Luotea Oyj

Thank you for joining us today. In this session we will walk you through our second quarter performance and key financials and take a look at Luotea's strategic direction going forward. I will deliver the presentation together with our CFO Mika Stirkkinen and throughout the presentation you can submit questions in the comment field and we will address them in Q&A session at the end of the webcast. I will start with some highlights from the second quarter. In Q2, our group net sales increased by 1.5% from the second quarter of last year. Our adjusted EBIT-A was 2.5 million euros up from 1.9 million in the corresponding quarter last year. And the adjusted EBIT was 2.2 million euros up from 1.5 million euros last year. This year we expect reported group costs to normalize and group costs to decrease. Another positive development has been seen in our contract portfolio. Thanks to positive contract intake, it's up from the end of 2025. There are also some significant current news. We announced yesterday that we have appointed a new CEO for Luotea Sweden, Richard Nyrén, and he will start latest by February 5th of next year. More on this shortly in this presentation. And as for our guidance, it remains unchanged. In 2026, our adjusted EBITDA is expected to be better or materially better than the adjusted EBITDA 7 million euros in 2025. On this slide, we've seen the development of Luotea's net sales and our adjusted EBIT-A. In the second quarter of 2026, our group net sales were 88.1 million euros, up by 1.3 million euros from the corresponding quarter in 2025. If you wonder why the sales are still down slightly from Q4 2025, that is a question of normal seasonality and the last quarter of the year is always the busiest of the year. and the group's adjusted EBIT-A also increased by 0.7 million euros and is now 2.5 million euros. And here we see the development in sales and adjusted EBIT-A from our operations in Finland. The sales were 55.7 million euros in the second quarter, down by 1.3 million euros from the corresponding quarter in 2025. The adjusted EBITDA also decreased by 0.7 million euros from the second quarter of 2025 and was now 3.4 million euros. On a positive and it's very positive note, it was considerably better than in the previous two quarters. The decrease in sales in Finland was largely due to intense price competition in the cleaning market, where our sales decreased by 7%. and many companies have ongoing cost-saving measures which affect our add-on sales especially. And we are not engaging in margin undercutting in our contract sales. As a result, our net sales in Finland decreased by 2.3%, and it's however really important to note that in property maintenance and technical services, we saw a very robust sales growth of 5%, which is really good. and our Luotea Smarty service is also making some promising inroads. More on those later in this presentation. And we also see several other opportunities for a positive contract sales growth in Finland. Our new contract intake has been positive both in the last quarter in 2025 and in both quarters of this year, and it's really good also. And also our customer satisfaction remains very high, which means that we expect the sales in Finland to improve as our clients outlook improves. Another opportunity lies in public procurement act, Hankintalaki in Finnish, which is expected to open large number of public and municipal contracts for competitive bidding. This is likely to favor large players like Luotea, as we can offer comprehensive and cost-effective services. We also expect further opportunities to emerge the public sector, particularly within the well-being service counties, hyvinvointialueet in Finnish. As the Finnish healthcare system faces increasing financial pressure, these counties are likely to turn more to private service providers to achieve cost savings. And this development is also expected to favor companies like us. We also believe that our data-driven services provide a really strong competitive advantage and enable us to consistently outperform market growth. Then to Sweden. Sweden comprises roughly a third of our businesses and there the market is very different from that in Finland. Correspondingly in Sweden where our sales increased quite significantly. The main reason for that is increased customer satisfaction which has resulted in strong growth in add-on sales. Sales were up by 2.6 million euros from the second quarter of last year and were now 32.5 million euros and at the same time the turnaround in Sweden is still ongoing and the Swedish operations registered a loss of 0.6 million euros in adjusted EBIT-A but as you can see we are now on the way correcting this as the loss was less than half of what it was a year ago and 0.7 million euros smaller than corresponding quarter in 2025. and as you saw from the results in Finland, we managed to turn our operations in Finland around and make them profitable in the last few years and in Sweden we are executing exactly the same playbook and I'm really confident that we will be just as successful in Sweden. And as I mentioned, another positive sign is that customer satisfaction is up in Sweden and that has already led to higher add-on sales. and also mentioned, we announced a change in leadership in Sweden yesterday. Mikko Taipale, former CEO of Sweden, has done excellent work and I want to thank him for his important contribution. However, we need to take the next step and we have now appointed Rikard Nyrén as the new CEO and Rikard has extensive experience in leadership, business development and real estate value creation. And I'm really confident that he is the right person to execute the next phase of our strategy in Sweden. And those were the key figures from Q2 and our CFO Mika will continue with the financials in more detail shortly. But before that, I will say a few words about our strategy. And it's important to understand what our goals are, but it's just as important how we plan to achieve them. This image is Luotea's strategy in a nutshell. The foundation of our strategy are our missions and our values. Our mission is to create value for people, companies and society, value that goes beyond the surface. All this is guided by our values, courage, a down-to-earth attitude and collaboration. And these are very Nordic values, define how we work together both with our customers and with each other every day. And on the next level of the house are our success factors and then our strategic focus areas and I will shortly cover them in more detail. And at the top of the house is our vision to navigate the way toward a smarter tomorrow and this is the direction in which we want to take Luotea. And there are also more concrete medium goals and these can be seen in 2028 financial targets on the right side of the house. And of course the world around also affects us. And in the clouds you can see the major societal shifts that affect our businesses. These large-scale megatrends such as climate change and growing repair debt and urbanization increase the need for predictive maintenance, energy efficiency and intelligent facility management. And our services are designed to address these needs. And as you can see, Luotea is a next generation facility services company that navigates the way toward a smarter tomorrow. And we develop services where technology and human expertise complement one another, making buildings more sustainable, intelligent and more functional for their users. And in doing so, we help keep the infrastructure of businesses and the whole society running smoothly. and our ambition is to create deeper impact by improving our customers' everyday lives and by helping them to do business and by contributing to a better society. But let's take a closer look inside the house and open the door and start with our success factors. We have specified four success factors that enable Luotea's growth. We provide the full service offering that makes facility services smooth and cost-efficient. Our data-driven services provide real-time insights and help allocate resources precisely where they are needed. Our expertise in sustainability is reflected in our commitment to biodiversity and energy-efficient solutions. In addition, our Smarty service enables intelligent and climate-smart energy management in buildings. Next, let's look at our strategic focus areas. and here are the most important strategic focus areas we will concentrate in 2026 and of which we have OKR measures and KPIs to all our employees so that technicians and cleaners and property maintenance technicians knows what their part of executing the strategy is and that's also important and everything starts with our first focus area our services we plan to drive growth in our core business areas through highly high quality sustainable services services that create real value for our customers and we aim to achieve market leadership in selected business segments Our success of course depends on customer satisfaction. We plan to deliver the best customer experience in the industry. We are already on the right track as we can see from our improved MPS course both in Finland and Sweden. The key to profitability is not just sales, but also efficiency, our second focus area. As I mentioned earlier, we are in the process of turning around our businesses in Sweden by executing our playbook, which proved highly successful in Finland. and the goal is to ensure operational efficiency through effective management and cost control. And the third focus area is our goal to be the best place to work in the industry. This is the people's business especially. And we want our people to be safe, happy and motivated because that is the only way to ensure that our customers are happy too. And as I mentioned, we are already on the right track on both counts as both our employee satisfaction and our customer satisfaction figures have improved significantly. But we still have the work to do. Luotea is still a relatively new company, so we have to continue building our own Luotea culture and implementing our values, brave feet on the ground and cooperation. And we continue leading and developing our personal skills and capabilities. And we will also continue building the Luotea employer brand to ensure that we attract the best people. Digital services and AI are our fourth strategic focus area. Our office workers increasingly use AI to support their everyday work and improve efficiency. Just as important is that we use data and AI in our maintenance and cleaning services as a standard way of working. And by developing new services like Smarti, and it's important to note also that we don't just use data and AI to make our sales more efficient, they also save money and create value for our customers. I believe that these four focus areas form a coherent framework and they guide our decisions and support our ambition to operate more efficiently, grow in a disciplined way and continue leading development of modern facility services. To illustrate our strategy in practice, I would like to highlight a couple of customer stories. Let's start with the Port of Helsinki. Our cooperation with the Port illustrates perfectly how a long-term strategic partnership creates value for both sides. It's also an example of how our work helps keep helps keep society's most critical infrastructure running and doing so helps maintain Finland's security of supply. And the port of Helsinki is one of the Europe's busiest passenger ports, handling around 9.5 million passengers and over 13 million tons of cargo annually. That makes it Finland's main hub for foreign trade. And it's hard to overestimate how important this port is for the country. Luotea serves the Port of Helsinki's partner for property maintenance and technical fire safety services at the Olympic terminal, West terminal and also at the Katajanokka terminal. In addition, Luotea provides cleaning and assistance services at the West terminal. Reliable terminal maintenance and safety services are of course essential to port's daily operations. For such critical infrastructure it's also understandable that the port also values a long-standing strategic partnership. Then the second one, Jumbo, located in Vantaa in the greater Helsinki area, is the largest shopping center in Finland. And Jumbo has very ambitious sustainability goals and aims to achieve carbon positivity by year 2030. And last year they chose us, Luotea, as their partner in this emissions reduction journey. We provide Zumbovit comprehensive energy management services and continuous energy saving proposals. At the same time, we help them to optimize their ventilation systems and build better technical capabilities, but also improve their energy efficiency. This has already resulted in continuous emission reductions and considerable cost savings. In the long run, this will also increase the value of their properties and extend their lifespan. But that's not all. Jumbo has started a pilot with our data-driven Luotea Smarti services, which combines energy conditions and operations in the single dashboard view. And Luotea Smarti makes predictive energy optimizations possible, which will result in the future savings. And this illustrates... Sorry. This illustrates how we provide services where technology and human expertise complement one another, making buildings more sustainable, intelligent and more functional for the users. It also shows how partnerships provide opportunities for add-ons that benefit both sides. Since Jumbo is the largest shopping center in Finland and provides services for hundreds of thousands of people, our work here is another example of how we help keep businesses and services running, creating value not just for the client but for society as a whole. I hope these client cases give you a clearer idea about our strategy and how we plan to execute it. But now on to our financials and guidance, and I will hand over to our CFO, Mika Stirkkinen. Thank you, Antti.

Here you can see our adjusted EBITDA figures. The Q2 this year figures are 4.3 million, identical with last year's adjusted EBITDA figures. And on the right-hand side, you can see the rolling 12-month figures, which stood at 17.4 million. And as you can see, the level is solid and the EBITDA has stayed really, really at the solid level during the early part of the year. On the cash flow, our cash flow after investment stood at minus 1.3 million during the first half of the year. There were a couple of highlights on that. Networking capital change was negative of 2.7 million euros. Historically, end of June is the low point or the weak point in terms of seasonality and the net working capital change is expected to improve during the latter part of the year. Another highlight is the income taxes. We were a bit upfront in terms of income tax payments, and those are expected to be materially lower in the second half of the year. And then on the financing cash flows, We repaid a 5 million euro term loan during the first half of the year, as well as paid a dividend of 2.7 million. And then on top of that, we repaid leases. So those totaled 10.5 million altogether. On the capital structure, we have a really strong balance sheet. Our cash and cash equivalents stood at 3.9 million. We don't have any traditional bank loans in the balance sheet, hence balance zero. We have IFRS 16 lease liabilities of 13.2 million euros. These together result in a net debt of 9.3 million euros. And when you compare 9.3 3 million euros with the rolling 12-month adjusted EBITDA of 17.4. Our ratio net debt to adjusted EBITDA is 0.5. In connection with the repayment of the 5 million euros term loan, we upsized our revolving credit facility from 10 million to 15 million, and this facility is fully unutilized, i.e. we have a strong financial muscle. On the financial targets, These haven't changed since the capital markets day last November. Our mid-term organic growth target is 4-5%. Associate EBITDA margin target 5%. Our cash conversion target 90%. And then dividend policy is to deliver more than 50% of net profit as dividends. and to repeat our guidance, guidance is unchanged from Q1. We expect our adjusted EBITDA in 2026 to be better or materially better than the adjusted EBITDA of 7 million euros in 2025. And now it's time for your questions.

Hello, my name is Antti Isokangas, I'm the interim communications director and I'm here with your questions. There have been quite a few of them, actually ten, all of them from the same person, someone called Raymond. who types very, very fast. These are very long and very detailed questions, some of them overlapping. But let's start with the first one. With quarterly revenue showing very limited growth, how much of the EBITDA improvement is based on permanent productivity gains and better contract margins, and how much comes from timing, seasonal effects, or temporary cost reductions? When should this improvement begin to translate into sustainable free cash flow, earnings per share and higher shareholder returns? Multiple questions at the same time.