Delete Group Oyj - Half Year financial report

Net sales continued to grow in the second quarter, operating profit still suppressed by project mix

DELETE GROUP OYJ, STOCK EXCHANGE RELEASE 23 August 2019 at 16:35 EEST

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DELETE GROUP OYJ

Interim Financial Statements January–June 2019 (IFRS, IAS 34, unaudited)

NET SALES CONTINUED TO GROW IN THE SECOND QUARTER, OPERATING PROFIT STILL
SUPPRESSED BY PROJECT MIX

HIGHLIGHTS OF APRIL–JUNE 2019

  · Net sales increased by 8% to EUR 56.6 (Q2 2018: 52.4) million
  · EBITDA decreased by EUR -2.2 million to EUR 5.3 (7.5) million
  · EBIT decreased by EUR -4.0 million to EUR 1.1 (5.1) million
  · Net debt increased by 20% to EUR 125.5 (104.7) million
  · Operative cash flow decreased by EUR -1.8 million to EUR -2.1 (-0.3)
million
  · Bond tap of EUR 25 million was completed in April and utilized for the
repayment of the revolving credit facility

HIGHLIGHTS OF JANUARY–JUNE 2019

  · Net sales increased by 9% to EUR 96.9 (89.2) million
  · EBITDA decreased by EUR -2.3 million to EUR 4.9 (7.3) million
  · EBIT decreased by EUR -5.6 million to EUR -3.6 (2.1) million
  · Operative cash flow decreased by EUR -5.7 million to EUR -5.5 (0.2) million

KEY FIGURES

+------------------+-------+-------+-------+-------+---------+---------+--------
--+
|                  |4–6/201|4–6/201|Change |1–6/201|1–6/2018 |Change
|1–12/2018 |
|                  |9      |8      |       |9      |         |         |
|
+------------------+-------+-------+-------+-------+---------+---------+--------
--+
|Net sales, MEUR   |56.6   |52.4   |7.9%   |96.9   |89.2     |8.7%     |192.8
|
+------------------+-------+-------+-------+-------+---------+---------+--------
--+
|EBITDA1), MEUR    |5.3    |7.5    |-29.2% |4.9    |7.3      |-32.3%   |18.0
|
+------------------+-------+-------+-------+-------+---------+---------+--------
--+
|Adjusted2) EBITDA,|5.7    |7.7    |-26.1% |5.7    |8.0      |-28.3%   |19.9
|
|MEUR              |       |       |       |       |         |         |
|
+------------------+-------+-------+-------+-------+---------+---------+--------
--+
|Adjusted EBITDA, %|10.1%  |14.7%  |-4.6%  |5.9%   |9.0%     |-3.1% pts|10.3%
|
|of sales          |       |       |pts    |       |         |         |
|
+------------------+-------+-------+-------+-------+---------+---------+--------
--+
|EBIT, MEUR        |1.1    |5.1    |-78.9% |-3.6   |2.1      |         |7.2
|
+------------------+-------+-------+-------+-------+---------+---------+--------
--+
|Adjusted EBIT,    |1.5    |5.3    |-72.6% |-2.7   |2.8      |         |9.1
|
|MEUR              |       |       |       |       |         |         |
|
+------------------+-------+-------+-------+-------+---------+---------+--------
--+
|Adjusted EBIT, %  |2.6%   |10.1%  |-7.5%  |-2.8%  |3.2%     |-6.0% pts|4.7%
|
|of sales          |       |       |pts    |       |         |         |
|
+------------------+-------+-------+-------+-------+---------+---------+--------
--+
|Profit (-loss) for|-1.6   |2.8    |       |-8.4   |-2.9     |         |-0.5
|
|the period, MEUR  |       |       |       |       |         |         |
|
+------------------+-------+-------+-------+-------+---------+---------+--------
--+
|Operative cash    |-2.1   |-0.3   |       |-5.5   |0.2      |         |15.7
|
|flow, MEUR        |       |       |       |       |         |         |
|
+------------------+-------+-------+-------+-------+---------+---------+--------
--+
|Net debt3), MEUR  |125.5  |104.7  |19.8%  |125.5  |104.7    |19.8%    |100.0
|
+------------------+-------+-------+-------+-------+---------+---------+--------
--+

Information about the formulas and Alternative Performance Measures are
presented in the notes section of this interim review. All figures represented
are statutory unless otherwise mentioned.

Delete Group has adopted IFRS 16 (Leases) on 1 January 2019, using the modified
retrospective approach which means that the comparative information is not
restated. The impacts of IFRS 16 are reported in the notes section of this Half
-Year Report

OUTLOOK FOR 2019

Updated outlook for 2019:

The demand for industrial cleaning services is expected to remain stable for
2019. The overall demand for demolition services is expected to remain on a
reasonable level, with fewer large demolition projects than in the previous
year. The market demand for recycled fuel is expected to improve to some degree
during the second half of 2019.

Delete Group’s operating profit (EBIT) is not expected to reach the 2018 level.

Earlier outlook from 15 May 2019:

The demand for industrial cleaning services is expected to remain stable. The
demand for demolition services is expected to remain on a reasonable level
supported by the somewhat resilient renovation construction market. The market
demand for recycled fuel is expected to improve to some degree during 2019.

Delete Group’s operating profit (EBIT) is expected to improve in 2019.

During the first half of 2019 the Demolition Services project volume is expected
to remain stable but the demand for large demolition projects is expected to
decline. Furthermore, the heavy winter conditions are likely to have some
adverse effect on the due execution of certain projects and sewer work volume
during early 2019. Due to these reasons Delete’s profitability is expected to
decline during the first half of 2019 compared to the first half of 2018.

TOMMI KAJASOJA, CEO OF DELETE GROUP:

“Even though we achieved solid growth in the second quarter, our profitability
fell behind the previous year’s level. The Industrial Cleaning Services
segment’s performance was on a reasonable level, but the profitability suffered
from resourcing challenges and related increased subcontracting costs during the
shut-down period in the spring. The Group’s operating profit was further
suppressed by the continued weak demand for the recycled fuel in the Recycling
Services segment affecting the margins and the Demolition Services segment’s
challenging project mix with fewer large projects.

As is typical for the Industrial Cleaning Services, the activity level in the
second quarter increased considerably over the first quarter due to seasonality.
Compared to the previous year, the net sales were fairly stable decreasing by
-1% and organically4) by -3%. However, the operating profit of Industrial
Cleaning Services was suppressed to some degree by challenges with resource
planning and execution during the second quarter of 2019.

Demolition Services’ net sales increased by 16%. The growth was driven by the
acquisitions made in 2018, which contributed 18%-points, while the organic
growth was -2%. As expected, the second quarter sales and project mix were
weaker than in the previous year. It comprised smaller assignments which were
more tightly priced, hindered efficient resource utilisation and increased
logistics costs, resulting in a clearly weakened operating profit. In terms of
new orders, Demolition Services’ business has developed favourably since the
challenging first half of the year, but we do not expect the operating profit to
reach last year’s level for the full year.

Recycling Services’ net sales grew by 24% in the second quarter, all
organically, but the profitability fell short of the previous year due to
continued low demand for recycled fuel and increased processing costs for
construction waste. We have recently taken pricing actions and invested in
increased capacity and efficiency at our Rusko recycling plant. We expect these
measures to improve the Recycling Services’ profitability gradually during the
second half of 2019.

Our strategic focus areas are to grow our service offering and to expand
geographically within Finland and Sweden. During 2019, we have been able to
expand our renovation demolition offering towards turnkey solutions. We will
also continue to improve our operations to drive gross margins in all our
segments and realise synergies between our Finnish and Swedish operations. In
the first six months of the year we have progressed with efficiency-enhancing
measures across all segments, both in terms of cost structure and delivery
efficiency. The measures are being implemented gradually in 2019, and their
impact is expected to be partly reflected in the 2019 result.

The strategic assessment of options for the group and its businesses will
continue during 2019. The results of the evaluation will be announced when the
assessment has been completed.”

OPERATING ENVIRONMENT

Industrial cleaning

The underlying core demand for industrial cleaning services remains stable and
industrial demand is expected to remain close to the 2018 level. The 2019
planned maintenance shut-down schedule is similar as in 2018. 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.

Demolition services

While the number of new construction permits has declined, the overall market
demand for demolition services remains on a reasonable level, but currently it
consists of fewer large demolition projects than in the previous year. The
market demand is supported by the underlying market drivers: The ageing building
stock in both Finland and Sweden increase the demand for renovation demolition
services, with buildings from the 1960s and early 1970s being renovated. Public
sector real estate, particularly municipality-owned, such as hospitals and
schools, require renovation or even complete demolition.

Recycling services

Increasing environmental awareness continues to drive improvements and new
regulations, such as the EU’s 70% recycling target by 2020 and the landfill ban
on construction and demolition waste. Regulatory development in both 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 weak market demand for recycled fuel (REF), which is
increasing logistics costs for the operators ahead of corresponding end customer
price increases, is expected to ease gradually in the mid- to long-term.

NET SALES

In the second quarter, Delete Group’s net sales were EUR 56.6 (52.4) million,
representing a year-on-year growth of 8% with Demolition Services and Recycling
Services contributing positively to the growth. Organic growth for the period
was 0% and acquisitive growth 8%.

The net sales of Industrial Cleaning Services were EUR 25.1 (25.4) million,
representing a decrease of -1%, of which -3% organically. Recycling Services’
net sales grew by 24% to EUR 7.7 (6.2) million. This was achieved through
organic growth alone, which was mainly driven by recent price increases and
supported by considerable investments in capacity and processing efficiency
during the recent quarters. The net sales of Demolition Services were EUR 25.0
(21.5) million growing by 16%. Acquisitions completed in September 2018
contributed to the growth by 18%-points, while organic growth was -2%.
Development of the Swedish and Finnish demolition markets remained reasonably
active, but the average assignment size was smaller than in the previous year.

The Group’s net sales in January–June amounted to EUR 96.9 (89.2) million,
fuelled by strong organic growth in Recycling Services (27%) and acquisition
driven growth (14%) in the Demolition Services, while the Industrial Cleaning
Services remained on the previous year’s level (0%).

NET SALES BY SEGMENT

+------------+------+------+-------+----------+----------+-------+-----------+
|MEUR        |4–6/20|4–6/20|Change |1–6/2019  |1–6/2018  |Change |1–12/2018  |
|            |19    |18    |       |          |          |       |           |
+------------+------+------+-------+----------+----------+-------+-----------+
|Industrial  |25.1  |25.4  |-1.0%  |40.3      |40.1      |0.5%   |88.0       |
|Cleaning    |      |      |       |          |          |       |           |
+------------+------+------+-------+----------+----------+-------+-----------+
|Demolition  |25.0  |21.5  |16.3%  |44.8      |39.3      |14.0%  |83.4       |
|Services    |      |      |       |          |          |       |           |
+------------+------+------+-------+----------+----------+-------+-----------+
|Recycling   |7.7   |6.2   |23.5%  |14.1      |11.2      |26.5%  |24.8       |
|Services    |      |      |       |          |          |       |           |
+------------+------+------+-------+----------+----------+-------+-----------+
|Eliminations|-1.2  |-0.7  |-78.5% |-2.3      |-1.4      |-59.1% |-3.4       |
|            |      |      |       |          |          |       |           |
+------------+------+------+-------+----------+----------+-------+-----------+
|Group total |56.6  |52.4  |7.9%   |96.9      |89.2      |8.7%   |192.8      |
|            |      |      |       |          |          |       |           |
+------------+------+------+-------+----------+----------+-------+-----------+

FINANCIAL PERFORMANCE

The Group’s adjusted operating profit (EBIT) during the second quarter of 2019
decreased by EUR -3.8 million from the previous year to EUR 1.5 (5.3) million.
Operationally, the EBIT was adversely affected by fewer sizeable demolition
projects and the related supressed field efficiency and increased logistics
costs. Furthermore, the continuing challenges in the demand for recycled fuel in
the Recycling Services had an unfavourable impact on the EBIT in the second
quarter 2019.

In the second quarter, the EBIT-% decreased in all business segments, in
Industrial Cleaning Services to 13% (16%), in Demolition Services to 3% (12%)
and in Recycling Services to -2% (19%).

The IFRS 16 adoption has had a minor favourable impact on the operating profit
and a significantly more favourable impact on the EBITDA in January–June 2019.
The impact in January–June 2019 for lease expenses was a decrease of EUR -2.9
million, for depreciation costs an increase of EUR 2.7 million and for interest
expenses an increase of EUR 0.2 million.

The Group’s adjusted EBIT for January–June 2019 amounted to EUR -2.7 (2.8)
million. Industrial Cleaning Services EBIT was close to previous year’s level,
while Demolition Services and Recycling Service results were weaker than in the
previous year.

EBIT BY SEGMENT

+--------------+------+---------+-------+---------+---------+-------+----------+
|MEUR          |4–6/20|4–6/2018 |Change |1–6/2019 |1–6/2018 |Change |1–12/2018 |
|              |19    |         |       |         |         |       |          |
+--------------+------+---------+-------+---------+---------+-------+----------+
|Industrial    |3.2   |4.1      |-21.4% |2.7      |2.8      |-4.3%  |9.6       |
|Cleaning      |      |         |       |         |         |       |          |
+--------------+------+---------+-------+---------+---------+-------+----------+
|Demolition    |0.8   |2.6      |-69.2% |-0.6     |3.2      |-119.9%|5.7       |
|Services      |      |         |       |         |         |       |          |
+--------------+------+---------+-------+---------+---------+-------+----------+
|Recycling     |-0.1  |1.2      |-110.7%|-0.1     |1.9      |-105.5%|3.5       |
|Services      |      |         |       |         |         |       |          |
+--------------+------+---------+-------+---------+---------+-------+----------+
|Administration|-2.8  |-2.7     |-1.6%  |-5.5     |-5.8     |4.7%   |-11.5     |
|              |      |         |       |         |         |       |          |
+--------------+------+---------+-------+---------+---------+-------+----------+
|Group total   |1.1   |5.1      |-78.9% |-3.6     |2.1      |-270.9%|7.2       |
|              |      |         |       |         |         |       |          |
+--------------+------+---------+-------+---------+---------+-------+----------+

EBITDA BY SEGMENT

+--------------+------+---------+-------+---------+---------+-------+----------+
|MEUR          |4–6/20|4–6/2018 |Change |1–6/2019 |1–6/2018 |Change |1–12/2018 |
|              |19    |         |       |         |         |       |          |
+--------------+------+---------+-------+---------+---------+-------+----------+
|Industrial    |5.0   |4.8      |4.2%   |6.3      |4.6      |36.6%  |13.7      |
|Cleaning      |      |         |       |         |         |       |          |
+--------------+------+---------+-------+---------+---------+-------+----------+
|Demolition    |2.1   |3.3      |-36.6% |2.0      |4.7      |-57.3% |8.4       |
|Services      |      |         |       |         |         |       |          |
+--------------+------+---------+-------+---------+---------+-------+----------+
|Recycling     |0.5   |1.5      |-65.9% |1.2      |2.4      |-51.5% |4.7       |
|Services      |      |         |       |         |         |       |          |
+--------------+------+---------+-------+---------+---------+-------+----------+
|Administration|-2.3  |-2.0     |-10.3% |-4.5     |-4.4     |-2.5%  |-8.8      |
|              |      |         |       |         |         |       |          |
+--------------+------+---------+-------+---------+---------+-------+----------+
|Group total   |5.3   |7.5      |-29.2% |4.9      |7.3      |-32.3% |18.0      |
|              |      |         |       |         |         |       |          |
+--------------+------+---------+-------+---------+---------+-------+----------+

From 1 January 2019, the internal management fee has been allocated to
Administration unit instead of the three business segments affecting EBIT. 2018
has been restated accordingly. The impact on segment EBIT in January-June 2018
is a decrease of EUR 1.1 million in Administration and correspondingly an
increase of EUR 0.5 million in the Industrial Cleaning Services and an increase
of EUR 0.6 million in the Demolition Services. EBITDA is not affected by the
reclassification and is comparable.

In April–June, the net financial expenses amounted to EUR -2.5 (-2.0) million
and in January–June to EUR -4.6 (-4.5). The increase was mainly related to the
bond tap financing costs and increased interest-bearing debt. In April–June,
profit before taxes amounted to EUR -1.5 (3.1) million and in January–June to
EUR -8.1 (-2.4) million. In April–June, the income taxes amounted to EUR 0.1
(0.3) million and in January–June to 0.3 (0.5) million. In April–June, the net
result for the financial period amounted to EUR -1.6 (2.8) million and in
January–June to EUR -8.4 (-2.9) million.

FINANCING AND FINANCIAL POSITION

In April-June, the cash flow from operating activities was EUR -2.1 (-0.3)
million and for January-June EUR -5.5 (0.2) million, driven by lower operating
profit than in the previous year.

Delete Group’s cash and cash equivalents at the end of June 2019 were EUR 3.4
(4.2) million. The Group’s interest-bearing debt was EUR 128.9 (108.9) million,
consisting mainly of a EUR 110.0 million secured bond, a EUR 5.0 million drawn
revolving credit and lease liabilities. The Group has undrawn revolving credit
facilities of EUR 20.0 million to be used for general corporate purposes,
acquisitions and capital expenditure. The revolving credit facility’s quarterly
maintenance covenant for debt leverage was complied with at the end of June
2019.

At the end of June 2019, the Group’s net debt amounted to EUR 125.5 (104.7)
million, increasing mainly due to acquisition financing in 2018 and the impact
of increased lease liabilities derived from IFRS 16 adoption, explained in more
detail in the notes section under IFRS 16 Leases.

The balance sheet total at the end of June 2019 was EUR 232.5 (213.6) million.
Property, plant and equipment totalled EUR 45.0 (44.8) million. The equity
ratio6) was 26.8% (31.9%). The change in balance sheet total and equity ratio
are primarily related to the implications of IFRS 16 adoption.

In the second quarter, Delete Group Oyj issued a tap of senior secured floating
rate notes in a nominal amount of EUR 25 million. The subsequent notes, which
mature on 19 April 2021, had an issue price of 100,00 per cent (par), and bear a
floating rate of EURIBOR 3 months plus a margin of 5 per cent per annum, payable
quarterly in arrears commencing on 19 April 2019. The proceeds from the tap
issue were applied towards repayment of drawings under the company’s EUR 25
million super senior revolving credit facility and other existing financial
indebtedness.

+---------+--------+--------+---------+--------+--------+---------+---------+
|Key      |4–6/2019|4–6/2018|Change   |1–6/2019|1–6/2018|Change   |1–12/2018|
|figures  |        |        |         |        |        |         |         |
+---------+--------+--------+---------+--------+--------+---------+---------+
|Return on|-2.5%   |4.1%    |-6.5% pts|-12.7%  |-4.1%   |-8.5% pts|-0.7%    |
|Equity,% |        |        |         |        |        |         |         |
+---------+--------+--------+---------+--------+--------+---------+---------+
|Net debt,|125.5   |104.7   |19.8%    |125.5   |104.7   |19.8%    |100.0    |
|MEUR     |        |        |         |        |        |         |         |
+---------+--------+--------+---------+--------+--------+---------+---------+
|Equity   |26.8%   |31.9%   |-5.1% pts|26.8%   |31.9%   |-5.1% pts|31.5%    |
|ratio,%  |        |        |         |        |        |         |         |
+---------+--------+--------+---------+--------+--------+---------+---------+

CAPITAL EXPENDITURE AND CORPORATE TRANSACTIONS

Capital expenditure in intangible and tangible assets for April–June 2019 was
EUR 2.6 (1.8) million. For January-June, capital expenditure in intangible and
tangible assets was EUR 4.3 (3.9) million. There have been no acquisitions
during January-June, but a EUR 2.0 million purchase price settlement was
completed in the first quarter for an acquisition closed in the third quarter of
2018.

R&D EXPENDITURE

In January–June 2019, the R&D related expenditure was immaterial and was related
to minor development of processes and tools.

KEY EVENTS AFTER THE REPORTING PERIOD

Peter Revay has been appointed Country Manager of Delete Sweden and a member of
the Group management team on 1 August 2019.

Holger C. Hansen has resigned from his duties as a board member of Delete Group
Oyj as of 23 August, 2019. Mr Hansen will continue to support the operative
management of Delete Group as an external advisor.

SUMMARY OF SIGNIFICANT RISKS AND RISK MANAGEMENT

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

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

Operational risks are mainly related to project execution and the integration of
acquired businesses both quality-wise and financially. The internal control
environment is under constant development to improve preventative measures.

Financing risks are mainly related to interest rates, credit and liquidity.

Other uncertainties are related to the market environment as well as the
successful implementation of the Group’s growth strategy and related corporate
acquisitions as well as the integration of the acquired companies, personnel and
recruitments.

The Group confirms that there are no relevant changes identified that can be
expected to have a significant influence on the business, given the risks
mentioned hereinabove, at the end the second quarter in 2019.

SHARES AND SHAREHOLDERS

The number of registered shares in Delete Group Oyj is 10,858,595 P-shares and
3,089,649 C-shares. All of the shares have one vote each. The Group is owned by
Ax DEL Oy (85% of the shares) and a group of key employees and other minority
investors (15%). 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 on 2 April 2019
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 2018. The Annual General Meeting resolved that no dividend will be paid
for the fiscal year 2018.

Åsa Söderström Winberg, Holger C. Hansen and Ronnie Neva-aho were re-elected as
members of Board of Directors and Christian Schmidt-Jacobsen was elected as a
new member. Convening after the Annual General Meeting, the Board of Directors
elected Åsa Söderström Winberg as its chair.

Authorised Public Accounting firm KPMG Oy Ab was elected to continue as the
Auditor of the company and Teemu Suoniemi, Authorised Public Accountant, will
act as the Principal Auditor.

The Chair of the Board will be paid EUR 40,000 and the Board members EUR 22,000
as remuneration for 2019. The appointed members of the Audit Committee and the
Project 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

This Half-Year Report has been prepared according to IAS 34 standard. The same
accounting standards have been used as in the Financial Statements.

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’s 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 2019

Delete Group will publish the interim review January–September 2019 on 15
November 2019.

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              4–6/2019   4–6/2018   1–6/2019   1–6/2018   1–12/2018
EBIT              1.1        5.1        -3.6       2.1        7.2
Adjustments       0.4        0.2        0.8        0.8        1.9
Adjusted EBIT     1.5        5.3        -2.7       2.8        9.1

MEUR              4–6/2019   4–6/2018   1–6/2019   1–6/2018   1–12/2018
EBITDA            5.3        7.5        4.9        7.3        18.0
Adjustments       0.4        0.2        0.8        0.8        1.9
Adjusted EBITDA   5.7        7.7        5.7        8.0        19.9

FORMULAS

1) EBITDA = operating profit + depreciation and amortization costs

2) Adjustment definition: adjustments are material items outside the ordinary
course of business affecting comparability, e.g. 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 contributing to
organic growth for the said period.

5) Comparable financials definition: acquired (divested) businesses’ reported
results added (removed) for the current and comparison period in a comparable
form as if the transaction would have taken place in the beginning of the fiscal
year.

6) Equity ratio = equity/(assets-prepayments)

7) 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

CONDENSED NOTES

Accounting policies

These interim financial statements have been prepared according to IAS 34
Interim Financial Reporting -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’s 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, except the following new
standards which have been applied from the beginning of the reporting period:

IFRS 16 Leases (effective for financial years beginning on or after 1 January
2019):

IFRS 16 introduces a single, on-balance sheet lease accounting model for
lessees. A lessee recognises a right-of-use asset representing its right to use
the underlying asset and a lease liability representing its obligation to make
lease payments. There are recognition exemptions for short-term leases and
leases of low-value items. IFRS 16 replaces the former IAS 17 standard and
related interpretations.

The Group has started to apply IFRS 16 initially on 1 January 2019, using the
modified retrospective approach which means that the comparative information
will not be restated.

The Group recognises new assets and liabilities for its operating leases of
premises and machinery. Under IAS 17 the Group has recognised finance leases on
balance sheet as assets and liabilities which have been transferred as such to
the 1 January 2019 opening balance.

The recognised right-of-use assets relate to leased premises, rental machinery
and vehicles. Some of Delete’s lease contracts for premises are made for a fixed
period with an extension option and some contracts are open-ended. The lease
liability for fixed term contracts has been defined as the present value of the
remaining lease payments and the expected use of the extension option. For open
-ended premises lease contracts, the lease liability has been defined based on
the estimated lease period.

Lease contracts for premises relate to Delete’s head office and branch offices
and service hubs and form the main part of the right-of-use assets and the lease
liability. Contracts are typically made for a fixed period of 2 to 6 years and
they may contain extension options. When Delete estimates that the extension
option will be utilised, it will be included

in the calculation of the right of-use-asset.

Lease liability for rental machinery and vehicle leases has been measured at the
present value of the remaining lease payments.

Delete utilises the recognition exemptions allowed in IFRS 16 for short term
contracts with less than 12 months duration and for contracts of low value, both
of which are reported as lease expenses as before in the statement of income
under Materials and Services or Other Expenses. Lease contracts for rental
machinery and equipment can be fixed or open-ended.

From 1 January, 2019 leases are recognized as right-of-use assets and
corresponding lease liabilities. Lease payments are split to repayment of lease
liability and interest cost. The interest cost is recognised in the statement of
income over the lease period. The right of-use asset is depreciated over the
lease period on a straight-line basis. Adoption of the new standard affects many
key figures, e.g. EBITDA and EBIT increase, equity ratio decreases and net debt
increases. Cash flow from operating activities increases and cash flow from
financing activities decreases.

The impact on opening balance 1 Jan 2019 is shown on the table below.

In relation to these leases under IFRS 16, the Group has recognised depreciation
and interest costs instead of operating lease expense. The impact in January
-June 2019 for depreciation costs is an increase of EUR 2.7 million and for
interest expenses an increase of EUR 0.2 million.

IFRIC 23 Uncertainty over Income Tax Treatments (effective for financial years
beginning on or after 1 January 2019).

The interpretation brings clarity to the accounting for income tax treatments
that have yet to be accepted by tax authorities. The key test is whether the tax
authority will accept the company’s chosen tax treatment. When considering this
the assumption is that tax authorities will have full knowledge of all relevant
information in assessing a proposed tax treatment. The group expects that there
will not be any significant impacts from this interpretation.

Other published new and amended standards are not expected to have an effect on
the Group’s consolidated financial statements.

Operating profit (EBIT)

Operating profit (EBIT) consists of sales and other operating income less 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 operating
profit.

Financing

In the Second quarter, Delete Group Oyj issued a tap of senior secured floating
rate notes in a nominal amount of EUR 25 million. The subsequent notes, which
mature on 19 April 2021, had an issue price of 100,00 per cent (par), and bear a
floating rate of EURIBOR 3 months plus a margin of 5 per cent per annum, payable
quarterly in arrears commencing on 19 April 2019. The proceeds from the tap
issue were applied towards repayment of drawings under the company’s EUR 25
million super senior revolving credit facility and other existing financial
indebtedness.

SEGMENT REPORTING

The Group has three reportable segments, Industrial Cleaning Services,
Demolition Services and Recycling Services, which are the Group’s business
areas. The reporting segments have been aggregated from the group’s five
operating segments: the operating segments for Industrial Cleaning Services in
Finland and Sweden as well as the operating segments for Demolition Services in
Finland and Sweden have been combined as reportable segments as they are
considered to be similar and having similar economic characteristics.

The Industrial Cleaning Services business serves, among others, industrial
customers, energy companies, shipyards and construction sector companies in
Finland and Sweden.

The Demolition Services business delivers professional construction demolition
services in Finland and Sweden and takes care of asbestos and other hazardous
substance demolitions, firestop and damage renovations.

Delete Group’s Recycling Services receives and processes construction and
industrial waste in the Helsinki metropolitan area and in the Tampere region.

Segment information is based on IFRS accounting principles applied in the group,
and it is consistent with the group’s internal reporting.

The measure of profit or loss for the reportable segment is operating profit,
which is regularly reviewed by the Group’s management team to make decisions
about resources to be allocated to the segment and to assess its performance.

Administration costs are not allocated to segments but are presented separately.
Segment assets and liabilities are not presented as these are not regularly
monitored by the management team. From 1 January 2019, the internal management
fee has been allocated to the Administration unit instead of the three business
segments affecting EBIT. 2018 has been restated accordingly. The impact on
segment EBIT in January-June 2018 is a decrease of EUR 1.1 million in
Administration and correspondingly an increase of EUR 0.5 million in the
Industrial Cleaning Services and an increase of EUR 0.6 million in the
Demolition Services. EBITDA is not affected by the reclassification and is
comparable.

Any transactions between segments are based on market prices.

REVENUE STREAMS

BUSINESS COMBINATIONS

Delete Group had no business combinations during 1-6 2019. A purchase price
settlement of EUR 2.0 million for an acquisition closed in the third quarter
2018 was completed in the first quarter 2019.

CLASSIFICATION OF FINANCIAL ASSETS AND LIABILITIES

KEY EVENTS AFTER THE REPORTING PERIOD

Peter Revay has been appointed Country Manager of Delete Sweden and a member of
the Group management team on 1 August 2019.

Holger C. Hansen has resigned from his duties as a board member of Delete Group
Oyj as of 23 August, 2019. Mr Hansen will continue to support the operative
management of Delete Group as an external advisor.

Delete Group Oyj

Board of Directors

FOR FURTHER INFORMATION

Ville Mannola, CFO of Delete Group Oyj

E-mail: ville.mannola@delete.fi

Tel.: +358 400 357 767

Tommi Kajasoja, CEO of Delete Group Oyj

E-mail: tommi.kajasoja@delete.fi

Appointment requests via Helena Karioja, tel. +358 40 662 7373

www.delete.fi

DELETE GROUP IN BRIEF

Delete Group is a leading environmental full-service provider in the Nordics.
The Group offers specialist competences and specialised equipment through three
business areas: Industrial Cleaning, Demolition Services and Recycling Services.
Delete was formed in 2010 through the combination of Toivonen Yhtiöt and Tehoc
and was acquired by private equity investor Axcel in 2013. Since 2011, Delete
has made over 34 acquisitions within the industrial cleaning and demolition
segments.

The Group is headquartered in Helsinki and employs approximately 1,000
professionals at over 34 locations in Finland and Sweden.

Attachments:

08236816.pdf