Robit Oyj

Annual Report (ESEF) • Jun 15, 2022

Untitled THE REPORT OF THE BOARD OF DIRECTORS Year 2021 in Brief • Net sales EUR 100.8 million (91.6) • EBITDA EUR 7.6 million (5.1) • EBITA EUR 2.9 million (-0.0) • Operating profit as percentage of net sales (EBIT %) 2.1% (-0.9) • Review period net income EUR 0.9 million (-2.9) • Net cash flow for operating activities EUR -4.2 million (4.3) • Equity ratio at the end of the review period 42.2% (45.5) Key financials Q4 2021 Q4 2020 Change % Net sales, EUR 1,000 26 285 23 691 11.0% EBITDA, EUR 1,000 1 650 2 052 -19.6% EBITDA, % of net sales 6.3% 8.7% EBITA, EUR 1,000 543 832 -34.8% EBITA, % of sales 2.1% 3.5% EBIT, EUR 1,000 327 626 -47.8% EBIT, % of sales 1.2% 2.6% Result for the period, EUR 1,000 -152 515 -129.5% Result for the period, % of sales -0.6% 2.2% Earnings per share (EPS) 0.00 0.02 -104.8% Return on equity (ROE), % Return on capital employed (ROCE), % TREATMENT OF RESULT FOR THE FINANCIAL YEAR The Board of Directors proposes to the Annual General Meeting that the parent company’s loss for the financial year ended on 31 December 2021, EUR 1,518,952.39, be transferred to cumulative loss. DISTRIBUTION OF FUNDS TO SHAREHOLDERS The Board of Directors proposes to the Annual General Meeting that no dividend be paid for 2021. ROBIT’S OUTLOOK FOR 2022 Robit expects the market situation to remain strong if geopolitical risks do not materialise. Demand in the mining segment is supported by the positive development in metal prices. Demand in the construction industry is supported by the good work situation in the construction market areas that are relevant to Robit and the significant financing decided globally for the construction industry. The company expects COVID-19 restrictions to have a limited impact on the demand of Robit’s products in 2022. Demand prospects for the mining industry are good for 2022. Demand for consumable parts across cycles is more stable in relation to investment products. The high level of mineral prices and positive outlook are reflected in the prospection drilling activities which are developing well. Prospection drilling is a cyclical part of the industry, reflecting the mining industry’s willingness to invest in future capacity increases. Robit has good growth potential in the mining segment. The construction industry is always locally cyclical, and the market situation can change rapidly. The prospects of Robit’s customers are good, and projects related to infrastructure construction that are ongoing or about to be launched support the prospects for 2022. GUIDANCE FOR 2022 Robit estimates that net sales for 2022 will grow and adjusted EBITDA profitability in euros will improve compared with 2021, assuming that there are no significant changes in the exchange rates compared with the end of 2021. CEO TOMMI LEHTONEN Robit’s growth and profitability continued to develop positively in 2021. For the first time in the company’s history, net sales exceeded EUR 100 million and totalled EUR 100.8 million (91.6). There was an increase of 10% from 2020. Orders received increased by 13%. The year ended well in terms of sales. In the last quarter of the year, net sales grew by 11% and orders by 29.8%. This was the first quarter in which orders exceeded EUR 30 million. Robit’s profit for the financial year turned positive, although profitability development was held back by cost inflation and supply chain challenges. The EBITDA for the financial period was EUR 7.6 million (5.1), up 48.4% on the corresponding period. In the last quarter, the EBITDA was EUR 1.7 million (2.1). Profitability in the last quarter was particularly weakened by high freight costs. Raw material costs rose rapidly during the year. Result impacts were limited by pricing and procurement measures. Already at the end of 2020, the challenges for global container traffic and the rapid growth in sales of Top Hammer products led to many measures aimed at safeguarding the level of customer service. These measures raised our inventory levels as we prioritised ensuring availability. Success in business growth During 2021, we managed to grow our business, especially in the Top Hammer and mining customer segments. We won several new mining contracts in all markets, and the Top Hammer business continues to have good growth prospects. The share of the mining industry increased to about 60% of 2021 sales. The Down the Hole business developed unevenly across markets. Down the Hole involves significant project business, which results in fluctuations in demand. We will continue to systematically develop sales of Down the Hole products for both mining and construction into new markets with clear geographical priorities. The challenges associated with container transport, combined with rapid growth, caused bottlenecks in the supply chain during the year. This development was already visible at the end of 2020, and provisions were made for it, including by increasing inventory levels. During the year, decisions were also made on investments of around EUR 6 million, mainly related to Top Hammer production, with the aim of ensuring sufficient supply capacity to support the growth in the coming years. The new capacity was partly available in the last quarter of the year and will be at full capacity in the first quarter of 2022. During the financial period, many ad hoc arrangements were made in relation to ensuring customers’ deliveries, which resulted in additional costs affecting the company’s profitability, for example due to air freight. In 2021, raw material prices rose rapidly. This trend was already visible at the end of 2020, and the impact of cost inflation was also limited by increasing orders for raw materials until the end of 2020. These measures helped to postpone the impact of the rise in raw material prices until the second half of the year. In line with the strategy, the share of new, more cost- effective suppliers was increased, and price increases were implemented during the year. These measures helped to limit the impact of cost inflation on the company’s performance. Responsibility rooted even more strongly in Robit’s daily operations Robit embedded sustainability plans into its daily operations. All Robit team members and our partners are actively involved in developing the company towards our corporate responsibility goals under four main themes: responsible partnerships, reducing CO2 emissions in the value chain, a happy and prosperous work community and efficiency throughout the product life cycle. In many areas, we already saw good progress in the second half of the year. For each of the main themes, the company has defined indicators and objectives that will be part of the company’s incentive scheme in the future. Determined movement towards strategic goals During the year, we updated our business plans to support Robit in achieving its strategic goals. The focus of the plans remains on ensuring growth, profitability and cash flow development. At the same time, we decided to invest more strongly in our ability to deliver as well as in our long-term product development. We clarified and strengthened our sales organisation to ensure that our growth projects progress in line with the priorities we have set. The most significant results were achieved in strengthening the distributor structure. We won new customers both with distributors and in our direct sales regions. Overall, we managed to grow in several markets, and Robit still has significant opportunities for further growth in all our market areas. During the year, we implemented several development measures to strengthen our sales margin. We managed to increase the share of purchases from new, more cost-effective suppliers and we implemented price increases. At the same time, we strengthened our pricing processes during the year. Overall, cost inflation and supply difficulties held back profitability. An efficient supply chain is an essential part of a competitive the company that supplies consumables. In addition to investments, we are taking our order-to-supply chain practices one step further. We strengthened resourcing in this area and implemented a major development project focused on improving factory lead times and the security of supply. Systematically strengthening supply We made progress on a broad front during the year. The focus was on strengthening longer-term capabilities through a three- part product development and research programme. We also launched new product ranges, which will simplify the offering and make it more competitive. We also worked closely with key customers, and through this, we were able to develop new products with significantly better performance. The new products developed will serve as the basis for new product ranges to be launched in 2022. We managed to take a clear step forward in strengthening the competitiveness of Robit’s offering. NET SALES Net sales by product area EUR thousand Q4 2021 Q4 2020 Change % 2021 2020 Change % Top Hammer 15 910 11 284 41.0% 56 287 46 348 21.4% Down the Hole 10 375 12 407 -16.4% 44 468 45 283 -1.8% Total 26 285 23 691 11.0% 100 755 91 631 10.0% The Group’s net sales in the fourth quarter of the year totalled EUR 26.3 million (23.7). There was an increase of 11% from the corresponding period (6.9). In constant currencies, the change was 9% (14.1). The Group’s net sales in January–December totalled EUR 100.8 million (91.6). There was an increase of 10% from the corresponding period (6.0). In constant currencies, the change was 10.7% (10.8). The Top Hammer business continued to grow strongly in the fourth quarter, with net sales growing by 41%. In January– December, Top Hammer net sales grew by 21.4% to EUR 56.3 million (46.3). The growth of the business has been supported in particular by the new mining customers gained. The Down the Hole business decreased by -16.4% in the fourth quarter. In January–December, the net sales decreased by - 1.8% to EUR 44.5 million (45.3). The decrease in net sales came from the Geotechnical segment, where the activity of the project business was lower than in 2020. The Down the Hole business grew in the mining and excavation segment, but the growth was lower than the company’s targets. Net sales by market area EUR thousand Q4 2021 Q4 2020 Change % 2021 2020 Change % EMEA 11 276 9 289 21.4% 45 298 40 028 13.2% Americas 5 738 4 000 43.4% 19 960 14 008 42.5% Asia 3 128 2 789 12.1% 10 771 11 397 -5.5% Australasia 3 649 3 519 3.7% 14 001 13 654 2.5% East 2 495 4 094 -39.1% 10 725 12 544 -14.5% Total 26 285 23 691 11.0% 100 755 91 631 10.0% The company’s strong growth continued in the fourth quarter in the Americas region, where net sales grew by 43.4%. Growth was strong in both South and North America. Net sales also grew in the EMEA, Asia and Australasia regions. The East region was clearly left behind the exceptionally strong corresponding quarter. There were significant project deliveries during the corresponding period in 2020. In January–December, the company’s growth was especially driven by the Americas and EMEA regions. In the East region, low project activity in the Geotechnical segment was reflected in declining net sales. Other segments in the East region increased. Net sales in the Asia region fell by -5.5% due to the low demand in the early part of the year. In the Australasia region, the company grew by 2.5%. PROFITABILITY Key figures EUR thousand Q4 2021 Q4 2020 Change % 2021 2020 Change % EBITDA, EUR 1,000 1 650 2 052 -19.6% 7 595 5 116 48.4% EBITDA, % of net sales 6.3% 8.7% 7.5% 5.6% EBIT, EUR 1,000 327 626 -47.8% 2 080 -868 339.8% EBIT, % of net sales 1.2% 2.6% 2.1% -0.9% Result for the period, EUR 1,000 -152 515 -129.5% 886 -2 894 130.6% Result for the period, % of sales -0.6% 2.2% 0.9% -3.2% The EBITDA for the fourth quarter was EUR 1.7 million (2.1). The EBITDA’s share of net sales was 6.3% (8.7). The company’s EBIT was EUR 0.3 million (0.6). The EBIT was 1.2% (2.6) of the review period net sales. The result was weakened by increased logistical and raw material costs. In January–December, the EBITDA was EUR 7.6 million (5.1). The EBITDA’s share of net sales was 7.5% (5.6). The company’s EBIT was EUR 2.1 million (-0.9). The EBIT was 2.1% (-0.9) of the net sales. Improved operating profit in the financial period was supported by increased net sales, measures taken in the pricing and management of pricing as well as the gradual realisation of savings in acquisitions. High freight costs and the globally increased costs of raw materials created cost pressure, especially towards the end of the year. Securing customer service and the delivery pipeline for new customers also caused higher than normal freight costs during the comparison period. Financial income and expenses in the fourth quarter totalled EUR -0.3 million (-0.4), of which EUR -0.3 million (-0.4) was interest expenses and EUR 0.1 million (0.1) exchange rate changes. Review period net income was EUR -0.6 million (0.5). In January–December, financial income and expenses totalled EUR -1.3 million (-2.7), of which EUR -1.2 million (-1.1) was interest expenses and EUR 0.1 million (-1.3) exchange rate changes. The result for the financial period improved to EUR 0.4 million (-2.9). CASH FLOW AND INVESTMENTS Consolidated cash flow statement EUR thousand Q4 2021 Q4 2020 2021 2020 Net cash flows from operating activities Cash flows before changes in working capital 1 707 2 382 7 826 7 160 Cash flows from operating activities before financial items and taxes -237 4,401 -2 785 5 555 Net cash inflow (outflow) from operating activities -449 4 107 -4 174 4 263 Net cash inflow (outflow) from investing activities -1 454 -991 -3 885 -1 173 Net cash inflow (outflow) from financing activities 2 391 -2 184 3 091 -3 626 Net increase (+)/decrease (-) in cash and cash equivalents 487 932 -4 968 -536 Cash and cash equivalents at the beginning of the financial year 8 926 13 235 14 339 15 248 Exchange gains/losses on cash and cash equivalents 113 174 154 -370 Cash and cash equivalents at end of the year 9 525 14 339 9 525 14 339 The Group’s cash flow before changes in working capital during the fourth quarter was EUR 1.7 million (2.4). The net cash flow for operating activities was EUR -0.4 million (4.1). The changes in working capital had an impact of EUR -1.9 million (2.0). The growth in sales and other receivables had an impact on cash flow of EUR -0.4 million and on inventories of EUR -1.5 million. The growth in inventories primarily came from the growth in inventories in the Top Hammer business. The increase in account payables and other payables had an impact of EUR -0.1 million on the cash flow from operating activities. The net cash flow from operations in the financial period was EUR -4.2 million (4.3). The net cash flow from investing activities in the fourth quarter was EUR -1.5 million (-1.0). Gross investments in production during the review period totalled EUR 1.5 million (0.9). The investments’ share of net sales was 6% (4.0). The investments were mainly directed at the company’s factories in South Korea and Lempäälä, Finland. The investments are aimed at responding to the growth of the Top Hammer business. The net cash flow for investment activities in the financial period was EUR -3.9 million (-1.2). The net cash flow from financing activities for the fourth quarter was EUR 2.4 million (-2.2). Net changes in loans totalled EUR -0.4 million (-1.9). The change in bank overdrafts was EUR 3.3 million (0.1). The repayment of lease liabilities reported in net cash flow from financing activities under IFRS 16 totalled EUR -0.5 million (-0.4). The net cash flow from financing activities in the financial period was EUR 3.1 million (-3.6). Depreciation, amortisation and write-downs in the fourth quarter totalled EUR -1.3 million (-1.4). Of this, EUR 0.2 million related to amortisation of customer relationships and brand value from business acquisitions. Depreciation, amortisation and write-downs in the financial period totalled EUR -5.5 million (-6.0). FINANCIAL POSITION 31 December 2021 31 December 2020 Cash and cash equivalents, EUR thousand 9 525 14 339 Interest-bearing liabilities, EUR thousand 41 522 35 567 of which short-term interest-bearing financial liabilities: 10 500 11 154 Net interest-bearing debt, EUR thousand 31 996 21 228 Undrawn credit facility, EUR thousand 2 738 261 Gearing, % 65.1% 45.2 Equity ratio, % 42.2% 45.5 The Group had interest-bearing debt amounting to EUR 41.5 million (35.6), of which EUR 7.7 million (6.4) was interest-bearing debt under IFRS 16. The Group’s liquid assets totalled EUR 9.5 million (14.3). Interest-bearing net liabilities were EUR 32.0 million (21.2), and interest-bearing net bank debt without IFRS 16 debt impact was EUR 24.3 million (14.8). The Group’s equity at the end of the review period was EUR 49.1 million (47.0). The Group’s equity ratio was 42.2% (45.5) and its net gearing was 65.1% (45.2). PERSONNEL AND MANAGEMENT The number of personnel increased by 12 from the end of the comparison period, and at the end of the review period it was 273 (261). At the end of the review period, 72% of the company’s personnel were located outside Finland. The company Management Team at the end of the review period was comprised of Tommi Lehtonen (CEO), Jaana Rinne (HR Director) and Arto Halonen (CFO). FINANCIAL TARGETS Robit’s long-term target is to achieve organic net sales growth of 15% annually and adjusted EBITDA profitability of 13%. Long-term target 2019 2020 2021 Net sales growth, % 15% 4.6% 6.0% 10.0% Adjusted EBITDA, % of net sales 13% 3.1% 5.6% 7.5% SHARE-BASED INCENTIVE PROGRAMMES Share-based incentive scheme 2018–2021 On 15 June 2018, Robit’s Board of Directors decided on a new share-based incentive scheme for the Group’s management and key personnel. The scheme has three parts: the key person’s own investment in the company, reward shares and a performance-based additional share scheme. Obtaining a reward from the share scheme required the acquisition of Robit Plc’s shares by the key person. The commitment period of the incentive scheme’s additional share scheme allocated in 2018 started on 1 September 2018. For shares subject to share ownership conditions, the key personnel who joined the scheme in 2018 received shares as a reward after a commitment period of around three years. At the time of allocation, the rewards of the additional share scheme payable on the basis of the commitment period that started on 1 September 2018 were estimated to correspond to the value of a maximum of 24,000 Robit Plc shares, also including the component payable in cash. On 31 May 2021, when the share ownership conditions of the additional share scheme were fulfilled, an amount corresponding to the value of 17,000 Robit Plc shares, also including the component payable in cash, was paid. The targets set for the earning period 2018–2020 of the performance-based additional share scheme were not achieved and, therefore, no reward was payable for the earning period of the performance-based additional share scheme that ended on 31 December 2020. The incentive scheme ended on 31 May 2021 when the rewards of the additional share scheme were paid, and they did not include any transfer restrictions in accordance with the rules of the scheme. Share-based incentive scheme 2020–2023 On 25 February 2020, Robit’s Board of Directors decided on a new share-based incentive scheme for the Group’s management and key personnel. The share scheme has three elements: own investment of the key personnel in Robit shares (base share plan), reward shares by the company (matching share plan) and performance-based additional share plan (performance matching plan). The share-based incentive scheme covers 17 individuals. The company’s matching shares and performance matching shares will be paid in April 2023. After the payment, the shares will be subject to a transfer restriction for a period of one year. If all three main elements of the scheme are fulfilled in full as determined in the scheme and according to the target setting of the company’s Board of Directors, the maximum amount of shares issued based on the scheme will be 441,760 shares, corresponding to 2.1% of the current total share capital. Share-based incentive scheme 2021–2024 On 15 June 2021, Robit Plc’s Board of Directors decided on a performance-based share reward scheme for key personnel. The share scheme includes earning periods of one and two years. The first earning period of the share scheme comprises the year 2021 and the second earning period comprises the years 2022–2023. The share scheme’s potential reward for the one-year earning period 2021 is based on the company’s predetermined EBITDA target in the financial statements for 2021. The share scheme’s possible reward for the two-year earning period 2022–2023 is based on the company’s predetermined average earnings per share in the financial statements for the years 2022 and 2023. The share scheme’s possible reward for both earning periods will be paid in May 2024. The share scheme covers 21 individuals. The total amount of share rewards payable on the basis of the earning periods 2021 and 2022–2023 corresponds to a maximum of 155,000 Robit Plc shares, corresponding to 0.7% of the company’s current share capital. Long-term share-based incentive scheme for the CEO 2019–2024 On 24 September 2019, the Board of Directors of Robit Plc decided on a long-term share-based incentive scheme for the CEO. The scheme covers Tommi Lehtonen, who started as the CEO of the Group on 1 May 2019. The share reward scheme has three earning periods and covers the period from 1 January 2019 to 31 December 2024. The Board of Directors of Robit Plc sets targets for each two-year earning period starting from 2019. The earning periods end on 31 December 2020, 31 December 2022 and 31 December 2024 respectively. The rewards payable on the basis of this system will correspond to the value of a total of 160,000 Robit Plc shares, also including the amount of money used for taxes and tax-related payments. The number of shares corresponds to approximately 0.8% of the total number of the company’s shares. The rewards of the incentive scheme are paid in three instalments after the end of each earning period. No reward was paid to the CEO for the earning period ending on 31 December 2020. RESOLUTIONS OF THE ANNUAL GENERAL MEETING 2021 Robit Plc’s Annual General Meeting on 25 March 2021 adopted the financial statements for 1 January–31 December 2020 and resolved that no dividend would be paid based on the adopted balance sheet for the financial year 2020. The General Meeting resolved to discharge the members of the Board of Directors and the Managing Directors from liability for the financial year ending 31 December 2020. The General Meeting decided to approve the Remuneration Report for Governing Bodies. The decision was advisory. The General Meeting resolved that the Board of Directors consists of six (6) members. Kim Gran, Mammu Kaario, Mikko Kuitunen, Anne Leskelä, Kalle Reponen and Harri Sjöholm were re-elected as members of the Board of Directors. The annual remuneration for the Chairman of the Board of Directors is EUR 45,000, of which 40% is paid in shares and the remaining 60% is an advance tax withheld and paid to the Finnish Tax Administration by the company. There is also a meeting fee of EUR 500 per meeting. The fee is paid for meetings attended by the Chairman of the Board. Other costs such as travel and lodging expenses will also be compensated. The annual remuneration for the Board members is EUR 30,000, of which 40% is paid as shares and the remaining 60% is an advance tax withheld and paid to the Finnish Tax Administration by the company. There is also a meeting fee of EUR 500 per meeting. The fee is paid for meetings attended by the member of the Board. Other costs such as travel and lodging expenses will also be compensated. Members of the Working Committee, Personnel Committee and Audit Committee are paid a financial compensation of EUR 500 per meeting attended. Other costs such as travel and lodging expenses will also be compensated. The annual remuneration of the Chairman of the Board and Board members for the entire term of office will be paid in December 2021. The part of the remuneration paid in shares may be paid by issuing new shares in the company or by acquiring shares by the authorisation given to the Board of Directors by the General Meeting. The receiver of the remuneration pays the transfer tax. Ernst & Young Oy, an audit firm, was re-elected as the company’s auditor for a term that will continue until the end of the next Annual General Meeting. Ernst & Young Oy has notified the company that Authorised Public Accountant Toni Halonen will serve as the company’s principal responsible auditor. The General Meeting resolved to pay the auditor’s remuneration in accordance with an invoice approved by the company. The General Meeting resolved to authorise the Board of Directors to resolve the acquisition of a maximum of 2,108,390 treasury shares and/or accept the same number of the company’s shares as a pledge, in one or several tranches by using funds in the unrestricted shareholders’ equity. The maximum total of shares that will be acquired and/or accepted as a pledge corresponds to 10% all shares in the company as of the date of the notice to the General Meeting. However, the company cannot, together with its subsidiary companies, own or accept as a pledge altogether more than 10% of its own shares at any point in time. The company’s shares may be purchased under this authorisation solely by using unrestricted shareholders’ equity. The shares will be acquired otherwise than in proportion to the share ownership of the shareholders via public trading arranged by Nasdaq Helsinki Ltd at the market price on the date on which the acquisition is made or otherwise at a price formed on the market. The authorisation is proposed to be used e.g. for the purposes of implementing the company’s share-based incentive schemes or for other purposes as decided by the Board of Directors. It was resolved that the authorisation revokes the authorisation granted by the General Meeting on 22 April 2020 to decide on the acquisition of treasury shares. The authorisation is valid until the closing of the next Annual General Meeting, however, no longer than until 30 June 2022. The Annual General Meeting resolved to authorise the Board of Directors to resolve on a share issue and on the issuance of special rights entitling to shares as referred to in Chapter 10 Section 1 of the Finnish Limited Liability Companies Act, in one or more tranches, either against or without consideration. The number of shares to be issued, including shares to be issued on the basis of special rights, may not exceed 2,108,390, which amounts to 10% of all shares in the company as of the date of the notice to the Annual General Meeting. The Board of Directors may decide to either issue new shares or to transfer any treasury shares held by the company. The authorisation entitles the Board of Directors to decide on all terms that apply to the share issue and to the issuance of special rights entitling to shares, including the right to derogate from the shareholders’ pre-emptive right. The authorisation shall be used e.g. for the purposes of strengthening the company’s balance sheet and improving its financial status, implementing the company’s share-based incentive systems or for other purposes as decided by the Board of Directors. The authorisation is valid until the closing of the next Annual General Meeting, however, no longer than until 30 June 2022. The authorisation will revoke all previously granted, unused authorisations to decide on a share issue and the issuance of options or other special rights entitling to shares. REPORT OF OTHER THAN FINANCIAL INFORMATION Robit is a global growth company selling and manufacturing drilling consumables. The company provides products and services for the needs of the mining and surface mining, quarrying, underground construction and well drilling industries. This strongly internationalised company’s offering is divided into three product and service areas: Top Hammer, Down the Hole and Geotechnical. Robit has its own sales and service points in eight countries as well as an active dealership network through which it sells to more than 100 countries. Robit’s manufacturing units are located in Finland, South Korea, Australia and the UK. Robit is dedicated to act responsibly in its business. Daily work is directed by strategy, values and operating principles of the Group. Key principles and obligations supporting other than financial matters’ management Robit follows international and local laws and statutes in force in its business. The company follows also international agreements and recommendations, such as the UN Sustainable Development Goals. The Code of Conduct guides our responsibility. The induction of every new Robit employee includes the completion of the Code of Conduct eLearning programme. This is to ensure that everyone working in the company knows our Code of Conduct and is committed to it. The Code of Conduct provides guidelines on, among others, the following issues: compliance with laws, human and labour rights, equality, honesty and fair competition. During 2021, all Robit team members completed a refresher course of the Code of Conduct programme. Sustainability in Robit’s daily life In 2021 Robit implemented a thorough ESG account project and launched an ESG roadmap as well as targets in the Capital Markets Day in September 2021. The roadmap focuses on four main key themes: sustainable partnerships, CO2 emission reduction in value chain, healthy and happy workplace, and efficiency throughout the product lifecycle. Sustainable partnerships Both upstream and downstream in its value chain, Robit develops the sustainability and operational performance through long-term partnerships. Robit works with partners who share similar principles and targets when it comes to environment, social responsibility, and governance. In 2021 Robit created sustainability compliance documents for it´s important external stakeholders. Distributors having contract with Robit and suppliers serving the needs of Robit production were asked to commit to Robit ESG principles. Partners are engaged to support Robit sustainability targets. Sustainability approach have been added to supplier audit agenda. CO2 emission reduction in Robit’s value chain Robit has identified CO2 reduction as one key focus area of sustainability. There are possibilities to effect to CO2 emissions by making changes in company´s own operations. However, it is also recognized that there is potential for improvement by influencing indirect effects and external stakeholders. As a first step Robit has built CO2 calculation tool to recognize Scope 1 and 2 CO2 emissions caused by Robit´s own operations. Robit’s 2020 carbon footprint (Scope 1 and 2) calculated according to Greenhouse Gas Protocol (GHG protocol) Corporate Standard was 3 383-ton CO2e corresponding to 36.9-ton CO2e per million euro of net sales. To reduce emissions, company have decided to increase share of green energy used in the factories. First change has been utilized in Robit Australian factory in October 2021. 2021 KPI result: 36,7 CO2e per million euro of net sales (2020: CO2e per million euro of net sales), change to baseline -0,5 percent. Healthy and happy workplace Robit targets to be a desired employer and to offer a healthy workplace for its employees. In addition to complying with statutory requirements the company wants to support employee wellbeing and competence development. “We respect everybody” is one of the three Robit values that have been actively communicated to personnel. Robit continually works to improve safety at the company. There is a Robit HSE Team in place, which coordinates safety activities within the Group. Robit continues to build diversity and inclusion as a natural part of Robit culture. Diversity is already today one of the strengths at Robit and there are tens of different nationalities working in the company. Several communication channels for the personnel have been taken into use, including etc. Feeling Pulse for weekly feedback, Yammer for informal discussions, Robit Talks where important topics, like values and company development areas are discussed, and Whistleblowing channel in accordance with the law. Efficiency throughout product lifecycle Efficiency throughout the product lifecycle means: • material efficiency in product design and production, • materials are sourced efficiently and from sources that share Robit’s ESG vision, • increasing product lifetime through training and value adding services, • decreasing waste in customers’ operations. Especially big leverage is in optimizing Robit’s customers’ drilling operations. By optimizing the drilling operation, it is possible to reduce energy consumption and increase rate of penetration and thus drilling efficiency. Robit has been training it´s sales and distributors so that they would have better capability to find best products for the end-users and thus support them to perform drilling in effective way. ESG KPIs and targets Robit has defined measurable targets for each four key themes in order to follow the realization of the ESG roadmap. Robit launched the targets as a part of the ESG plan in September 2021. SHARES AND SHARE TURNOVER On 31 December 2021, the company had 21,179,900 shares and 4,252 shareholders. The trading volume in January– December was 5,866,628 shares (7,539,280). The company holds 88,464 treasury shares (0.4% of total shares). On 31 December 2021, the market value of the company’s shares was EUR 85.4 million. The closing price of the share was EUR 4.03. The highest price in the review period was EUR 6.46 and the lowest price EUR 3.65. Shareholding of the board members and management 31 Dec 2021 Shares Share % Shareholding of the board members 5 860 397 27,67 % Harri Sjöholm * 5 759 427 27,19 % Kim Gran 26 226 0,12 % Mammu Kaario 22 106 0,10 % Mikko Kuitunen 13 084 0,06 % Anne Leskelä 6 226 0,03 % Kalle Reponen 33 328 0,16 % Group CEO 19 952 0,09 % Other management team members 34 710 0,16 % Total 5 915 059 27,93 % 27,06 % owned by Harri Sjöholm through Five Alliance Ltd Shareholdings by owner class (shares) 31 Dec 2021 Owners Owners % Votes Shares Share % 1 - 100 1 384 32,55 62 792 62 792 0,30 101 - 500 1 437 33,80 400 939 400 939 1,89 501 - 1 000 568 13,36 463 532 463 532 2,19 1 001 - 5 000 669 15,73 1 480 539 1 480 539 6,99 5 001 - 10 000 105 2,47 761 947 761 947 3,60 10 001 - 50 000 66 1,55 1 453 744 1 453 744 6,86 50 001 - 100 000 6 0,14 450 363 450 363 2,13 1 00 001 - 500 000 8 0,19 1 596 016 1 596 016 7,54 500 001 - 9 0,21 14 510 028 14 510 028 68,51 Total 4 252 100 21 179 900 21 179 900 100 In administrative registration 10 782 378 782 378 3,69 In waiting list 0 0 0 0 Shared accounts 0 0 0 0 On special purpose accounts total 0 0 0 0 Shares total 21 179 900 21 179 900 100 RISKS AND BUSINESS UNCERTAINTIES Robit closely monitors the impact of COVID-19 on demand in the sector. In general, customer activities have returned to normal levels. The effects on Robit’s operations are now limited and only affect individual countries or regions. COVID-19 continues to restrict travel and thus the implementation of some testing and sales growth projects. Robit will continue actions to protect the health of its personnel and to ensure the continuity of the company’s operations. At the time of reporting, all of the company’s factories were operating at design capacity. No disruptions in the supply chain have been identified that cannot be managed, for example, with current inventory levels and supplier cooperation. The geopolitical situation, which is growing tenser, poses a risk to the company’s business. The escalation of the situation may affect the development of net sales and profitability, especially in the East region, which accounts for 11% of the company’s sales. In addition, the effects of possible sanctions on the smooth flow of payment transactions pose a risk to the company’s cash flow and treasury management. Other uncertainty factors include exchange rate development, the functioning and commissioning of new information systems, integration of corporate acquisitions, risks related to the security of supply and logistics as well as the IPR risks. Fully transferring the increase in raw material costs to customer prices may pose a financial risk. Changes in export countries’ tax and customs legislation may adversely impact the company’s export trade or its profitability. Risks related to information security and cyber threats may also have a detrimental effect on Robit’s business. Potential changes in the business environment may adversely impact the payment behaviour of the Group’s customers and increase the risk of litigation, legal claims and disputes related to Robit’s products and other operations. CHANGES IN GROUP STRUCTURE There were no changes in the Group structure during the financial period. OTHER EVENTS IN OCTOBER–DECEMBER 2021 On 22 October 2021, the company updated its previous profit guidance for 2021. According to the new guidance, Robit Plc expected the market situation to remain at a good level for the rest of the year. The company estimated that net sales would grow and comparable profitability would improve in 2021 as follows: net sales would be EUR 97 to 101 million and adjusted EBITDA would be at least EUR 7 million, assuming that the exchange rates remained at the level of September 2021. According to the old guidance, Robit expected the market situation to develop positively and believed COVID-19 restrictions to have a limited impact on the demand of the company’s products in 2021. Robit Plc estimated that net sales for 2021 would grow and adjusted EBITDA profitability in euros would improve compared with 2020. On 28 October 2021, the company published its interim financial reporting for 1 January–30 September 2021. On 9 November 2021, the company published the company’s schedule for financial information and the Annual General Meeting of 2022. On 16 December 2021, the Board of Directors of Robit Plc decided to transfer a total of 19,500 shares of the company as Board fees to the members of the Board of Directors on the basis of the Board’s 2021 term of office. The transfer was based on the authorisation given by the Annual General Meeting on 25 March 2021. At the closing price of 15 December 2021, the total value of the shares to be transferred was EUR 78,000. It was decided to transfer to CEO Tommi Lehtonen a total of 3,000 shares as part of the fixed annual salary. The transfer was based on the CEO agreement. At the closing price of 15 December 2021, the total value of the shares to be transferred was EUR 12,000.00. It was decided to transfer to CFO Arto Halonen a total of 1,500 shares as part of the fixed annual salary. The transfer was based on the executive employment contract. At the closing price of 15 December 2021, the total value of the shares to be transferred was EUR 6,000.00. Therefore, the total number of shares to be transferred was 24,000 and their total value at the closing price of 15 December 2021 was EUR 96,000. The share rewards were paid with Robit Plc’s treasury shares held by the company, so the total number of Robit Plc’s shares did not change. Before the transfer, Robit Plc held 112,464 treasury shares, which was 0.5% of the company’s entire shareholding, and 88,464 after the transfers, which was 0.4% of the company’s total shares. The share rewards were paid by 23 December 2021. EVENTS AFTER THE REVIEW PERIOD On 20 January 2022, the company published the proposals of Robit Plc’s Shareholders’ Nomination Committee for the Annual General Meeting of 2022: The Nomination Committee proposes that the Annual General Meeting elect six (6) members to the Board of Directors. The Nomination Committee proposes to the Annual General Meeting that Kim Gran, Mikko Kuitunen, Anne Leskelä and Harri Sjöholm be re-elected as members of the Board of Directors for a term ending at the end of the next Annual General Meeting after the election. Of the current members of the Board, Mammu Kaario and Kalle Reponen have announced that they will no longer be available for the election of the members of the Board. Eeva-Liisa Virkkunen and Markku Teräsvasara are nominated as new members. All candidates have given their consent to the selection and are independent of the company and its major shareholders, with the exception of Harri Sjöholm, who is dependent on the company and its major shareholders. Harri Sjöholm is the majority shareholder in Five Alliance Oy, which holds 27.06% of the company’s shares. The Nomination Committee proposes to the Annual General Meeting that the annual remuneration for the Chairman of the Board is EUR 50,000, of which 40% is paid as shares and the remaining 60% is an advance tax withheld and paid to the Finnish Tax Administration by the company. The annual remuneration for the Board members is EUR 30,000, of which 40% is paid as shares and the remaining 60% is an advance tax withheld and paid to the Finnish Tax Administration by the company. The Nomination Committee also proposes that the Board members and the Chairman be paid a meeting fee of EUR 500 per meeting attended for Board meetings and committee meetings. Other costs such as travel and lodging expenses will also be compensated. The annual remuneration of the Chairman of the Board and Board members for the entire term of office will be paid in December 2022. The part of the remuneration paid in shares may be paid by issuing new shares in the company or by acquiring shares by the authorisation given to the Board of Directors by the General Meeting. The receiver of the remuneration pays the transfer tax. The Nomination Committee’s proposals will be included in the notice of the general meeting. Timo Sallinen (Senior Vice-President, Investments, Varma Mutual Pension Insurance Company) acted as the Chairman of the Shareholders’ Nomination Committee that prepared the proposals for the Annual General Meeting of 2022, with Harri Sjöholm (Chairman of the Board of Five Alliance Oy), Tuomas Virtala (CEO, Asset Management of OP Corporate Bank Plc) and Jukka Vähäpesola (CEO of Elo Mutual Pension Insurance Company) as the other members. On 26 January 2022, the company announced that it was strengthening its management team. As of 26 January 2022, the following key personnel of the company were appointed as new members of Robit’s management team: George Apostolopoulos, VP Global Sales; Adam Baker, VP Down the Hole; Jorge Leal, VP Top Hammer and Ville Pohja, VP Geotechnical. CFO Arto Halonen, CEO Tommi Lehtonen and HR Director Jaana Rinne will continue as members of the management team. KEY FIGURES SUMMARY 2021 2020 2019 2018 2017 Net sales, EUR 1 000 100 755 91 631 86 482 82 683 88 222 Net sales growth, percent 10 % 6.0 % 4.6 % -6.3 % 37.7 % EBITDA, EUR 1 000 7 595 5 116 1 605 -4 782 1 626 EBITDA, percent of sales 7.5 % 5.6 % 1.9 % -5.8 % 1.8 % Adjusted EBITDA 7 595 5 116 2 707 -3 529 3 500 Adjusted EBITDA, percent of sales 7.5 % 5.6 % 3.1 % -4.3 % 4.0 % EBITA, EUR 1 000 2 940 -48 -4 927 -9 658 -2 734 EBITA, percent of sales 2.9 % -0.1 % -5.7 % -11.7 % -3.1 % Adjusted EBITA 2 940 -48 -3 720 -8 405 -861 Adjusted EBITA, percent of sales 2.9 % -0.1 % -4.3 % -10.2 % -1.0 % EBIT, EUR 1 000 2 080 -868 -5 767 -29 800 -3 640 EBIT, percent of sales 2.1 % -0.9 % -6.7 % -36.0 % -4.1 % Result of the period, EUR 1 000 886 -2 894 -7 265 -31 384 -5 190 Result of the period, percent of sales 0.9 % -3.2 % -8.4 % -38.0 % -5.9 % Earnings per share (EPS), EUR 0.04 -0.14 -0.35 -1.49 -0.27 Return on equity (ROE), percent 1.8 % -5.9 % -13.4 % -41.9 % -7.3 % Return on capital employed (ROCE), percent 2.5 % -2.6 % -8.7 % -27.5 % -5.8 % Adjusted return on capital employed (ROCE), percent 2.5 % -2.6 % -7.4 % -26.4 % -4.2 % Net interest-bearing debt, EUR 1 000 31 996 21 228 22 967 15 810 7 752 Equity ratio, percent 42.2 % 45.6 % 47.4 % 49.3 % 57.6 % Equity per share, EUR 2.33 2.23 2.41 2.74 4.37 Net gearing, percent 65.1 % 45.2 % 45.3 % 27.4 % 8.4 % Gross investments, EUR 1 000 4 293 1 281 1 375 4 630 13 341 Gross investments, percent of sales 4.3 % 1.4 % 1.6 % 5.6 % 15.1 % Gross investments, excl. Acquisitions, EUR 1 000 4 293 1 281 1 375 4 630 11 139 R&D costs, EUR 1 000 436 566 569 1 228 1 482 R&D costs, percent of sales 0.4 % 0.6 % 0.7 % 1.5 % 1.7 % Average number of employees 267 257 274 308 296 Number of employees at the end of period 273 261 252 286 329 Dividend, EUR * 0.0 0.0 0.0 0.0 0.1 Dividend of the result, percent 0.0 % 0.0 % 0.0 % 0.0 % -37.0 % Effective dividend yield 0.0 % 0.0 % 0.0 % 0.0 % 1.5 % Price / earnings 213 -27 -8 -1 -37 Share price at the end of period 4.03 3.65 2.90 1.64 6.47 Lowest 3.65 1.7 1.58 1.58 6.42 Highest 6.46 3.65 3.97 8.18 11.73 Market capitalisation, EUR million 85.4 76.9 61.1 34.6 135.9 CORPORATE GOVERNANCE STATEMENT AND REMUNERATION REVIEW Robit Corporate Governance Statement for 2021 is published as a separate statement on Robit’s website: https://www.robitgroup.com/investor/corporate-governance/corporate-governance-statement/ Robit Remuneration Report 2021 is published as a separate statement on Robit’s website: https://www.robitgroup.com/investor/corporate-governance/remuneration-statement/ Lempäälä, 15 February 2022 ROBIT PLC Board of Directors 1 Robit Plc Consolidated financial statements 1 Jan – 31 Dec 2021 2 Contents Consolidated financial statements ................................................................................................................. 1 Consolidated statement of comprehensive income ....................................................................................... 4 Consolidated balance sheet ............................................................................................................................ 5 Consolidated statement of changes in equity ................................................................................................ 7 Consolidated statement of cash flows ............................................................................................................ 8 1 About the consolidated financial statements .................................................................................... 9 1.1 General information........................................................................................................................ 9 1.2 Basis of preparation ........................................................................................................................ 9 1.3 Management judgement and sources of uncertainty .................................................................. 10 2 Robit’s performance......................................................................................................................... 11 2.1 Net sales and segment information .............................................................................................. 11 2.2 Production’s materials and services ............................................................................................. 13 2.3 Employee benefits ........................................................................................................................ 13 2.4 Other operating income and expenses ......................................................................................... 16 2.5 Depreciation and amortization ..................................................................................................... 17 3 Acquisitions and intangible assets ................................................................................................... 18 3.1 Acquisitions ................................................................................................................................... 18 3.2 Goodwill & impairment testing ..................................................................................................... 18 3.3 Other intangible assets ................................................................................................................. 21 4 Capital structure and financing ........................................................................................................ 24 4.1 Share capital and reserves ............................................................................................................ 24 4.2 Earnings per share ........................................................................................................................ 25 4.3 Borrowings .................................................................................................................................... 26 4.4 Financial assets ............................................................................................................................. 29 4.5 Finance income and costs ............................................................................................................. 31 4.6 Financial risk and capital management......................................................................................... 32 4.7 Commitments and contingent liabilities ....................................................................................... 35 5 Operating assets and liabilities ........................................................................................................ 37 5.1 Property, plant and equipment .................................................................................................... 37 5.2 Inventories .................................................................................................................................... 40 5.3 Account and other receivables ..................................................................................................... 41 5.4 Account and other payables ......................................................................................................... 42 5.5 Provisions ...................................................................................................................................... 43 5.6 Advance payments received ......................................................................................................... 43 6 Other notes ...................................................................................................................................... 44 6.1 Subsidiaries and foreign currencies .............................................................................................. 44 6.2 Taxes ............................................................................................................................................. 46 3 6.3 Related party transactions ............................................................................................................ 49 6.4 Subsequent events ........................................................................................................................ 51 6.5 New and amended standards adopted by the group ................................................................... 51 4 Consolidated statement of comprehensive income EUR thousand Note 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Net sales 2.1 100 755 91 631 Other operating income 2.4 1 690 2 524 Materials and services 2.2 -65 699 -58 773 Employee benefit expense 2.3 -16 280 -15 747 Depreciation, amortization and impairment 2.5 -5 514 -5 984 Other operating expenses 2.4 -12 871 -14 520 EBIT (Operating profit) 2 080 -868 Finance income and costs Finance income 4.5 924 286 Finance cost 4.5 -2 253 -2 936 Finance income and costs net -1 329 -2 650 Profit before income tax 751 -3 518 Income taxes Current taxes -333 -380 Change in deferred taxes 468 1 004 Income taxes 6.2 135 624 Result for the period 886 -2 894 Attributable to: Owners of the parent 843 -2 894 Non-controlling interest 44 0 886 -2 894 Other comprehensive income Items that may be reclassified to profit or loss in subsequent periods: Cash flow hedges 4.4 45 - Translation differences 4.1 1 003 -1 088 Other comprehensive income, net of tax 1 048 -1 088 Total comprehensive income 1 934 -3 981 Attributable to: Owners of the parent 1 892 -3 981 Non-controlling interest 42 0 1 934 -3 981 Earnings per share attributable to the owners of the parent during the year: Basic and diluted earnings per share 4.2 0,04 -0,14 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 5 Consolidated balance sheet EUR thousand Note 31-Dec-21 31-Dec-20 ASSETS Non-current assets Goodwill 3.1 5 487 5 134 Other intangible assets 3.2 2 695 3 809 Property, plant and equipment 5.1 27 396 24 641 Loan receivables 4.4 287 386 Other receivables 0 3 Derivatives 4.4 56 0 Deferred tax assets 6.2 1 926 1 528 Total non-current assets 37 847 35 500 Current assets Inventories 5.2 43 538 34 857 Account and other receivables 4.4, 5.3 25 337 18 621 Loan receivables 4.4 100 125 Income tax receivable 6.2 57 81 Cash and cash equivalents 4.4 9 525 14 339 Total current asset 78 557 68 023 Total assets 116 403 103 523 EUR thousand 31-Dec-21 31-Dec-20 EQUITY AND LIABILITIES Equity attributable to owners of the parent Share capital 4.1 705 705 Share premium 4.1 202 202 Reserve for invested unrestricted equity 4.1 82 570 82 570 Cumulative translation difference 4.1 -1 793 -2 798 Fair value reserve 4.1 45 - Retained earnings 4.1 -33 738 -30 796 Profit for the year 4.1 843 -2 894 Equity attributable to parent company shareholders in total 48 833 46 989 Non-controlling interest 281 - Total equity 49 114 46 989 Liabilities Non-current liabilities Borrowings 4.3 25 209 19 247 Lease liabilities 4.3 5 813 5 166 Deferred tax liabilities 6.2 694 798 Employee benefit obligations 2.3 725 628 Total non-current liabilities 32 441 25 838 Current liabilities 6 Borrowings 4.3 8 619 9 941 Lease liabilities 4.3 1 881 1 213 Advances received 5.5 771 130 Income tax liabilities 6.2 259 283 Account payables and other liabilities 5.4 23 278 19 029 Provisions 5.5 40 100 Total current liabilities 34 848 30 696 Total liabilities 67 289 56 535 Total equity and liabilities 116 403 103 523 The above consolidated balance sheet should be read in conjunction with the accompanying notes. 7 Consolidated statement of changes in equity A= Share capital B = Share premium C = Reserve for invested unrestricted equity D = Cumulative translation difference E = Fair value reserve F = Retained earnings G = Equity attributable to parent company shareholders H = Non-controlling interest I = Total equity EUR Thousand A B C D E F G H I Equity on 31 December 2019 705 202 82 268 -1 710 -30 744 50 721 Other changes -223 -223 Equity on 1 January 2020 705 202 82 268 -1 710 -30 968 50 498 Profit for the period -2 894 -2 894 Other comprehensive income Translation difference -1 088 -1 088 Total comprehensive changes 0 0 0 -1 088 -2 894 -3 981 Equity issue 183 183 Share-based payments to employees 44 172 216 Use of treasury shares 74 74 Total transactions with shareholders, recognised directly in equity 0 0 301 0 172 473 Equity on 31 December 2020 705 202 82 570 -2 798 -33 690 46 989 EUR Thousand A B C D E F G H I Equity on 1 January 2021 705 202 82 570 -2 798 -33 690 46 989 46 989 Profit for the period 843 843 44 886 Other comprehensive income Cash flow hedges 45 45 45 Translation differences 1 005 1 005 -2 1 003 Total comprehensive changes 1 005 45 843 1 892 42 1 934 Share based payments to employees -142 -142 -142 Use of treasury shares in the remuneration of the Board of Directors 94 94 94 Changes in non-controlling interests 0 240 240 Total transactions with shareholders, recognised directly in equity -48 -48 240 191 Equity on 31 December 2021 705 202 82 570 -1 793 45 -32 896 48 833 281 49 114 * Other changes include corrections to 2019 IFRS 16 calculations and Robit SA inventory 8 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Consolidated statement of cash flows EUR thousand Note 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Cash flows from operating activities Profit before income tax 751 -3 518 Adjustments Depreciation, amortization and impairment charges 2.5 5 514 5 984 Finance income and finance costs 4.5 1 329 2 650 Share-based payments to employees 2.3 -178 182 Loss (+) on sale of property, plant and equipment 2.4 -144 158 Other non-cash transactions 553 1 704 Cash flows before changes in working capital 7 826 7 160 Change in working capital Increase (-) in account and other receivables -6 452 1 Increase (-) / decrease (+) in inventories -8 187 -5 000 Increase (+) in account and other payables 4 032 3 395 Cash flows from operating activities before financial -2 785 5 555 items and taxes Interest and other finance expenses paid -1 046 -1 083 Interest and other finance income received 22 28 Income taxes paid -365 -238 Net cash inflow (outflow) from operating activities -4 174 4 263 Cash flows from investing activities Purchases of property, plant and equipment 5.1 -4 169 -1 204 Purchases of intangible assets 3.3 -124 -77 Proceeds from the sale of property, plant and equipment 279 103 Proceeds from loan receivables 4.4 129 6 Net cash inflow (outflow) from investing activities -3 885 -1 173 Cash flows from financing activities Share issue 4.1 0 79 Distribution of dividends -9 0 Changes in loans 4.3 5 385 -1 751 Change in bank overdrafts 4.3 -478 -179 Payment of lease liabilities 4.3 -1 807 -1 774 Net cash inflow (outflow) from financing activities 3 091 -3 626 Net increase (+) / decrease (-) in cash and cash equivalents -4 968 -536 Cash and cash equivalents at the beginning of the financial year 4.4 14 339 15 248 Exchange gains/losses on cash and cash equivalents 154 -370 Cash and cash equivalents at end of the year 4.4 9 525 14 339 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. 9 1 About the consolidated financial statements 1.1 General information These are the consolidated financial statements of Robit Plc (the “Company”) and its subsidiaries (together referred as “Robit”, or the “Group”). Robit is a Finnish Group that sells and services drilling consumables for global customers for applications in the tunnelling, geothermal heating and cooling, construction and mining industries. Robit has 9 offices and active sales networks in over 100 countries. Robit has production units in Finland, South Korea, Australia and UK. Robit Corporation is a publicly listed company and its shares are listed on the NASDAQ OMX Helsinki Ltd main list with trading code ROBIT. Robit Plc, the parent company of Robit is a Finnish public limited liability company. The registered address of Robit Plc is Vikkiniityntie 9, FI-33880 Lempäälä, Finland. Copies of the consolidated financial statements are available at the head office at Robit Oyj and at Robit’s home pages www.robitgroup.com. The Board of Directors of Robit Plc has approved these consolidated financial statements for issue on February 15 th , 2022. Under the Finnish Limited Liability Companies Act, shareholders can approve or disapprove the consolidated financial statements in the Annual General Meeting held after the release. The Annual General Meeting is also entitled to amend the consolidated financial statements. 1.2 Basis of preparation The consolidated financial statements of Robit have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, conforming with the International Accounting Standards (IAS) and IFRS standards as well as SIC and IFRIC interpretations applicable as per 31 December 2021. The notes to the consolidated financial statements also comply with the Finnish accounting and corporate legislation complementing the IFRS standards. The consolidated financial statements of Robit have been prepared on a historical cost basis, except for the derivative financial instruments, that are measured at fair value through profit or loss. Financial statements are presented in thousands of euros. The figures presented in the financial statements are rounded and therefore the sum of individual figures may differ from the presented sum figure. Items included in the financial statements of each of the Group’s subsidiaries are measured using the currency of the primary economic environment in which the subsidiary operates (‘the functional currency’). The Company’s functional currency is euro, which is also the presentation currency of Robit’s consolidated financial statements. Parent company Robit Plc financial statements have been prepared according to Finnish Accounting Standards (FAS). 10 1.3 Management judgement and sources of uncertainty The preparation of financial statements requires the use of estimates and assumptions that may affect the recognized amounts of assets and liabilities at the date of the financial statements. In addition, the recognized amounts of net sales and expenses during the periods presented are affected. Actual results may differ from previously made estimates. The management’s assumptions and estimates can be found in the following notes: How should Robit’s financial statements be read? Robit has focused in its financial statements on the information, which it considers to be relevant to the stakeholders and other users of financial statements. The notes to the consolidated financial statements include six sections: About the consolidated financial statements, Robit’s performance, Acquisitions and intangible assets, Capital structure and financing, Operating assets and liabilities and Other Notes. Each part includes related significant accounting principles. This presentation aims at providing the reader a clear understanding of the Group’s financial position and performance as well as selected accounting policies. Key judgements and estimates Note Goodwill impairment testing 3.2. Fair value of the acquired assets (customer relationships and brand) 3.1. Other intangible assets (capitalized development expenses) 3.3. Inventory valuation 5.2. Deferred tax assets and liabilities 6.2. Overdue receivables 4.6. 11 2 Robit’s performance 2.1 Net sales and segment information Accounting policies Product sales Robit enters into contracts with customers to supply its products, such as drill bits and casing systems. In general, these products are standardised and require only limited specifications provided by customers. Robit is responsible for the purchase or production of the products and in some cases also for their delivery. The performance obligation ends when the goods have been delivered to the customer. If the performance obligation ends based on terms of delivery only when the customer has received the goods, sales revenue is recognised at the time of receipt. The time of recognition of sales is specified by terms and conditions in the sales contract, such as based on terms of delivery or the customer’s acceptance procedure. Longer-term supply contracts covering individual purchase orders are also entered into with customers, for example for the supply of consumables for mines or projects. The performance obligations associated with these longer-term contracts are recognised based on terms of delivery at the time of delivery and are not partially recognised, for example based on the degree of completion of the projects over time, because Robit’s products are consumables in nature. Return or repayment obligations are generally not associated with supply contracts. Robit is responsible for ensuring that the products meet the customer’s order in terms of technical specifications and also Robit’s own quality standards at the time of delivery. If a technical or qualitative problem due to Robit is identified in a product, Robit is obliged to supply to customer with replacement products. These obligations are assessed for each contract in turn, and a separate warranty provision is recognised for them (presented in Note 5.5). Because the products are consumables in nature, no long-term warranty obligations that could be payable in future financial years are associated with the products. Some customer contracts may contain a variable discount component that allows the customer to receive a quantity discount if the quantities of the original delivery contract are exceeded. In these cases, the realisation of the quantity discount is estimated for each contract in turn and deducted for sales revenue based on the most probable value. The significance of such contracts for the recognition of Robit’s sales revenue is currently very minor, however. For these reasons, no significant judgmental decisions are made in the recognition of sales revenue. Terms of payment and payment periods vary from customer to customer. The applied terms of payment and length of payment period granted to the customer are influenced by, among other things, the geographical location of the customer and the production plant and their distance from each other. In addition, the customer’s terms of payment are influenced by the customer-specific credit risk, which is assessed based on the customer’s geographical location, the customer’s financial situation and the customer’s previous payment behaviour. Typically, credit terms of payment are used with customers in cases where the performance obligation ends before payment is received from the customer. Cash discounts are generally not used but, if they are used, the cash discounts given are deducted from net sales. With some customers, an advance payment principle is applied, and the advance payments received from customers are entered in the balance sheet (disclosed in Note 5.6). Significant credit components are generally not associated with sales transactions. Sales of products with after-sales support Robit enters into service agreements with customers that include services such as technical support or training in addition to supplying the products. These services bring added value for the client and they are not part of the integration of products that takes place at the customer. The agreements therefore typically include more performance obligations, service and products sold. Selling prices are allocated to different performance obligations relative to their separate selling prices. Possible discounts are allocated proportionately to all performance obligations. Product sales revenue is recorded at a specific time (see above), whereas sales revenue for services is recognised over time as the customer simultaneously receives and consumes the services provided by Robit. The degree of fulfilment of a performance obligation relative to sales is measured using the output-based method, whereby the degree of fulfilment is measured based on the service provided to date. 12 Net sales by business unit Net sales from external customers broken down by strategic business units is shown on the table below. Net sales by product area EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Top Hammer 56 287 46 348 Down the Hole 44 468 45 283 Total 100 755 91 631 Net sales by market area Net sales from external customers broken down by location of the customers is shown on the table below. EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 EMEA 45 298 40 028 Americas 19 960 14 008 Asia 10 771 11 397 Australasia 14 001 13 654 East 10 725 12 544 Total 100 755 91 631 None of the Robit’s customer generated more than 10 per cent of the Group’s revenue for the year ended 31 December 2021 or 2020. Segment information The chief operating decision-maker has been identified as Robit's board of directors. The board of directors is responsible for strategy, appointing key management positions, significant development projects, business combinations, investments, organization structure and financing. A global skilled sales and distributor organizations recognizing customer needs and requirements in addition to high quality manufacturing based on local subcontractors and global sourcing function are cornerstones of Robit’s operations. In accordance with its strategy, Robit is primarily a sales company on global markets. Robit’s sales organization is divided into geographical regions (EMEA, Americas, Asia, Australasia and East). Four manufacturing units located in Finland, South Korea, Australia and UK, are common resources for business operations. These manufacturing units serve the entire sales organization bus concentrating to manufacture certain type or certain size of products. In order to manage the efficiency of the resources, the business is divided into two strategic business units (SBU): Top Hammer and Down the Hole. The SBU’s are structured around the different drilling technologies but they have substantial synergies in sales, manufacturing and sourcing. Due to the Group’s structure and nature of business, the business is presented as one segment, which includes group services and other items. The board of directors regularly reviews consolidated net sales and profitability of the group. In addition, the board of directors reviews net sales of the sales regions and the strategic business units. 13 2.2 Production’s materials and services Materials and services recognized as an expense during the year ended 31 December 2021 amounted to EUR 65 699 thousand (2020: EUR 58 773 thousand). Materials and services include purchases of raw materials such as steel, tungsten carbide, trading products and subcontracting services inventories and changes in inventories. EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Subcontracts -948 -405 External services -5 805 -3 549 Sales freights -2 710 -1 803 Sales provisions and Royalties -586 -502 Maintenance expenses -647 -588 Cost of sales -55 003 -51 927 Total -65 699 -58 773 2.3 Employee benefits Accounting policies Short-term benefits Short-term employee benefits include wages and salaries, including non-monetary benefits and annual leave compensations expected to be settled within 12 months of the reporting date. Short-term benefits are recognized in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Post-employment benefits Robit’s pension plans are defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity with no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. Contributions to the defined contribution plans are charged directly to the statement of comprehensive income in the year to which these contributions relate. Other long-term benefits Other long-term employee benefits are long-service leave or sabbatical leave, jubilee or other long-service benefits and long-term disability benefits. Robit has other long-term employee benefits plans in Australia (long-service leave) and in Korea (severance payment). Robit key employees are obliged to take part into a long-term incentive plan based on initial investment to Robit shares. The expense is accrued to the period, on which the employee is able to utilize the benefit. Termination benefits Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. 14 EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Wages and salaries -13 507 -13 102 Pension costs - defined contribution plans -1 264 -1 038 Social security expenses -920 -660 Share-based payments 47 -300 Other long-term benefits -289 -257 Other employee benefit expenses -347 -390 Total -16 280 -15 747 Robit’s number of personnel increased in 2021 by 12 persons compared to 2020, with the total number of personnel being 273 at the end of the period under review (2020: 261). Robit’s average number of personnel was 267 persons during the financial period 2021 and 257 in 2020. Robit has both defined contribution plans and defined benefit plans. All pension plans are defined contribution plans. In Australia, the employees are entitled to be paid long-service leave after 10 years of service in the same business. This arrangement is defined as other long-term employee benefit and thus defined benefit plan. Expenses related to long-service leave amounted to EUR 46 thousand for the year ended 31 December 2021 (2020: EUR 8 thousand). The liability related to long-service fee amounted to EUR 257 thousand as at 31 December 2020 (2020: EUR 289 thousand). In Korea, Robit has severance payment plan, where employees earn the benefit based on their service and the whole benefit is paid to an employee when an employment ends. This plan meets the criteria of being other long-term employee benefit and thus defined benefit plan. Expenses related to severance payment plan amounted to EUR 265 thousand for the year ended 31 December 2021 (2020: EUR 197 thousand). The employee benefit obligation recognized for severance payment plan amounted to EUR 467 thousand as at 31 December 2021 (2020: EUR 338 thousand). Long-term remuneration: share-based incentive plan Share-based incentive scheme 2018–2021 On 15 June 2018, Robit’s Board of Directors decided on a new share-based incentive scheme for the Group’s management and key personnel. The scheme has three parts: the key person’s own investment in the company, reward shares and a performance-based additional share scheme. Obtaining a reward from the share scheme required the acquisition of Robit Plc’s shares by the key person. The additional share scheme has two commitment periods, which started on 1 September 2018 and 1 September 2019. For shares subject to the share ownership conditions, the key person will receive shares as a reward after a commitment period of around three years. Receiving the shares is dependent on the continuation of the employment or service contract at the time of payment of the reward. The rewards payable on the basis of the commitment period that started on 1 September 2018 will correspond to the value of a maximum of 24,000 Robit Plc shares, also including the component payable in cash. The targets set for the earning period 2018–2020 of the performance-based additional share scheme were not achieved, and no reward will be paid for the earning period of the performance-based additional share scheme that ended on 31 December 2020. The incentive scheme ended on 31 May 2021 when the rewards of the additional share scheme were paid, and they did not include any transfer restrictions in accordance with the rules of the scheme. Long-term share-based incentive scheme for the CEO 2019–2024 15 On 24 September 2019, the Board of Directors of Robit Plc decided on a long-term share-based incentive scheme for the CEO. The scheme covers Tommi Lehtonen, who started as the CEO of the Group on 1 May 2019. The share reward scheme has three earning periods and covers the period from 1 January 2019 to 31 December 2024. The Board of Directors of Robit Plc sets targets for each two-year earning period starting from 2019. The earning periods end on 31 December 2020, 31 December 2022 and 31 December 2024. The rewards payable on the basis of this system will correspond to the value of a total of 160,000 Robit Plc shares, also including the amount of money used for taxes and tax- related payments. The number of shares corresponds to approximately 0.8% of the total number of the company’s shares. The rewards of the incentive scheme are paid in three instalments after the end of each earning period. No reward was paid to the CEO for the earning period ending on 31 December 2020. Share-based incentive scheme 2020–2023 On 25 February 2020, Robit’s Board of Directors decided on a new share-based incentive scheme for the Group’s management and key personnel, including own investment of the key personnel in Robit shares (base share plan), reward shares by the company (matching share plan) and performance-based additional share plan (performance matching plan). The share-based incentive scheme covers approximately 25 individuals. The company’s matching shares and performance matching shares will be paid in April 2023. If all three main elements of the scheme are fulfilled in total as determined in the plan and according to the target setting of the Board of Directors of the company, the maximum amount of shares issued based on the plan will be 401,760 shares, corresponding to 2.1% of the entire current shareholding. Share-based incentive scheme 2021–2024 On 15 June 2021, Robit Plc’s Board of Directors decided on a performance-based share reward scheme for key personnel. The share scheme includes earning periods of one and two years. The first earning period of the share scheme comprises the year 2021 and the second earning period comprises the years 2022–2023. The share scheme’s potential reward for the one-year earning period 2021 is based on the company’s predetermined EBITDA target in the financial statements for 2021. The share scheme’s possible reward for the two-year earning period 2022–2023 is based on the company’s predetermined average earnings per share in the financial statements for the years 2022 and 2023. The share scheme’s possible reward for both earning periods will be paid in May 2024. The share scheme covers 21 individuals. The total amount of share rewards payable on the basis of the earning periods 2021 and 2022–2023 corresponds to a maximum of 155,000 Robit Plc shares, corresponding to 0.7% of the company’s current share capital. Instrument LTI 2018 LTI 2019-2024 LTI 2020-2023 LTI 2021-2024 Total Issuing date 14.6.2018 31.5.2019 24.3.2020 24.6.2021 Initial amount, pcs 284 000 160 000 441 760 155 000 1 040 760 Dividend adjustment No No No No Initial allocation date 14.6.2018 24.9.2019 11.6.2020 15.6.2021 Beginning of earning period 1.1.2018 1.1.2019 1.1.2020 1.1.2021 End of earning period 31.12.2020 31.12.2024 31.12.2022 31.12.2023 Vesting date 31.5.2021 31.12.2024 30.4.2024 30.4.2024 Vesting conditions Net sales & EPS Defined separately for each vesting period Net sales EBITDA & EPS Maximum contractual life, years 2,5 6 3,8 2,9 Remaining contractual life, years 0 3 2,3 2,4 Number of persons at the end of year 0 1 17 21 Payment method Cash & Equity Cash & Equity Cash & Equity Cash & Equity 16 2.4 Other operating income and expenses Accounting policies Government grants relating to costs are deferred and recognized in the profit or loss over the period necessary to match them with the costs that they are intended to compensate. Robit as lessee Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. Robit as a lessor As of 1 January 2019, the Group has applied the IFRS 16 standard which replaces old IAS 17 Leases-standard. Robit adopted the IFRS 16 standard from 1 January 2019, using the modified retrospective approach whereby comparative financial information is not restated. Other operating income EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Operational exchange rate income 1 353 1 484 Other operating income 337 1 040 Total 1 690 2 524 In December 2020 the company was given a ruling of a partial forgiveness of a R&D loan. This had a positive impact of 0.5 million to Other operating income. Other operating expenses EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Administration costs -6 587 -6 587 Lease payments -31 -31 Premise expenses -1 197 -1 197 Operational exchange rate expenses -2 965 -2 965 Other operating expenses -3 740 -3 740 Total -14 520 -14 520 Auditor’s fees EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Statutory fees -301 -301 Tax consultancy -22 -22 Other services -3 -3 Total -327 -327 17 Ernst & Young -company portion of statutory fees is 225 thousand euros for auditing. 2.5 Depreciation and amortization Accounting policies Property, plant and equipment and other intangible assets are recognized on the balance sheet at cost less accumulated depreciations, amortizations and impairment losses, if any. Depreciation and amortization is recognized on a straight-line basis to write off the cost over the estimated economic useful life of assets. The assets’ useful lives are reviewed, and adjusted when necessary, at each balance sheet date. Depreciation and amortization periods are disclosed in notes 3.3 and 5.1. EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Depreciation by class Land and water -51 -54 Buildings and constructions -1 590 -1 559 Machinery and equipment -2 236 -2 456 Other tangible assets -301 -316 Total -4 178 -4 385 Right of use asset (IFRS 16) depreciation amounted to EUR 1 662 thousand (2020: 1 496) EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Amortization by class Customer relationships and brand -859 -820 Intangible rights -69 -142 Other intangible assets -408 -637 Total -1 336 -1 599 Customer relationships and brand were recognized in connection of the acquisitions. Please refer to Note 3. 18 3 Acquisitions and intangible assets 3.1 Acquisitions Accounting policies Robit applies the acquisition method to account for business acquisitions. Identifiable assets acquired and liabilities in business acquisitions are measured initially at their fair values at the acquisition date. The fair value of the consideration transferred comprises the initial cash paid to the sellers and an estimate of any future payments Robit may be liable to pay based on future performance of the business. This latter amount is classified as contingent consideration and can be either classified as equity or a financial liability. Where settlement of any part of cash consideration is deferred the amounts payable in the future are discounted to their present value. Goodwill is initially measured as the excess of the aggregate of the consideration transferred over the net identifiable assets acquired and liabilities assumed. Acquisitions in 2021 No acquisitions in 2021. Acquisitions in 2020 No acquisitions in 2020. 3.2 Goodwill & impairment testing Accounting policy Goodwill arises on the acquisition of subsidiaries. Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the assets and liabilities of the acquiree. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. The allocation is made to those cash generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose. The Group uses value in use calculations when assessing the recoverable amount. In assessing the recoverable amount, estimated future net cash flows are discounted to their present value based on the weighted average pre-tax cost of capital. The weighted average cost of capital reflects the current market view of the time value of money and risks related to the units to be tested. Key judgements and estimates – fair value of the acquired net assets Net assets acquired through business combinations are measured at fair value. The measurement of fair value of the acquired net assets is based on market value of similar assets (property, plant and equipment), or an estimate of expected cash flows (intangible assets). The valuation, which is based on prevailing repurchase value, expected cash flows or estimated sales price, requires management judgement and assumptions. The management trusts that the applied estimates and assumptions are sufficiently reliable for determining fair values. 19 An impairment loss is charged to the statement of income when the carrying amount of CGU exceeds the recoverable amount. Impairment loss is first allocated to goodwill and then to other assets on a pro rata basis. Impairment losses recognized for goodwill in the statement of income are not reversed. The table below presents the movements of goodwill: EUR thousand 2021 2020 Carrying value at 1 January 5 134 5 420 Exchange differences 353 -286 Carrying value at 31 December 5 487 5 134 The table summarizes the allocation of goodwill to business units: EUR thousand 2021 2020 Down the hole 5 399 5 046 Top Hammer 87 88 Total 5 487 5 134 The goodwill of Top Hammer cash-generating unit has been tested for impairment as of December 31, 2021. The values used for the goodwill testing and their impact are presented in the table below. Based on the assumptions below, the recoverable amount of the Top Hammer cash-generating unit is estimated to exceed the carrying amount of tested net assets by EUR 5 582 thousand, which represents 11 % of the carrying amount of the tested assets. Management has determined the values for key assumptions used in the impairment testing of the Top Hammer cash- generating unit as follows: Key judgements and estimates – goodwill impairment testing The management makes significant estimates and judgements in determining the level at which the goodwill is tested and whether there are any indications of impairment. The goodwill in the Robit’s balance sheet arose mainly in June and July 2016 when Robit acquired Robit Australia and Robit GB, but also acquisition in February 2017 of Halco. Robit has re-organized its Down the Hole business and substantial savings in production and supply chain are expected to be gained. Robit has two CGU’s Top Hammer and Down the Hole). Cash flow estimates are based on management’s best estimates for future net sales, cost development, general market conditions and applicable tax rates. The estimate covers following three-year period. The cash flows beyond this period are based on the estimated growth rates stated below. Management tests the effects of changes of significant estimates used in forecasts by sensitivity analyses in a way described below. 20 Assumption Approach used to determine values Net sales growth The cumulative annual growth rate for the revenue is expected to be 7.2 % (2020: 10.0%) during the three-year forecast period. Net sales are expected to increase since training and development of the distribution network has been targeted better as well as the Korean facility’s improved performance allows more active pricing and enables growth of market share. EBITDA-margin Average EBITDA-margin is expected to be 11.4% (2020: 11.5 %) during the three-year forecasting period. The long-term EBITDA is expected to be 14.0% (2020: 13.6 %) of the net sales. This is based on implemented measures and management’s expectations for future development. Long-term growth rate The long-term growth rate beyond three year forecast period is expected to be 1.5% (2020: 1.5%) per annum. This in line with the expected long-term inflation rate. Pre-tax discount rate The pre-tax discount rate used in impairment testing is 13.3% (2020: 13.1 %). This reflects the specific risks relating to Down the Hole business and the countries in which it operates. The recoverable amount of Top Hammer cash-generating unit would equal its carrying amount if any of the key assumptions were to change as follows (keeping other assumptions constant): Assumed values in goodwill impairment calculations From To Average EBITDA-margin during the three-year forecast period 11.4 % 7.0 % Average EBITDA-margin (exceeding the three-year forecasting period) 14.0 % 12.8 % Pre-tax discount rate 13.3 % 14.7 % If the long-term growth rate of the Top Hammer cash-generating unit beyond the three-year forecast period was 0.5% instead of 1.5%, the recoverable cash flow would be 6.3% higher than the carrying amount: Long-term growth rate exceeding the three-year forecasting period Growth 1.5% Growth 0.5% Recovarable amount of cashflow exceeding carrying amount  11,3%  6,3% The goodwill of Down the Hole cash-generating unit has been tested for impairment as of December 31, 2021. The values used for the goodwill testing and their impact are presented in the table below. Based on the assumptions below, the recoverable amount of the Down the Hole cash-generating unit is estimated to exceed the carrying amount of tested net assets by EUR 4 931thousand, which represents 16 % of the carrying amount of the tested assets. Management has determined the values for key assumptions used in the impairment testing of the Down the Hole cash- generating unit as follows: Assumption Approach used to determine values Net sales growth The cumulative annual growth rate for the revenue is expected to be 12.2% (2020: 8.2 %) during the three-year forecast period. Net sales is expected to increase due to the synergies related to business combinations after training of the distribution networks has been completed and the steady development of the market. EBITDA-margin Average EBITDA-margin is expected to be 9.9% (2020: 11.2%) during the three-year forecasting period. The long-term EBITDA is expected to be 12.0% (2020: 12.6%) of the net sales. This is based on implemented measures and management’s expectations for future development. 21 Long-term growth rate The long-term growth rate beyond three-year forecast period is expected to be 1.5% (2020: 1.5%) per annum. This in line with the expected long-term inflation rate. Pre-tax discount rate The pre-tax discount rate used in impairment testing is 13.3% (2020: 12.7%). This reflects the specific risks relating to Down the Hole business and the countries in which it operates. The recoverable amount of Down the Hole cash-generating unit would equal its carrying amount if any of the key assumptions were to change as follows (keeping other assumptions constant): Down The Hole 2021 Assumed values in goodwill impairment calculations From To Average EBITDA-margin during the three-year forecast period 9.9 % 3.1 % Average EBITDA-margin (exceeding the three-year forecasting period 12.0 % 10.0 % Pre-tax discount rate 13.3 % 15.2 % If the long-term growth rate of the Down the Hole cash-generating unit beyond the three-year forecast period was 0.5% instead of 1.5%, the recoverable cash flow would be 11.4% higher than the carrying amount: Long-term growth rate exceeding the three-year forecasting period Growth 1.5% Growth 0.5% Recovarable amount of cashflow exceeding carrying amount  16.2 %  11.4 % 3.3 Other intangible assets Accounting policy Intangible assets are recognized in the balance sheet when the asset can be controlled by Robit, the expected future benefits attributable to the asset will flow to Robit and the cost of the asset can be measured reliably. An intangible asset is initially recognized at cost, comprising of its purchase price and any directly attributable expenditures. Intangible assets are carried in the balance sheet at acquisition cost less any accumulated amortization and any accumulated impairment losses. Intangible assets are amortized using the straight-line method depending on the useful life of the asset. The appropriateness of the amortization periods and method is assessed at each balance sheet date. The useful lives for Robit’s intangible assets are as follows: Years Customer relationships 7-10 Brand 15 Intangible rights 5 Other intangible assets 5 Development costs Development costs are capitalized when certain criteria related to economic and technical feasibility are met, and it is expected that the product will generate future economic benefits. Capitalized development costs include mainly materials, supplies and direct labour costs. Earlier expensed development costs are not capitalized later. Intangible assets under development are not amortized, but they are tested for impairment at least annually. 22 Other intangible assets EUR thousand Customer relation- ships Brand Intangible rights Other intangible assets Total 2021 Cost at 1 January 5 788 823 669 5 810 13 091 Additions 0 0 86 38 124 Disposals 0 0 0 0 0 Reclassifications 0 0 0 0 0 Exchange differences 147 58 -1 13 217 Cost at 31 December 5 935 881 754 5 861 13 432 Accumulated amortization and impairment at 1 January -3 561 -247 -652 -4 268 -9 282 Amortization -802 -57 -69 -211 -1 336 Disposals And impairment 0 0 0 0 0 Exchange differences -92 -19 1 0 -119 Accumulated amortization and impairment at 31 December -4 454 -323 -720 -4 478 -10 737 Net book amount at 1 January 2 227 576 17 1 543 3 809 Net book amount at 31 December 1 481 558 34 1 383 2 695 EUR thousand Customer relationships Brand Intangible rights Other intangible assets Total 2020 Cost at 1 January 5 804 870 663 5 749 13 087 Additions 0 0 9 69 77 Disposals 0 0 0 0 0 Reclassifications 0 0 0 0 0 Exchange differences -17 -47 -3 -7 -73 Key judgements and estimates - capitalized development expenses Costs incurred in the development phase of a development project are capitalized as intangible assets if a number of criteria are met. Management has made judgements and assumptions when assessing whether a project meets these criteria, and on measuring the costs and the economic life as well as the future cash inflows generated by the development projects. Expected returns from capitalized development projects involve estimates and judgement from the management about the future net sales and related costs. These estimates involve risks and uncertainties, and it is possible that, following changes in circumstances, expected returns from capitalized development projects change. Robit assesses indications of impairment for capitalized development projects. The value for capitalized development projects may decrease, if the expected returns from new services change. Key judgements and estimates related to intangible assets acquired in connection with business combinations are discussed in section Acquisitions. 23 Cost at 31 December 5 788 823 669 5 810 13 091 Accumulated amortization and impairment at 1 January -2 771 -203 -512 -4 188 -7 675 Amortization -764 -56 -142 -637 -1 599 Disposals And impairment 0 0 0 0 0 Exchange differences -26 11 3 3 -9 Accumulated amortization and impairment at 31 December -3 561 -247 -652 -4 822 -9 282 Net book amount at 1 January 3 034 667 151 1 561 5 412 Net book amount at 31 December 2 227 576 17 988 3 809 Intangible assets customer relationships and brand were recognized in connection with the acquisitions of Robit Australia and Robit GB in 2016. Intangible rights include mainly patents. Robit aims to continue to strengthen its existing patent and intellectual property portfolio by acquiring and licensing strategic patents, other intellectual property rights and technologies. Other intangible assets inclue capitalised development costs and IT software. Research and development Robit continues to invest in its own product development projects and in collective product development projects in the industry in order to secure a competitive and innovative offering. Total costs relating to research and development recognized to the consolidated statement of comprehensive income were EUR 436 thousand in 2021 and EUR 566 thousand in 2020. Robit has, among others, developed the Robit Sense Systems technology designed for monitoring and measuring drilling results. Capitalized development expenses in the balance sheet amounted to EUR 436 thousand as at December 31st 2021 (2020: EUR 629 thousand). 24 4 Capital structure and financing 4.1 Share capital and reserves Accounting policy Robit’s equity consists of share capital, share premium, the reserve for invested unrestricted equity, translation differences, and retained earnings. Changes in treasury shares owned by Robit are recorded in the retained earnings. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds. Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders. Share capital and share premium Ordinary shares are classified as equity. The parent company has one share class, and each share has equal right to dividend. Each share carries one vote at the general meeting. All shares issued by the parent company are fully paid. The shares have no nominal value. The table below presents the number of outstanding shares for the reported periods: Shares Number At 1 Jan 2020 20 935 107 Use of treasury shares to management compensation 7 936 Use of treasury shares to BoD compensation 19 893 Share issue 96 000 At 31 Dec 2020 21 058 936 Use of treasury shares to management compensation 13 000 Use of treasury shares to BoD compensation 19 500 At 31 Dec 2021 21 091 436 The amounts included in the share premium fund relate to share issues in accordance with the previous Finnish Limited Liability Companies Act, which was in force until 31 August 2006, whereby the share premium account was credited with the amounts in excess of the then current nominal value of the shares that were paid by shareholders in connection with share issues. Own shares 25 The table below shows the changes in own shares during the reporting periods: Shares Number At 1 Jan 2020 148 793 Use of treasury shares to management compensation -7 936 Use of treasury shares to BoD compensation -19 893 At 31 Dec 2020 120 964 Use of treasury shares to management compensation -13 000 Use of treasury shares to BoD compensation -19 500 At 31 Dec 2021 88 464 Reserve for invested unrestricted equity Under the Finnish Companies Act, the subscription price of new shares is credited to the share capital, unless it is provided in the share issue resolution that it is to be credited in full or in part to the invested unrestricted equity reserve. Contributions to the reserve for invested unrestricted equity can also be made without share issues. Part of the Board of Directors yearly compensation was paid with Robit’s treasury shares in 2021 and 2020. Dividends The annual general meeting resolution March 25, 2021 was not pay dividend in 2021. The annual general meeting on 22.4.2020 resolved to authorise Board of Directors to resolve that the maximum of EUR 0.03 per outstanding share, if any, be paid from the company’s distributable funds to the shareholders, if the financial position of the Compaby is favourable to such distribution. The Board of Directors resolved not to use the authorisation and no such distribution was made in 2020. Effect of hedging instruments on equity EUR thousand 2021 2020 Fair value reserve 1.1. 0 - Cash flow hedges Change in fair value recognized in other comprehensive income Interest rate swaps 56 - Amount reclassified to profit or loss Interest rate swaps Tax effect 11 - Fair value reserve 31.12. 45 - 4.2 Earnings per share Accounting policy Basic earnings per share is calculated by dividing the profit attributable to owners of the parent company by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated on the same basis as Basic EPS except that it reflects the impact of any potential commitments the Group has to issue shares in the future. 26 The Group did not have any instruments that would have dilutive impact on the earnings per share as at 31 December 2021 or 2020. 1 Jan – 31 Dec 2021 1 Jan – 31 Dec 2020 Profit attributable to the owners of the parent company (euros) 842 503 -2 893 815 Weighted average number of shares (number of shares) 21 051 891 20 983 328 Basic and diluted earnings per share 0,04 -0,14 4.3 Borrowings Accounting policy Borrowings are recognized initially at fair value, net of transaction costs incurred, and are subsequently carried at amortised cost. Transaction costs are amortized over the term of the loan and recognized as finance cost as part of interest expense using effective interest rate method. Borrowings are derecognized when loan has been repaid or liability has been extinguished for example in connection with refinancing. Borrowings are recognized as current liabilities unless the Group has an unconditional right to defer the settlement of the liability for at least 12 months after the end of reporting period. The benefit of a government loan (Business Finland loan) at a below market rate of interest is treated as a government grant. The loan itself is accounted for as described above. However, those government loans that have been withdrawn before the date of transition to IFRS are recorded at their nominal value in accordance with the transitional provisions of IFRS 1. Carrying amounts of the borrowings: EUR thousand 31-Dec-21 31-Dec-20 Non-current borrowings Loans from credit institutions 25 182 19 060 Other loans 27 41 Lease liabilities 5 813 5 312 Total non-current borrowings 31 022 24 413 Current borrowings Loans from credit institutions 5 187 5 850 Other loans 170 86 Bank overdrafts 3 262 3 739 Lease liabilities 1 881 1 479 Total current borrowings 10 500 11 154 27 Total borrowings 41 522 35 567 The Group’s management has determined that there is no material difference between the borrowings’ carrying value and fair value because significant part of Robit’s loans are with variables interest rate. There have not been significant changes in interest rates since the issue date of the loans and margins of loans are considered to reflect different conditions and the subordination of the loans with reasonable accuracy. The management has assessed that there have not been significant changes in credit risk since the loans were drawn-down. Loans from credit institutions A credit facility, totalling EUR 30.3 million, of which EUR 25.0 million is secured by a negative pledge that imposes on Robit certain covenants and limitations regarding additional loans. The negative pledge states that (subject to certain exceptions) Robit will not provide any other security over its assets, and will ensure that the following financial performance measures (the original terms of the financing agreement) are met: • Minimum equity ratio of 32.5% and • Net debt/adjusted EBITDA ratio is defined to be 4.0 Robit Plc agreed in June 2021 on the restructuring of EUR 30.0 million in loans with its main financing bank and of that EUR 30.0 million was EUR 26.5 million drawn and converted old loans. The net debt/EBITDA ratio according to the new financing agreement at the next covenant review date on 31 December 2021 must not exceed 4.0. In financial year 2022 the net debt/EBITDA ratio must not exceed 3.0 on the first review date on 31 March and after that the ratio must not exceed 3.5 from the next review date 30.6.2022 onwards. The covenant of Robit Plc’s financing agreement, net interest-bearing debt/EBITDA, was 4,5 and did not meet the terms of the financing agreement on 31 December 2021. The company obtained the consent of its main financier to the breach of the covenant on 21 December 2021. Robit amortized its loans by EUR 1.5 million at the end of December. The interest rate margin on the new financing agreement is 2.4%. Robit has EUR 9.5 million in cash assets at its disposal on 31 December 2021 and according to management estimates, will be able to meet its loan amortization obligations and liquidity. Other loans from financial institutions includes mainly variable rate bank loans. Information regarding guarantees for the loans can be found in note 4.7. Other loans Other loans are Business Finland interest subsidized loans for Robit’s research and development projects. The loans have an interest rate lower than the market rate. Bank overdrafts The Group had EUR 3 262 thousand liability as at 31 December 2021 (2020: EUR 3 739 thousand) related to its credit facility agreement including one Finnish bank limit. The maximum amount at 31 December 2021 was EUR 6 000 thousand (2020: EUR 4 000 thousand). Finance lease liabilities Lease liabilities are secured as the rights to the leased asset revert to the lessor in the event of default: Lease liabilities are reported as use of asset liabilities with bank financing. 28 Net debt EUR thousand 31-Dec-21 31-Dec-20 Cash and cash equivalents -9 525 -14 339 Current loans 10 500 11 154 Non-current loans 31 022 24 413 Net debt 31 996 21 228 Cash -9 525 -14 339 Gross debt - fixed interest rate 188 281 Gross debt - variable interest rate 41 522 35 286 Net debt 31 996 21 228 2021 Current leases Non- current leases Current loans Non-current loans Total Debt 1.1. 1 479 5 312 9 589 19 101 35 481 Cash flows -1 838 0 -3 455 0 -5 293 Changes in lease agreements 2 240 501 0 0 2 741 Other 0 0 2 484 6 108 8 593 Total 1 881 5 813 8 619 25 209 41 522 2020 Current leases Non- current leases Current loans Non-current loans Total Debt 1.1. 2 700 4 070 9 490 18 035 34 295 Cash flows -1 774 0 -3 554 0 -5 328 Changes in lease agreements 287 1 096 0 0 1 383 Other 0 0 4 005 1 212 5 217 Total 1 213 5 166 9 941 19 247 35 567 29 4.4 Financial assets Accounting policies The Group classifies all its financial assets in category “loans and receivables”. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The Group’s loans and receivables are included in the consolidated balance sheet lines “Cash and cash equivalents”, “Loan receivables”, “Account and other receivables” and “Other receivables” (non-current). Loans and receivables at amortised cost mainly consist of accounts receivable and cash and cash equivalents that are not quoted in an active market and that are not kept for trading purposes. Loans and receivables are measured initially at fair value plus transaction costs, if any, and subsequently, at amortised cost using the effective interest method. An impairment loss is recognized in the statement of comprehensive income if the carrying value of the loan receivable is higher than the estimated recoverable amount. Derivatives The Group uses derivative contracts to hedge interest rate risk. Derivative contracts are initially recognized at fair value and subsequently at fair value. Changes in the fair value of derivative contracts are recognized in financial items through profit or loss, unless they are designated as hedging instruments, in which case they are hedged in accordance with hedge accounting. Hedge accounting can be used to reduce the volatility due to fair value measurement in the income statement. In this case, the asymmetry between the hedging instrument and the hedged item is eliminated when both affect the income statement simultaneously. When starting a hedging relationship subject to hedge accounting, the Group prepares a determination of the hedging relationship. the objective of risk management and the strategy for taking hedging. EUR thousand 31-Dec-21 31-Dec-20 Carrying amounts of loans and receivables Loan receivables 125 125 Account and other receivables 18 621 18 621 Cash and cash equivalents 14 339 14 339 Total current 33 085 33 085 Loan receivables 386 386 Other receivables 0 0 Total non-current 386 386 Total 33 471 33 471 Loan receivables Loan receivables previously reported as share loan receivables amounted to EUR 182 thousand as at 31 December 2021 (2020: EUR 247 thousand). In previous years Robit has issued shares to its key employees and has promissory notes to enable them to pay the share subscriptions. The interest rate used is the reference rate set by the Finnish Ministry of Finance every six months. Interest is paid two times a year. No margin has been added to the reference rate. The amount of interest subsidy is recognized as other operating expenses. In connection with the 2020 long term incentive plan and share issuance 30 to key personnel, the company granted loans for the payment of share subscription. The payment period for these loans is 8 years and the interest rate is 12-month Euribor plus a margin of 0.99%. Loan receivables are measured at amortised cost because the criteria below are met: - the financial asset is held within a business model whose objective is holding financial assets in order to collect contractual cash flows, and - the terms of contract of the financial asset provide for cash flows at certain times which are solely the payment of the principal and interest on the remaining amount of capital Account and other receivables are described more detailed in note 5.3. Account and other receivables. Cash and cash equivalents consist of cash at hand and deposits held at call with banks. Fair values of derivative financial instruments Derivatives designated as cash flow hedges Notional amount Fair value assets Fair value liabilities Interest rate swaps Interest rate swap, EUR thousand 10.000 56 0 In 2020 Robit Group had no derivative financial instruments in use. The fair values of interest rate swaps and interest rate derivatives are determined as the present value of the future cash flows based on market interest rates on the reporting date. Financial instruments designated as hedging instruments Cash flow hedges in 2021 Maturity Interest rate swaps 2022 2023 2024 2025 2026- Total Hedged item: Floating rate EUR loan Notional amount, EUR thousand 10.000 10.000 Average fixed rate 0.325 % 0.325 % In 2020 Robit Group had no financial instruments designated as hedging instruments in use. Effect of hedging instruments on the statement of financial position and statement of comprehensive income EUR thousand 2021 Notional amount 10 000 Assets Carrying amount 56 Line item in the statement of financial position Trade and other receivables Liabilities Carrying amount 0 Line item in the statement of financial position Trade and other payables Change in value for recognizing hedge ineffectiveness Hedged item -56 31 Hedged instrument 56 Effective portion Amount recognized in other comprehensive income 45 Amount reclassified from the fair value reserve to profit or loss 0 Line item in the income statement Financial items 4.5 Finance income and costs Accounting policy Finance costs consist of interest expenses on bank loans, bank overdrafts and other loans, foreign exchange losses on financing activities. Transaction costs related to loans are expensed in profit or loss using effective interest rate method. The effective interest rate is the rate that discounts the estimated future payments through the expected life of a loan to the net carrying amount of the financial liability. The calculation includes all fees paid by the contracting parties and transaction costs. Interest income is recognized using the effective interest rate, unless the receipt of interest is uncertain. In such cases the interest income is accounted for on a cash basis. Foreign exchange gains and losses on financing activities are recognized within finance income or costs. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently re- measured at their fair value. Fair value gains and losses on derivatives are recognized to the statement of comprehensive income. EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Finance income Foreign exchange gains on financing activities 912 258 Other finance income 10 25 Interest income on cash equivalents 1 2 Finance income total 924 286 Finance cost Foreign exchange losses on financing activities -844 -1 519 Interest expenses on borrowings -1 150 -1 148 Interest expense on deferred consideration -55 -21 Other finance costs -204 -248 Finance cost total -2 253 -2 936 32 Finance income and costs total -1 329 -2 650 4.6 Financial risk and capital management The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and cash flow interest rate risk), credit risk and liquidity risk. The Group’s overall risk management program focuses to seek to identify and mitigate potential risks arising from financial markets, customer transactions and liquidity requirements. Risks are identified, assessed and mitigated as a part of daily management routines. Majority of Group financing is done by Robit Plc, minor investments or working capital needs may be financed locally. The Board of Directors provides principles for overall risk management, as well as policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk and use of derivative financial instruments. (a) Market risk (i) Foreign exchange risk The following table demonstrates the sensitivity to a reasonably possible change in the base currency against the quote currency, with all other variables held constant, of the Group’s profit before tax and equity due to changes in the fair value of financial assets and liabilities. A reasonably possible change is assumed to be a 10% base currency appreciation or depreciation against the quote currency. A change of a different magnitude can also be estimated fairly accurately because the sensitivity is nearly linear. 31 December 2021 31 December 2020 Base currency Base currency 10 % stronger 10 % weaker 10 % stronger 10 % weaker EUR thousand Income statement Income statement Income statement Income statement Base currency/Quote currency EUR/USD 814 -814 181 -181 EUR/AUD -7 7 -132 132 EUR/GBP -188 188 243 -243 EUR/WON -643 643 -536 536 EUR/ZAR 264 -264 132 -132 EUR/RUB -121 121 -135 135 (ii) Cash flow interest rate risk The Group’s interest rate risk arises from long-term borrowings. Majority of the Group’s loans are with variables interest rate which expose the Group to cash flow interest rate risk. During the presented periods, the Group’s borrowings at variable rate were denominated in euro and South Korean Won. At 31 December 2021, if interest rates had been 50 basis points higher with all other variables held constant, post-tax profit for the year would have been EUR 152 thousand lower as a result of higher interest expense on floating rate interest- bearing liabilities. Interest rate sensitivity has been calculated by shifting the interest curve by 50 basis points (due to low market interest environment the lower scenario has not been presented). The interest position includes all external variable rate interest-bearing liabilities. 33 31 December 2021 31 December 2020 Interest rate Interest rate 0,5 % higher 0,5 % higher 0,5 % higher 0,5 % matalampi EUR thousand Income statement Income statement Income statement Tuloslaskelma Impact of interest change -152 - -126 - (b) Credit risk Credit risk arises mainly from cash and cash equivalents and credit exposures to customers from outstanding receivables. Credit risk on cash and cash equivalents is managed at group level. Cash and cash equivalents are held in reputable mainly Nordic banks. Each local entity is responsible for managing the credit risk for their account receivables balances. The local entities have the responsibility to analyse the credit standing of each of their new clients before standard payment and delivery terms and conditions are offered. Before accepting a customer, the customer’s ability to pay the purchase transactions is carefully estimated through analysing customer’s financial statements and current market position. Credit risk countering payment methods such as letter of credit and advance payments are used in high risk regions. The Group has been able to collect also significantly overdue receivables eventually. The maximum exposure to the credit risk at the reporting dates are the carrying values of each class of financial assets mentioned above. The aging of the account receivables including bad debt provision deducted is as follows: EUR thousand 31-Dec-21 31-Dec-20 Not due 17 231 13 389 Overdue by Less than 30 days 2 200 2 021 30-60 days 597 228 61-90 days 271 155 More than 90 days 924 654 Total 21 223 16 448 Key judgements and estimates - Overdue receivables The Group applies the simplified approach defined in IFRS 9 for the recognition of expected credit losses, according to which lifetime expected losses can be recognised for all trade receivables. For the purpose of determining expected credit losses, trade receivables are classified on the basis of shared credit risk characteristics and delayed payment. Expected loss rates are based on sales payment profiles over a 12-month period before 31 December 2021 and on actual credit losses incurred during that period. Actual loss rates are adjusted to reflect current and future-oriented information and macroeconomic factors that affect the ability of customers to make a payment of receivables. 34 The Group has only one type of financial assets subject to the expected credit loss model: trade receivables from sales of product and maintenance services. Although cash and cash equivalents and liabilities recognised at amortised cost are also subject to impairment testing under IFRS 9, the impairment loss observed is not material. On the basis of this, entries reducing the carrying amount of trade receivables were made, amounting to EUR 724 thousand in financial year 2021 and EUR 842 thousand in 2020. For the calculation of the impairment of trade receivables, see Note 5.3. (c) Liquidity risk Cash flow forecasting is performed in the Group’s finance function. Group finance function monitors the Group’s liquidity requirements monthly to ensure it has sufficient cash to meet operational needs while maintaining sufficient headroom on its undrawn committed facilities at all times. Cash and cash equivalents amounted to EUR 9 525 thousand as at 31 December 2021 (2020: EUR 14 339 thousand). Operating cash flows and liquid funds are the main source of financing for the future payments together with possible new debt or equity financing. Covenants on the Group’s interest-bearing financial liability drawn-down in 2021 are monitored regularly. The financial covenants are the equity ratio and the net debt in relation to EBITDA. The minimum equity ratio is agreed to be 32,5%. Minimum net debt to EBITDA ratio was defined to be 4.0 at 31 December 2021 review date. The net debt/EBITDA ratio according to the new financing agreement at the next covenant review date on 31 March 2022 must not exceed 4.0. Financial year 2021 will return to the original covenant on the net debt/EBITDA ratio, which must not exceed 2.5. The covenant of Robit Plc’s financing agreement, net interest-bearing debt/EBITDA, was 4,5 and did not meet the terms of the financing agreement on 31 December 2021. The company obtained the consent of its main financier to the breach of the covenant on 21 December 2021. We are referring to note 4.3 information on the covenant breach. The Group’s equity ratio 42.2 % as at 31 December 2021 (2020: 45.5%) is strong and the Group is able to draw external financing in case that operational cash flows are not sufficient. The Group does not invest actively surplus cash held. The Group’s target is to achieve both organic and structural growth and cash balances are directed to those purposes. The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. EUR thousand Less than 6 months 6 – 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years Total contractual cash flows Carrying amount (assets)/ liabilities 31-Dec-21 Financial liabilities Account payables 17 458 0 0 0 0 17 458 17 458 Lease liabilities 974 974 1 434 3 457 2 363 9 203 7 879 Loans from credit institutions 3 288 1 898 3 387 19 117 2 678 30 369 30 369 Bank overdrafts 3 262 0 0 0 0 3 262 3 262 Other loans 85 85 17 0 0 197 197 Total financial liabilities 25 067 2 957 4 849 22 574 5 042 60 488 59 165 35 EUR thousand Less than 6 months 6 – 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years Total contractual cash flows Carrying amount (assets)/ liabilities 31-Dec-20 Financial liabilities Account payables 15 603 0 0 0 0 15 603 15 603 Lease liabilities 991 832 931 2 398 3 021 7 939 6 791 Loans from credit institutions 3 439 2 406 18 494 342 229 24 910 24 910 Bank overdrafts 3 739 0 0 0 0 3 739 3 739 Other loans 86 0 40 0 0 126 126 Total financial liabilities 23 858 3 238 19 465 2 740 3 250 52 318 51 150 Capital management Robit defines capital as equity plus borrowings as shown on the balance sheet 31.12.2021 EUR 82 942 thousand (2020 EUR 82 556 thousand). Robit’s capital management’s target is to keep capital structure that supports the business by ensuring the operating conditions and to increase shareholder value by aiming at a competitive return on invested capital. The capital structure shall take into account both current and future business needs, as well as ensure competitive cost of financing. Robit board monitors equity ratio and net interest-bearing debt to EBITDA ratio. The equity ratio is calculated as shareholders' equity divided by total assets less advances received. The capital structure can be affected, among other things, by the dividend distribution and share issues. If necessary, Robit has the opportunity to acquire own shares and to issue new shares in accordance with mandates by General Meeting. The Group's equity ratio was 42.2 (2020: 45.5) per cent and the ratio of net debt to adjusted EBITDA was 4.5 as at 31 December 2021. We are referring to note 4.3 information on the covenant breach. Cooperation with banks is based on long-term banking relationships. In the long-term goal is to service Robit’s loan obligations by operating cash flow. During the phase of rapid growth, capital may be acquired both equity and debt financing terms. 4.7 Commitments and contingent liabilities Guarantees given and contingent liabilities EUR thousand 31-Dec-21 31-Dec-20 Guarantees and mortgages given on own behalf: Enterprise mortgages 41 069 41 069 Real estate mortgages 7 136 4 050 Total 48 205 45 119 EUR thousand 31-Dec-21 31-Dec-20 Other guarantees: Other guarantee liabilities 80 94 Total 80 94 36 Lease commitments Robit leases factory buildings and land areas in Australia, UK and Korea under non-cancellable operating lease agreements. Robit leases also some office space under non-cancellable operating lease agreements. The lease terms vary from one year to ten years. Robit also leases cars, office equipment and forklifts under non-cancellable operating lease agreements where the lease term varies from one year to five years. Investments in real estate The Group is obligated to revise the deductions it has made for the real estate investment completed in 2017 in case the taxable use of the real estate diminishes during the revision period. The last revision year will be 2026. The maximum amount of the liability amounts to EUR 90 thousand. The Group is obligated to revise the deductions it has made for the real estate investment completed in 2018 in case the taxable use of the real estate diminishes during the revision period. The last revision year will be 2027. The maximum amount of the liability amounts to EUR 20 thousand. The Group is obligated to revise the deductions it has made for the real estate investment completed in 2021 in case the taxable use of the real estate diminishes during the revision period. The last revision year will be 2030. The maximum amount of the liability amounts to EUR 185 thousand. 37 5 Operating assets and liabilities 5.1 Property, plant and equipment Accounting policy Property, plant and equipment is initially recognized at historical cost which comprises of the purchase price and other expenditures directly related to the acquisition that are necessary for bringing the asset to its operating condition and location. Items of property, plant and equipment are carried in the balance sheet at cost less any accumulated depreciation and any accumulated impairment losses. Items of property, plant and equipment leased under the lease terms are accounted for similarly to purchased property, plant and equipment. Repair and maintenance costs are recognized as expenses at the time they incur. Depreciation on property, plant and equipment is calculated using the straight-line method over their estimated useful lives, as follows: Years Buildings and structures 10-30 Machinery and equipment 5-15 Other tangible assets 5-10 The assets’ useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Gains or losses on disposal of property, plant and equipment are included either within other operating income or other operating expenses in the statement of comprehensive income. Property, plant and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. EUR Thousand Land Buildings and constructions Machiner y and equipme nt Other tangible assets Advances paid and constructi on in progress Total 2021 Cost at 1 January 1 028 18 613 25 106 2 094 482 47 323 Additions 0 1 643 2 278 473 2 249 6 644 Disposals 0 0 -184 -98 0 -282 Reclassifications 0 -219 -6 -308 0 -533 Exchange differences -7 228 366 47 9 643 Cost at 31 December 1 021 20 265 27 561 2 208 2 740 53 794 Accumulated depreciation and impairment at 1 January -105 -5 036 -16 130 -1 411 0 -22 682 Depreciation -52 -1 590 -2 236 -302 0 -4 180 Reclassifications 0 278 0 289 0 567 Disposals and impairment 0 0 158 69 0 227 Exchange differences 0 -15 -278 -37 0 -330 Accumulated depreciation and impairment at 31 December -157 -6 363 -18 486 -1 393 0 -26 398 Net book amount at 1 January 922 13 577 8 976 683 482 24 641 38 Net book amount at 31 December 864 13 902 9 075 815 2 740 27 396 EUR thousand Land Buildings and constructions Machiner y and equipme nt Other tangible assets Advances paid and constructi on in progress Total 2020 Cost at 1 January 1 061 17 472 25 350 2 089 0 45 972 Other changes 0 -1 314 -5 -57 0 -1 376 Additions 0 2 852 680 173 525 4 230 Disposals 0 0 -449 -1 -47 -496 Reclassifications 0 0 0 0 0 0 Exchange differences -33 -396 -470 -111 3 -1 007 Cost at 31 December 1 028 18 613 25 106 2 094 482 47 323 Accumulated depreciation and impairment at 1 January -56 -3 846 -14 108 -1 184 0 -19 193 Other changes 0 318 5 26 0 349 Depreciation -54 -1 559 -2 456 -316 0 -4 385 Reclassifications 0 0 0 0 0 0 Disposals and impairment 0 0 235 0 0 235 Exchange differences 4 51 194 62 0 311 Accumulated depreciation and impairment at 31 December -105 -5 036 -16 130 -1 411 0 -22 682 Net book amount at 1 January 1 005 13 626 11 242 905 0 26 779 Net book amount at 31 December 922 13 577 8 976 683 482 24 641 * Other changes include corrections to 2019 IFRS 16 calculations 39 Right-of-use assets Right-of-use assets EUR thousand Land Buildings and constructions Machinery and equipment Other tangible assets Total Lease liabilities As at 1 January 2021 759 5 131 1 046 262 7 198 6 791 Net changes -6 474 -489 319 299 2 593 Depreciation -52 -976 -61 -167 -1 255 Interest expense -364 Payments -1 320 As at 31 December 2021 701 5 166 1 400 414 7 681 7 694 Right-of-use assets EUR thousand Land Buildings and constructions Machinery and equipment Other tangible assets Total Lease liabilities As at 1 January 2020 842 4 696 1 203 282 7 023 6 771 Net changes -29 1 657 -9 106 1 724 1 749 Depreciation -54 -1 221 -148 -126 -1 549 Interest expense -334 Payments -1 395 As at 31 December 2020 759 5 131 1 046 262 7 198 6 791 Buildings comprise the factory building in Finland and some structures in Korea. Main part of machinery and equipment relates to production machinery. Other tangible assets include mainly Korean leasehold improvements. Assets leased under leases Robit leases laptops, cars and some production machinery in UK and South Africa under non-cancellable finance lease agreements. IFRS 16 standard has been applied to the use of right assets. Refer to note 4.7. for disclosure of contractual obligations to purchase. 40 5.2 Inventories Accounting policy Materials and supplies, work in progress and finished goods are stated at the lower of cost and net realizable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The costs of purchase of inventories comprise the purchase price, import duties and other taxes, transport, handling and other costs directly attributable to the acquisition of finished goods, materials and services. Trade discounts, rebates and other similar items are deducted in determining the costs of purchase. The costs of conversion of inventories include direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are determined using weighted average costs. EUR thousand 31-Dec-21 31-Dec-20 Materials and supplies 6 733 5 136 Work in progress 2 350 2 265 Finished goods 34 455 27 456 Total 43 538 34 857 The inventories include mainly raw materials used in the production and finished products, such as button bits, drilling rods, casing systems hammer components and assembled hammers. Inventory of finished goods include obsolescence provision of EUR 1 817 thousand. The increase of the provision was EUR 439 thousand and the release EUR 193 thousand due to the sale of slow-moving inventories and scrapping of unsalable inventories, in respect of which the risk of obsolescence has been reduced. Movements in the provision for obsolescence of inventory that are assessed for impairment are as follows: EUR thousand 31-Dec-21 31-Dec-20 At 1 January 1 573 1 236 Provision for impairment recognised during the year 439 650 Inventories written off during the year -0 -61 Unused amounts reversed -193 -252 At 31 Dec 1 817 1 573 Key judgements and estimates - Inventory valuation Inventory valuation requires management estimates and judgements specially relating to obsolescence and recording inventory to net realizable value based on expected selling prices as well as the management’s assessment of the general market development in the Robit’s main markets. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to complete the sales. 41 5.3 Account and other receivables Accounting policies Account receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Account receivables are recognized initially at fair value and subsequently at amortized cost less impairment. The Group uses a simplified approach to estimating expected credit losses. To estimate credit losses, trade receivables are grouped on the basis of credit risk characteristics and past-due dates. Impairment is recognized in the statement of comprehensive income under other operating expenses. Other receivables include mainly prepaid expenses and accrued income from the usual operating activities of the Group. The current account and other receivables comprised of the following: EUR thousand 31-Dec-21 31-Dec-20 Account receivables 21 223 16 448 Prepayments and accrued income 586 107 Other receivables 3 527 2 066 Total 25 337 18 621 * Incl. mainly VAT receivables EUR 1 565 thousand. The carrying amounts of current trade receivables and other receivables are considered to be close to their fair values. This is due to their short-term nature. Movements in the provision for impairment of trade receivables that are assessed for impairment are as follows: EUR thousand 31-Dec-21 31-Dec-20 At 1 January 723 842 Provision for impairment recognised during the year 172 290 Receivables written off during the year as uncollected -40 -367 Unused amounts reversed -19 -41 At 31 Dec 836 723 Change in provisions in the income statement: During the year, the following gain/(losses) were recognised in profit or loss in relation to impaired receivables. EUR thousand 31-Dec-20 31-Dec-20 Impairment losses Individually impaired receivables -40 -294 Movement in provision for impairment -103 -115 Reversal of previous impairment losses 0 17 -143 -382 42 Classification of accounts receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within 30-90 days and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. Details about the group’s impairment policies and the calculation of the loss allowance are provided in note 4.6. 5.4 Account and other payables Accounting policy Account payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Account payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest rate method. The current account and other payables comprise of the following: EUR thousand 31-Dec-21 31-Dec-20 Account payables 17 458 15 603 Accrued expenses 4 145 2 971 Other 1 675 454 Total 23 278 19 029 Material items included in accrued expenses: EUR thousand 31-Dec-21 31-Dec-20 Accrued salaries 1 268 1 115 Accrued social security costs 312 254 Accrued interests 9 6 Other * 2 557 1 596 Total 4 145 2 971 * Mainly accrued outsourcing fees, accrued audit fees and accrued rental expenses. The carrying amounts of account payables and other payables are considered to be the same as their fair values, due to their short-term nature. 43 5.5 Provisions Accounting policy Return or repayment obligations are generally not associated with supply contracts. Robit is responsible for ensuring that the products meet the customer’s order in terms of technical specifications and also Robit’s own quality standards at the time of delivery. If a technical or qualitative problem due to Robit is identified in a product, Robit is obliged to supply to customer with replacement products. These obligations are assessed for each contract in turn, and a separate warranty provision is recognised for them. Because the products are, in nature, consumables, no long-term warranty obligations that could be payable in future financial years are associated with the products. A provision has been made estimating warranty claims for the products sold in which a technical or qualitative problem has been identified. These claims are expected to be settled over the next year and are therefore reported as current provisions. The amount of the provision was EUR 0 thousand at 31 December 2021 (2020: EUR 89 thousand). Movements in the provision for warranty provision EUR thousand 31-Dec-21 31-Dec-20 At 1 January 89 43 Provision for warranty costs recognised during the yea 64 120 Warranty costs during the year -70 -40 Unused amounts reversed -82 -35 At 31 Dec 0 89 5.6 Advance payments received Advance payments received amounted to EUR 771 thousand as at 31 December 2021 (2020: EUR 130 thousand). Advance payments are usually required from clients that are not creditworthy. In normal course of business advance payments are not an usual way of doing business. 44 6 Other notes 6.1 Subsidiaries and foreign currencies Accounting policy Consolidation Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group and are de-consolidated from the date that control ceases. All intercompany transactions, receivables, liabilities, unrealized profits and distribution of profits within Robit Group are eliminated in the consolidated financial statements. Accounting principles of subsidiaries have been changed where necessary to ensure consistency with the principles adopted by the Group. Foreign currency translation Assets and liabilities in foreign subsidiaries are translated into euro at the rate prevailing on the balance sheet date. Income and expenses in foreign subsidiaries are translated into euro using an average rate. Translation differences that arise when translating the financial statements of subsidiaries are recognized in other comprehensive income and accumulated in translation differences reserve in equity. Foreign currency denominated transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or if items have been revalued, using the measurement date exchange rates. Foreign exchange gains and losses arising in respect of business operations, such as sales and purchases, are recognized in relevant lines above operating profit. Foreign exchange differences arising from financing transactions are recognized in finance income and costs. The exchange differences charged/credited to the statement of comprehensive income are as follows: EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Included in EBIT /operating profit 47 -1 481 In finance income and expenses 57 -1 262 Total 104 -2 743 45 Group’s subsidiaries as at 31 December 2020 and 2019 were as follows: Parent % Parent % Group % Group % 31.12.2021 31.12.2020 31.12.2021 31.12.2020 Halco Brighouse Ltd, UK, Parent Robit UK 100 % 100 % Halco Drilling Ltd UK, Parent Robit UK 100 % 100 % Robit Rocktools Ab, Sweden 100 % 100 % 100 % 100 % Robit Africa Holdings Ltd, South-Africa 100 % 100 % 100 % 100 % Robit Asia Ltd, Hong Kong 100 % 100 % 100 % 100 % Robit Australia Holdings Ltd, Australia 100 % 100 % 100 % 100 % Robit Australia Pty Ltd, Australia, parent Robit Australia Holdings Ltd 100 % 100 % Robit Finland Oy Ltd, Finland 100 % 100 % 100 % 100 % Robit GB Ltd, UK 100 % 100 % 100 % 100 % Robit Inc, USA 100 % 100 % 100 % 100 % Robit Korea LTD, South-Korea 100 % 100 % 100 % 100 % Robit OOO, Russia 100 % 100 % 100 % 100 % Robit Plc-BFC, Dubai 100 % 100 % 100 % 100 % Robit S.A.C, Peru, 1% owned by Robit Inc 99 % 99 % 100 % 100 % Robit SA, South Africa 74 % 74 % 100 % 100 % Robit UK Ltd, UK 100 % 100 % 100 % 100 % Robit USA LLC, USA, parent Robit INC. 100 % 100 % TOO Robit, Kazakhstan 100 % 100 % 100 % 100 % * Companies were dormant or holding companies. ** The name of Bulroc Ltd was changed in 2018 to Robit GB Ltd and Drilling Tools Australia Ltd Pty was changed in 2018 to Robit Australia Ltd Pty. Robit USA LLC name as changed to Halco USA LLC in 2019. *** During 2015 Robit SA established a Black Employees Empowerment Trust (‘the Trust’, “BEET”) in South Africa. The purpose of the Trust is to support the local black employees of Robit SA and generate better business opportunities for Robit when operating in South Africa. Robit SA directed a share issue to the Trust. As a result, the Trust owns 26% of the shares of Robit SA. However, Robit SA is considered to have control over the Trust. 4% of the shares were issued directly to one of the key employees of Robit SA. The purpose and nature of the arrangement is to remunerate certain employees of Robit SA. This arrangement is accounted as a remuneration. 46 6.2 Taxes Income tax expense Accounting policy The income tax expense consists of current tax and changes in deferred tax. Tax is recognized in the consolidated profit or loss statement or if tax relates to items recognized in other comprehensive income or directly in equity, then the related tax is recognized in other comprehensive income or equity correspondingly. The current income tax charge is calculated on the basis of the local tax laws and tax rates enacted or substantively enacted at the end of the reporting period in relevant countries where the Group operates and generates taxable income. Income taxes recognized in consolidated income statements differ from the income taxes calculated using the Finnish tax rate as follows: EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Current tax: Current tax on profits for the year -351 -380 Adjustments in respect of prior years 18 0 Total current tax expense -333 -380 Deferred tax: Decrease (-) / increase (+) in deferred tax assets 281 -459 Decrease (+) / increase (-) in deferred tax liabilities 187 467 Adjustments in respect of prior years -18 79 Total deferred tax expenses 450 1 005 Income tax expense 135 624 EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Profit before tax 751 -3 518 Tax calculated at Finnish tax rate 151 -705 Tax effect of: Effect of other tax rates for foreign subsidiaries -8 1 Expenses not deductible for tax purposes 439 358 Income not subject to tax 125 -150 Unrecognized deferred tax assets from tax losses -46 -479 Utilization of previously unrecognized tax losses -821 443 Other adjustments 0 0 Adjustment in respect of prior years 25 -92 Taxes in income statement -135 -624 Deferred income tax 47 Accounting policy Deferred tax assets and liabilities are accounted for using the liability method for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to be applied when the related deferred tax asset is realized or the deferred tax liability is settled. Deferred tax liabilities are recognized for all taxable temporary differences except for deferred tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. Realisable value of deferred tax assets is assessed at each balance sheet date and adjustments are made in case there is indication that utilisation of deferred tax assets would no longer be probable. Deferred tax assets and liabilities are offset only when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Key judgements and estimates - deferred tax assets and liabilities Judgement is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognized on the balance sheet. Deferred tax assets are recognized only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows that relate among others to the amount of future net sales, operating costs and finance costs. The Group’s ability to generate taxable income depends also on factors related to general economy, finance, competitiveness and regulations that the Group is unable to control. These estimates and assumptions are subject to risk and uncertainty, hence it is possible that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognized on the balance sheet and the amount of other tax losses and temporary differences not yet recognized. The Group’s management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. The amount of current income tax liabilities for identified uncertain tax positions is recognized when it is probable that certain tax positions will be challenged and may not be fully sustained upon review by tax authorities. 48 The gross movement on the deferred tax account is as follows: EUR thousand 31-Dec-21 31-Dec-20 As at 1 of January 732 -192 Recognized in profit or loss 468 1 004 Recognized in equity -11 0 Acquisition of subsidiaries 0 0 Exchange rate differences 46 -80 As at 31 of December 1 234 732 The following table presents the movements in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances with the same tax jurisdiction: EUR thousand At 1 Jan Recognized in profit or loss Recignised directly to equity Acquisition of subsidiaries Exchange rate differences At 31 Dec 2021 Deferred tax assets Inventories 274 216 0 0 27 517 Employee benefits 320 -38 0 0 2 285 Property, plant and equipment 201 10 0 0 17 228 Tax losses 514 0 0 0 14 528 Other 473 92 0 0 14 578 Total 1 782 281 0 0 75 2 137 Set-off of deferred taxes -254 -211 Deferred tax assets, net 1 528 1 926 At 1 Jan Recognized in profit or loss Recignised directly to equity Acquisition of subsidiaries Exchange rate differences At 31 Dec 2021 Deferred tax liabilities Property, plant and equipment 356 46 0 0 12 414 Intangible assets 909 -254 0 0 19 674 Other items -213 22 11 0 -2 -182 Total 1 052 -187 11 0 29 905 Set-off of deferred taxes -254 -211 Deferred tax liabilities, net 798 694 EUR thousand At 1 Jan Recognized in profit or loss Recignised directly to equity Acquisition of subsidiaries Exchange rate differences At 31 Dec 2020 Deferred tax assets Inventories 311 -37 0 0 0 274 49 Employee benefits 284 42 0 0 -6 320 Property, plant and equipment 496 -277 0 0 -18 201 Tax losses 0 514 0 0 0 514 Other 28 530 0 0 -85 473 Total 1 119 772 0 0 -108 1 782 Set-off of deferred taxes -49 -254 Deferred tax assets, net 1 069 1 528 At 1 Jan Recognized in profit or loss Recignised directly to equity Acquisition of subsidiaries Exchange rate differences At 31 Dec 2020 Deferred tax liabilities Property, plant and equipment 140 208 0 0 8 356 Intangible assets 1 165 -232 0 0 -24 909 Other items 8 -209 0 0 -12 -213 Total 1 313 -233 0 0 -29 1 052 Set-off of deferred taxes -49 -254 Deferred tax liabilities, net 1 264 798 6.3 Related party transactions Related parties of the Group consist of the parent company and Group companies mentioned in note 6.1. Related parties are also key management personnel and their close family members as well as entities controlled by them. Key management personnel are the members of the Board of Directors, CEO and management team of Robit. Five Alliance Oy has significant influence in Robit Plc and its ownership as at 31 December 2019 was 26.86% (26.99 % as at 31 December 2019). The chairman of the board of directors Harri Sjöholm has control in Five Alliance Oy. The remuneration of Board of Directors Salaries, remuneration and other benefits paid in 2020 and 2019 to the Board of Directors were as follows: EUR Thousand 2021 2020 Harri Sjöholm 59,8 45,3 Mammu Kaario 41,8 40,8 Kai Seikku - 2,3 Kalle Reponen 42,7 42,0 Mikko Kuitunen 38,3 38,0 Anne Leskelä 41,6 36,3 Kim Gran 40,8 37,5 Total 264,9 242,0 50 Remuneration to the Chairman of the Board of Directors is EUR 45 thousand per year and to each member of the Board of Directors EUR 30 thousand per year. In addition, members of the board receive EUR 500 for each meeting they attend. Committee meeting fee is 500 for each attended meeting. Remuneration for the members of the Board of Directors will be paid so that 40% of the specified annual amount will be used to purchase Robit’s shares or alternatively the shares may be conveyed by using the own shares held by the company, and the rest will be paid in cash. Meeting fees are paid in cash. Travel claims are paid according to company travel policy. Members of the board do not participate into share-based remuneration plans and they do not have any pension agreements with the company. There are no restriction in the shareholdings granted as the annual board fee. Total 19 500 shares were granted to the Board of Directors. As annual board fee 4 500 shares were granted to the chairman of the board Harri Sjöholm and 3 000 shares to Mammu Kaario, Kim Gran, Anne Leskelä, Mikko Kuitunen and Kalle Reponen. The remuneration of Board of directors and the CEO The Board of Directors decides on the salary, remuneration and other benefits received by the CEO. The salary, remuneration and other fringe benefits paid in 2021 to the CEO, Tommi Lehtonen, amounted to EUR 201 thousand. During the financial year, 3 000 shares, which is worth of EUR 12 thousand, were granted to the CEO in respect of his CEO agreement. In addition, a pension scheme fee of 8 thousand was paid on behalf of CEO. For more information on the share reward program, see section 2.3. The remuneration of the Management team Decisions concerning incentive and remuneration system for management are made by the Board of Directors based on the proposal made by the CEO. The salary for all members of the management team consists of a fixed basic salary and a results- based bonus. The bonus is determined based on the company performance, the business area in question and other key operative objectives. Remuneration of the management team members in 2021 and 2020 were as follows: Compensation to other management EUR thousand 1 Jan - 31 Dec 2021 1 Jan - 31 Dec 2020 Salaries and other short-term employee benefits 298 441 Signing bonus - 26 Severance payment - 30 Share-based payments 16 6 Total 314 503 The management team members did not have voluntary pension plans that would have been classified as defined contribution plan. For more information on the share-based incentive program, see section 2.3. Share-based payments and shareholder loans During 2021 management team received 3 000 shares as a part of a share-based incentive program. There were no share- based payments to management during the 2020 relating to share-based incentive programs. For more information on the share-based incentive program, see section 2.3. Share holdings of the board of directors and the management 51 The total number of shares was 21 179 900 as at 31 December 2021 (2020: 21 179 900). The shareholding of the management was as follows: Shareholding of management as at 31.12.2020 Shares Percentages of shares Members of the Board of directors 5 860 397 27,67 % Harri Sjöholm * 5 759 427 27,19 % Mammu Kaario 22 106 0,10 % Kim Gran 26 226 0,12 % Anne Leskelä 6 226 0,03 % Kalle Reponen 33 328 0,16 % Mikko Kuitunen 13 084 0,06 % CEO 19 952 0,09 % Other members of the management team 34 710 0,15 % Total 5 915 059 27,06% owned by Harri Sjöholm through Five Alliance Oy 6.4 Subsequent events There were no material subsequent events. 6.5 New and amended standards adopted by the group During the period no new or amended standards were implemented that would of affected the Financial Statements. 52 AUDITOR’S REPORT (Translation of the Finnish original) To the Annual General Meeting of Robit Plc Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Robit Plc (business identity code 0825627-0) for the year ended 31 December 2021. The financial statements comprise the consolidated balance sheet, statement of comprehensive income, statement of changes in equity, statement of cash flows and notes, including summaries of significant accounting policies, as well as the parent company’s balance sheet, income statement, statement of cash flows and notes. In our opinion • the consolidated financial statements give a true and fair view of the group’s financial position as well as its financial performance and its cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. • the financial statements give a true and fair view of the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. Our opinion is consistent with the additional report submitted to the Audit Committee. Basis for Opinion We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor’s Responsibilities for the Audit of Financial Statements section of our report. We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements. In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in note 2.4 to the consolidated financial statements and in note Auditors’ fees detail to the parent company financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 53 We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements. We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud. Key Audit Matter How our audit addressed the Key Audit Matter Revenue recognition We refer to the Group’s accounting principles and the note 2.1. Robit Group’s revenues in 2021 amounted to 100,8 million euros consisting mainly of drilling machinery consumables such as drill bits and casing systems. Revenue from sale of goods is recognized at a point in time, when control of the goods is transferred to customer, typically at the time of delivery of the goods. The Group focuses on revenue as a key performance measure which could create the incentive for revenue to be recognized too early. Revenue recognition was a key audit matter and a significant risk of material misstatement referred to in EU Regulation No 537/2014, point (c) of Article 10(2) because of the risk of correct timing of revenue recognition (cut off). Our audit procedures to address the risk of material misstatement relating to revenue recognition included, among others: • we assessed the reasonableness of the Group’s accounting policies over revenue recognition and compliance with applicable accounting standards. • we assessed the process and methods for revenue recognition. • we tested the recorded sales transactions during the year against underlying documents on a sample basis. • we tested the sales cut off on either side of the balance sheet date on a sample basis. • we obtained confirmations of receivable balances at year end from customers and analyzed credit invoices issued after the balance sheet date. • we performed analytical procedures on revenues. • we considered the appropriateness of the Group’s disclosures in respect of revenues. 54 Goodwill valuation We refer to the Group’s accounting principles and the note 3.2. At the financial statement date, the value of Robit Group’s goodwill amounted to 5,5 million euros representing 5 % of total assets and 11 % of total equity. The Group management uses assumptions in respect of determining weighted average cost of capital and future market and economic conditions such as economic growth, revenue and margin developments. Goodwill valuation was a key audit matter and a significant risk of material misstatement referred to in EU Regulation No 537/2014, point (c) of Article 10(2) because the impairment testing involves estimates and significant judgment from management. Our audit procedures to address the risk of material misstatement relating to goodwill valuation included, among others: • we involved our valuation specialists to assist us in evaluating the assumptions and methodologies used by the Group in the testing, in particular those related to the determination of weighted average cost of capital. • we focused on the sensitivity in the available headroom by cash generating unit and whether any reasonably possible change in assumptions could cause the carrying amount to exceed its recoverable amount. We tested the allocation of the assets, liabilities, revenues and expenses to each of the cash generating units. • we assessed retrospectively the outcome of the management’s historical estimates. • we considered the appropriateness of the Group’s disclosures in respect of impairment testing. 55 Key Audit Matter How our audit addressed the Key Audit Matter Valuation of trade receivables We refer to the Group’s accounting principles and the notes 4.4, 4.6 and 5.3. Valuation of trade receivables was a key audit matter because of the significance of overdue trade receivables to the financial statements as a whole. As of balance sheet date December 31, 2021, the carrying value of trade receivables amounted to 21,2 million euros. Carrying value of trade receivables is a result of gross receivables netted by a provision for credit losses. Valuation of trade receivables requires management to estimate the amount of expected credit losses for the accrued provision for credit losses. We performed, among others, the following audit procedures: • we evaluated the valuation methods applied on valuation of trade receivables as well as performed analyses of overdue and undue gross receivable balance development and corresponding movement in credit loss provision during the year. • we sent receivable balance confirmation requests to the Group’s customers and compared trade receivable balances to subsequent cash receipts. • we analysed management’s estimates of expected credit losses of the most significant aged and overdue receivables considering historical payment patterns as well as recent communications with the counterparties and dunning procedures. • we considered the appropriateness of the Group’s disclosures in respect of trade receivables. Responsibilities of the Board of Directors and the Managing Director for the Financial Statements The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and the Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 56 In preparing the financial statements, the Board of Directors and the Managing Director are responsible for assessing the parent company’s and the group’s ability to continue as going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company’s or the group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company’s or the group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for 57 the direction, supervision and performance of the group audit. We remain solely responsible 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 identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Other Reporting Requirements Information on our audit engagement We were first appointed as auditors by the Annual General Meeting on 26 March 2013, and our appointment represents a total period of uninterrupted engagement of nine years. Robit Plc has been a public interest entity since 17 May 2017. The Board of Directors and the Managing Director are responsible for the other information. The other information comprises the report of the Board of Directors and the information included in the Annual Report, but does not include the financial statements and our auditor’s report thereon. We have obtained the report of the Board of Directors prior to the date of this auditor’s report, and the Annual Report is expected to be made available to us after that date. Our opinion on the financial statements does not cover the other information. In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to report of the Board of Directors, our responsibility also includes considering whether the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. In our opinion, the information in the report of the Board of Directors is consistent with the information in the financial statements and the report of the Board of Directors has been prepared in accordance with the applicable laws and regulations. 58 If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Helsinki, 15th February 2022 Ernst & Young Oy Authorized Public Accountant Firm Toni Halonen Authorized Public Accountant 59 Independent Auditor’s Report on Robit Oyj’s ESEF Consolidated Financial Statements (Translation of the Finnish original) To the Board of Directors of Robit Oyj We have performed a reasonable assurance engagement on the iXBRL tagging of the consolidated financial statements included in the digital files robit-2021-12-31-fi.zip of Robit Oyj for the financial year 1.1. – 31.12.2021 to ensure that the financial statements are tagged with iXBRL mark ups in accordance with the requirements of Article 4 of EU Commission Delegated Regulation (EU) 2018/815 (ESEF RTS). Responsibilities of the Board of Directors and Managing Director The Board of Directors and Managing Director are responsible for the preparation of the Report of Board of Directors and financial statements (ESEF financial statements) that comply with the ESEF RTS. This responsibility includes: • preparation of ESEF financial statements in accordance with Article 3 of ESEF RTS • Tagging the consolidated financial statements included within the ESEF financial statements by using the iXBRL mark ups in accordance with Article 4 of ESEF RTS • Ensuring consistency between ESEF financial statements and audited financial statements The Board of Directors and Managing Director are also responsible for such internal control as they determine is necessary to enable the preparation of ESEF financial statements in accordance the requirements of ESEF RTS. Auditor’s Independence and Quality Control We are independent of the company in accordance with the ethical requirements that are applicable in Finland and are relevant to the engagement we have performed, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The auditor applies International Standard on Quality Control (ISQC) 1 and therefore maintains a comprehensive quality control system including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Auditor’s Responsibilities In accordance with the Engagement Letter we will express an opinion on whether the electronic tagging of the consolidated financial statements complies in all material respects with the Article 4 of ESEF RTS. 60 We have conducted a reasonable assurance engagement in accordance with International Standard on Assurance Engagements ISAE 3000. The engagement includes procedures to obtain evidence on: • whether the tagging of the primary financial statements in the consolidated financial statements complies in all material respects with Article 4 of the ESEF RTS • whether the ESEF financial statements are consistent with the audited financial statements The nature, timing and extent of the procedures selected depend on the auditor’s judgement including the assessment of risk of material departures from requirements sets out in the ESEF RTS, whether due to fraud or error. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our statement. Opinion In our opinion the tagging of the consolidated financial statement included in the ESEF financial statements of Robit Oyj for the year ended 31.12.2021 complies in all material respects with the requirements of ESEF RTS. Our audit opinion on the consolidated financial statements of Robit Oyj for the year ended 31.12.2021 is included in our Independent Auditor’s Report dated 15.2.2022. In this report, we do not express an audit opinion or any other assurance on the consolidated financial statements. 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