Lassila & Tikanoja plc: Financial Statements Release 1 January-31 December 2023

Lassila & Tikanoja plc
Stock exchange release
9 February 2024 at 8:00 a.m.

Lassila & Tikanoja plc: Financial Statements Release 1 January-31 December 2023

EFFICIENCY MEASURES IMPROVED PROFITABILITY IN FACILITY SERVICES FINLAND, PROFITABILITY DECREASED IN ENVIRONMENTAL SERVICES

Unless otherwise mentioned, the figures in brackets refer to the corresponding period in the previous year.

• Net sales for the final quarter were EUR 200.9 million (210.1). Net sales decreased by 4.4%.
• Adjusted operating profit for the final quarter was EUR 7.2 million (9.6) and operating profit was EUR 6.7 million (12.9). The operating profit for the comparison period was improved by a gain of EUR 4.3 million from the sale of the renewable energy sources business. Earnings per share were EUR 0.14 (0.29).
• Net sales for 2023 amounted to EUR 802.1 million (844.1). The comparison period included EUR 35.4 million of net sales from the renewable energy sources business. Adjusted operating profit was EUR 39.0 million (40.9) and operating profit was EUR 38.4 million (42.9). The operating profit for the comparison year was improved by a gain of EUR 4.3 million from the sale of the renewable energy sources business. Earnings per share were EUR 0.79 (0.83).
• Net cash flow from operating activities after investments was strong at EUR 50.9 million (41.1) and net cash flow from operating activities after investments per share was EUR 1.33 (1.08).
• The Board of Directors proposes a dividend of EUR 0.49 per share.

Outlook for the year 2024

Net sales in 2024 are estimated to be at the same level as in the previous year, and operating profit is estimated to be at the same level or better compared to the previous year.

PRESIDENT AND CEO EERO HAUTANIEMI:

"Net sales for 2023 amounted to EUR 802.1 million (844.1). The comparison period included EUR 35.4 million of net sales from the renewable energy sources business. Adjusted operating profit was EUR 39.0 million (40.9). Net cash flow from operating activities was strong at EUR 93.6 million (71.8), as was the Group's financial position. In 2023, the increase in production costs affected all of L&T's divisions, as did the labour market decisions reached in the late spring, which included one-off items.

In the Environmental Services division, the decline in general economic activity was reflected in lower waste volumes and the prices of recycled raw materials throughout the year. The decrease in the prices and volumes of recycled raw materials burdened the net sales of the division and had a negative effect of EUR 4.5 million on the operating profit.

The Finnish Waste Act was amended in July 2021. Under the reform, municipalities take on a larger role in organising the collection of packaging material waste and biowaste from housing properties. As a consequence of the reform, L&T's direct customer agreements with residential properties on the separate collection of packaging waste and biowaste are transferred to municipalities for competitive bidding gradually between 1 July 2022 and 1 July 2025.
As a result of municipalisation, EUR 40 million of the value of the Finnish waste management market was moved out of the scope of free competition to municipal waste companies during 2022-2023. The effects of this change were fully visible on the division starting from the latter half of 2023. L&T estimates that based on decisions made by the end of year 2023, a further EUR 30 million will be moved out of the scope of free competition to municipal waste companies between 2024 and 2026.

In the latter half of the year, the collection of packaging waste from residential properties was transferred to municipal waste companies in several geographical areas that are significant to L&T. L&T participates in the competitive tendering of municipal contracts. During 2023 competitive tendering of municipal contracts is estimated to have amounted to EUR 15-20 million and the Group won municipal contracts amounting to EUR 8 million. Nevertheless, the change transferred the ownership of the waste material collected from these residential properties, decreased additional sales and reduced the efficiency of L&T's waste collection logistics increasing production costs. The change had a total negative impact of approximately EUR 2.5 million on operating profit in 2023.

L&T aims to compensate for the impacts of municipalisation by growing the corporate customer business and continuing to improve the efficiency of operations during the next three years. In the division, measures to improve operational efficiency and profitability were initiated during the latter half of the year. The employment relationship of approximately 50 salaried employees are terminated as a result of change negotiations and other jointly agreed measures latest by the end of the first quarter of 2024.

The Industrial Services division achieved a good result. Net sales increased in all of the division's business lines. We carried out several large projects in the market for demanding industrial soil remediation projects in particular. Business operations in Sweden developed favorably despite the challenging market environment.

The operating profit of Facility Services Finland improved significantly in 2023. Measures to streamline the cost structure and improve operational efficiency continued. Progress was achieved in digitalisation with the number of sites within the scope of data-driven cleaning increasing in 2023. In building technology services, the demand for energy efficiency services increased during the period under review.

The customer agreements in Facility Services Sweden are mostly fixed-price contracts, and the division has not been able to pass the increased production costs on to customer prices. The division has a programme under way to simplify operating models and adapt them to the changed business environment. The results are expected to become visible by the end of 2024.

In October 2023, Lassila & Tikanoja plc's Board of Directors approved the company's renewed strategy. Under the renewed strategy, the Environmental Services and Industrial Services divisions will seek new growth especially by focusing on business opportunities related to the circular economy of materials. Growth will be sought through organic development and potential selective acquisitions. In connection with the strategy review, the Board of Directors decided to evaluate the strategic alternatives for Facility Services Finland and Facility Services Sweden as part of the company's business portfolio development. The sale of operations is one possible option. This strategic evaluation progressed according to plan in the fourth quarter."

GROUP NET SALES AND FINANCIAL PERFORMANCE

October-December
Net sales for the fourth quarter amounted to EUR 200.9 million (210.1), representing a year-on-year decrease of 4.4%. Adjusted operating profit was EUR 7.2 million (9.6), representing 3.6% (4.6%) of net sales. Operating profit was EUR 6.7 million (12.9), or 3.3% (6.2%) of net sales. Earnings per share were EUR 0.14 (0.29).

Net sales increased in Industrial Services and decreased in the other divisions. Operating profit improved in Industrial Services and Facility Services Finland, and declined in Environmental Services and Facility Services Sweden.

The result for the fourth quarter was affected positively by L&T's EUR 1.1 million (0.9) share of the profit of the joint venture Laania Oy. The operating profit for the comparison period was improved by a gain of EUR 4.3 million from the sale of the renewable energy sources business.

Year 2023
Net sales for 2023 amounted to EUR 802.1 million (844.1), a decrease of 5.0% year-on-year. Excluding the effect of the renewable energy sources business, net sales were on a par with the comparison period and the rate of organic growth was -0.9%. Adjusted operating profit was EUR 39.0 million (40.9), representing 4.9% (4.8%) of net sales. Operating profit was EUR 38.4 million (42.9), or 4.8% (5.1%) of net sales. Earnings per share were EUR 0.79 (0.83).

Net sales increased in Industrial Services and decreased in the other divisions. Operating profit improved in Industrial Services and Facility Services Finland, and declined in Environmental Services and Facility Services Sweden.

The result for the financial year was affected positively by the fair value of EUR 1.3 million of an interest rate swap being recognised in financial items due to the termination of the interest rate swap. The result for the period was also affected positively by L&T's EUR 3.6 million (0.7) share of the profit of the joint venture Laania Oy. The operating profit for the comparison year was improved by a gain of EUR 4.3 million from the sale of the renewable energy sources business.

Financial summary

	10-12/2023	10-12/2022	Change %	1-12/2023	1-12/2022	Change %
Net sales, EUR million	200.9	210.1	-4.4	802.1	844.1	-5.0
Adjusted operating profit, EUR million	7.2	9.6	-25.4	39.0	40.9	-4.7
Adjusted operating margin, %	3.6	4.6		4.9	4.8
Operating profit, EUR million	6.7	12.9	-48.6	38.4	42.9	-10.6
Operating margin, %	3.3	6.2		4.8	5.1
EBITDA, EUR million	20.5	26.5	-22.7	95.8	98.3	-2.6
EBITDA, %	10.2	12.6		11.9	11.6
Earnings per share, EUR	0.14	0.29	-54.0	0.79	0.83	-4.6
Net cash flow from operating activities after investments per share, EUR	0.60	1.05	-43.3	1.33	1.08	23.7
Return on equity (ROE), %				13.3	14.6
Capital employed, EUR million				425.9	437.2	-2.6
Return on capital employed (ROCE), %				10.3	10.4
Equity ratio, %				36.8	34.3
Gearing, %				69.3	75.9

NET SALES AND OPERATING PROFIT BY DIVISION


Environmental Services

October-December
The division's net sales for the fourth quarter decreased to EUR 68.9 million (71.1). Operating profit was EUR 3.6 million (6.2).

Year 2023
The full-year net sales of the Environmental Services division decreased to EUR 283.7 million (321.2) in 2023. Operating profit was EUR 27.1 million (30.3). Excluding the effect of the renewable energy sources business, net sales decreased by 1.2%. The renewable energy sources business was reported as a part of the Environmental Services division until the end of the second quarter of 2022.

The focus of the Environmental Services division is heavily on corporate customers and producer responsibility organisation customers, and their number grew in the beginning of the year and stabilised in the fourth quarter. In the Environmental Services division, the decline in general economic activity was reflected in lower waste volumes and the prices of recycled raw materials throughout the year. The decrease in the prices and volumes of recycled raw materials burdened the net sales of the division and had a negative effect of EUR 4.5 million on the operating profit.

The Finnish Waste Act was amended in July 2021. Under the reform, municipalities take on a larger role in organising the collection of packaging material waste and biowaste from housing properties. As a consequence of the reform, L&T's direct customer agreements with residential properties on the separate collection of packaging waste and biowaste are transferred to municipalities for competitive bidding gradually between 1 July 2022 and 1 July 2025.

As a result of municipalisation, EUR 40 million of the value of the Finnish waste management market was moved out of the scope of free competition to municipal waste companies during 2022-2023. The effects of this change were fully visible on the division starting from the latter half of 2023. L&T estimates that based on decisions made by the end of year 2023, a further EUR 30 million will be moved out of the scope of free competition to municipal waste companies between 2024 and 2026.

In the latter half of the year, the collection of packaging waste from residential properties was transferred to municipal waste companies in several geographical areas that are significant to L&T. L&T participates in the competitive tendering of municipal contracts. During 2023 competitive tendering of municipal contracts is estimated to have amounted to EUR 15-20 million and the Group won municipal contracts amounting to EUR 8 million. Nevertheless, the change transferred the ownership of the waste material collected from these residential properties, decreased additional sales and reduced the efficiency of L&T's waste collection logistics increasing production costs. The change had a total negative impact of approximately EUR 2.5 million on operating profit in 2023.

L&T aims to compensate for the impacts of municipalisation by growing the corporate customer business and continuing to improve the efficiency of operations during the next three years. In the division, measures to improve operational efficiency and profitability were initiated during the latter half of the year. The employment relationship of approximately 50 salaried employees are terminated as a result of change negotiations and other jointly agreed measures latest by the end of the first quarter of 2024.

The division aims to shift its focus increasingly to the materials business in the circular economy value chain. Related assessments were initiated in the latter part of the year.

There is a significant systems renewal project under way in Environmental Services, which will also include the deployment of a new ERP system. The systems renewal project increased the division's fixed costs in 2023. The supplier of the ERP system was changed in 2022 and, during the period under review, the previous supplier paid a one-off compensation relating to the termination of the co-operation. Expenses capitalised during the co-operation with the previous supplier were written down on the balance sheet during the review period. The one-off compensation and the related costs and write-down did not have a significant effect on the division's operating profit. The system is scheduled to enter the deployment stage in the second half of 2024. The total investment in the system projects is estimated at approximately EUR 16.9 million, of which approximately EUR 14,2 million was realised by the end of 2023.

Industrial Services

October-December
The division's net sales for the final quarter were EUR 37.9 million (36.3). Adjusted operating profit was EUR 3.8 million (3.1) and operating profit was EUR 3.6 million (2.3). Operating profit was reduced by a change of EUR 0.2 million in the fair value of the deferred consideration related to the acquisition of Sand & Vattenbläst i Tyringe AB ("SVB") recognised in the fourth quarter of 2023. The change in the fair value is due to SVB's improved result which increases the final acquisition price recognised as liability. In the comparison period, the fair value change recognised in the deferred consideration related to the acquisition reduced operating profit by EUR 0.8 million.

Year 2023
The Industrial Services division's full-year net sales in 2023 grew to EUR 141.0 million (132.0). Adjusted operating profit was EUR 14.0 million (13.6). Operating profit was EUR 13.8 million (12.7). Operating profit was reduced by a change of EUR 0.2 million in the fair value of the deferred consideration related to the acquisition of Sand & Vattenbläst i Tyringe AB ("SVB") recognised in the fourth quarter of 2023. The change in the fair value is due to SVB's improved result which increases the final acquisition price recognised as liability. In the comparison period, the fair value change recognised in the deferred consideration related to the acquisition reduced operating profit by EUR 0.8 million.

Demand was strong in all of the Industrial Services division's business lines. The environmental construction business line was highlighted as a focus area in L&T's renewed strategy in the autumn, and several large customer projects, especially in demanding soil remediation, were carried out in the business line during the period under review. The customer volume increased in hazardous waste services. In process cleaning in Finland, the demand related to annual maintenance breaks was strong, and the resource allocation was successful. Business operations in Sweden developed favorably despite the challenging market environment.

Facility Services Finland

October-December
The division's net sales for the final quarter were EUR 61.4 million (64.6). Operating profit was EUR 1.1 million (0.8).

Year 2023
The full-year net sales of the Environmental Services division decreased to EUR 250.0 million (256.3) in 2023. Operating profit improved to EUR 4.4 million (-0.5).

In Facility Services Finland the measures initiated in the second half of 2022 to streamline the cost structure and improve operational efficiency continued in the division throughout the period under review.

In 2023, the efficiency of production improved and personnel turnover decreased in cleaning services. Good progress was achieved in digitalisation with the number of sites within the scope of data-driven cleaning increasing in 2023. In building technology services, the demand for energy efficiency services increased during the period under review. The rising costs caused by high inflation were, for the most part, passed on to customer prices.

Facility Services Sweden

October-December
The division's net sales for the final quarter decreased to EUR 34.5 million (39.8). Operating profit was EUR -0.9 million (0.5). Operating profit before the amortisation of purchase price allocations of acquisitions was EUR -0.6 million (0.8).

Year 2023
The net sales of Facility Services Sweden amounted to EUR 133.2 million (140.4) in 2023. The decrease in net sales was due to the depreciation of the Swedish krona. Net sales denominated in the Swedish krona increased. Operating profit declined to EUR -3.7 million (0.4). Operating profit before the amortisation of purchase price allocations of acquisitions was EUR -2.5 million (2.2).

Customer agreements in the Swedish business are mostly fixed-price contracts, and the division has not been able to pass the increased production costs on to customer prices. In the fourth quarter, the uncertainty in the business environment was reflected in customer demand, and fewer new projects were started than in the comparison period. The division has a programme under way to simplify operating models and adapt them to the changed business environment. The results are expected to become visible by the end of 2024.

FINANCING

In 2023, net cash flow from operating activities amounted to EUR 93.6 million (71.8). Net cash flow after investments totalled EUR 50.9 million (41.1). In the comparison period, net cash flow after investments was reduced by acquisitions, which had a total impact of approximately EUR 13 million. A total of EUR 5.1 million in working capital was released (EUR 6.2 million committed).

At the end of the financial year, interest-bearing liabilities amounted to EUR 193.7 million (216.8). Net interest-bearing liabilities totalled EUR 160.9 million (167.3). The average interest rate on long-term loans, excluding lease liabilities, with interest rate hedging, was 4.0% (2.5%). In the second quarter, the company refinanced a EUR 50 million bank loan that would have matured in the third quarter of 2024. The new bank loan is in the amount of EUR 40 million and will mature in the third quarter of 2026. In addition to the usual financial covenants, the new bank loan is linked to sustainability targets, namely L&T's carbon footprint and accident frequency. The interest rate swap used by the company to convert part of the EUR 50 million bank loan into a fixed interest loan was terminated in connection with the refinancing of the bank loan. The fair value of the interest rate swap, EUR 1.3 million, was recognised in financial income in the second quarter. The company had no interest rate swaps at the end of the financial year. In the third quarter, the company repaid the remaining amount of EUR 17.7 million of the bond issued in 2018.

The EUR 100.0 million commercial paper programme was unused at the end of the financial year, as was the case in the comparison period. The account limit totalling EUR 10.0 million and the committed credit limit totalling EUR 40.0 million were not in use, as was the case in the comparison period.

Net financial expenses amounted to EUR -6.3 million (-5.8). Net financial expenses were increased by the rise in the general interest rate level, which was compensated by the fair value of EUR 1.3 million of an interest rate swap being recognised due to the termination of the interest rate swap. The effect of exchange rate changes on net financial expenses was EUR -0.0 million (-0.2). Net financial expenses were 0.8% (0.7%) of net sales.

The equity ratio was 36.8% (34.3%) and the gearing ratio was 69.3% (75.9%). The Group's total equity was EUR 232.2 million (220.4). Cash and cash equivalents amounted to EUR 32.9 million (49.5) at the end of the financial year.

DIVIDEND DISTRIBUTION

The Annual General Meeting held on 23 March 2023 resolved that a dividend of EUR 0.47 per share, totalling EUR 17.9 million, be paid on the basis of the balance sheet that was adopted for the financial year 2022. The dividend was paid to shareholders on 3 April 2023.

CAPITAL EXPENDITURE

Gross capital expenditure for 2023 came to EUR 61.1 million (58.2). The capital expenditure consisted primarily of machine and equipment purchases, as well as investments in information systems. Acquisitions accounted for approximately EUR 21 million of the gross capital expenditure in the comparison period.

SUSTAINABILITY

Environmental responsibility

Climate benefits for customers created by L&T

	2023	2022	Target
Carbon handprint (tCO2e)	-453,000	-534,500	growth faster than net sales

The carbon handprint illustrates the climate benefits of a product, process or service, i.e. the emission reduction potential for the user. L&T's carbon handprint reduces the customer's carbon footprint. Our services generated emission reductions for customers through, for example, customers replacing virgin raw materials with secondary raw materials, and fossil fuels with solid recovered fuels. The decline in L&T's carbon handprint was due to the decline in waste material volumes, particularly in the construction segment, that reduces the amount material directed to recycling.

The carbon handprint of the renewable energy sources business and the joint venture Laania is not reported as part of L&T's carbon handprint for 2022. The renewable energy sources business was transferred to Laania joint venture in July 2022.

Progress towards science-based emission reduction targets, using 2018 as the baseline

	2023	2022	Target	Target to be achieved by
Carbon footprint (tCO2e)	31,200	34,200	24,400	2030

L&T's strategic objective is to halve the carbon footprint of its operations by 2030, using 2018 as the baseline, and to reduce the indirect emissions generated by its supply chain. The emission reduction target set by L&T has been validated by the Science Based Targets initiative. The achievement of this objective will be promoted by switching to zero-emission transport technologies and fuels and by opting for renewable energy at L&T's properties. Transport operations account for 95 per cent of the emissions generated by L&T's own operations. The use of renewable fuels increased significantly year-on-year, particularly in the Industrial Services division's fleet of heavy vehicles.

The fuel distribution obligation was adjusted in 2022 by reducing the biofuel component by 7.5 percentage points. The change was not taken into account in the emissions calculations reported in L&T's annual report published in March 2023, as Statistics Finland had not yet updated its fuel classification data in accordance with the change. Statistics Finland published the updated fuel classification data later in spring 2023, and they have been taken into account in the emission calculations in this report.

Recycling rate and material recovery

	2023	2022	Target	Target to be achieved by
Recycling rate of material flows managed by L&T, %	57.8	59.4	65	2026

The recycling rate is the weighted average of our customers' recycling rates. It also includes materials that cannot yet be recycled. To increase our reuse and recycling rate, we actively look for new material streams whose refining rate we can increase. Reporting covers municipal waste collected from corporate customers, hazardous waste, industrial waste and construction waste in Finland. Slurry, contaminated soil and ash are excluded from reporting.

Social responsibility

Total recordable incident frequency (TRIF)

	2023		2022		Target		Target to be achieved by
Total recordable incident frequency	23	23		15		2030

L&T eliminates hazards and improves its own safety as well as the safety of customers and other stakeholders through effective proactive measures, such as risk assessments, safety observations, Safety Walks and occupational safety sessions. L&T has provided training on building workplace safety culture to over 80% of the company's supervisors in Finland as part of the Safety under the helmet training initiative.

Well-being at work

	2023	2022	Target	Target to be achieved by
Occupational health rate (proportion of employees with no sickness-related absences)	41	40	57	2026
Sickness-related absences (%)	5.1	5.6	4	2030

The objective of L&T's personnel policies and plans is to ensure that the number, competence and retention of personnel are at the level required for effective performance. For a labour-intensive company, employees' ability to work and function and maintain it throughout their careers until retirement on old-age pension is important.

CURRENT ISSUES RELATED TO SUSTAINABILITY

L&T updated its environmental sustainability target in October 2023. The goal is to halve the emissions of L&T's own operations by 2030 from the level in 2018 and to reduce indirect (Scope 3) emissions by 18% by 2030 from the level in 2022. The company has set a target of net-zero emissions by 2045.

L&T was awarded Gold, which is the second-best rating, in the international EcoVadis sustainability assessment. Each year, EcoVadis assesses approximately 90,000 globally operating companies, of which only 5% reach the Gold level.

The sustainability results presented in this report have not yet been verified. L&T's verified sustainability figures will be published in the Annual Report in week 9.

PERSONNEL

The average number of employees converted into full-time equivalents was 6,743 (6,820). At the end of the review period, L&T had 8,159 (8,371) full-time and part-time employees. Of these, 6,891 (7,020) worked in Finland and 1,268 (1,351) in Sweden.

SHARES AND SHARE CAPITAL

Traded volume and price

The volume of trading in 2023 was 5.6 million shares, which is 14.8% (24.7%) of the average number of outstanding shares. The value of trading was EUR 57.1 million (104.9). The highest share price was EUR 11.84 and the lowest EUR 9.00. The closing price was EUR 9.80. At the end of the financial year, the market capitalisation excluding the shares held by the company was EUR 373.9 million (405.9).

Own shares

At the end of the period, the company held 644,772 of its own shares, representing 1.7% of all shares and votes.

Share capital and number of shares

The company's registered share capital amounts to EUR 19,399,437 and the number of outstanding shares was 38,154,102 at the end of the period. The average number of shares excluding the shares held by the company was 38,126,791.

Share-based incentive plans

In December 2022, the Board of Directors of Lassila & Tikanoja plc decided to establish two new long-term share-based incentive plans for the Group's key employees. The aim of the new plans is to align the objectives of the company, shareholders and key employees in order to increase the value of the company in the long term, to retain the key employees at the company and to offer them competitive reward plans that are based on earning and accumulating the company's shares as well as on appreciation of the share price. The Performance Share Plan 2023-2027 comprises three (3) three-year (3) performance periods covering the calendar years 2023-2025, 2024-2026 and 2025-2027.

During the performance period 2023-2025, the earning of rewards is based on the following performance criteria: return on capital employed (ROCE), total shareholder return (TSR) and reduction of the carbon footprint (ESG). The target group of the Performance Share Plan during the performance period 2023-2025 consists of approximately 38 key employees, including the Group's President and CEO and the Group Executive Board.

During the performance period 2024-2026, the earning of rewards is based on the following performance criteria: return on capital employed (ROCE), total shareholder return (TSR) and reduction of the carbon footprint (ESG). The target group of the Performance Share Plan during the performance period 2024-2026 consists of approximately 50 key employees, including the Group's President and CEO and the Group Executive Board.

The transitional share-based incentive scheme 2023-2026 consists of two (2) earnings periods of one (1) year each, corresponding to the calendar years 2023 and 2024. The earnings period is followed by a two-year retention period. The aim of the scheme is to support the transition from the old share-based incentive scheme to the new share-based incentive scheme. The earning of rewards for the 2023 and 2024 earnings periods is based the return on capital employed (ROCE) and the reduction of the carbon footprint (ESG). The target group of the transitional share-based incentive scheme for the earnings periods 2023 and 2024 consists of approximately 10 key employees, including the Group's President and CEO and the Group Executive Board.

Shareholders

At the end of the review period, the company had 24,959 (24,556) shareholders. Nominee-registered holdings accounted for 10.2% (7.0%) of the total number of shares.

Flagging notifications

On 26 June 2023, Lassila & Tikanoja plc received a notification indicating that Mandatum Life Insurance Company Limited's shareholding in Lassila & Tikanoja fell below the 5% threshold on 26 June 2023.

Authorisations for the Board of Directors

The Annual General Meeting held on 23 March 2023 authorised Lassila & Tikanoja plc's Board of Directors to decide on the repurchase of the company's own shares using the company's unrestricted equity. In addition, the Annual General Meeting authorised the Board of Directors to decide on a share issue and the issuance of special rights entitling their holders to shares.

The Board of Directors is authorised to purchase a maximum of 2,000,000 company shares (5.2% of the total number of shares). The repurchase authorisation is effective for 18 months.

The Board of Directors is authorised to decide on the issuance of new shares or shares that may be held by the company through a share issue and/or issuance of option rights or other special rights conferring entitlement to shares, referred to in Chapter 10, Section 1 of the Finnish Companies Act, so that under the authorisation, a maximum of 2,000,000 shares (5.2% of the total number of shares) may be issued and/or conveyed. The authorisation is effective for 18 months.

RESOLUTIONS BY THE ANNUAL GENERAL MEETING

The Annual General Meeting of Lassila & Tikanoja plc, which was held on 23 March 2023, adopted the financial statements and consolidated financial statements for the financial year 2022, discharged the members of the Board of Directors and the President and CEO from liability and adopted the remuneration report for the company's governing bodies. The Annual General Meeting resolved on the use of the profit shown on the balance sheet and the payment of dividend, the composition and remuneration of the Board of Directors, the election and remuneration of the auditor, amendment of Articles of Association, and authorising the Board of Directors to decide on the repurchase of the company's own shares and on a share issue and the issuance of special rights entitling to shares.

The Annual General Meeting resolved that a dividend of EUR 0.47 per share be paid on the basis of the balance sheet to be adopted for the financial year 2022. It was decided that the dividend be paid on 3 April 2023.

The Annual General Meeting confirmed the number of members of the Board of Directors as six in accordance with the proposal of the Shareholders' Nomination Board. Teemu Kangas-Kärki, Laura Lares, Sakari Lassila, Jukka Leinonen and Pasi Tolppanen were re-elected, and Anni Ronkainen was elected as a new member, to the Board for a term ending at the conclusion of the next Annual General Meeting. Jukka Leinonen was elected as the Chairman of the Board and Sakari Lassila was elected as the Vice Chairman.

The Annual General Meeting elected PricewaterhouseCoopers Oy, Authorised Public Accountants, as the company's auditor. PricewaterhouseCoopers Oy has announced that it will name Samuli Perälä, Authorised Public Accountant, as the principal auditor.

The Annual General Meeting resolved to amend Article 10 of the Articles of Association to enable the holding of a general meeting without a meeting venue, as a remote meeting.

The resolutions of the Annual General Meeting were announced in more detail in a stock exchange release on 23 March 2023.

BOARD OF DIRECTORS

The members of Lassila & Tikanoja plc's Board of Directors are Teemu Kangas-Kärki, Laura Lares, Sakari Lassila, Jukka Leinonen, Anni Ronkainen and Pasi Tolppanen. Lassila & Tikanoja plc's Annual General Meeting held on 23 March 2023 elected Jukka Leinonen as the Chairman of the Board and Sakari Lassila as the Vice Chairman.

In its constitutive meeting held after the Annual General Meeting, the Board of Directors elected the members of the Audit Committee and the Personnel and Sustainability Committee from amongst its members. Sakari Lassila (Chairman), Teemu Kangas-Kärki and Anni Ronkainen were elected to the Audit Committee. Jukka Leinonen (Chairman), Laura Lares and Pasi Tolppanen were elected to the Personnel and Sustainability Committee.

The company announced the composition of Lassila & Tikanoja plc's Nomination Board on 19 September 2023. Lassila & Tikanoja plc's three largest shareholders, who are entitled to appoint a representative to Lassila & Tikanoja plc's Shareholders' Nomination Board are the Evald and Hilda Nissin Säätiö foundation, a group of shareholders (Chemec Oy, CH-Polymers Oy, Maijala Eeva, Maijala Hannele, Maijala Heikki, Maijala Juhani, Maijala Juuso, Maijala Miikka, Maijala Mikko, Maijala Roope and Maijala Tuula), and Nordea Funds Ltd (through 11 funds managed by it). These shareholders have appointed Juhani Lassila, Miikka Maijala and Tanja Eronen as their representatives in Lassila & Tikanoja's Nomination Board. The Chairman of Lassila & Tikanoja plc's Board of Directors, Jukka Leinonen, acts as the fourth member of the Nomination Board. The Chairman of the Nomination Board is Juhani Lassila.

Long-term targets

Financial targets

Indicator	Target
Annual growth in net sales, %	5%
Return on capital employed, % (ROCE)	15%
Gearing, %	Less than 125%

Lassila & Tikanoja does not consider the long-term financial targets as guidance for any fiscal year.

Sustainability and stakeholder targets

Measure	Target
Net Promoter Score, NPS	>50 by 2026
Employee Net Promoter Score, eNPS	>50 by 2026
Carbon footprint	-50% by 2030, using 2018 as the baseline

L&T updated its environmental sustainability target in October 2023. The goal is to halve the emissions of L&T's own operations by 2030 from the level in 2018 and to reduce indirect (Scope 3) emissions by 18% by 2030 from the level in 2022. The company has set a target of net-zero emissions by 2045.

Sustainability and stakeholder measures are reported as part of the Group's quarterly and annual reporting.

Strategy

In October, Lassila & Tikanoja plc's Board of Directors approved the company's updated strategy. Under the updated strategy, the Environmental Services and Industrial Services divisions will seek new growth especially by focusing on business opportunities related to the circular economy of materials. Growth will be sought through business development and potential complementary acquisitions.

The Environmental Services division's strong market position, broad customer base and significant material volumes provide a good basis for growing the materials business. As for material streams, the division will continue to focus on plastic, wood waste and metals, but opportunities related to other streams are also being explored.

In the Industrial Services division, new business opportunities are emerging around the processing and value increase of industrial flows, as well as the restoration of the built environment. Growth is also sought in the Swedish market in industrial services and material value chains.

Facility Services Finland and Facility Services Sweden will focus on improving profitability. In October 2023, Lassila & Tikanoja announced that the company's Board of Directors had decided to evaluate the strategic options for Facility Services Finland and Facility Services Sweden as part of the company's business portfolio development. The sale of operations is one possible option. The review is expected to be completed by the end of 2024. The review will not necessarily lead to any measures, and Lassila & Tikanoja will disclose more information on the matter as necessary.

The company discussed its updated strategy in more detail at a Capital Markets Day organised on 23 November 2023. The recording and presentation materials are available on the Group website.

CHANGES IN THE GROUP EXECUTIVE BOARD

On 31 March 2023, the company announced that Tina Hellstadius, the Senior Vice President for Facility Services Sweden, will leave Lassila & Tikanoja on 31 March 2023.

On 18 April 2023, the company announced that Mikko Taipale (Master of Laws) has been appointed Senior Vice President, Facility Services Sweden and a member of the Group Executive Board effective from 19 April 2023.

EVENTS AFTER THE FINANCIAL YEAR

On 11 January 2024, the company announced that Lassila & Tikanoja's Shareholders' Nomination Board proposes to the Annual General Meeting to be held on 21 March 2024 that the Board of Directors have seven (7) members. The Nomination Board proposes that Teemu Kangas-Kärki, Laura Lares, Sakari Lassila, Jukka Leinonen, Anni Ronkainen and Pasi Tolppanen be re-elected to the Board of Directors and that Juuso Maijala be elected as a new member. A presentation of Juuso Maijala is available on L&T's website. In addition, the Nomination Board proposes that Jukka Leinonen be elected as Chairman of the Board of Directors and Sakari Lassila as Vice Chairman.

NEAR-TERM RISKS AND UNCERTAINTIES

General economic uncertainty may affect the level of economic activity among customers, which may reduce the demand for L&T's services.

Higher costs, such as the rising prices of fuel and energy, and potential changes in interest rates may have an impact on the company's financial performance.

The Finnish Waste Act was amended in July 2021. Under the reforms to the Waste Act, municipalities take on a larger role in organising the collection of packaging waste materials and biowaste from residential properties. As a consequence of the reform, L&T's direct customer agreements with residential properties on the separate collection of packaging waste and biowaste will be transferred to municipalities for competitive bidding gradually between 1 July 2022 and 1 July 2025. As a result of municipalisation, approximately EUR 30 million of the Finnish waste management market will be moved out of the scope of free competition and to municipally owned companies between the years 2024-2026. The Environmental Services division participates in competitive tendering for municipal contracts and is a significant player in municipal contracts, but the Group estimates that the overall impact of the change will be negative.

The company has several ERP system renewal projects under way. Temporary additional costs arising from system deployments and establishing the operating model may weigh down the company's result.

Production costs may be increased by challenges related to employee turnover and labour availability.

The geopolitical situation involves continued uncertainty due to Russia's war of aggression. The indirect impacts on overall economic activity in Finland and Sweden may have a negative impact on net sales and profit.

The Group company Lassila & Tikanoja FM AB is a claimant and a defendant in legal proceedings in Sweden concerning unpaid receivables invoiced from a former customer of the Group. In June 2022, Lassila & Tikanoja FM AB took legal action in the District Court of Solna against the former customer company of L&T, demanding payment for unpaid receivables. At the balance sheet date, the carrying amount of the receivables in the Company's balance sheet was approximately EUR 1.5 million. L&T's former customer company in question has rejected Lassila & Tikanoja FM AB's claims and the payment obligation, and brought a counterclaim demanding compensation totalling approximately SEK 116 million from Lassila & Tikanoja FM AB. The dispute is still pending. Lassila & Tikanoja considers the counterclaim to be without merit and has not recognised any provisions in relation to it.

More detailed information on Lassila & Tikanoja's risks and risk management is provided in the 2022 Annual Review and in the Report by the Board of Directors and the consolidated financial statements.

PROPOSAL FOR THE DISTRIBUTION OF PROFIT

According to the financial statements, Lassila & Tikanoja plc's unrestricted equity amounts to EUR 51,335,173.21, with the profit for the period representing EUR 7,420,038.45 of this total. There were no substantial changes in the financial standing of the company after the end of the period, and the solvency test referred to in Chapter 13, Section 2 of the Companies Act does not affect the amount of distributable profits.

The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.49 per share be paid for the financial year 2023. The dividend will be paid to shareholders entered in the company's shareholder register maintained by Euroclear Finland Oy on the record date, 25 March 2024. The Board proposes to the Annual General Meeting that the dividend be paid on 3 April 2024.

No dividend shall be paid on shares held by the company on the record date of the dividend payment, 25 March 2024.

On the day the proposal for the distribution of profit was made, the number of shares entitling to dividend was 38,154,102, which means the total amount of the dividend would be EUR 18,695,509.98. The Group's earnings per share amounted to EUR 0.79. The proposed dividend, EUR 0.49 per share, is 62.1% of the Group's earnings per share.

Lassila & Tikanoja's Annual Report, which includes the Report by the Board of Directors and the financial statements for 2023, will be published in week 9 at vuosikertomus.lt.fi/en.

Helsinki, 8 February 2024

LASSILA & TIKANOJA PLC

Board of Directors
Eero Hautaniemi
President and CEO

For additional information, please contact:
Eero Hautaniemi, President and CEO, tel. [phone]
Valtteri Palin, CFO, tel. [phone]

Lassila & Tikanoja is a service company that is putting the circular economy into practice. Together with our customers, we keep materials, manufacturing sites and properties in productive use for as long as possible and we enhance the use of raw materials and energy. This is to create more value with the circular economy for our customers, personnel and society in a broader sense. Achieving this also means growth in value for our shareholders. Our objective is to continuously grow our actions' carbon handprint, our positive effect on the climate. We assume our social responsibility by looking after the work ability of our personnel as well as offering jobs to those who are struggling to find employment, for example. With operations in Finland and Sweden, L&T employs approximately 8,160 people. Net sales in 2023 amounted to EUR 802.1 million. L&T is listed on Nasdaq Helsinki.

Distribution:
Nasdaq Helsinki
Major media
www.lt.fi/en