Eltel AB (publ)

A warm welcome to this presentation of LTEL's first quarter results. My name is Alexandra Kjernlund. I am communications director at LTEL. The presentation will be held by our CEO and president, Håkan Dahlström, and our CFO, Tarja Leikas. And after the presentation, we will open up for your questions. And you are welcome to post your questions throughout the web conference, either by the telco or the web. With that, I'd like to hand over to you, Håkan and Tarja.

Thank you, Alexandra. Good morning all. I would like to start with talking a little bit about ELTIL today. We are the leading Nordic service provider in critical infrastructure. We deliver installations, upgrade and maintenance services within the area of power and communication. The area that we have been active in during 25 years is what we talk about as classic services. And here we serve a broad range of customers in the public and private sectors, from network owners and operators to the industry. During the last years, we have also established ourselves as a provider in what we call emerging services. This is services like renewable energy, energy storage, e-mobility, meaning e-charging for electrical cars and trucks, and not at least during the last two years, also data center solutions. In this area, as I talk about as emerging services, I'm really pleased to see that this area now in the first quarter has a revenue share of 23%. So with strong growth in the first quarter, our emerging services is almost a quarter. I would claim that 25 was the year that we gained momentum across all our strategic initiatives and I will show in the later part of this presentation today where we are today. But now looking a bit at the first quarter. I'm really happy to see that the year started out so strong with strong growth and significant improved profitability. The net sales development, more than 10% in organic growth or local currency, is driven by Finland. Finland had an impressive net sales development in the first quarter, mainly due to emerging services, but also very good performance in communication and power. Also, Denmark, Germany had a solid growth, more than 5%, and Sweden, Norway, more flattish on net sales. As I mentioned before, the emerging services portion of this increased from 6% a year ago to now 23%. Q1 is the 11th quarter in a row of improved profitability. This is something that I have been very consistent with, talking about every quarter we have to beat the same quarter the year before. The seasonality have a very big impact on our business, but to compare to the year before is then very important. One big contribution to this improved profitability in the first quarter is our operation in Norway. We have had issues, as you know, two years ago, one year ago in Norway, but now we have four quarters in a row with improved profitability in Norway. That now also the net sales is flattish in Norway tells me that we are most likely here now in a new trend in our operation in Norway. On the commercial side, I would like to give you two examples of important contracts that I actually think is very illustrative for the business in Hjältäl. The first one is the data center contract, 25 million euro. It's signed with the customer Hyperco, and this is about building a grid connection substation outside the data center, but connecting the data center towards the grid. The other one, a very important frame agreement that we have had with Elisa during many years. We are the main supplier to Elisa and also now we have been able to renew the contract for a new period. So 60 million euro here in a frame agreement doing service and maintenance upgrade services towards Elisa. Very important for our communication business in Finland. I would claim that we see here in the first quarter that we still are the market leading actor in the classic services, and we are now gaining more and more ground in our emerging services. So this, I would say, with the increased demand I can see from public sector, it shows us that this critical infrastructure has never been more critical, that given the world around us. And now to a bit more on the numbers, Tarja.

Happy to. Thank you, Håkan. I'm pleased to report our strong first quarter. We delivered both top line growth and profitability improvement. This marks, like Håkan mentioned, 11th consecutive quarter of year over year profitability improvement and the best first quarter, you didn't mention, best first quarter performance in a decade. Net sales increased over 13%, driven primarily by power business. Growth was strongest in Finland, with Sweden and Norway developing in line with targets, and Denmark and Germany exceeding targets with 5.4% growth. Overall, first quarter was strong. Adjusted EBITDA more than tripled, with Norway the largest contributor to the improvement. This followed by Finland and Sweden, and together with these, group reached 3.1 million adjusted EBITDA. Considering business seasonality, we are satisfied with the outcome. Our headcount is now down by 300 employees year on year. This reflects effective scaling, structural portfolio changes and increased use of partners. Profitability development remains the cornerstone of our strategy and we continue to make progress towards our financial goals. So the journey towards this 5% EBITDA continues, and as said, now 11th consecutive quarter with improved EBITDA. This historically strong first quarter profitability is built on both commercial and operational excellence. And you can see that here in cross profit, the margin, the cross profit is increasing as expected, but the margin reflects the service mix that we have currently. Then we look into our segments and first Finland, which share of our operations is now 42%. Our net sales show very strong 29% growth, largely due to project facings in power business area. Solar PV and data center solutions were the biggest elements here. Finland is the forerunner in ELTA's emerging services in the green energy investments. In communication, the volumes were, as we expected, lower than previous year. Adjusted EBITDA improvement continued, reaching 2.7 million. Both business areas contributed to this enhanced profitability. Here I would mention also the communications capability to adjust operations to meet the decreased demand and this is to me very notable. Finland is executing really strong commercial discipline. And then the second largest, Sweden. Sweden is now 29% of our operations. Here we are delighted for Sweden's continued growth. We recorded over 54 million euros net sales. Communication, unlike in our other segments, continued to grow. And this is from a broad spectrum of customers. Customers from telecom, public infra and defence. Power volumes declined following lower volumes in smart meters and solar PV. Our adjusted EBITDA came to 1.8 million euros. We welcome this continued profitability improvement. Sweden has a good start for year 26. Then we go to Denmark and Germany, which share of our operations is now 17%. Here we report good, solid, more than 5% growth. Net sales came to 32 million. Communication business area continues being slow in Denmark, whereas power and smart meters net sales grew significantly both in Germany and Denmark. Following Denmark's continued communication downturn, we report profitability decline. We have taken the decision to right-size the organization and operations to align with the current and future market demands. This process is ongoing and we expect the impact from this later this year. Then we go to Norway, which share of our operations is now 13%. Net sales in Norway has stabilized and we report 2% growth. We are delighted to see emerging services development, data center solutions and e-mobility growth, as well as customer base expansion are materializing in Norway. This top line stabilization has been both long waited and long developed. This demonstrates our capability to beat the traditional telecom decline. Very good. Equally delightful is the profitability development. Norway is our biggest contributor to positive first quarter EBIT development. They contributed more than 2 million euros to the improvement. Considering the seasonality of our business, this is impressive. With the rolling 12-month adjusted EBITDA being positive and the top line development, we witness a trend turn in Norway. This gives an indication of better future outcome. We are very happy for the Norwegian crew. Then, as usual, we take a look at the balance sheet. And there we have a couple of exceptional items affecting the net debt, leverage and net working capital comparability. First, last year's refinancing, the bond debt replaced the equity classified hybrid bond. And secondly, this quarter we repaid the tax deferral. Tax deferral is a COVID-19 related governmental benefit, which we received from the Swedish tax authorities back in 2023. Then networking capital, this reflects the exceptional growth and operations activity ongoing. Here we also have the tax deferral repayment, like I mentioned, that tax deferral impacts networking capital. Last year networking capital was negative 76 and now we report negative 37. Then net debt, here we report 169 million euros. If we adjust the hybrid bond, then we are on the level 144. And when we take away tax deferral payment impact to the cash, we land to 126. Last year we were on level of 104. and leverage with the same comments, we report 3.2, comparable would be 2.8, and last year we reported 2.1. And as the table shows, we have come quite far from the levels of 23 when we were on level 6.3. We are pleased to see the strategy materializing and the results becoming visible. And then the financial targets, which we keep unchanged. Adjusted EBITDA margin 5%, growth between 2 and 4%, and leverage between 1.5 and 2.5. And then Håkan will continue with the strategy.