Eltel Group: Interim Report January–March 2016

January–March 2016

  · Net sales amounted to EUR 287.5 million (239.0), up 23.2%* in local
currencies, organic net sales decreased by 0.4%*
  · Operative EBITA amounted to EUR 3.2 million (5.3) or 1.1% of net sales (2.2)
  · No non-recurring items (-2.6)
  · EBITA amounted to EUR 3.2 million (2.7) or 1.1% of net sales (1.1)
  · Net financial expenses decreased to EUR -3.7 million (-7.9)
  · The net result amounted to EUR -3.6 million (-7.5)
  · Earnings per share was EUR -0.06 (-0.14)
  · Operative cash flow amounted to EUR -37.4 million (-59.9), cash conversion
was 112.1% on a rolling 12-month basis

Unless otherwise stated, figures in brackets refer to the same period in the
previous year
* Organic net sales excludes Norwegian Communication business and the Edi.Son,
Sønnico and Vete acquisitions in 2015 and is presented using comparable exchange
rates.

Comments by the CEO

Continued growth with weather affecting profitability

Eltel’s growth trajectory continued in the first quarter 2016, with a solid 20
-percent increase in net sales driven by acquisitions made in 2015. The long
-term positive drivers in the Infranet market remained visible, and Eltel won
some exciting new contracts during and after the reporting period. Our committed
order backlog continued to show a positive trend and increased during the
quarter. However, from an Eltel perspective, organic growth was hampered by less
favourable weather conditions in the first quarter.

Since the first quarter is Eltel’s weakest in seasonal terms, fluctuations in
production and delivery volumes have the biggest impact on our profitability.
Weather effects, combined with the business mix, particularly in our Transport &
Security segment, resulted in a lower consolidated operative EBITA margin
compared with the same period in 2015.

Our second quarter started with three new acquisitions – Celer in Finland and U
-Serv and the field service activities of EVB in Germany. These are all prime
examples of acquisitions that expand our local platforms and add critical mass
in our new markets. Taking into account our recent achievements and the advances
made last year, Germany is expected to account for a more sizeable portion of
Group revenues in 2016 and onwards.

In the short term, we can still see room for improvements, especially in our
rail and power transmission business. These operations also account for the most
cyclical parts of our business where timing of orders and deliveries may cause
fluctuations between individual quarters.

We remain dedicated to our mid to long-term targets regarding profitable growth.
The selected acquisitions we have completed will serve as important drivers for
our revenue growth moving forward. Organic growth continues to be supported by a
solid market outlook and a historically strong committed order backlog, with
production and delivery volumes normally increasing in the second half of the
year. Our focus on continued operational efficiency is being further enhanced
with several organisational initiatives and investments planned for 2016 – to
build on The Eltel Way. One good example of this is the two-year project we have
launched to utilise best practice and scale synergies within our centralised
support functions.

In our society, where an efficient and more sustainable infrastructure is
playing an increasingly important role,

Eltel will continue to be the forerunner in transforming the Infranet industry.

–Axel Hjärne, President and CEO

The information above has been published pursuant to the Swedish Securities
Markets Act (Sw: Lag om värdepappersmarknaden) and the Swedish Financial
Instruments Trading Act (Sw: Lagen om handel med finansiella instrument).

For further information:
Ingela Ulfves
VP – Investor Relations and Group Communications
Tel: +358 40 311 3009, ingela.ulfves@eltelnetworks.com

About Eltel
Eltel is a leading European provider of technical services for critical
infrastructure networks – Infranets – in the segments of Power, Communication
and Transport & Security, with operations throughout the Nordic and Baltic
regions, Poland, Germany, the United Kingdom and Africa. Eltel provides a broad
and integrated range of services, spanning from maintenance and upgrade services
to project deliveries. Eltel has a diverse contract portfolio and a loyal and
growing customer base of large network owners. In 2015 Eltel net sales amounted
to EUR 1,255 million. The current number of employees is approximately 9,600.
Since February 2015, Eltel AB is listed on Nasdaq Stockholm.