Netel Holding AB: Consolidation of operations, cost saving programmes of MSEK 40-50 and divestment of operations in the UK initiated

Third quarter
Continuing operations^{1, 2}

• Net sales decreased 17.8 per cent to MSEK 654 (796)
• EBITA MSEK -59 (34) with an EBITA margin of -9.1% (4.3)
• Adjusted EBITA MSEK -53 (45), with an adjusted EBITA margin of -8.1 per cent (5.7)
• Operating loss (EBIT) MSEK -62 (33) with an operating margin of -9.4 per cent (4.1)
• Loss for the period MSEK -67 (9)
• Earnings per share for continuing operations before and after dilution SEK -1.39 (0.14)
• Earnings per share including discontinuing operations before and after dilution SEK -1.39 (0.18)
• Cash flow from operating activities MSEK -44 (47)

January-September
Continuing operations^{1, 2}

• Net sales decreased 8.1 per cent to MSEK 2,138 (2,326)
• EBITA MSEK -15 (94) with an EBITA margin of -0.7 per cent (4.0)
• Adjusted EBITA MSEK 8 (112), with an adjusted EBITA margin of 0.4 per cent (4.8)
• Operating loss (EBIT) MSEK -21 (89), with an operating margin of -1.0 per cent (3.8).
• Loss for the period MSEK -66 (19)
• Earnings per share for continuing operations before and after dilution SEK -1.36 (0.39)
• Earnings per share including discontinuing operations before and after dilution SEK -1.04 (0.23)
• Cash flow from operating activities MSEK -136 (-4)
• Net debt excluding leases amounted to MSEK 862 (674) and net debt excluding leases/adjusted EBITDA 6.3 (2.7)
• The order backlog increased to SEK 3.84 billion (3.58)

¹ The Finnish operations were divested on June 30 2025 and are reported separately in this report as discontinuing operations.
² No adjustments have been made for the earnings effect communicated on 1 October 2025.

Significant events during the third quarter

• New framework agreement in Power with E.ON in Sweden.
• New agreement with Elvia in Norway for the upgrade of three power stations.
• After the end of the quarter, the company has received a waiver from existing lenders regarding the third quarter, but as of 30 September, covenants in existing financing agreements were not met, which according to IFRS entails a reclassification of existing debt from long-term to short-term as of the balance sheet date. Dialogues and processes are ongoing with lenders for long-term financing before the end of the year.

Significant events after the end of the third quarter

• On 1 October 2025 Netel announced that write-downs regarding completed projects and projects in the closing phase in three subsidiaries and market changes are affecting Netel's results for 2025. The assessment from 1 October remains unchanged - full-year 2025 revenue is expected to amount to approximately SEK 3 billion with an adjusted EBITA margin of 1.5-2%.
• The operations excluding the three above-mentioned subsidiaries constitute more than 90% of Netel's sales in 2025 and are estimated, despite lower volumes, to show an adjusted EBITA margin of approximately 4-5% for the full year 2025.
• Letter of intent signed to divest the operations in the UK to management.
• A profitability improvement action plan with defined milestones has been decided and initiated.
• A cost-saving program totalling SEK 25 million has been launched to reduce group overheads, with full effect expected in 2026. An additional SEK 15-25 million in savings is anticipated following company consolidations, with full effect in 2027.
• Cash flow is expected to be strong in the fourth quarter of 2025, in line with normal seasonal variation.
• Renewed two-year frame agreement within Power with Elvia in Norway regarding emergency services.
• Indication 2026: Growth and margin improvement are expected for the full year 2026 given the cost-saving measures in 2025-2026 and the market conditions Netel sees today.

CEO's comments

Clear, time-specific measures for restoring profitability

Netel continues to have a high order backlog of SEK 3.8 billion and operates in attractive markets driven by powerful megatrends, we have a strong offering and longstanding customer relationships. However, it has been a difficult quarter, and we have challenging quarters ahead. On 1 October, we communicated that Netel had been affected during the second half of 2025 by write-downs regarding completed projects and projects in end stages in three subsidiaries acquired in 2021-2022, as well as by lower than expected volumes and deteriorating market conditions. The remaining operations, which account for more than 90% of Netel's expected net sales in 2025, are still expected - despite reduced volumes due to market changes - to deliver an adjusted EBITA margin of approximately 4-5% for the full year.

The write-downs arose as we prepared to close out projects and the identified overvalued projects in the three subsidiaries. These write-downs and lower volumes have had a significant negative impact on our profitability. We are now turning over every stone to restore profitability. Among other measures, we are introducing new working methods, improving project management, consolidating companies, reducing the organisation, and streamlining management layers. We have after the end of the quarter decided to review the possibility of divesting our operations in the UK and have signed a letter of intent with the target to complete the transaction before the end of the year.

Our new, recently signed customer agreements and strategy to expand to new regions and customer groups in our existing markets will also help to boost profitability. We have a close and transparent dialogue in good spirit with our lenders, with a mutual intention to reach a new agreement for long-term financing before the end of the year.

Continued high order backlog of SEK 3.8 billion
Our underlying markets are healthy and are driven by the strong megatrends of digitalisation, electrification and modernisation of critical infrastructure. We also have a generally high level of activity in our markets with many tender requests. This also means that many new players are entering our markets, thus intensifying competition. We are therefore working focused on ensuring that we are competitive. We signed new important contracts including with E.ON and Vattenfall in Sweden as well as Elvia in Norway. We continue to have a high order backlog exceeding SEK 3.8 billion, of which SEK 2.0 billion pertains to 2026 and we are confident that we will be able to continue to maintain it a high level considering prevailing market conditions. We are closely monitoring our customers' investment appetite and have noted a decrease in the investment volume in the telecom market, which we can adapt to more easily with our flexible business model with a high proportion of subcontractors.

Focus on profitability in procurements
At the beginning of 2025, we made a strategic decision to focus on our profitability target in project procurements rather than on growth. This was communicated in the report for the first quarter of 2025 when we lowered our annual financial growth target from 10 per cent to 3-5 per cent. This strategic decision together with the increased competition that exists in several markets has resulted in us not winning contracts at the rate we expected. This is particularly noticeable in Infraservices where competitors that previously focused on the construction sector are now shifting to our customer segments that comprise industries as well as municipal and governmental bodies. We are therefore optimising our organisation and working methods to be competitive in this market as well.

We expect to achieve growth and margin improvement for the full year 2026, given our cost-saving measures during 2025-2026 and the market conditions we see today.

Savings programmes totalling MSEK 40-50
To achieve our profitability target, we need to keep working hard. These measures differ slightly between the divisions, and the programmes were introduced internally with time-specific milestones.

We have resolved on a savings programme totalling MSEK 25 to reduce costs that will generate a full effect in 2026. Of this amount, MSEK 10 pertains to already identified services and vacancies within central functions that have not been filled. Identified cost savings and organisational changes within the Norwegian telecom operations amount to MSEK 15. These measures are being implemented.

The consolidation of companies together with additional restructuring of managerial functions and cost savings within central functions will provide an additional MSEK 15-25 in savings with full effect in 2027.

Infraservices - new division management and improved governance
We have new management in place in one of our companies, who during a review prior to project completion discovered that the projects were overvalued and had to be written down. Profitability was also impacted by the lower volumes in the quarter. The division is carrying out measures to improve project control, increase risk control and facilitate more uniform ways of working for tenders, follow-ups and forecasts. As an additional measure, I assumed the role of acting head of the division during the quarter.

Power - new major framework agreements signed
Profitability was impacted by one-off write-downs of completed projects or projects in end stages that started in 2022 in a Swedish subsidiary within Power, and a continued high proportion of project starts and lower volumes in Sweden. Profitability is expected to improve in 2026 in part through contributions from recently signed, major framework agreements with E.ON, Vattenfall. In Sweden, Elvia in Norway and agreement with Elvia for the upgrade of three power stations.

In Power, we are also reducing managerial levels to become closer to the projects and streamlining the structure of the division by merging several subsidiaries. We have also accelerated focus and resource to manage projects efficiently with good governance, high risk control and high customer satisfaction.

Telecom - savings measures of MSEK 15
Profitability was impacted by the high proportion of projects that remained in start-up phases during the quarter as well as lower volumes in recently won projects. We did not achieve the saving from the new business system and new organisation in Norway that we had anticipated in 2025. Approximately MSEK 15 of the MSEK 25 savings programme set to lower expenses in 2026 involves the Norwegian telecom operations. These measures include vacancies that have not been filled and we have a new organisation as of 1 October 2025 which is adapted to new, more efficient ways of working. The new digital tools that are gradually being introduced into the Norwegian service organisation are also expected to continue to contribute to increased efficiency and profitability. As in the Infraservices division, I have also taken on the role of acting head of the division.

Initiated divestment of the UK operations
Netel acquired the UK business in 2022 to establish itself in an additional market. The UK business has had a negative performance trend and has negatively impacted both our earnings and cash flow. We have conducted a strategic review of the business and decided to review the possibility of divesting it. We have a signed letter of intent in place. Our intention is to complete the divestment before the end of the year.

Separate reporting of the three subsidiaries
To ensure the transparency our measures, we are reporting the sales and adjusted EBITA of the divisions and the Group separately excluding the company in the Infraservices division in Sweden, the company within Power in Sweden and the operations within Telcom in the UK. This information can be found on page 35. In this way, we show both how the divisions and the Group are performing without these three subsidiaries and how our measures are impacting our core business and the three subsidiaries. In the January-September 2025 period, excluding the three subsidiaries, the Group's sales declined 0.8 per cent to MSEK 2,001 (2,017) and the adjusted EBITA margin amounted to 3.6 per cent (5.0).

Operations excluding the three above-mentioned companies account for more than 90 per cent of our expected sales in 2025, and are expected, despite lower volumes, to deliver an adjusted EBITA margin of approximately 4-5 per cent for the full-year 2025. Our savings program is expected to have effects in 2026 and 2027.

Our financing
Tied-up capital is impacted by projects in start-up phases, the longer lead times and invoicing in the quarter. Project write-downs resulted in net debt excluding leases increasing to MSEK 862 (674) and net debt excluding leases/adjusted EBITDA to MSEK 6.3, which far exceeds our capital structure target as the target does not take into account one-off project write-downs.

Cash flow from operating activities was also negatively impacted in the quarter, primarily by the high proportion of projects in start-up phases. We expect a strong cash flow in the final quarter of the year, which follows typical seasonal patterns.

Since EBITDA, which is one of Netel's covenant in existing loan agreements, does not take into account one-off write-downs of projects, the project write-downs described above meant that the company did not meet all loan conditions in existing financing agreements as of 30 September. After the end of the quarter, the company has received a waiver from existing lenders regarding the third quarter. A process in good faith is underway with lenders with a mutual intention to establish a new long-term financing before the end of the year. We have a good and forward-looking dialogue with our lenders who have received detailed information about our action and savings programmes.

Project business tends to fluctuate
Following the communication on 1 October, we have been asked how our business operates and why earnings fluctuate between quarters. It is important to understand that our income statement is based on percentage of completion where revenue and costs, and therefore margins, are divided across the timespan of the projects. Four times a year, we review all projects in detail and update our forecasts for the margins for the projects. It is on these occasions and before a project is ended that our earnings may be adjusted. The forecast adjustments have an immediate impact on the income statement through changed revenue recognition and if a write-down of, for example, 0.5 per cent on EBITA were to arise, it will at that point affect the previously reported results of the entire project, which can have major consequences in individual quarters even if the projects themselves have a profit margin that is in line with our financial goals.

Since we have a project-based business, our earnings and cash flow will continue to fluctuate between quarters, and it is important to view our performance over longer time periods in order to gain a fair view. The nature of our business also means that project management, risk control and uniform ways of working related to tendering, follow-ups and forecasts are of key importance to us. These are areas that have been - and continue to be - highly important to me and my Management Team since I assumed the role of CEO almost two years ago. Owing to this, we have increased the transparency of our subsidiaries, invested in reporting and governance tools and introduced new procedures for central review and approval of tenders. This work will be accelerated further in connection with the consolidation of subsidiaries within the Group.

Future outlook
Difficult, but necessary, decisions have been made, and we will have to make more such decisions. We have a clear plan to improve profitability and are completing the measures we have communicated and what we can influence ourselves. We are maintaining a high pace during the remainder of 2025 to win new great contracts, implement the savings programmes and drive our signed agreements to enter 2026 with better conditions. Through continued focus on consolidating our operations within the divisions and the Group, increased internal efficiency, improved processes and a strengthened financial position, we are preparing ourselves to face the future. In conclusion, I would like to thank all of our employees for their commitment, professionalism and support. Together, we can create value through our shared knowledge, good customer relationships and strong offerings.

Jeanette Reuterskiöld
President and CEO

Our measures to increase profitability in summary:

• Divestment of the UK operation initiated
• Restructuring of companies with profitability problems
• Consolidation of subsidiaries into larger units
• Reduction of management staff
• Improvement of internal processes and follow-up
• Cost savings of SEK 25 million with full effect in 2026 and SEK 15-25 million with full effect in2027

Webcast presentation and teleconference
Jeanette Reuterskiöld, President and CEO, and Fredrik Helenius, CFO, will present the interim report on Friday, 24 October at 9:00 a.m. (CEST) in a webcast. Questions may be asked both online and by phone. Presentation material is also available at https://netelgroup.com/en/investors/reports-and-presentations/. The presentation will be held in English.

If you want to participate through the webcast, use the link https://netel-group.events.inderes.com/q3-report-2025. It will be possible to submit written questions during the webcast. If you want to ask questions orally via teleconference, please register through the link https://conference.inderes.com/teleconference/?id=5007514. After registration, you will receive a telephone number and ID to log in to the conference. It will be possible to ask questions orally during the teleconference.

Interim reports on www.netelgroup.com
The complete interim report and previous reports are available on https://netelgroup.com/en/investors/reports-and-presentations/.

Next report
The year-end och fourth quarter report 2025 will be published 6 February 2026, 07:30 a.m. CET.

About us

With 25 years of experience, Netel is a leader in the development and maintenance of critical infrastructure within Infraservices, Power and Telecom in Northern Europe. We are involved in the entire value chain from design, production and maintenance of our customers' facilities. We are dedicated to securing an accessible and reliable future, where technology unites and transforms society. Netel reported net sales of SEK 3,300 million in 2024 and the number of employees in the group is about 840. Netel is listed on Nasdaq Stockholm since 2021. Read more at netelgroup.com.

Contacts

Jeanette Reuterskiöld, President and CEO, [phone], [e-mail]
Fredrik Helenius, CFO, [phone], [e-mail]
Åse Lindskog, IR, [phone], [e-mail]

This information is information that Netel Holding AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 2025-10-24 07:30 CEST.