed by the Company’s three largest shareholders, who appoint one (1) member each. The Chair- man of the Company’s Board of Directors serves as the fourth member of the Nomination Board. The Nomination Board was established to operate until further notice. Its members are elected annually and their term of oﬃce ends when new members are elected to replace them. The Shareholders’ Nomination Board’s selection pro- cess, composition and duties are described in detail in the charter, which is available at www.lt.ﬁ/en/investors/corpo- rate-governance/shareholders-nomination-board. Composition of the Nomination Board tasked with prepa- rations for the Annual General Meeting 2023 The following members were appointed to the Shareholders’ Nomination Board of Lassila & Tikanoja on 9 September 2022: Patrick Lapveteläinen (Chairman), representing Mandatum Life Insurance Company Limited, Miikka Maijala, represent- ing a group of shareholders, Juhani Lassila, representing the Evald and Hilda Nissi Foundation, and Jukka Leinonen as the Chairman of the Board of Directors of Lassila & Tikanoja plc. The Nomination Board met four times during its term. It submitted its proposals to the Annual General Meet- ing on 11 January 2023. The proposals were published in the form of a stock exchange release. Board of Directors Composition and election of the Board of Directors In accordance with the Articles of Association, the Board of Directors of Lassila & Tikanoja plc comprises a minimum of three members and a maximum of seven. The members of the Board of Directors are elected by the Annual General Meeting. The term of each member of the Board of Directors expires at the end of the next Annual General Meeting of Shareholders following their election. Board members The following six members were elected to the Board of Directors by the Annual General Meeting of 2022. Jukka Leinonen, Chairman (born 1962) Independent of the company and major shareholders Board member: since 2021 Board committees: Chairman of the Personnel and Sustainability Committee Education: M.Sc. (Eng.) Key work experience: Telenor ASA, EVP and Head of Nor- dics, member of Telenor’s Group Executive Management 2019–2022, DNA Oyj, CEO 2013–2021, Vice President, Corpo- rate Business 2010–2013, TeliaSonera, various management positions in corporate business sales, marketing and product management 2002–2009, Sonera Oyj, management positions 2000–2002, Sonera Solutions Oy (Yritysverkot Oy), President and CEO 1996–1999 Membership on other Boards: DNA Oyj, Chairman of the Board 2021–2022, Representative Council of the Confeder- ation of Finnish Industries 2020–2021, Altia Oyj 2020–2021, FiCom ry, Chairman of the Board 2019–2021 and Member of the board 2013–2018, Service Sector Employers PALTA ry 2013–2017 Sakari Lassila, Vice Chairman (born 1955) Independent of the company and major shareholders Board member: since 2011 Board committees: Chairman of the Audit Committee Education: M.Sc. (Econ.) Key work experience: Indcrea Oy, Managing Director 2008–2018, Cupori Group Oy, member of the Management Board 2008–2014, Managing Director of Cupori AB 2012– 2014, Carnegie Investment Bank AB, Finland Branch, exec- utive positions 2002–2005, Alfred Berg Finland Oyj, execu- tive positions within investment banking 1994–2002 Citibank Oy, head of corporate bank 1991–1994, Union Bank of Finland: supervisory and executive positions 1983–1991 Membership on other Boards: Evald and Hilda Nissi Foundation, Vice Chairman of the Board, member 1987–, Aplagon Oy, Chairman of the Board 2009– Lassila & Tikanoja Financial Review 2022 71 KEY FIGURES FINANCIAL STATEMENTS REPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Teemu Kangas-Kärki (born 1966) Independent of the company and major shareholders Board member: since 2016 Board committees: Member of the Audit Committee Primary occupation: Nokian Tyres Oyj, CFO Education: M.Sc. (Econ.) Key work experience: Fiskars Oyj, Chief Operating Oﬃcer and Deputy to the CEO 2017–2018, Interim President 2017, Chief Operating Oﬃcer and Chief Financial Oﬃcer, deputy to the CEO 2014–2017, President, Home Business Area 2012– 2014 and Chief Financial Oﬃcer 2008–2012, Alma Media Corporation, CFO 2003–2008, Kesko Oyj, Vice President, Corporate Controller 2002–2003, Corporate Business Con- troller 2000–2001, Nestlé Finland Oy, Finance Director 1999– 2000, Smith & Nephew Oy, Finance Manager 1996–1998, Unilever Oy & Gmbh, Marketing Controller & Internal Auditor 1992–1996 Membership on other Boards: Marimekko Oyj, Vice Chair of the Board, Chair of the Audit and Remuneration Committee 2022– Laura Lares (born 1966) Independent of the company and major shareholders Board member: since 2014 Board committees: Member of the Audit Committee Primary occupation: Ablers Oy, Managing Director and Board member Education: Ph.D. (Tech.) Key work experience: Woimistamo Oy, Managing Director 2012–2018, Kalevala Koru Oy & Lapponia Jewelry Oy, Man- aging Director 2007–2012, UPM Kymmene Corporation, Director of Wood Products Division, Director of Business Development & Human Resources 2004–2006 Membership on other Boards: Ablers Oy 2018–, Lappeenranta University of Technology 2009–2017, Woikoski Oy 2012–2016 Laura Tarkka (born 1970) Independent of the company and major shareholders Board member: since 2017 Board committees: Member of the Personnel and Sustainability Committee Primary occupation: Gigantti Oy, CEO Education: M.Sc. (Eng.), CEFA degree Key work experience: Kämp Group Oy/Kämp Collection Hotels Oy, CEO 2014–2020, Diacor Terveyspalvelut Oy, CFO and deputy CEO 2013–2014, Fazer Group, Director 2007–2012, Icecapital Securities Ltd, investment banker 2001–2007, Mandatum Stockbrokers Ltd, investment banker 1997–2001 Membership on other Boards: Oy Karl Fazer Ab 2021–, Caruna Oy 2019–, Central Chamber of Commerce 2021–, the Finnish Fair Corporation 2019–2021, Viking Line Oyj 2020–2021, Docrates Oy 2016–2021 Pasi Tolppanen (born 1967) Independent of the company and major shareholders Board member: since 2020 Board committees: Member of the Personnel and Sustainability Committee Primary occupation: YIT Corporation, Executive Vice Pres- ident, Infrastructure segment and member of the Group Management Team Education: Ph.D. (Tech.) Key work experience: DEN Group Oy, CEO 2020–2021, Maintpartner Group Oy, CEO 2017–2019, Pöyry Oyj, President Regional Operations Northern Europe, Managing Director of Pöyry Finland Oy and member of the Management Board 2013–2016 and various managerial positions 2007–2012 Membership on other Boards: Forcit Oy 2019–; Terrawise Oy 2019–2021; Maintpartner Ab, Chairman 2017–2022 In 2022, the Board of Directors also had Heikki Bergholm as a member. His membership ended at the Annual General Meeting 2022. Diversity of the Board of Directors The company considers diversity essential to achieving its strategic targets. Diversity is also viewed from several perspectives when planning the composition of the Board of Directors. In the election of Board members, the aim is to ensure that the Board of Directors as a whole supports the company’s business and its development. It is important from the point of view of the eﬀective operation of the Board of Directors that the Board of Directors is suﬃciently diverse and comprises of an adequate number of members, and that the members have diverse expertise and experience to com- plement each other. In assessing the composition of the Board of Directors, it is, for example, considered whether the professional and educational background, and gender and age distribution of the Board is adequately diverse and whether it includes suitable decision-making ability, skills and experience to be able to meet the requirements set by the company’s busi- ness operations and strategic targets. The company’s aim is that both genders are represented in the Board of Directors. The principles regarding the diversity of the Board of Direc- tors are taken into consideration in the successor planning of Board members. Both genders have been represented in the Board of Directors for a long time. In 2022, four of the Board members were male and two were female. The age range of the Board members was 52–67 years. The less rep- resented gender accounted for 33 per cent of the Board of Directors. Independence of the members of the highest governance body None of the members of the Board of Directors are in an employment relationship with the company. The Board of Directors has assessed that all of its members are inde- pendent of the company. In the assessment, it was taken into consideration that Sakari Lassila has been a member of the Board of Directors for more than 10 years consecutively. The Board of Directors has not identiﬁed any reasons why Sakari Lassila should not be considered independent of the company. All of the members of the Board of Directors are also independent of the company’s major shareholders. Lassila & Tikanoja Financial Review 2022 72 KEY FIGURES FINANCIAL STATEMENTS REPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT The areas of expertise of the Board of Directors Independent Committee memberships Name Board member since Primary areas of expertise of the company of signiﬁ- cant sha- reholders Audit Committee Personnel and Sustainability Committee Concurrent Board memberships in listed companies Jukka Leinonen 2021 Customer experience, ICT and data analytics, operational management, strategy and M&A Chairman Sakari Lassila 2011 Internal control and risk management, strategy and M&A, ﬁnance Chairman Teemu Kangas-Kärki 2016 Governance, internal control and risk management, strategy and M&A, ﬁnance Member 1 Laura Lares 2014 ESG and sustainability, strategy and M&A, industry expertise and technologies Member Laura Tarkka 2017 Customer experience, ESG and sustainability, human resources management, operational management Member Pasi Tolppanen 2020 Customer experience, international market insight, operational management, industry expertise Member Yes No The table presents the key areas of expertise of the members of the Board of Directors on 31 December 2022. A particular area of expertise not being speciﬁcally mentioned for a Board member does not mean that the member in question lacks expertise in that area. * Chairman of the Board from 17 March 2022 onwards, member of the Board prior to that date. Duration of Board membership in years (number of persons) 1–2 years 3–5 years 6–9 years >10 years Gender distribution (number of persons) Men Women 0 1 2 3 4 Customer experience ESG and sustainability Human resources management Governance ICT and data analytics Group administration International market insight Operational management Internal control and risk management Strategy and M&A Finance Industry expertise Technologies Main areas of expertise Duration of Board membership in years (number of persons) Gender distribution (number of persons) Main areas of expertise Lassila & Tikanoja Financial Review 2022 73 KEY FIGURES FINANCIAL STATEMENTS REPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Board members’ shareholding 31 December 2022 Shares in the company held by the Board members and any corporations over which they exercise control have been taken into account in terms of shareholding. Board members do not hold shares in any group companies other than Las- sila & Tikanoja plc. Information about the Board members’ remuneration is disclosed in the Remuneration report of the governing bodies, which is published in connection with the Report of the Board of Directors and is available at lt.ﬁ/en/ investors. Board members’ shareholding 31.12.2022 Jukka Leinonen 37,351 Sakari Lassila 21,427 Teemu Kangas-Kärki 5,943 Laura Lares 7,266 Laura Tarkka 5,294 Pasi Tolppanen 3,325 Total 80,606 Duties of the Board of Directors The Board of Directors is responsible for the management of the company, the proper arrangement of the company’s operations, and the proper arrangement and supervision of the company’s accounting and ﬁnancial management. The Board of Directors decides upon matters that are of major importance, in view of the scope and size of the operations of the company. The Board of Directors is also responsible for the duties speciﬁed in the Companies Act and the Articles of Association, and in other regulations. The Board of Directors has drawn up a written charter for its work. It governs the Board’s work in addition to the company’s Articles of Associa- tion and Finnish laws and regulations. According to the charter, the duties of the Board of Direc- tors include, for example: • being responsible for the development of shareholder value • conﬁrming the company’s goals • deciding on the corporate strategy and conﬁrming divisional strategies • deciding on the Group structure and organisation • ensuring the operation of the management system • handling and adopting interim reports, half-year ﬁnancial reports, ﬁnancial statements and annual reports • conﬁrming the Group’s operating plan, budget and investment plan • deciding on strategically or ﬁnancially signiﬁcant investments, corporate acquisitions, disposals or other arrangements, as well as ﬁnancing arrange- ments and contingent liabilities • drawing up the dividend policy • conﬁrming treasury, investment, disclosure, risk man- agement and insurance policies, as well as the princi- ples of internal control • approving the sustainability programme • nominating and dismissing the President and CEO and monitoring and evaluating their work • deciding on the nomination, remuneration and other ﬁnancial beneﬁts of the President and CEO’s immedi- ate subordinates The evaluation of the performance and working methods of the Board is conducted annually as an internal self-evalua- tion. Meetings of the Board of Directors Board meetings are held at the company’s head oﬃce in Hel- sinki, other group locations or other places decided on by the Board of Directors. If necessary, the Board of Directors may also hold meetings virtually and make decisions without con- vening. The Board of Directors convenes as often as its tasks require. It conﬁrms its annual, regular meetings. Meetings held annually prior to the publication of the ﬁnancial state- ments and each interim report, as well as strategy, budget and other meetings conﬁrmed in the annual programme of the Board, are considered regular meetings. In addition to regular meetings, the Board can hold extraordinary meet- ings. The company’s President and CEO and CFO usually par- ticipate in Board meetings. Where necessary, such as in conjunction with discussing the strategy or budget, the meetings are also attended by other members of Lassila & Tikanoja plc’s Group Executive Board. The company’s Gen- eral Counsel acts as the secretary of the Board of Directors. Minutes are prepared of Board meetings, subject to the signature of members of the Board of Directors participat- ing in the meeting, as well as the President and CEO of the company and secretary to the Board. These minutes are kept at the company’s headquarters. The President and CEO is responsible for ensuring that the Board is provided with suﬃcient information for assess- ing the operations and the ﬁnancial situation of the com- pany. He also supervises and reports to the Board on the implementation of the Board’s decisions. Activities of the Board of Directors in 2022 The Board of Directors met 14 times during 2022. The aver- age attendance rate of the members at the meetings was 98 per cent. Key themes in Board work included strategy and directing and supporting its implementation, monitoring strategic projects, developing the corporate structure and business portfolio and directing risk management. Committees of the Board of Directors The Board has an Audit Committee and a Personnel and Sus- tainability Committee. The Audit Committee consists of three (3) Board members, and the Personnel and Sustainability Committee consists of three (3) Board members. At its organ- isational meeting after the Annual General Meeting, the Board of Directors elects chairmen and members of the Commit- tees from among its number for a term of one year at a time. The committee members must have the expertise and expe- rience required by the duties of the committee. The Board of Directors conﬁrms the charters of the committees annu- ally. The committees have no independent decision-making authority; the Board of Directors makes the decisions based on the preparation work by the committees. The chairman of the committee reports on the work of the committee at the Board meeting following the commit- tee meeting. Minutes of the committees’ meetings are pro- vided to the Board members for information. Audit Committee At its organisational meeting after the Annual General Meet- ing on 17 March 2022, the Board of Directors appointed Sakari Lassila (Chairman), Laura Lares and Teemu Kan- gas-Kärki as members of the Audit Committee. All of the members of the Audit Committee are independent of the company and its major shareholders. The Audit Committee will convene at least four times a year. The duties of the Audit Committee pursuant to the char- ter include: • monitoring the ﬁnancial position and ﬁnancing of the Group. • monitoring the reporting process of ﬁnancial state- ments. • supervising the ﬁnancial reporting process. • monitoring the eﬃciency of the company’s internal control, internal audit and risk management systems. • reviewing the operating principles of the company’s internal control. • reviewing the plans and reports of the company’s internal audit. • reviewing the company’s corporate governance statement. • monitoring related-party transactions. • monitoring the statutory audit of the ﬁnancial state- ments and consolidated ﬁnancial statements. • evaluating the independence of the auditing company • evaluating the provision of non-audit services to the company by the auditing ﬁrm. • preparing the proposal and/or recommendation con- cerning the auditor of the company. Lassila & Tikanoja Financial Review 2022 74 KEY FIGURES FINANCIAL STATEMENTS REPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT • maintaining contact with the company’s auditor and reviewing the reports prepared for the committee by the auditor. • assessing compliance with laws and provisions. The Audit Committee met ﬁve times in 2022. The attendance rate of the members at the meetings was 100 per cent. Personnel and Sustainability Committee At its organisational meeting after the Annual General Meet- ing of 17 March 2022, the Board of Directors appointed Jukka Leinonen (Chairman), Laura Tarkka and Pasi Tolppanen as members of the Personnel and Sustainability Committee. All of the members of the Committee are independent of the company and its major shareholders. The Personnel and Sus- tainability Committee meets at least four times a year. The duties of the Personnel and Sustainability Commit- tee pursuant to the charter include: • handling, evaluating and making statements on the salary structure of the Group management and personnel as well as remuneration and incentive schemes. • monitoring the functionality of the remuneration systems to ensure that the management’s incentive schemes promote the achievement of the company's targets and are based on personal performance. • handling and preparing executive appointment issues for consideration by the Board of Directors. • discussing and preparing matters related to the organisational structure and the development of management and human resources. • dealing with management succession plans. • prepare the remuneration policy of the company’s governing bodies and the remuneration report. • presenting the governing bodies’ remuneration pol- icy and reporting to the Annual General Meeting and answering related questions. • monitoring and evaluating the development of sus- tainability in the Group. • monitoring developments in the business environ- ment and regulation • monitoring and evaluating the development of occupational safety and work ability issues in the Group. • monitoring the development of stakeholder sup- port (employee and customer experience as well as other external stakeholders). • monitoring the results of the Group’s ESG assess- ments and analyses. • reviewing the statement of non-ﬁnancial informa- tion as part of the Board’s report. • processing the Annual Report. • monitoring and evaluating the development of diversity in the workplace community. The Committee met four times in 2022. The attend- ance rate of the members at the meetings was 100 per cent. President and CEO Lassila & Tikanoja plc’s President and CEO is appointed by the Board of Directors. The President and CEO is responsi- ble for day-to-day operations in keeping with the instruc- tions of the Board of Directors. They are also responsible for the strategy process. Eero Hautaniemi, M.Sc. (Econ.), has served as the President and CEO since 1 January 2019. The more detailed personal and shareholding information of the President and CEO is disclosed below in connection with the personal and shareholding information of the members of the Group Executive Board. Group Executive Board The Group Executive Board assists the President and CEO in the management of the company. The Group Executive Board has no authority based on legislation or the Articles of Association. The Group Executive Board comprises of the President and CEO as the chairman and Group exec- utives conﬁrmed by the Board of Directors. The members of the Group Executive Board report to the President and CEO. The Group Executive Board convenes at least once a month. On the date of this statement, the Group Executive Board comprised the following persons: Eero Hautaniemi (born 1965) President and CEO Member of the Group Executive Board since: 1 January 2019 Education: M.Sc. (Econ.) Key work experience: Oriola-KD Oyj, CEO 2006–2017, GE Healthcare Finland Oy, President 2004–2005, GE Healthcare IT, General Manager, Oximetry, Supplies and Accessories busi- ness area 2003–2004, Instrumentarium Corporation, special- ist and executive positions 1990–2003 Membership on other Boards:, Ilmarinen Mutual Pension Insurance Company, member of the Supervisory Board 2019– Tina Hellstadius (born 1973) Senior Vice President, Facility Services Sweden Member of the Group Executive Board since: 19 April 2022 Education: M.Sc. (Technology) Key work experience: SOL Sweden, CEO 2017–2022, Telia Group, Director, Supply Chain Excellence 2014–2017, LRF Samköp, CEO 2010–2014, Euromaint Rail AB, Head of Con- tracts 2008–2010, Bid Manager 2007–2008, Scania CV, Vice Commodity Manager 2006–2007, Sourcing Manager 2005– 2006, Team Leader 2004–2005 Sirpa Huopalainen (born 1965) General Counsel Member of the Group Executive Board since: 26 February 2019 Education: OTK, Master of Laws (Aus.) Key work experience: Lassila & Tikanoja plc, General Counsel 2012–, Atria Plc, General Counsel 2007–2012, Metso Auto- mation Oy, Legal Counsel 2004–2007, Metso Corporation, Legal Counsel 1999–2004, Rauma Corporation, Legal Counsel 1996–1999 Jorma Mikkonen (born 1963) Senior Vice President, Public Aﬀairs and Sustainability Member of the Group Executive Board since: 1 June 2015 Education: Master of Laws Key work experience: Lassila & Tikanoja plc: Vice President, Environmental Services 2009–2012, Vice President, Industrial Services 2000–2009, Säkkiväline Oy, Administrative Director 1999–2000, Corporate Lawyer 1992–1999, Helsinki Finnish Saving Bank, Corporate Lawyer 1991–1992 Antti Niitynpää (born 1972) Senior Vice President, Facility Services Finland Member of the Group Executive Board since: 30 July 2021 Education: eMBA Key work experience: Lassila & Tikanoja plc, Business Direc- tor, Cleaning Services 2019–2021, Lassila & Tikanoja plc, Business Director, Property Maintenance 2014–2018, Lassila & Tikanoja plc, Regional Director, Helsinki metropolitan area 2013–2016, ISS Finland, Regional Director, Service Director, Customer Accounts Director 2006–2013, Suomen Laatutakuu Palvelut Oy, Project Director 1999–2006, Purkat Oy, CEO 1995– 1999 Membership on other Boards: Kiinteistötyönantajat ry (Employers’ association of property management) 2022– Valtteri Palin (born 1973) CFO Member of the Group Executive Board since: 1 August 2019 Education: M.Sc. (Econ.) Key work experience: Lassila & Tikanoja plc, CFO, responsible for controller operations, 2019, SRV Yhtiöt Oyj, CFO, 2008– 2019, SRV Toimitilat Oy, business controller 2005–2008, Skan- ska Oy, Finance Manager, business controller and controller, 1998–2005 Hilppa Rautpalo (born 1974) Senior Vice President, Human Resources Member of the Group Executive Board since: 1 January 2020 Education: Master of Laws (trained at the bench) Key work experience: Arctia Ltd, SVP, Legal Aﬀairs and HR 2018–2019, Unisport-Saltex Oy, General Counsel, Group HR Director 2017–2018, Ekokem Oyj, SVP, Legal Aﬀairs and HR 2013–2017, Amer Sports Oyj, Senior Legal Counsel 2007– 2009, Metsä Group, Group Legal Counsel 2000–2007 Membership on other Boards Finnpilot Pilotage Oy, 2020– Lassila & Tikanoja Financial Review 2022 75 KEY FIGURES FINANCIAL STATEMENTS REPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Petri Salermo (born 1970) Senior Vice President, Environmental Services Member of the Group Executive Board since: 1 January 2013 Education: eMBA, CBM Key work experience: Lassila & Tikanoja plc: Business Director, Environmental Services 2009–2012; Sales Director, Environmental Services 2003–2009; Sales Manager, Envi- ronmental Services 2001–2003, Europress Oy: Sales Director 1998–2001, managerial positions in sales 1995–1998 Antti Tervo (born 1978) Senior Vice President, Industrial Services Member of the Group Executive Board since: 14 February 2012 Education: M.Sc. (Econ.) Key work experience: Lassila & Tikanoja plc: Chief Oﬃcer responsible for procurement and supply chain, 2012–2014, Siemens North West Europe: Head of Commodity Manage- ment 2009–2012; Project Manager, Procurement and Supply Chain Management 2008–2009, Siemens Oy: Director, Pro- curement 2005–2009; Procurement Manager 2003–2005; Supply Chain Consultant 2001–2003 Group Executive Board members’ shareholding 31 December 2022 Eero Hautaniemi 46,827 Tina Hellstadius 0 Sirpa Huopalainen 6,744 Jorma Mikkonen 7,107 Antti Niitynpää 1,107 Valtteri Palin 1,560 Hilppa Rautpalo 1,758 Petri Salermo 19,105 Antti Tervo 10,856 Total 95,064 The Audit Committee meets at least four times a year before the publication of interim reports and the ﬁnancial statements release. In its meetings, the Audit Committee reviews the ﬁnancial information presented by the Chief Financial Oﬃcer, as well as interim and half-year ﬁnancial reports and ﬁnancial statements releases. The auditor is also invited to attend the meetings. The Audit Committee is presented in more detail in the Committees section. L&T’s ﬁnancial reporting process L&T conducts a signiﬁcant proportion of its business in Fin- land. Functions related to accounting, accounts payable and receivable, payments, taxation and ﬁnancing in the ﬁnancial reporting process in Finland are centralised. Organisation of these functions into diﬀerent teams allows the separation of various ﬁnance-related tasks. To support the consistent pro- cess in Finland, L&T also runs a centralised accounting sys- tem and common operational practices. L&T’s foreign subsidiaries each have independent ﬁnan- cial management departments operating in compliance with the accounting principles and reporting instructions issued by the Group’s ﬁnancial management. L&T’s domestic busi- ness segments and foreign subsidiaries submit a monthly reporting package to the Group according to the Group's instructions. Controllers supervise the ﬁnancial reports of domestic business segments and foreign subsidiaries. L&T’s Group ﬁnancial management is responsible for preparing and updating the Group accounting policies and instructions, and for preparing reporting schedules. The ﬁnancial management department consolidates sub- sidiaries’ ﬁnancial statements into consolidated ﬁnancial statements, which include notes to the ﬁnancial statements, and prepares interim and half-year ﬁnancial reports, ﬁnancial statements releases and the annual ﬁnancial statements. Public ﬁnancial reporting is realised with the same principles, and it is subject to the same control methods as monthly internal ﬁnancial reporting. The Audit Committee reviews the interim report, half-yearly report and ﬁnancial statements and proposes its recommendation on their processing to the Board of Directors. The Board of Directors approves the interim report, half-yearly report, ﬁnancial statements release and ﬁnancial statements prior to their publication. Internal control Internal control is a material part of the Group’s administra- tion and management. The purpose of internal control is to ensure the reliability of the Group’s ﬁnancial reporting, eﬃ- ciency and proﬁtability of operations, and compliance with legislation and other regulations. Tools of internal control include policies and principles, guidelines, manual and IT sys- tem-based automatic controls, follow-up reports and inspec- tions or audits. The company’s Board of Directors has ratiﬁed L&T’s internal control policy. The Board of Directors and the President and CEO are responsible for the organisation of internal control. The Audit Committee of the Board of Directors monitors the eﬃciency and performance of internal control and cor- rectness of ﬁnancial reporting. The ﬁnancial development of the company is monitored monthly by an operational report- ing system covering the whole Group. In addition to actual data, the system provides budg- ets, forecasts and investment reports. L&T's operations and ﬁnancial reports are monitored and compared against budgets and forecasts at diﬀerent organisational levels. Group management, divisional management and area man- agement, as well as business unit management, analyse the results and any nonconformities. Those responsible for ﬁnances at the divisions also analyse the ﬁnancial reports and prepare reports for management use. Their duties also include supervision of the accuracy of ﬁnancial reports and analysis of results. Risk management L&T has a deﬁned a risk management process that includes a review of ﬁnancial, strategic and operational risks. Risk management at L&T aims to identify signiﬁcant risk factors, prepare for them, and manage them in an optimal way so that the achievement of the company’s strategic and ﬁnan- cial objectives is not compromised. Comprehensive risk management endeavours to manage the Group’s risk as a whole and not just individual risk factors. Responsibilities The principles of L&T’s risk management are approved by the company’s Board of Directors. The Board monitors the Shares in the company held by the Group Executive Board members and any corporations over which they exercise control have been taken into account in terms of share- holding. Group Executive Board members do not hold shares in any group companies other than Lassila & Tikanoja plc. Information on the President and CEO’s remuneration is pro- vided in the remuneration report, which has been published in connection with the Report of the Board of Directors. The remuneration report and information on the Group Executive Board’s remuneration is available online at www.lt.ﬁ/en/investors. Descriptions of internal control procedures and main features of risk management system The Group’s ﬁnancial reporting The ﬁnancial reporting principles represent an essential ele- ment of L&T's Integrated Management System. The ﬁnancial information of the Group and its divisions is reported and analysed internally within the Group monthly and disclosed as interim reports, half-year ﬁnancial reports and ﬁnancial statements releases. The Group’s and its divisions’ budgets and long-term ﬁnancial plans are updated annually. The Group’s ﬁnancial reporting process includes both ﬁnancial accounting and management accounting. The internal control and risk management processes and pro- cedures pertaining to the ﬁnancial reporting process are explained in more detail below. Their purpose is to ensure that the information disclosed in the ﬁnancial reports pub- lished by the company is essentially correct. Audit Committee The Board of Directors’ Audit Committee supervises and monitors the eﬃciency of L&T’s ﬁnancial reporting pro- cess and internal control systems. The Audit Committee has reviewed L&T’s internal control policy and the Board of Directors has approved it. Lassila & Tikanoja Financial Review 2022 76 KEY FIGURES FINANCIAL STATEMENTS REPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT L&T may not trade in ﬁnancial instruments issued by L&T. In addition, L&T’s aforementioned persons discharging mana- gerial duties may not trade in L&T’s ﬁnancial instruments for a closed period of 30 days preceding the publication of the company’s interim reports, half-year report and ﬁnancial state- ments release, including the date of publication. The closed period preceding result announcements and the restriction on carrying out transactions during the closed period also apply to the persons who participate in the prepa- ration of interim reports and the ﬁnancial statements release, or who otherwise have regular access to L&T’s undisclosed ﬁnancial information. Transactions with related parties The company and its Board of Directors evaluates and mon- itors transactions between the company and its related par- ties, and aims to ensure that any conﬂicts of interest are taken into consideration in decision-making. If the related-party transactions are material to the company and deviate from the company’s ordinary business operations or are made in devi- ation from ordinary market terms, the company must report the decision-making procedure concerning such related-party transactions. L&T’s related-party transactions are described in Note 5.4 to the ﬁnancial statements. L&T did not carry out any busi- ness transactions with related parties that were material to the company, deviated from its normal business operations or were not made on market or market equivalent terms in 2022. Auditor L&T has one auditor that must be a ﬁrm of auditors approved by the Finland Chamber of Commerce. The auditor is elected by the Annual General Meeting. PricewaterhouseCoopers Oy, Authorised Public Accountants, was elected by the Annual General Meeting of 2022 as the company’s auditor, with Samuli Perälä, Authorised Public Accountant, as the principal auditor. During the ﬁnancial years 2012–2021, the company’s auditor was KPMG Oy Ab, Authorised Public Accountants, and auditors representing KPMG. The Audit Committee of the Board of Directors processes the audit plan annually and reviews the audit ﬁndings with the Board of Directors. In 2022, the fees paid for the Group’s statu- implementation of risk management and assesses the eﬃ- ciency of the methods employed. The President and CEO is responsible for the organisation and implementation of risk management. Risk management at L&T Group is controlled by the risk management and insurance policy conﬁrmed by L&T’s Board of Directors. The policy speciﬁes the objectives and principles, organisation and responsibilities, and proce- dures of the Group’s risk management. The Group’s ﬁnanc- ing policy conﬁrmed by L&T’s Board of Directors is followed in the management of ﬁnancial risks. The principles for insurance risk management are speciﬁed in the Risk Man- agement and Insurance Policy. Identiﬁcation, assessment and reporting of risks Risks are surveyed regularly and systematically at both the division and company levels and in functions considered to be critical. The signiﬁcance of risks is assessed using a risk matrix. Measures for managing and minimising the identi- ﬁed risks are prepared, and responsibility for these meas- ures is allocated to speciﬁed individuals or units. The most signiﬁcant risks identiﬁed, and the preparations for them are regularly reported to the President and CEO and the Board of Directors. and focal areas speciﬁed by the Board of Director and the President and CEO. The internal audit function reports to the Audit Committee of L&T’s Board of Directors. In addition, the President and CEO, the CFO, the General Counsel and the management of each audited division are informed of the audit results. The implementation of the measures resulting from the internal audit recommendations is monitored and the monitoring results are reported to the Audit Committee. Insider guidelines The company complies with the Market Abuse Regulation (596/2014, “MAR”) and the Securities Market Act and related regulations and guidelines issued by the European Securities Markets Authority, the Finnish Financial Supervisory Authority and Nasdaq Helsinki Ltd. Moreover, the Board of L&T’s has also veriﬁed insider guidelines to supplement the Guidelines for Insiders issued by Nasdaq Helsinki Ltd. Certain key aspects of the insider guidelines are described below. The insider guidelines clearly specify certain practices and decision-making procedures to ensure that the compa- ny’s insider management has been arranged in a consistent and reliable way. The General Counsel is responsible for insider issues in the company. L&T maintains an internal non-public list of the persons discharging managerial duties and the persons closely associated with them who, pursuant to MAR, are under an obligation to disclose their transactions involving L&T’s ﬁnancial instruments. L&T has deﬁned the company’s Board of Directors and the President and CEO as persons discharging managerial duties pursuant to the Market Abuse Regulation, and each of these persons has been instructed to inform the persons closely associated with them of the notiﬁcation obligation concern- ing transactions. Transactions by managers and the persons closely associated with them are published as stock exchange releases via the company website. The company maintains separate project-speciﬁc insider lists pursuant to MAR on signiﬁcant projects that may have a signiﬁcant impact on the value of ﬁnancial instruments issued by L&T. Such lists are established and maintained following the decision to postpone the disclosure of inside information. Persons who are entered in a project-speciﬁc insider list or other persons in possession of inside information concerning tory auditing totalled EUR 364,000 (264,000). The fees paid to the auditing company and companies belonging to the same group for non-audit services totalled EUR 167,000 (23,000). Other information disclosed in the CG statement Internal audit Internal audit enhances the realisation of the monitoring responsibility of L&T’s Board of Directors. It is the task of L&T’s internal audit to support the company and its senior manage- ment in the achievement of strategic and ﬁnancial goals by providing a systematic and independent approach to assess- ing and developing the eﬀectiveness of the organisation’s internal control, risk management and governance systems and performance, eﬃciency and appropriateness of busi- ness processes. The Board’s Audit Committee conﬁrms the annual plan of internal audit, in which items to be audited are selected based on the Group’s strategic objectives, estimated risks LEADER OF THE REGENERATIVE SOCIETY Remuneration Report 2022 Lassila & Tikanoja plc Lassila & Tikanoja Financial Review 2022 77 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Remuneration Report This Remuneration Report has been prepared in accordance with the applicable legislation and the Securities Market Association’s Finnish Corporate Governance Code for Finn- ish listed companies, which entered into force on 1 January 2020. This report describes the remuneration of the Compa- ny’s governing bodies, namely the Board of Directors and the President and CEO, for the ﬁnancial year 2022. The Personnel and Sustainability Committee of the Board of Directors has discussed this report and it will be presented to the 2023 Annual General Meeting of Lassila & Tikanoja plc (hereinafter referred to as “L&T” or the “Company”). The resolution of the Annual General Meeting concerning the Remuneration Report is advisory. The 2022 Annual General Meeting voted for the Remuneration Report for the ﬁnancial year 2021 and aﬃrmed it by an advisory resolution. This Remuneration Report, other information disclosed in accordance with the Corporate Gov- ernance Code, and information on the remuneration of the members of the Group Executive Board are available on the Company’s website. Introduction L&T’s Personnel and Sustainability Committee has drafted and the Board of Directors has approved the Remuneration Policy, presented to the 2020 Annual General Meeting. The Remuner- ation Policy describes the remuneration principles concerning the Company’s governing bodies, namely the Board of Direc- tors and the President and CEO. During the ﬁnancial year 2022, L&T complied with the Remuneration Policy presented to the Annual General Meeting. An analysis of the total compensation of the key management is prepared annually by a consultant independent from the company. The analysis is reviewed by the Personnel and Sustainability Committee. There were no deviations from the Remuneration Policy and no clawback of remuneration. In accordance with the Remuneration Policy, the aim of the remuneration scheme of the Board of Directors and the President and CEO is to con- tribute to the positive development of shareholder value, as well as to enhance the Company’s competitiveness, long- term ﬁnancial success, and fulﬁlment of the strategy and goals set by the Company. The key principle of the Remuneration Policy is that remuneration of the Board of Directors and the Presi- dent and CEO shall contribute to the achievement of the abovementioned goals and provide – in terms of both level and structure – a fair and competitive package that pro- motes commitment and retention and is in line with market practices. The aim of all remuneration throughout Lassila & Tikanoja Group is to promote good performance and to motivate personnel to engage in long-term eﬀorts to pro- mote the achievement of the Company’s goals. Remuneration is one factor through which the Company strives to ensure the availability of skilled and motivated persons for all positions at all levels of the organisation. These principles apply also to the remuneration of the members of the Board of Directors and the President and CEO. The chart shows the development of the remuneration of the Board members and the President and CEO during the ﬁnancial years 2018–2022 relative to the development of the average remuneration of employees and the Group’s ﬁnancial performance. Fees paid to the Board of Directors for the ﬁnancial year 2022 The Annual General Meeting annually determines the annual fees and the meeting fees payable to the members of the Board of Directors for Board and committee work. The Shareholders' Nomination Board prepares proposals on remuneration for the Annual General Meeting to be held in the spring 2023. Annual fees, meeting fees for Board and committee meetings, and other ﬁnancial beneﬁts The Annual General Meeting held on 17 March 2022 resolved on the remuneration of the Board of Directors in 2022 as follows: • Chairman of the Board EUR 60,000 • Vice Chairman of the Board EUR 40,000 • members EUR 30,000 The fees shall be paid so that 40% of the annual fee is paid in Lassila & Tikanoja plc shares held by the Company or, if this is not feasible, shares acquired from the market, and 60% in cash. Shares are to be issued to Board members and, where nec- essary, acquired directly from the market on behalf of Board members on the third trading day after the publication of the interim report for the ﬁrst quarter of the year. In addition, meeting fees were paid to the members of the Board of Directors as follows: EUR 1,000 to the Chairman, EUR 700 to the Vice Chairman, and EUR 500 to each member for each meeting. Meeting fees were also paid to the Chair- men and members of committees established by the Board of Directors: EUR 700 to the Chairman of a committee and EUR 500 to each member for each meeting. None of the members of the Board of the Directors is employed by the company or a company belonging to the same group of companies with the company or acts as the company’s advisor, and thereby they receive no salary, pension beneﬁts, other ﬁnancial beneﬁts associated with employment or service, or other emoluments or fees not associated with Board work from the company. The members of the Board are not included in the compa- ny’s share-based incentive schemes and they do not have any pension contracts with the company. For the payment of the 40 per cent proportion of the annual fee of the mem- bers of the Board of Directors, a total of 8,618 shares held by the Company were transferred to the Board members on 2 May 2022 at a rate of EUR 10.205 per share in the following amounts: 2,351 shares to the Chairman, 1,567 shares to the Vice Chairman, and 1,175 shares to each member. 180 135 90 45 0 2018 2019 2020 2021 2022 Development of business and remuneration, indexed, 2018=100 Adjusted operating proﬁt Employees, average CEO Board of directors, average * Reported operating proﬁt for 2018 does not diﬀer signiﬁcantly from the adjusted operating proﬁt ** Employee salaries relative to the total number of personnel, converted to a full-time equivalent basis *** Total remuneration, with the incentive schemes being based on the preceding year’s results (based on the achievement of the performance criteria for the earnings period that corresponded to the ﬁnancial year 2021, the incentive bonus was earned at 72% of the maximum amount for the short-term incentive scheme and at 69.9% of the maximum amount for the long-term incentive scheme) Total remuneration Lassila & Tikanoja Financial Review 2022 78 KEY FIGURES FINANCIAL STATEMENTSREPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT Fees paid to the members of the Board of Directors 2022 EUR Annual fee Meeting fees Total Jukka Leinonen, Chairman*) 60,000 13,400 73,400 Heikki Bergholm, Chairman) 4,400 4,400 Sakari Lassila, Vice Chairman 40,000 12,600 52,600 Teemu Kangas-Kärki, member 30,000 9,000 39,000 Laura Lares, member 30,000 9,000 39,000 Laura Tarkka, member 30,000 7,500 37,500 Pasi Tolppanen, member 30,000 8,500 38,500 ) Chairman of the Board from 17 March 2022, member of the Board until that date. *) Chairman of the Board until 17 March 2022. Remuneration of the President and CEO for the ﬁnancial year 2022 The Board of Directors decides on the remuneration and ﬁnan- cial beneﬁts payable to the President and CEO. Before deci- sion-making by the Board of Directors, the matter is prepared by the Personnel and Sustainability Committee of the Board. Eero Hautaniemi has served as the President and CEO since 1 January 2019. The Company did not have a Deputy CEO. Key remuneration principles The remuneration of the President and CEO consists of a ﬁxed monthly salary and beneﬁts, and a separate annually decided short-term incentive. In addition, the President and CEO is included in the share-based incentive scheme, which serves as a long-term incentive scheme. The short-term incentive scheme and the share-based incentive scheme that serves as a long-term incentive scheme constitute the varia- ble components of the President and CEO’s remuneration. Short-term incentive scheme The short-term incentive bonus for the President and CEO cor- responds to six months’ salary at a maximum. The objectives of the short-term incentive scheme are set – and their achieve- ment assessed – annually. Any incentives are usually paid in February of the year following the earnings period typically spanning a calendar year. The precondition for payment is that the President and CEO is employed by the Company at the time. The President and CEO’s incentive bonus for the earn- ings period that corresponds to the ﬁnancial year 2022 was based on the Group’s proﬁt performance and strategic tar- gets deﬁned by the Board of Directors as follows: consoli- dated operating proﬁt (70% weight), employee Net Promoter Score (eNPS, 10% weight) and customer satisfaction (NPS, 10% weight). Based on the achievement of the earnings cri- teria for the earnings period that corresponded to the ﬁnan- cial year 2022, the incentive bonus was earned at 29% of the maximum amount. The President and CEO will be paid EUR 63,882 in the ﬁnancial year 2023 for the earnings period that corresponds to the ﬁnancial year 2022. Long-term incentive scheme The President and CEO’s long-term incentive scheme is the Company’s share-based incentive scheme. The Board of Directors decides on the share-based incentive scheme as part of the overall incentive and commitment scheme. The earnings period of the plan is one calendar year. The Board of Directors decides on the earning criteria for each earnings period based on the Personnel and Sustainability Commit- tee’s proposal. The ﬁnal numbers of shares issued based on meeting the earnings criteria are decided by the Board of Directors at the beginning of the year following the earnings period. Rewards will be paid in February of the calendar year following the earnings period. The rewards are paid partly as shares and partly in cash. The cash component is intended to cover the taxes and tax-like payments incurred from the share-based reward. The reward corresponds to 12 months’ salary at a maximum. The precondition for payment is that the President and CEO is employed by the Company at the time. Any shares earned through the incentive scheme must be held for a minimum period of two years following payment (commit- ment period). After the two-year commitment period, shares must continue to be held at a value corresponding to the President and CEO’s gross salary for six months, as long as the President and CEO is employed by the Company. If the President and CEO resigns during the commitment period at their own initiative, they are obligated to return the received shares without compensation. The share-based incentive schemes with the years 2022 and 2021 as the earnings periods are described below: • The share-based incentive scheme with the ﬁnancial year 2021 as the earnings period. The reward was based on the Group’s EVA result with a weight of 90% and the carbon handprint target with a weight of 10%. The earnings criteria for the earnings period that cor- responds to the ﬁnancial year 2021 were achieved to such an extent that the reward to be paid will repre- sent 69.9% of the maximum amount. In the ﬁnancial year 2022, the President and CEO was paid a total of EUR 265,132 under the long-term incentive scheme (corresponding to 10,974 L&T shares to be transferred and including the cash component) for the earnings period that corresponded to the ﬁnancial year 2021, calculated at the average share price on the day immediately following the publication of the ﬁnancial statements. • The share-based incentive scheme with the ﬁnan- cial year 2022 as the earnings period. The reward was based on the Group’s EVA result with a weight of 90% and the carbon footprint target with a weight of 10%. As the EVA earnings criteria for the earnings period corresponding to the ﬁnancial year 2022 were not met, no long-term incentive bonuses will be paid to the President and CEO in 2023 for that earnings period. Other key terms and conditions A written service contract has been drawn up for the President and CEO. According to the contract, the period of notice is six months should the company terminate the contract, and six months should the President and CEO terminate the contract. In the event that the company ter- minates the contract, the President and CEO will be paid compensation amounting to twelve (12) months’ salary. Separate rewards are not paid to the President and CEO for memberships of the Boards of Directors of the Compa- ny’s subsidiaries, and the President and CEO receives no remuneration from L&T Group companies other than the parent company. The President and CEO’s pension is deter- mined according to the Employees Pensions Act. Remuneration paid to the President and CEO Short-term and long-term incentive bonuses were paid to the President and CEO in the ﬁnancial year 2022. Incentive bonuses amounting to EUR 63,882 will become due for pay- ment for the ﬁnancial year 2022. No supplementary pension was paid. The following table presents the remuneration paid to the President and CEO during the ﬁnancial year 2022: EUR 2022 Annual salary (including salary and fringe beneﬁts) 458,640 Incentive bonus 157,248 Share-based bonus 265,132 Fringe beneﬁts (included in the annual salary) 19,260 Total 881,020 Remuneration of the President and CEO: maximum earning potential Fixed annual salary, 100% Short term incentives, max. 50% Long term incentives, max. 100% Independent Auditor’s Reasonable Assurance Report on Lassila & Tikanoja Oyj’s ESEF Financial Statements To the Management of Lassila & Tikanoja Oyj We have been engaged by the Management of Lassila & Tikanoja Oyj (business identity code 1680140-0) (hereinaf- ter also “the Company”) to perform a reasonable assurance engagement on the Company’s consolidated IFRS ﬁnancial statements for the ﬁnancial year 1 January – 31 December 2022 in European Single Electronic Format (“ESEF ﬁnancial statements”) version 743700Z9Z54VGHZA0028-2022-12- 31-ﬁ.zip. Management’s Responsibility for the ESEF Financial Statements The Management of Lassila & Tikanoja Oyj is responsible for preparing the ESEF ﬁnancial statements so that they com- ply with the requirements as speciﬁed in the Commission Delegated Regulation (EU) 2019/815 of 17 December 2018 (“ESEF requirements”). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation of ESEF ﬁnancial statements that are free from material noncompliance with the ESEF requirements, whether due to fraud or error. Our Independence and Quality Management We have complied with the independence and other ethical requirements of the International Code of Ethics for Profes- sional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, conﬁdentiality and professional behaviour. Our ﬁrm applies International Standard on Quality Man- agement 1, which requires the ﬁrm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Our Responsibility Our responsibility is to express an opinion on the ESEF ﬁnan- cial statements based on the procedures we have performed and the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with the International Standard on Assur- ance Engagements (ISAE) 3000 (Revised) Assurance Engagements Other than Audits or Reviews of Historical Financial Information . That standard requires that we plan and perform this engagement to obtain reasonable assur- ance about whether the ESEF ﬁnancial statements are free from material noncompliance with the ESEF require- ments. A reasonable assurance engagement in accordance with ISAE 3000 (Revised) involves performing procedures to obtain evidence about the ESEF ﬁnancial statements compliance with the ESEF requirements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material noncompliance of the ESEF ﬁnancial statements with the ESEF requirements, whether due to fraud or error. In making those risk assess- ments, we considered internal control relevant to the Com- pany’s preparation of the ESEF ﬁnancial statements. We believe that the evidence we have obtained is suﬃ- cient and appropriate to provide a basis for our opinion. Opinion In our opinion, Lassila & Tikanoja Oyj’s ESEF ﬁnancial state- ments for the ﬁnancial year ended 31 December 2022 comply, in all material respects, with the minimum requirements as set out in the ESEF requirements. Our reasonable assurance report has been prepared in accordance with the terms of our engagement. We do not accept, or assume responsibility to anyone else, except for Lassila & Tikanoja Oyj for our work, for this report, or for the opinion that we have formed. Helsinki 23.2.2023 PricewaterhouseCoopers Oy Authorised Public Accountants Samuli Perälä Authorised Public Accountant (KHT) Lassila & Tikanoja Financial Review 2022 KEY FIGURES FINANCIAL STATEMENTS REPORT BY THE BOARD OF DIRECTORS CORPORATE GOVERNANCE REMUNERATION REPORT 80 Lassila & Tikanoja plc Valimotie 27, 00380 Helsinki tel. 010 636 111 www.lt.ﬁ/en/ LEADER OF THE REGENERATIVE SOCIETY

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