Eltel AB (publ)

A warm welcome to this presentation of the second quarter results by LTEL. My name is Alexandra Tjärnlund. I am communications director at LTEL. But you won't see so much of me because the presentations will be held by our president and CFO, CEO Håkan Dahlström, as well as our CFO, Tarja Leikas. And after their presentation, we will open up for questions. And you are most welcome to post these questions throughout the webcast, either online via the webcast or by dialing in. And if you dial in, you press hash key five on your keypads. With that, I think it's time to hand over to you, Håkan.

Thank you, Alexandra. Good morning and very welcome, everybody. I will go through shortly our highlights from the second quarter and I would like to start with the net sales. I think we have a solid growth. Happy to see 5.3% organic growth in the segment and for the whole group 3.8%. So in line with our targets and really nice to see. What is also very satisfying for me is that we have been able to secure a very important contract during the quarter and this to a total value of 370 million euro to be compared with second quarter last year of 164. By this, we have been able to increase the value in our order book to 1.3 billion. And this is, as you understand, an estimate since we have so many frame agreements. But it's a bit larger than what we had before with 1.2 billion. So really nice to see the development there. What is not so good is the decline in volume that we are having in Norway. And this is, of course, burdening both the top line and the bottom line, even though the reduction in the second quarter was less than previously experienced we also see in all the nordic market particularly sweden and denmark a shift of volume from communication to power and i will elaborate a little bit on this in a moment but first a few words about our profit and financial position So during the second quarter, we were able to improve by 2 million euro. And this is, of course, very important for us. And our main task is in the company to strengthen our profitability, of course. So with a 0.5 million euro profit in the second quarter, we have taken a step, another step in the right direction. But we are not where we want to be. Also good to see that the cash flow year to date has improved in all segments and the liquidity situation is significantly better now than a year ago. So a few really important proof points here. One of them is the networking capital that has been improved down to minus 54 million. All different parts of the organization have contributed to this. So that's also nice to see. Our commercial terms are paying off. Looking at the strategy within the end of this presentation today, elaborate a little bit on the progress we have in our strategy. And the short version here is that the gross profit year to date has increased with 40%, meaning from roughly 29 million euro to a bit more than 40 million euro year to date. And I think that is one important milestone towards more healthy financial result. It's also great to see the quality in our strong pipeline. When we now have the ambition to broaden our customer base and address new and adjacent business, we see that this is something that many, many customers and potential customers are happy to discuss with El Talen. So this is a really nice development we have here. And one proof point of this is that during the quarter, we were able to sign a new contract in the area of new business for 14.6 million euro. And that to be compared with 4 million a year ago. And this is one of the main result of the strategy that we launched early 2023. We also have finalized the divestment of high voltage Poland during the quarter, and I will mention a few words about that. But first, a little bit more about this, what is happening in the market as we see it. It's two things happening at the same time in the market where the traditional telecom operators in most of the cases in Nordic, they are reducing the investment in infrastructure like 5G and fiber network. At the same time, there is much more initiative in the power sector, and it's about transition to green energy, renewable energy, but also strengthen the critical infrastructure as we have in all of the society when it comes to power transmission and power distribution. Here there is one exception, and that is Finland. We see that the communication business based on the traditional operator demand is still increasing in Finland, and that is due to the ongoing fiber rollout. On the other side, on the power side, we see an updated regulation that is sort of creating a bit of hesitation and reduced investment from the distributor of the power segment in Finland. development a little bit by itself, more communication, a little bit hesitation in power, versus the other part of the Nordic, where it is a lot of new initiatives, idea, investment in power, and the traditional operators are a bit reducing their investment and a bit hesitant. But we see also new players coming in to communication, asking for the same type of services that we traditionally have sold to the operators. And this is, to a large extent, public sector. An example of this is the agreement that we have signed with the Swedish Defense Material Administration, FMV, about the air bases in Sweden. We have another example in Norway with the contract with Equinor. So this... When the operators are reducing the investment, we broaden the customer base and find new customers for the same type of services as we have done traditionally for the operators. We also see that there is a lot of new initiatives when it comes to renewable energy, particularly solar. The wind industry has been more hesitant and we have not seen any significant initiatives in the Nordic when it comes to wind. A lot of planning, a lot of projects, a lot of discussions, but it is within the solar that we expect the most activity going forward, short term. Also a few words then about the high voltage polar. And as we communicated second week of April, we have signed an agreement to divest this. And now 6th of June communicated the 7th of June. We have finalized that process and the divestment is done. This has been done to reduce the risk for ELTEL and our shareholders. And I can see already now that this is... bit of a relief for us that we are now able to have stronger focus on our core market and develop our margin in the business in the Nordics. There is a lot of complexity in the Polish market when it comes to this type of project that we have run. And as you can see on the right side, this has been a business that has had significant losses over a couple of years, five, six years, and we have, during 2023, been able to improve the business to a level where it was possible to divest it. The financial impact of this for Eltäl is, as we have said during the first quarter report and earlier communicated, but we could just confirm that this is now finalized and to the financial impact, as we have said before. So I think that is the chapter that we are happy to leave behind us. And with that, I would like to ask Tarja to join me here to tell you more about the group numbers.

Yeah, and really nice numbers. Nice to be reporting the second quarter result. Our group net sales increased, like Håkan said, 3.8%, and in the segments, the growth was 5.3%. The growth engines here were Denmark, Finland and Sweden, and that's the order of the magnitude. In June, we completed, like Håkan mentioned, high voltage Poland divestment, and the Polish business is no longer part of LTL. When we exclude Poland from our numbers, the growth is slightly more rapid. Regarding profitability, we note that our adjusted EBIT A has improved by 2 million. Majority of Eltel's second quarter result is in line with our expectations. The only exception being slower than anticipated communication market in Norway. We do report positive development in return on capital employed, which has turned from the negative 11.7 to positive 14.3%. This is a result from profitability improvement and the lower operative capital we have employed. Our result includes negative 23.1 million from the divestment of Poland. This number will be shown in items affecting comparability going forward. The transaction had a negative cashflow impact of 4 million euros in the second quarter. Then we have the segment results, and first we have Finland. Finland's share of our operations is 43%. The second quarter Finland, they turned to growth. Net sales increased 8.7% compared to previous year, and the first half was 3.6% higher than the previous year. The market demand has remained strong in communication, and the volumes in power transmission have increased. The power distribution has declined, and this is due to the updated market regulation, although the impact has not been as significant as we initially anticipated. Adjusted EBITDA improved by 1.5 million and came to 2.4 million. The communications, good volumes, smart grids, and the improved outcome from the earlier reported unfavorable power service contracts were the main items behind the improvement. The positive momentum Team Finland has built has really held on. Then we move on to Sweden, which share of LTL is 24%. In Sweden, net sales have remained stable compared to previous year. The declining communication volumes, like Håkan presented earlier, have slowed us down, but the sharp increase in power volumes has been enough to secure the stable development. Adjusted EBITDA of the quarter was slightly higher than previous year and came to one million. Then we go to Norway, which share of Eltel is 15%. We have been suffering from the declined communications market for the past two years in Norway. Our second quarter net sales declined by 2.5% compared to the previous year, and first half, we are more than 11% lower than previous year. New strategy execution is progressing in Norway, but this has not been enough to compensate the decreasing traditional communications volumes. Profitability-wise, the volume decline mitigating actions have prevented us from major profitability decline. Second quarter EBIT A came still to negative 1 million, being 200,000 lower than previous year. The continued volume declining communication will lead to adjustments in our Norwegian operations. This will happen during the second half. The planning is ongoing. Then we go to Denmark. Denmark's share of our operation is 12%. After the first quiet quarter, Denmark is growing again. The growth is now 17.9% compared to previous year's second quarter. The profitability is equally bouncing back to 4.6%. Cumulative first halves EBIT A is lower than previous year, as we did expect. This is being due to less favorable business mix. We have a very good reason to be pleased and confident about our Danish operations. And then we go to other business. where high-voltage Poland was included until its divestment in June. Business-wise, second quarter net sales declined from previous year and came to 18.1 million. Poland's share of this was 6.3 million. Here we report a profitability improvement. EBITDA loss has more than halved and came to negative 0.4 million. And then we look at the balance sheet items. In all here presented balance sheet items, we report major improvement compared to previous year. Our financial position is stronger. Cash flows from remaining LTL business entities were stronger than previous year. Our leverage has improved from last year's slightly over six, now to 3.6. Net debt has decreased from 141.6 to 127.9 million. Interest-bearing debt from 161.8 to 141.6 million. Networking capital development has been positive as well. From negative 2.4, we go down to negative 54.3. With these balance sheet items, we complete the second quarter and the first half year's financial report. As usual, we take a look at Eltel's financial target setting by the end of 2025. These we have kept unchanged. The targets by the end of 2025, EBITDA margin 5%, growth between 2% and 4%, leverage between 1.5% and 2.5%, and dividend payout subject to leverage target. Thank you for the attention and handing over to Hawk.