Delete Group Oyj - Interim report (Q1 and Q3)

Profitability improving, outlook remains positive

Delete Group Oyj Stock exchange release             19 May 2022 at 2:00 p.m.
EEST

DELETE GROUP OYJ

Interim Review January–March 2022 (IFRS, unaudited)

PROFITABILITY IMPROVING, OUTLOOK REMAINS POSITIVE

KEY POINTS: JANUARY–MARCH 2022

•         Net sales decreased by 7% to EUR 21.0 (Q1 2021: 22.6) million due to
divestment of W-Tech Entreprenad AB. Organic growth was +3%

•         EBITDA increased by EUR 1.0 million to EUR 0.2 (-0.8) million

•         EBIT increased by EUR 1.0 million to EUR -3.0 (-4.0) million

•         Operative cash flow decreased by EUR 6.0 million to EUR -2.8 (3.2)
million

•         Net debt decreased by EUR 0.8 million to EUR 77.8 million (78.6)

KEY FIGURES

+----------------------------+--------+--------+------+---------+
|                            |1–3/2022|1–3/2021|Change|1–12/2021|
+----------------------------+--------+--------+------+---------+
|Net sales, MEUR             |21.0    |22.6    |-7%   |131.3    |
+----------------------------+--------+--------+------+---------+
|EBITDA1), MEUR              |0.2     |-0.8    |121%  |9.9      |
+----------------------------+--------+--------+------+---------+
|Adjusted2) EBITDA, MEUR     |0.7     |-0.3    |334%  |13.0     |
+----------------------------+--------+--------+------+---------+
|Adjusted EBITDA, % of sales |3.6%    |-1.4%   |5.0ppt|9.9%     |
+----------------------------+--------+--------+------+---------+
|EBIT, MEUR                  |-3.0    |-4.0    |25%   |-3.1     |
+----------------------------+--------+--------+------+---------+
|Adjusted EBIT, MEUR         |-2.5    |-3.5    |30%   |0.0      |
+----------------------------+--------+--------+------+---------+
|Adjusted EBIT, % of sales   |-11.7%  |-15.5%  |3.8ppt|0.0%     |
+----------------------------+--------+--------+------+---------+
|Profit (-loss) for the      |-4.3    |18.1    |-123% |14.0     |
|period, continued operations|        |        |      |         |
|MEUR                        |        |        |      |         |
+----------------------------+--------+--------+------+---------+
|Profit (-loss) for the      |-4.3    |16.3    |-126% |11.9     |
|period, MEUR                |        |        |      |         |
+----------------------------+--------+--------+------+---------+
|Operative cash flow, MEUR   |-2.8    |3.2     |-188% |13.9     |
+----------------------------+--------+--------+------+---------+
|Net debt3), MEUR            |77.8    |78.6    |-1%   |72.0     |
+----------------------------+--------+--------+------+---------+

Information about the formulas and Alternative Performance Measures are
presented in the notes section of this Interim Review. All figures presented are
statutory unless stated otherwise.

OUTLOOK FOR 2022 (UNCHANGED)

The underlying demand for Cleaning Services and Recycling Services is expected
to grow in 2022. Delete Group’s efficiency and productivity are expected to
improve compared to the previous year.

Delete Group’s operating profit is expected to improve in 2022.

Due to the coronavirus pandemic and the geopolitical developments, the outlook
contains more uncertainty than usual and is based on the assumption that there
are no material changes in the operating environment, postponements of scheduled
work, or cancellations due to the pandemic.

SIRPA OJALA, CEO OF DELETE GROUP:

“The first quarter was a typical slow season for our businesses. I am reasonably
satisfied with our performance given the continuing challenges we faced from the
coronavirus pandemic, especially in Sweden, with sick leaves burdening our
ability to deliver efficiently. With the winter passing in late March, we saw
some good development in services’ demand levels and are preparing for an active
high season in the second quarter with fewer coronavirus related hindrances
expected.

The geopolitical development in Europe had only limited impact on our business,
at least so far, and we have no direct exposure to sanctioned parties or
conflict regions. The increasing fuel prices and general cost inflation impacted
our margins to some degree in the first quarter, but these will be mitigated
with a temporary fuel surcharge, effective gradually in the second quarter.

The divestment of W-Tech business in late 2021 affected the reported net sales
of Cleaning Services in the first quarter, but on a comparable basis, our
Cleaning Services business grew organically by 4% from the previous year.
Despite the coronavirus-related issues with delivery effiency and fuel cost
increase, we managed to improve our Cleaning Services’ EBITDA-% to 4% from the
previous year’s 2%.

Recycling Services had a slow start to the year with incoming waste volumes and
the net sales declining in the first quarter. The activity picked up speed
towards the spring season in March. Our Recycling Services’ profitability
remained very strong, even improving despite the lower volumes, on the back of
solid productivity and favourably developing REF and wood material demand.

We will continue to enforce tight cost and cash flow controls for quick
manoeuvring, should the geopolitical development or the coronavirus pandemic
-related issues interfere with the planned 2022 assignments. We will continue to
follow the health and safety precautions every day, protecting not only our
employees but also our customers and partners with whom we are in contact.

I look forward to continuing the development of our operations and collaborating
with our customers in the upcoming busy season. We received a very good net
promotion score from our customers in an extensive study conducted in the first
quarter and have set an ambitious target to improve further, aiming to be the
best partner to our customers also for the years to come.”

OPERATING ENVIRONMENT

Cleaning services

The coronavirus pandemic impacts are gradually passing and the overall demand
has normalised. The underlying long-term core demand is relatively resilient and
stable. Customers continue to demand capabilities to handle increasingly complex
assignments with high-quality environmental, health and safety standards, which
favours large professional players like Delete Group. The recent and ongoing
fuel and general cost inflation increases uncertainty for the short and mid
-term.

Recycling services

Regulatory development in the EU Circular Economy Action plan and national
legislation as well as generally increasing sustainability awareness continue to
support the growing demand for recycling services. The market demand for
recycled fuel (REF) and wood products has increased in recent periods and is
expected to develop favourably through 2022. The recent and ongoing fuel and
general cost inflation increases uncertainty for the short and mid-term.

NET SALES

In the first quarter, Delete Group’s net sales were EUR 21.0 (22.6) million,
representing a year-on-year decline of 7%, mainly due to the divestment of W
-Tech operations at year end 2021. Organically, the net sales grew 3%.

As usual, net sales of Cleaning Services were low during the winter period, EUR
16.0 (17.5) million. Organically, Cleaning Services grew 4%, but the reported
revenues declined by 12% due to the W-Tech divestment. The coronavirus still had
some unfavourable effects, especially in Sweden, during Q1 with a wave of sick
leaves impeding demand and deliveries in January and February.

Recycling Services’ net sales declined by 12% to EUR 5.2 (5.8) million due to a
slow start to the year with incoming construction and demolition waste volumes
declining.

NET SALES BY SEGMENT

+------------------+--------+--------+------+---------+
|MEUR              |1–3/2022|1–3/2021|Change|1–12/2021|
+------------------+--------+--------+------+---------+
|Cleaning Services |16.0    |17.5    |-9%   |110.2    |
+------------------+--------+--------+------+---------+
|Recycling Services|5.2     |5.8     |-12%  |25.0     |
+------------------+--------+--------+------+---------+
|Eliminations      |-0.2    |-0.8    |78%   |-3.8     |
+------------------+--------+--------+------+---------+
|Group total       |21.0    |22.6    |-7%   |131.3    |
+------------------+--------+--------+------+---------+

FINANCIAL PERFORMANCE

The Group’s adjusted operating profit (EBIT) during the first quarter of 2022
improved by EUR 1.0 million from the previous year to EUR -2.5 (-3.5) million.
The cost base efficiency programme completed at year end 2021 had a meaningful
favourable effect, as did the divestment of loss making W-Tech operations.

In the first quarter, Cleaning Services’ EBIT-% improved to -9% (-12%),
favourably affected by the W-Tech divestment. Cleaning Services’ field
productivity was on a fair level, although adversely affected, especially in
Sweden, by coronavirus-related sick leaves. Furthermore, fuel and general cost
inflation had a somewhat unfavourable impact on the margins.

Recycling Services’ profitability continued at an improved level in the first
quarter with EBIT-% of 9% (6%). Profitability improved on the back of well
developing production efficiency improvements and the favourably developing REF
and wood demand on the back of green transition, accelerated to some degree by
the geopolitical sanctions in Europe.

Administration costs were clearly on a lower level than in the previous year, to
some degree due to the efficiency programme effects, but the main reason being
the previous year’s considerable non-recurring costs related to divestments and
capital restructuring.

EBITDA BY SEGMENT

+------------------+--------+--------+------+---------+
|MEUR              |1–3/2022|1–3/2021|Change|1–12/2021|
+------------------+--------+--------+------+---------+
|Cleaning Services |0.6     |0.4     |45%   |12.5     |
+------------------+--------+--------+------+---------+
|Recycling Services|1.2     |1.1     |15%   |5.1      |
+------------------+--------+--------+------+---------+
|Administration    |-1.6    |-2.3    |30%   |-7.7     |
+------------------+--------+--------+------+---------+
|Group total       |0.2     |-0.8    |121%  |9.9      |
+------------------+--------+--------+------+---------+

EBIT BY SEGMENT

+------------------+--------+--------+------+---------+
|MEUR              |1–3/2022|1–3/2021|Change|1–12/2021|
+------------------+--------+--------+------+---------+
|Cleaning Services |-1.5    |-2.0    |26%   |2.7      |
+------------------+--------+--------+------+---------+
|Recycling Services|0.5     |0.3     |42%   |2.0      |
+------------------+--------+--------+------+---------+
|Administration    |-2.0    |-2.3    |15%   |7.8      |
+------------------+--------+--------+------+---------+
|Group total       |-3.0    |-4.0    |25%   |3.1      |
+------------------+--------+--------+------+---------+

In January–March, net financial expenses amounted to EUR -1.3 (22.2) million,
the previous year favourably affected by the EUR 24.8 million write-down of the
nominal value of senior secured notes. Gross financial expenses were EUR -1.3 (
-2.6) million. The decrease was mainly driven by a significantly lower amount of
interest-bearing debt.

In January–March, profit before taxes amounted to EUR -4.3 (18.2) million and
net result for the financial period amounted to EUR -4.3 (16.3) million. The
previous year’s profit before taxes and net result were favourably affected by
the notes’ write-down.

FINANCING AND FINANCIAL POSITION

In January–March, cash flow from operating activities was EUR -2.8 (3.2)
million, with most of the year-on-year difference coming from the non-recourse
factoring arrangement ramped-up in 2021. The balance of non-recourse factoring
receivables at the end of the first quarter was EUR 9.1 (7.8) million.

Delete Group’s cash and cash equivalents at the end of March 2022 were EUR 2.4
(4.4) million. The Group’s interest-bearing debt was EUR 80.3 (83.1) million,
consisting mainly of EUR 60.0 million in secured notes, a EUR 10.0 million drawn
revolving credit (SSRCF) and lease liabilities of EUR 11.2 million. At the end
of March, the Group had drawn fully its EUR 10.0 million SSRCF facility, used
for general corporate purposes, acquisitions, and capital expenditure. In
January 2022, Delete extended its SSRCF facility duration with Collector Bank to
February 2023, with the existing terms.

At the end of the first quarter, the only covenant for the senior secured notes
and the SSRCF was complied with. After allowed pro forma EBITDA adjustments for
divested W-Tech Entreprenad AB losses (EUR 0.4 million) and pro forma EBITDA
effects of the efficiency programme related to the divestment of the Demolition
Business (EUR 1.2 million), leverage was below 5.00x.

At the end of March 2022, the Group’s net debt amounted to EUR 77.9 (78.6)
million.The balance sheet total at the end of March 2022 was EUR 124.9 (135.2)
million, decreasing mainly because of the sale of W-Tech Entreprenad AB and the
related impairment of assets and sustained net losses on retained earnings.
Property, plant and equipment totalled EUR 23.8 (28.3) million, decreasing due
to deferred capital expenditure during the coronavirus pandemic period. The
equity ratio5) at the end of March 2022 declined to 12.7% (18.1%).

+-------------------+--------+--------+---------+---------+
|Key figures        |1–3/2022|1–3/2021|Change   |1–12/2021|
+-------------------+--------+--------+---------+---------+
|Return on Equity, %|-23.7   |144.6   |-168.2ppt|131.4%   |
+-------------------+--------+--------+---------+---------+
|Net debt, MEUR     |77.8    |78.6    |-1%      |72.0     |
+-------------------+--------+--------+---------+---------+
|Equity ratio, %    |12.7%   |18.1%   |-5.4ppt  |15.8%    |
+-------------------+--------+--------+---------+---------+

CAPITAL EXPENDITURE AND CORPORATE TRANSACTIONS

In January–March 2022, capital expenditure in intangible and tangible assets
excluding acquisitions was EUR 0.6 (0.5) million.

There were no acquisitions during January–March 2022.

R&D EXPENDITURE

In January–March 2022, R&D-related expenditure was immaterial and related to
minor development of processes and tools.

CHANGES IN MANAGEMENT

The composition of Delete Group Oyj’s Management Team has changed. Composition
of the Group Management Team as of 1 January 2022: Sirpa Ojala, CEO, Ville
Mannola, CFO and Peter Revay, Country Manager, Sweden. Additionally, Janika
Vilkman returned to the company as General Counsel and member of the Group
Management Team in February 2022.

KEY EVENTS AFTER THE REPORTING PERIOD

No key events after the reporting period.

SUMMARY OF SIGNIFICANT RISKS AND RISK MANAGEMENT

Delete Group conducts an extensive annual risk assessment analysis, as a result
of which, risk management capabilities are updated and reviewed and approved by
the Board of Directors.

The Group’s key risks are divided into strategic, operational, and financing
risks.

Operational risks are mainly related to uncertainty and a lack of visibility and
resourcing due to the coronavirus pandemic, geopolitical developments in Europe,
project execution, and the integration of acquired businesses, both in terms of
quality and financially. The Group's business operations also inherently involve
risks, such as environmental, health and safety risks, as well as dependence on
suppliers and clients. The internal control environment is under constant
development to improve preventative measures.

Financing risks are mainly related to refinancing, credit and liquidity, all of
which may be further affected by coronavirus pandemic-related uncertainties.

Other uncertainties are related to the market environment and inflation of
costs, especially for energy and fuel, as well as the successful implementation
of the Group’s transformation strategy, including risks related to the outcome
of the operational improvement plan for increased profitability, uncertainty
related to capturing synergies, and risks related to targeted bolt-on
acquisitions, personnel, and recruitments.

The Group has not identified other relevant changes that can be expected to have
a significant influence on the business, given the risks mentioned herein, at
the end of the first quarter in 2022.

SHARES AND SHAREHOLDERS

At the end of the first quarter 2022, the number of registered shares in Delete
Group Oyj was 1,085,859,500 P-shares and 308,964,900 C-shares. Each share
carries one vote. The Group is owned by Ax DEL Oy (86% of the shares) and a
group of key employees and other minority investors (14%). The Group does not
hold any of its own shares.

ANNUAL GENERAL MEETING AND BOARD AUTHORISATIONS IN EFFECT

The Annual General Meeting of Delete Group Oyj Shareholders held after the
reporting period on 28 April 2022 adopted the Financial Statements and
discharged the members of the Board of Directors and the CEO from liability for
the financial year 1 January–31 December 2021. The Annual General Meeting
resolved that no dividend will be paid for the fiscal year 2021.

Martin Forss, Åsa Söderström Winberg, Ronnie Neva-aho and Christian Schmidt
-Jacobsen were re-elected as members of Board of Directors. Convening after the
Annual General Meeting, the Board of Directors elected Martin Forss as its
chairman.

KPMG Oy Ab was elected to continue as the Auditor of the company and Ari
Eskelinen, Authorised Public Accountant, will act as the Principal Auditor.

The Chairman of the Board will be paid EUR 50,000 and the Board members EUR
22,000 as remuneration for 2021. The appointed members of the Audit Committee
and the ESG Committee will be paid EUR 4,000 as additional remuneration and the
appointed members of the Remuneration Committee EUR 2,000. Axcel Management’s
Christian Schmidt-Jacobsen will not be paid remuneration. It was resolved that
the remuneration for the Auditor shall be paid according to the Auditor's
invoice.

STATEMENT OF ACCOUNTING POLICIES FOR INTERIM REVIEW

Delete Group Oyj complies with half-yearly reporting according to the Finnish
Securities Markets Act and discloses interim reviews for the first three and
nine-month periods of the year, in which key information regarding the company’s
financial situation and development will be presented. The financial information
presented in this interim review is unaudited.

FINANCIAL CALENDAR 2022

Delete Group Oyj will publish the half-year financial report for January–June
2022 on 24 August 2022 and the interim review for January–September 2022 on 11
November 2022.

ALTERNATIVE PERFORMANCE MEASURES USED IN FINANCIAL REPORTING

Delete Group Oyj has adopted the guidelines of the European Securities and
Market Authority (ESMA) on Alternative Performance Measures. In addition to the
IFRS-based key figures, the company will publish certain other generally used
key figures that may, as a rule, be derived from the profit and loss statement
and balance sheet. The calculation of these figures is presented below.
According to the company’s view, these key figures supplement the profit and
loss statement and balance sheet, providing a better picture of the company’s
financial performance and position.

+-------------+--------+--------+---------+
|MEUR         |1–3/2022|1–3/2021|1–12/2021|
+-------------+--------+--------+---------+
|EBIT         |-3.0    |-4.0    |-3.1     |
+-------------+--------+--------+---------+
|Adjustments  |0.6     |0.5     |3.2      |
+-------------+--------+--------+---------+
|Adjusted EBIT|-2.5    |-3.5    |0.0      |
+-------------+--------+--------+---------+

+---------------+--------+--------+---------+
|MEUR           |1–3/2022|1–3/2021|1–12/2021|
+---------------+--------+--------+---------+
|EBITDA         |0.2     |-0.8    |9.9      |
+---------------+--------+--------+---------+
|Adjustments    |0.6     |0.5     |3.2      |
+---------------+--------+--------+---------+
|Adjusted EBITDA|0.7     |-0.3    |13.0     |
+---------------+--------+--------+---------+

MEUR                        1–3/2022  1–3/2021  1–12/2021
Restructuring & Relocation  0.2       -0.2      1.1
Operating systems           0.0       0.0       0.1
Disputes and litigation     0.0       0.0       0.2
Corporate transactions      0.1       0.7       0.6
Discontinued businesses*    0.0       0,0       0.8
Other                       0.2       0.0       0.4
Adjusting items             0.6       0.5       3.2

FORMULAS

1) EBITDA = operating profit + depreciation and amortisation costs

2) Adjustment definition: adjustments are material items outside the ordinary
course of business affecting comparability, such as acquisition-related
expenses, restructuring-related expenses, and other material extraordinary
costs.

3) Net debt = interest bearing liabilities, lease liabilities and instalment
credit liabilities – cash and cash equivalent assets

4) Organic growth: net sales from acquired businesses are considered inorganic
for 12 months after the acquisition, and not accounted for as contributing to
organic growth for the said period.

5) Equity ratio = equity / (assets – prepayments)

6) Net working capital = other than cash and cash equivalent current assets –
other than net debt-related current liabilities

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Amounts in thousands of euros

Continuing operations

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CONDENSED NOTES

Accounting policies

This interim review is not an interim report as specified in the IAS 34
standard. Delete Group Oyj complies with half-yearly reporting according to the
Finnish Securities Markets Act and discloses interim reviews for the first three
and nine-month periods of the year, in which key information regarding the
company’s financial situation and development will be presented. The financial
information presented in this interim review is unaudited. The accounting
policies applied in this interim review are the same as those applied in the
last annual financial statements.

Operating profit (EBIT)

Operating profit (EBIT) consists of sales and other operating income less the
costs of materials and services, costs of employee benefits and other operating
expenses as well as depreciation, amortisation and impairment losses. Exchange
rate differences resulting from working capital items are included in the
operating profit.

KEY EVENTS AFTER THE REPORTING PERIOD

No key events after the reporting period.

Delete Group Oyj

Board of Directors

FOR FURTHER INFORMATION

Ville Mannola, CFO of Delete Group Oyj

E-mail: ville.mannola@delete.fi

Tel. +358 400357 767

Sirpa Ojala, CEO of Delete Group Oyj

E-mail: sirpa.ojala@delete.fi

Appointment requests via Helena Karioja, tel. +358 40662 7373

www.delete.fi

DELETE GROUP IN BRIEF

Delete Group is one of the leading providers of environmental services in the
Nordic countries, a specialist that works for a better functioning and cleaner
society. We provide our customers in the industrial sector, construction and
real estate and the public sector with cleaning and recycling services that are
critical to their operations. We maintain security of supply by helping the
industry to optimise its production, and cities and municipalities to keep the
infrastructure in good condition and the living environment comfortable. We
receive, recycle and handle waste safely, reliably and responsibly.

In 2021, our net sales were EUR 131 million. The Group is headquartered in
Helsinki and employs approximately 650 professionals in more than 33 locations
in Finland and Sweden.

Attachments:

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