Translation: Original comment published in Finnish on 4/26/2024 at 9:27 am EEST. Kreate reported its Q1 results this morning, which were moderate in terms of numbers. Revenue declined slightly more than expected, which also led to a small earnings miss, although the differences around zero are rather dramatic relatively speaking. Looking at the result, it is good to see that the profitability trend is going in the right direction, as it was the second consecutive quarter of improvement. The guidance remained unchanged, but the outlook for market demand/activity is in fact very good. In connection with the result, the financial targets were also updated to emphasize profitability rather than growth, which was expected. Overall, after the first quarter, the prospects for an improvement in 2024 remain good from an operational perspective, but now also distinctly from a market perspective. Decline in revenue In Q1, Kreate's revenue decreased by 17% to approximately 54.4 MEUR, below our forecast of 57.8 MEUR. The decline in revenue accelerated slightly more than expected from the end of the year. By business line, in Q1, revenue decreased in Structural engineering by 27% to 40.2 MEUR (Q1'23: 54.8 MEUR). This was helped by a clear increase in business in Sweden (Sweden Q1: 6.5 MEUR vs. 3.6 MEUR y/y), but revenue was significantly reduced by the completion of major projects. In Transport infrastructure, revenue already grew by 24% to 13.3 MEUR, as the market became less challenging and delays decreased. The order book continued to decline by around 31%, but is still at a good level compared to recent years (Q1: 184 MEUR). Profitability improved further Kreate's EBITA improved from the comparison period to 0.3 MEUR (Q1'23: -0.4 MEUR), below our forecast of 0.9 MEUR due to a higher than expected decline in revenue. The EBITA margin rose to 0.6% from a weak comparison period (Q1’23: -0.6%). First quarter profitability is seasonally the weakest and in an environment of significantly declining revenue, improving profitability for the second quarter in a row is nevertheless a good achievement. On the lower lines, financial expenses were slightly higher than expected and EPS was a loss of EUR 0.06 (Q1’23: -0.08 MEUR). Guidance unchanged, visible upturn in outlook According to Kreate’s guidance, revenue will decrease and amount to 270-300 MEUR in 2024 (2023: 320 MEUR). EBITA is expected to grow to 8-11 MEUR (2023: 7.8 MEUR). However, there has been a clear upturn in the outlook in the beginning of the year, as bidding activity and activity levels in general have improved during the quarter. As the CEO said, the market situation in infrastructure is actually “very good” at the moment. Towards the end of the year, the order book and revenue will presumably start to pick up. All in all, given the positive earnings trend, the improved market outlook, and the financial situation, 2024 seems to be off to a good start for Kreate. Financial targets updated Kreate updated its financial targets in connection with the results. The focus is now on improving profitability rather than growth, which was the direction previously communicated. The company reached its previous revenue target of 300 MEUR already last year, but has fallen short of profitability. Kreate is now targeting an EBITA margin of more than 5% between 2024 and 2027, annual revenue growth of 5-10% and a net debt to EBITDA ratio below 2.5. The aim is to distribute a dividend of around 50% of profits. The profitability target remained unchanged, but the time horizon was revised from the medium term to the 2024-2027 time horizon. No percentage growth target has been given in the past, but the growth rate target still seems to be at a good level, taking into account the company's efforts to improve margins. With Kreate's cost structure, growth also creates profitability, so maintaining moderate growth is important in itself. The indebtness target was slightly increased (was <2.0), but the dividend policy remained unchanged. The targets were as expected and do not trigger any immediate changes to our long-term forecasts. We are well below the company's targets for both growth and profitability (2027e EBITA-%: 4.1%). However, we believe they are very achievable given Kreate's historical performance.

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