The Board of Directors of Lassila & Tikanoja plc has approved a Demerger Plan concerning the separation of Circular Economy Business into a new listed company

Lassila & Tikanoja plc
Stock exchange release
7 August 2025 at 8:05 a.m

The Board of Directors of Lassila & Tikanoja plc has approved a Demerger Plan concerning the separation of Circular Economy Business into a new listed company

The Board of Directors of Lassila & Tikanoja plc (the "Company"), having assessed the strategic alternatives for the Company's Circular Economy and Facility Services businesses, has approved a demerger plan concerning a partial demerger of the Company. According to the demerger plan, the Company will demerge so that all assets, debts and liabilities of the Company relating to the Circular Economy business area or mainly serving the Circular Economy business area of the Company are transferred to a new independent company to be named Lassila & Tikanoja Plc (the "New Lassila & Tikanoja") and to be incorporated in the demerger (the "Demerger"). An application is intended to be made to admit the shares of the New Lassila & Tikanoja for trading on the official list of Nasdaq Helsinki Ltd ("Nasdaq Helsinki"). In connection with the Demerger, the Company would retain its Facility Services business area, and the Company is intended to be re-named Luotea Plc ("Luotea"). After completion of the Demerger, the New Lassila & Tikanoja would initially have the same ownership structure as Luotea, and there would not be any cross-ownership between Luotea and the New Lassila & Tikanoja.

Highlights

• The Board of Directors of the Company has approved a demerger plan concerning the separation of the Circular Economy business area into an independent listed company.
• The Demerger is subject to approval by the Extraordinary General Meeting ("EGM") of the Company, expected to be held on 4 December 2025.
• The planned completion date of the Demerger is 31 December 2025.
• The demerger and listing prospectus, which is expected to be published by the Company in November 2025 before the EGM, will contain more detailed information on the Demerger and the listing of the new circular economy company.
• Certain major shareholders of the Company, holding in the aggregate approximately 27.59 per cent of the shares and votes in the Company, have, subject to certain customary conditions, irrevocably undertaken to attend the Company's EGM and vote in favour of the Demerger.
• The intention is that Jukka Leinonen be elected as Chairman of the Board of Directors and that Eero Hautaniemi be appointed as President and CEO of the circular economy company New Lassila & Tikanoja.
• The intention is that Johan Mild be elected as Chairman of the Board of Directors and that Antti Niitynpää be appointed as President and CEO of the facility services company Luotea.

Strategic rationale of the demerger

According to the assessment of the Board of Directors of the Company, separating the Circular Economy and Facility Service business areas could increase shareholder value by enabling each business area to more effectively execute its own focused strategies and growth opportunities.

According to the assessment of the Board of Directors of the Company, the Demerger is expected to enhance the performance of the New Lassila & Tikanoja's and Luotea's businesses through improved agility, independent decision-making and stronger management focus. As two separate entities, the New Lassila & Tikanoja and Luotea are also positioned to grow faster, both organically and inorganically, thanks to a more efficient capital allocation strategy.

The Board of Directors believes that demerging into two separate companies would increase the attractiveness of the companies and facilitate the valuation of the businesses. Additionally, the separation would clarify management, simplify company structures, increase transparency and clarify responsibilities.

Strategy and key strengths of the New Lassila & Tikanoja

• Large and growing circular economy market: The New Lassila & Tikanoja benefits from the global shift towards sustainable resource management, positioning itself well in the growing circular economy market. The total size of the market is approximately EUR 2.5 billion in Finland and approximately EUR 6.2 billion in Sweden, totalling EUR 8.7 billion. It is expected to grow at an annual rate of 3 per cent, providing a stable foundation for growth. Additional growth in the market is being driven by the waste-to-material and waste-to-product segments, which are estimated to grow into a market exceeding EUR 3 billion in size in the mid-term.
• Market leader in a fragmented market with strict requirements: As a leading market player in the Nordic circular economy market, the New Lassila & Tikanoja boasts a competitive infrastructure and competence base. The New Lassila & Tikanoja has sticky customer relationships, recycling expertise, technical knowledge, reporting capabilities for clients and waste management offering covering the whole value chain.
• Significant waste access and well-invested end-to-end circular infrastructure: The significant availability and ownership of diverse waste streams gives the New Lassila & Tikanoja a strong position and creates potential for a comprehensive development of the waste-to-material processes. The New Lassila & Tikanoja manages approximately 1 million tonnes of waste, of which it owns approximately 80 per cent. In addition, the New Lassila & Tikanoja has a geographically extensive network in Finland and possesses environmental permits, allowing it to manage waste throughout the entire value chain, including hazardous waste.
• Sticky customer relationships with contracted revenues: The New Lassila & Tikanoja enjoys stable, recurring revenues from long-term contracts with a diversified customer base, minimising churn and concentration risk. The New Lassila & Tikanoja has approximately 140 thousand customers, and high customer satisfaction with an NPS of 48. Additionally, around 87 per cent of the contracts have a re-occurring nature, providing a stable cash flow.
• Resilient track record of growth, profitability and cash generation: The New Lassila & Tikanoja has experienced strong organic growth supported by strategic acquisitions, with 6 per cent CAGR in the last five years. In addition, the New Lassila & Tikanoja has been one of the most profitable companies on the market, boasting a strong cash flow.
• Positioned for significant growth and expansion: The New Lassila & Tikanoja is set to expand both organically and through acquisitions by cross-selling to its extensive customer base, broadening its geographical presence in the circular economy by utilizing its current position in Sweden as a growth platform, and enhancing the material value of waste and material chain integration.

Strategy and key strengths of Luotea

• Large and resilient growth markets: Luotea is well-positioned in the stable property services market. Luotea's target market size is approximately EUR 12.2 billion, comprising EUR 6 billion in Finland and EUR 6.2 billion in Sweden. The target market is expected to have an annual growth rate of about 4 per cent. The key drivers of the market growth include increased regulation, emphasis on sustainability, automation and growing trend of outsourcing.
• Strong position with differentiated spearhead offerings: Luotea is one of the leading players in all its segments, distinguished by its differentiated spearhead offering. The spearhead products consist of data-driven optimised services, energy management systems and sustainability consulting. These are the spearheads for Luotea's growth in both new and existing customer relationships, offering cross-selling opportunities and increased demand for the core business services.
• Diversified and sticky customers with repositioned contract portfolio: Luotea has a broad and diverse customer base of over 6,000 clients, with a low turnover rate of just about 2 per cent. Over the past three years, the optimisation of its contract portfolio has significantly increased the proportion of high-profitability contracts, providing a healthy base for future expansion.
• Margin expansion through an improved operating model: In recent years, Luotea has improved its profitability in cleaning and property maintenance services in Finland and still holds significant potential for further enhancement. Luotea has a proven operating model that has already delivered strong results in Finland, and which has also been implemented in Sweden to the extent applicable.
• High cash generation through contracted business model: Long-term contracts ensure stable revenue due to re-occurring nature, providing predictable and robust financial profile while reducing customer churn. In addition, efficient capital utilisation and low investment requirements ensure strong cash conversion.
• Substantial growth potential in Finland and Sweden: With a diverse customer base and extensive coverage, Luotea is well-positioned to leverage cross-selling opportunities and expand into new segments. In addition, the future outsourcing needs of the public sector create additional growth potential.

Overview of the Demerger

The Demerger would be executed in accordance with the attached demerger plan as a partial demerger, as set out in the Finnish Companies Act (624/2006, as amended) (the "Finnish Companies Act"). The shareholders of the Company will receive as demerger consideration one new share of the New Lassila & Tikanoja for each share owned in the Company (the "Demerger Consideration"), that is, the Demerger Consideration will be issued to the shareholders of the Company in proportion to their existing shareholding with a ratio of 1:1. No action would be required from the shareholders to receive the Demerger Consideration. The Company's shareholders will retain their shareholdings in Luotea.

Completion of the Demerger is subject to, among other things, approval by the Company's EGM and the registration of the completion of the Demerger with the Finnish Trade Register following the creditor hearing process pursuant to the Finnish Companies Act.

The Board of Directors of the Company intends to propose to the shareholders of the Company that the shareholders resolve on the Demerger in the Company's EGM, which is expected to be held on 4 December 2025. The EGM resolves on the Demerger and other Board proposals based on the demerger plan. The Board of Directors of the Company will separately publish a notice to the EGM at a later stage.

The planned completion date of the Demerger pursuant to the demerger plan is 31 December 2025. Trading in the shares of the New Lassila & Tikanoja on Nasdaq Helsinki is expected to commence on or about 2 January 2026, or as soon as reasonably possible thereafter. The Company presents the Circular Economy business area as discontinued operations in its financial reporting in accordance with the IFRS 5 standard during the last quarter of 2025. The Board of Directors of the Company may, at any point prior to the completion of the Demerger, resolve not to complete the Demerger if it considers that the completion would no longer be in the best interests of the Company and its shareholders due to a change in circumstances that has occurred or arisen after the demerger plan has been signed.

Certain preliminary unaudited illustrative financial information

Net sales and operating profitability

The figures presented below are based on the L&T Group's segment reporting for the period 1 July 2024 - 30 June 2025. The reconciliation of alternative performance measures are provided in Appendix 2 of this release.

Last twelve months (1 July 2024 - 30 June 2025) EUR million / % of net sales	Circular Economy business1	Facility Services business2	Eliminations / Group administration and other	Current L&T Group, total
Net sales	415.2	346.0	-2.8	758.3
EBITDA	87.2	14.9	-5.8	96.3
Adjusted EBITDA	86.0	19.1	-1.2	103.9
Adjusted EBITDA margin	20.7%	5.5%		13.7%
EBITA3	45.1	5.3	-6.7	43.8
Adjusted EBITA3	44.0	9.5	-2.1	51.4
Adjusted EBITA margin	10.6%	2.7%		6.8%
EBIT	43.4	-19.5	-6.7	17.2
Adjusted EBIT	42.3	8.0	-2.1	48.1
Adjusted EBIT margin	10.2%	2.3%		6.3%
1 Figures based on L&T Group's restated segment reporting for Circular Economy business for 1 July 2024 - 30 June 2025 2 Sum of L&T Group's segments Facility Services Finland and Facility Services Sweden based on segment reporting for 1 July 2024 - 30 June 2025 3 Based on management reporting 1 July 2024 - 30 June 2025 The information presented above for Circular Economy and Facility Services businesses is based on historical segment reporting of L&T Group and does not represent income or expenses had the businesses been managed as stand-alone consolidated groups separate from the L&T Group. Furthermore, the segment-based information may not be indicative of the companies' operating performance as a standalone listed companies in the future.

Unaudited illustrative net interest-bearing debt

As per 30 June 2025 EUR million	New Lassila & Tikanoja	Luotea	Eliminations1	Current L&T Group, total
Interest-bearing liabilities	120	15	-10	125
Lease liabilities	57	13		70
Gross interest-bearing debt	178	28	-10	195
Interest-bearing receivables		-10	10	0
Cash and cash equivalents	-4	-14		-17
Net interest-bearing debt	174	4	0	178
1 A EUR 10 million commercial paper outstanding as per 30 June 2025 relates to New Lassila & Tikanoja. Since L&T Group's current commercial paper program remains with Luotea, the commercial paper has been also presented in Luotea's interest-bearing liabilities with a corresponding interest-bearing receivable from New Lassila & Tikanoja. The unaudited illustrative information presented above is based on L&T Group's unaudited consolidated balance sheet information as at 30 June 2025 and the Demerger Plan and it illustrates the preliminary consolidated net interest-bearing debt information of both the New Lassila & Tikanoja and Luotea as if the demerger had occurred on 30 June 2025. The unaudited preliminary illustrative net interest-bearing debt information set forth above has been prepared for illustrative purposes only and, because of its nature, addresses a hypothetical situation and does not represent the New Lassila & Tikanoja's and Luotea's actual net interest-bearing debt position after the completion of the demerger.

The New Lassila & Tikanoja's financial targets and dividend policy

• Average annual net sales growth of over 6% in the mid-term
• Adjusted EBITA margin of 11% in the mid-term
• Net debt to adjusted EBITDA of 1.5x-2.5x
• Dividend payout ratio of at least 50% of net income

Luotea's financial targets and dividend policy

• Average annual organic revenue growth of 4-5% in the mid-term
• Adjusted EBITA margin exceeding 5% in the mid-term
• Operating free cash flow of over 90% of EBITA in the mid-term
• Dividend payout at least 50% of net profit

Financing arrangements

In its preparations for the Demerger, the Company has secured sufficient financing for the demerging businesses, subject to customary conditions. In order to facilitate the Demerger process, the Company also intends to seek certain consents, waivers and term amendments with respect to its EUR 75 million unsecured notes maturing in 2028, that would transfer to the New Lassila & Tikanoja in the Demerger.

As announced by the Company on 27 June 2025, the Company has also agreed on financing arrangements related to an EUR 80 million bridge facility and an uncommitted accordion facility option to back up the outstanding EUR 75 million unsecured notes. The financing arrangements of the New Lassila & Tikanoja would after the Demerger consist mainly of the outstanding EUR 75 million unsecured notes, provided that the noteholders do not exercise their early redemption rights, a EUR 35 million term loan, and a EUR 40 million revolving credit facility. The financing arrangements of Luotea would consist mainly of a EUR 5 million term loan, a EUR 10 million revolving credit facility, and a EUR 100 million commercial paper program.

Board of Directors and management of the New Lassila & Tikanoja and Luotea

The EGM resolving on the Demerger, which is expected to be held on 4 December 2025, will elect the members of the Board of Directors of the New Lassila & Tiknaoja for a term commencing upon the completion of the Demerger. In accordance with the recommendation of the nomination board, the intention is that Jukka Leinonen be elected Chairman of the Board of Directors of the New Lassila & Tikanoja, that Sakari Lassila be elected Vice Chairman, and that Tuija Kalpala, Teemu Kangas-Kärki and Anna-Maria Tuominen-Reini be elected as members of the Board of Directors of the New Lassila & Tikanoja. Subject to the completion of the Demerger, the intention is that Jukka Leinonen, Tuija Kalpala, Teemu Kangas-Kärki, Sakari Lassila and Anna-Maria Tuominen-Reini would not continue as members of the Board of Directors of Luotea. The proposals regarding the respective compositions of the Luotea and the New Lassila & Tikanoja Boards will be included in the notice to the EGM.

The Company announced on 9 June 2025 that the Board of Directors of the Company has proposed that Eero Hautaniemi be appointed as President and CEO of the independent the New Lassila & Tikanoja and that Joni Sorsanen be appointed as CFO of the independent New Lassila & Tikanoja, should the Demerger be completed. Eero Hautaniemi and Joni Sorsanen will continue in their current positions with the Company until completion of the contemplated Demerger, in connection with which the appointments relating to the Demerger will take effect.

The EGM resolving on the Demerger will also elect the members of the Board of Directors of Luotea for a term expiring at the end of the next Annual General Meeting of Luotea. In accordance with the recommendation of the nomination board, the intention is to propose that Pasi Tolppanen, Anni Ronkainen and Juuso Maijala be re-elected as members of the Board of Directors of Luotea, and that Johan Mild, Timo Karppinen and Soile Kankaanpää be elected as new members of the Board of Directors of Luotea. Additionally, in accordance with the recommendation of the nomination board, the intention is that Johan Mild be elected Chairman and that Pasi Tolppanen be elected Vice Chairman of the Board of Directors of Luotea. The Company announced on 9 June 2025 that the Board of Directors of the Company has proposed that Antti Niitynpää be appointed President and CEO of Luotea and that Mika Stirkkinen be appointed CFO of Luotea.

Shareholder support

Certain major shareholders of the Company, including Evald and Hilda Nissi Foundation, Nordea Investment Management AB (as investment manager on behalf of Nordea Småbolagsfond Norden, Nordea 1 - Nordic Small Cap Fund and Nordea Invest Nordic Small Cap Fund), Juhani Maijala, Heikki Bergholm, Ilmarinen Mutual Pension Insurance Company, Varma Mutual Pension Insurance Company, Mikko Maijala and Elo Mutual Pension Insurance Company, holding in the aggregate approximately 27.59 per cent of the shares and votes in the Company, have, subject to certain customary conditions, irrevocably undertaken to attend the Company's EGM and vote in favour of the Demerger.

Advance tax ruling from the Finnish Tax Administration

The Company has received a legally binding advance tax ruling from the Finnish Tax Administration, according to which the Demerger will be treated as a tax neutral demerger as defined in Section 52 c of the Finnish Business Income Tax Act (360/1968, as amended).

Demerger and listing prospectus

The demerger and listing prospectus, which is expected to be published by the Company in November 2025 before the EGM resolving on the Demerger, will contain more detailed information on the Demerger and on the New Lassila & Tikanoja.

Employees

Subject to the approval of the EGM and the completion of the Demerger, all the Company's employees belonging to the Circular Economy business area at the time of completion of the Demerger would transfer to the service of the New Lassila & Tikanoja as existing employees.

Advisors to the Company

Danske Bank A/S, Finland Branch acts as the sole financial advisor of the Company in the Demerger. Hannes Snellman Attorneys Ltd acts as the legal advisor to the Company.

Telephone conference and webcast

The Company will host a conference call and webcast for analysts, investors and media on 7 August 2025 at 10:30 a.m. Finnish time in connection with the publication of the Half-Year Financial Report. The presentation material will be published on the Company's website.

The English language briefing will be hosted by the Company's President and CEO Eero Hautaniemi and CFO Joni Sorsanen.

Conference call:

You can access the teleconference by registering on the link below. After the registration you will be provided phone numbers and a conference ID to access the conference

https://palvelu.flik.fi/teleconference/?id=50050267

Webcast:

To access the audio webcast, please go to: https://lassila-tikanoja.events.inderes.com/q2-2025

Additionally, the Company plans to arrange a Capital Markets Day on 26 November 2025. Further details and invitations to the Capital Markets Day will be published at a later stage.

LASSILA & TIKANOJA PLC

Board of Directors

For more information:

Eero Hautaniemi, President and CEO, tel. [phone]

Joni Sorsanen, 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 7,400 people. Net sales in 2024 amounted to EUR 770.7 million. L&T is listed on Nasdaq Helsinki.

Distribution:

Nasdaq Helsinki

Major media

www.lt.fi/en

Appendix 1: The demerger plan and its appendices

Appendix 2: Reconciliation of alternative performance measures

Important notice

This release does not constitute a notice to convene a general meeting of shareholders nor does it constitute a demerger or listing prospectus. Any decision with respect to the proposed partial demerger of the Company should be made solely on the basis of information to be contained in the actual notice to convene the general meeting of shareholders of the Company, and the demerger and listing prospectus as well as on an independent assessment of the information contained therein. Investors are directed to consult the demerger and listing prospectus for more comprehensive information on New Lassila & Tikanoja, its shares and the proposed demerger.

This release does not constitute an offer of securities for sale or a solicitation of an offer to purchase the securities described in such release in the United States. In particular, any securities referred to in this release have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act"), and may not be offered, sold or delivered, directly or indirectly, in or into the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. There will be no public offering of securities in the United States.

The New Lassila & Tikanoja shares have not been and will not be listed on a U.S. securities exchange or quoted on any inter-dealer quotation system in the United States. Neither the Company nor New Lassila & Tikanoja intends to take any action to facilitate a market in the New Lassila & Tikanoja shares in the United States. Consequently, it is unlikely that an active trading market in the United States will develop for the New Lassila & Tikanoja shares.

The New Lassila & Tikanoja shares have not been approved or disapproved by the U.S. Securities and Exchange Commission, any state securities commission or any other regulatory authority in the United States, nor have any of the foregoing authorities passed comment upon, or endorsed the merit of, the partial demerger or the accuracy or the adequacy of this release. Any representation to the contrary is a criminal offence in the United States.

This release is for information purposes only and is not intended to and does not constitute or form part of any offer or invitation to purchase, otherwise acquire, subscribe for, sell, otherwise dispose of or issue, or any solicitation of any offer to sell, otherwise dispose of, issue, purchase, otherwise acquire or subscribe for, any security. This release is not a prospectus, product disclosure statement or other offering document for the purposes of Regulation (EU) 2017/1129 as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018 (as amended, the "UK Prospectus Regulation"), and the contemplated distribution of the New Lassila & Tikanoja shares is expected to be carried out in circumstances that do not constitute "an offer to the public" within the meaning of the UK Prospectus Regulation.

Forward-looking statements

This release includes "forward-looking statements" that are based on present plans, estimates, projections and expectations and are not guarantees of future performance. Words such as "intend", "assess", "expect", "may", "plan", "believe", "estimate" and other expressions entailing indications or predictions of future developments or trends, not based on historical facts, constitute forward-looking information. They are based on certain expectations and assumptions, which, even though they seem to be reasonable at present, may turn out to be incorrect. Shareholders should not rely on these forward-looking statements. Numerous factors may cause the actual results of operations or financial condition of the Company or New Lassila & Tikanoja to differ materially from those expressed or implied in the forward-looking statements. Neither the Company, New Lassila & Tikanoja, nor any of their affiliates, advisors or representatives or any other person undertakes any obligation to review, confirm or to release publicly any updates or revisions to any forward-looking statements to reflect events that occur or circumstances that arise after the date of this release other than as required by applicable laws and regulations.