Image 'Cover'!C8
HLRE Holding Group
Financial Statement
Parent HLRE Holding Oyj
Group HLRE Holding Group
Address Jasperintie 273
Domicile Pirkkala
DomicileOfEntity Pirkkala
Y-id 2611405-7
LEI 743700UNWAM0XWPHXP50
No changes
LegalFormOfEntity PLC
CountryOfIncorporation Finland
PrincipalPlaceOfBusiness Pirkkala
DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities Construction
NameOfUltimateParentOfGroup HLRE Holding Oyj
Financial Statements 2023
1.2.2022-31.1.2023
Contents page
Board of Directors´ Report
Consolidated Financial Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows, indirect
Information about the consolidated financial statements
1. Accounting principles
2. Management judgement and sources of uncertainty
Key information relating to income statement
3. Segment information
4. Revenue
5. Other operating income
6. Operating expenses
Personnel
7. Employee benefits expense
8. Information about key management personnel (incl. key management's shareholdings) and share-based payments schemes
Assets and liabilities used in business operations
9. Goodwill and other intangible assets, including impairment testing
10. Property, plant and equipment and leases
11. Inventories
12. Trade and other receivables
13. Other current liabilities
Capital structure and financing
14. Net debt
15. Loand and financial assets
16. Financial income and expenses
17. Management of financial risks
18. Shareholders' equity
19. Capital risk management
Other notes
20. Group structure
21. Taxes
22. Related party transactions
23. Long-term employee benefits
24. Commitments and contingent liabilties
25. New IFRS-standards that will enter into force at a later date
26. Events after the reporting date
Parent company Income Statement
Parent company Balance Sheet
Parent company notes
Signatures
Auditor´s report
Image 'BoD report'!E188
HLRE Holding Group
Board of Directors´ Report
FINANCIAL PERIOD 1 FEBRUARY 2021–31 JANUARY 2022
GENERAL
The HLRE Holding Group (commonly referred to as the Vesivek Group in customer and marketing communications) is a company focusing on roof and drainage renovation of single-family and terraced homes and the product development, manufacture, sales and installations of rainwater management systems and roof safety products. The Group operates in Finland and Sweden under the Vesivek brand.
In January 2023, the HLRE Holding Group operated in 17 (17) locations in Finland and 3 (3) in Sweden. The Group’s head office and sheet metal roofing factory are in Pirkkala, Finland, and the product development and manufacture of rainwater systems and roof safety products and corporate sales function in Orimattila, Finland. The Group’s customers include consumers, housing companies, construction companies and public-sector organizations.
In the consumer business, the Vesivek Group is the leading service company in the industry in Finland, delivering roofs with accessories and installation services from its own factory. The Group’s service offering includes the customer promise “Weather protection in just one day,” which is made possible by the in-house supply chain from product development to installation and the conceptualized business model. The majority share of a company engaged in the drainage business in Finland, acquired as part of the Group, strengthens the Group’s service offering in the market for the renovation of single-family houses.
The Nesco Group that designs, develops, fabricates and sells roof and roof safety products includes the companies Nesco Invest Oy, Vesivek Tuotteet Oy (formerly Nesco Oy) and Tuusulan Peltikeskus Oy. Vesivek Tuotteet Oy is a Finnish company that designs, manufactures and sells rainwater management systems and roof safety products. Tuusulan Peltikeskus Oy is a Finnish company that sells rainwater systems and roof safety and sheet metal products to consumers and construction companies, operating in the municipality of Tuusula in the Greater Helsinki region.
EUR 1000 1 February 2022-31 January 2023 1 February 2021-31 January 2022 Change
Revenue 129455,0 130351,5 -0,7 %
EBITDA 10225,5 12210,9 -16,3 %
Pfort or loss for the financial year -337,5 690,5 -148,9 %
Equity ratio 28,3 % 28,3 % 0,1 %
Cash flow from operating activities 4743,1 7332,4 -35,3 %
Personnel on average 836,0 850,0 -1,6 %
Gross capital ecpenditure -1987,4 -4011,0 -50,5 %
MAJOR EVENTS DURING THE FINANCIAL PERIOD
The Group’s turnover decreased slightly year-on-year from EUR 130.4 million to EUR 129.5 million (-0.7%).
During the financial period, Vesivek Salaojat Oy expanded its business operations to two new units, Vaasa and Oulu. The units operate as a separate business in connection with the Vesivek Oy unit.
At the beginning of January 2023, Vesivek Oy announced that it will start restructuring negotiations at its Lohja unit. In the proposed plan, the roofing business of the unit would be discontinued and the unit would only focus on the rainwater systems and roof safety business. The change negotiations of the Lohja unit were completed at the end of January 2023. As a result of the negotiations, the roofing business in the unit will be discontinued and the unit will continue in the rainwater system and roof safety business.
The Group company installing roof renovations in Finland, Vesivek Oy, moved to mainly scaffolding-based roofing installations already during the financial year 2019. Scaffolding, or work platforms, around a building function as fall protection and improve occupational safety, ergonomics and installation efficiency, as the work can be performed from the correct height without reaching. The scaffolding also protects the yard and access routes from any materials falling from the roof.
In spring 2020, the COVID-19 pandemic rapidly erupted, and its social and economic impacts have been significant in places, with increasing uncertainty and decreased visibility. In particular, the first quarter of the reported financial year was challenging in terms of the pandemic in Finland and Sweden. The downsizing of the installation units was continued and in many respects the units operated understaffed at the beginning of the financial year. The units had to react very quickly to unplanned changes due to sick leaves and act quickly according to the updated instructions and plans.
In February 2022, Russia’s war of aggression against Ukraine further increased uncertainty and general instability in Europe. During 2022, energy prices and the general increase in cost levels and interest rates also contributed to increasing lack of consumer confidence. The Group continued measures in Finland and Sweden to safeguard the adequacy of the companies’ cash reserves, operating prerequisites and business.
CHANGES IN GROUP STRUCTURE
There were no changes in the company structure during the financial period.
BUSINESS CONTINUITY
The financial statements for the financial period 1 February 2022–31 January 2023 have been prepared based on the going concern principle, assuming that the Company will be able to liquidate its assets and settle its liabilities as part of normal business operations in the foreseeable future.
The Group’s loss for the financial year ended 31 January 2023 was EUR 0.3 million, cash flow from operating activities EUR 5.0 million and net debt EUR 52 million. The SEK 300 million bond issued by the Company in February 2021 will fall due for payment in February 2024. The Company’s management has prepared financial forecasts of the development of turnover, expenses and investments from the balance sheet date until February 2024. The Company’s current liquid assets and projected operating cash flow are insufficient to cover the repayment of the SEK 300 million bond due in February 2024 without additional funding. There is a risk that the Company will not be able to refinance the bond.
As no binding decisions on additional financing have yet been issued by the date of adoption of the financial statements, the adequacy of financing constitutes a significant uncertainty that may give rise to significant doubts about the Company’s and the Group’s ability to continue as a going concern. If the company were unable to obtain additional financing, the assumption of continuity of operations would possibly no longer be valid, the situation might require valuing the assets to the recoverable amount and recording possible additional liabilities. The company's management estimates that it will be able to refinance the bond or obtain other additional financing. As a result, the Company's financial statements have been prepared on the basis of the going concern principle.
ESTIMATE OF MAJOR RISKS AND UNCERTAINTIES
The HLRE Holding Group assesses risks annually with the aim of minimising risks and better foreseeing them.
The Group’s growth and development are strongly linked with the growth and development of sales and success in internationalization, and failure in them might have direct or indirect impacts on the Group’s business and growth opportunities or development of its profitability. In addition to the above, the Group’s business operations are exposed to personnel-related risks, such as risks relating to the recruitment and retention of skilled personnel. The Group’s business is exposed to occupational safety risks at the construction sites, which also includes a risk of potential procedures by the authorities or legal proceedings. In addition, the Group is exposed to international price fluctuations and production bottlenecks for the commodities it uses in its business, such as steel, aluminium and wood. In the procurement of raw materials, the company uses several reliable and committed raw material suppliers. Cooperation with raw material suppliers is an ongoing cooperation process.
The Group’s business is exposed to seasonality which can be balanced by a service portfolio comprised of different product categories and extensive geographical distribution in Finland and through internationalization. Moreover, the most significant business uncertainties are associated with risks relating to partners, such as the most significant suppliers, opening of new locations and their development, success in concept development and maintaining the concept.
Expansion into other countries involves several risks associated with foreseeing consumer needs, preferences and behaviour in the target markets, among other factors. Expansion into other countries involves the risk of the company’s conceptualized business model not establishing a position in the market and securing an established customer base. The company’s conceptualized business model can also be non-compliant with the local building regulations, customs or prevailing practices. The possible failure of the launch of new concepts, such as the drainage business concept, would incur costs to the company and have a material adverse impact on the company’s brand, financial position and business performance.
At the end of the financial year 2023, the balance sheet of the HLRE Holding Group included EUR 40.3 million of goodwill.  Each year, the HLRE Holding Group tests goodwill for impairment and, if necessary, whenever there are indications that the value of the assets does not exceed their goodwill. During the financial year, HLRE Holding did not observe indications of not being able to recover the amount corresponding to the book value. Should there be negative changes in the profit and growth development of the HLRE Holding Group, this could lead to impairment of goodwill, which could have an unfavourable impact on the operating result and equity of the HLRE Holding Group.
The well-being of customers, partners and employees has also been a priority for the Group in the prolonged COVID-19 pandemic. The Group complies with the guidelines issued by the local health authorities in all of its locations to mitigate the pandemic. The Group has taken special measures according to its plan to ensure the safety of its customers and personnel and the continuity of its products and services in the exceptional situation caused by COVID-19.
During the financial year, COVID-19 caused challenges to the Group’s business operations, and the last quarter of the financial year in particular was challenging in terms of infections in Finland and Sweden. The units had to react to unplanned changes due to sick leaves and they complied with updated and revised instructions, plans and regional regulations issued by the authorities.
In addition to the above and other normal business risks, the Group is not aware of material risks affecting its operations. The Group’s revenue for the financial period from 1 February 2023 to 31 January 2024 is expected to grow moderately and profitability to remain at least at the level of the financial period ended on 31 January 2023. The Group’s growth in Finland will be generated from the increased efficiency of Vesivek Salaojat Oy’s existing locations. Moreover, growth in the Swedish subsidiary is believed to accelerate the growth of the Group during the financial year.
RISK MANAGEMENT
In its risk management, the HLRE Holding Group aims to be as systematic as possible as part of normal business processes. The Group has a risk management policy approved and followed up by the management team, supporting the achievement of strategic objectives and ensuring the continuity of business operations. The Group’s risk management policy focuses on managing both risks associated with business opportunities and risks threatening the achievement of the Group’s objectives. The management team analyses and assesses the most essential risks in terms of their probability and significance.
The review of business risks is part of the HLRE Holding Group’s management system. Risks are classified into strategic, operational, financial and damage risks. Strategic business risks are associated with customer relationships, competitors’ actions, political risks, brand, product and concept development, as well as investments. Operational risks are associated with shortcomings or errors in the company’s operations or systems or external risks, such as legislation or unexpected decisions or policies of the legal system or authorities, or changes in raw material prices or supply issues. Financial risks are associated with changes in the interest and foreign exchange markets, refinancing and counterparty and trade receivable risks. Damage risks can cause accidents, property damage, interruptions in production, environmental impacts or liability for damages.
The risk management process aims to identify and assess the risks, after which measures are planned and implemented with regard to each risk. The measures can include avoiding the risk, mitigating it by different means, transferring the risk through insurance policies or contractually, or taking the risk in a managed and conscious manner. Control functions or measures refer to verifying procedures that mitigate risks and ensure that risk management measures are taken.
The HLRE Holding Group does not have a separate risk management function; the associated responsibilities follow the organizational distribution of responsibilities. The company’s management team regularly reviews the risks. The company’s Board of Directors and its Audit Committee review the most significant risks and related measures at least once a year in conjunction with the strategy process.     
PERSONNEL
At the end of the financial year, the personnel numbered 835 (821), an increase of 14 employees that is 1.7 per cent. The Group personnel averaged 836 (850) FTE, a decrease of 14 employees, or -1.6 per cent. The Group’s employee benefits expenses totalled EUR 49.7 (50.3) million, a decrease of EUR 0.6 million, or -1.2 per cent.
BOARD OF DIRECTORS
In accordance with article 10 of the Articles of Association of the Group’s parent company HLRE Holding Oy, the company’s administration and appropriate organisation of operations is seen to by a Board of Directors with a minimum of three (3) and a maximum of ten (10) actual members according to the resolution of a general meeting of shareholders. The term of office of the Board members expires at the close of the next Annual General Meeting after their election.
At the company's Annual General Meeting on 28 April 2022, Pentti Tuunala, Kimmo Riihimäki, Ari Haapakoski, Timo Pirskanen, Mika Uotila and Anu Syrmä were re-elected as members of the Board of Directors. In its first meeting on 28 April 2022, the Board of Directors elected Pentti Tuunala as its Chair.  In its meeting on 28 April 2022, the Board of Directors decided to elect Timo Pirskanen, Pentti Tuunala and Mika Uotila from among its number to continue as members of the Audit Committee and elected Timo Pirskanen as the Chair of the Audit Committee.
During the financial year 1 February 2022–31 January 2023, the Board of Directors convened 12 times. The attendance rate of the Board members was 99%. The Audit Committee convened 3 times during the financial period 1 February 2022–31 January 2023 with an attendance rate of 100%.
REMUNERATION OF BOARD MEMBERS
The Annual General Meeting of the Group’s parent company HLRE Holding Oy resolved on 28 April 2022 that EUR 1,000.00 per month be paid as compensation to each Board member independent of the company and its major shareholders. If a Board member is employed by a company belonging to the HLRE Holding group of companies or by Sentica Partners Oy, they are not paid compensation for Board membership. No separate fee is paid for Board or committee meetings.
Furthermore, the Annual General Meeting resolved that each Board member will be compensated for reasonable travel expenses against receipts in accordance with the practices of the HLRE Holding Group.
MANAGEMENT TEAM
The following changes occurred in the Group’s Management Team, which has been operating since October 2021: Hanna Rinne was appointed as the Group’s interim HR Director and a member of the Group’s Management Team in August 2022, Juha Höyhtyä was appointed as the Managing Director of Vesivek Oy and Vesivek Salaojat Oy. At the end of the financial year, the composition of the Company’s Management Team was as follows: Kimmo Riihimäki, CEO; Hanna Rinne, interim HR Director; Jari Raudanpää, CFO; Juha Höyhtyä, Managing Director of Vesivek Oy and Vesivek Salaojat Oy; Pasi Heikkonen, Managing Director of Vesivek Tuotteet Oy; Jani Jylhä, Managing Director of Vesivek Sverige AB. The Management Team convenes regularly.
AUDITING
The Annual General Meeting of 28 April 2022 resolved to appoint PricewaterhouseCoopers Oy as the company’s auditor for the financial year 1 February 2022–31 January 2023, with Markku Launis, Authorised Public Accountant, as the auditor with main responsibility.
COMPANY STRUCTURE AND SHAREHOLDING
The Group’s parent company HLRE Holding Oyj is owned by funds managed by funds owned the Finnish private equity company Sentica Partners Oy and key personnel of the Group.
At the end of the financial period, HLRE Holding Oyj’s share capital entered in the Trade Register amounted to EUR 80,000. At the end of the financial year, the number of HLRE Holding Oyj shares was 16,626,723. The company has one series of shares, and each share confers one vote at a general meeting. All shares confer equal rights to dividends and other distribution of assets. At the end of the financial year, the company had a total of 40 shareholders. At the end of the financial period, the company held 27,550 treasury shares.
The Board of Directors has no valid authorizations granted by the general meeting to repurchase shares or issue shares or grant other special rights entitling to shares referred to in chapter 10, section 1 of the Limited Liability Companies Act.
BOARD OF DIRECTORS’ PROPOSAL CONCERNING THE USE OF THE COMPANY’S NON-RESTRICTED SHAREHOLDERS’ EQUITY
The Group's parent company HLRE Holding Oyj’s profit for the financial year was EUR 291,309.67. The Board of Directors proposes that the profit for the financial year be recognized as a change in retained earnings, after which its distributable funds amount to EUR 19,282,857.04. The Board of Directors’ proposal to the general meeting is that no dividends be distributed.
MAJOR EVENTS AFTER THE FINANCIAL PERIOD
The Group’s operating environment is subject to uncertainty caused by the impairment of the general security situation in Europe and continued increase in raw material and energy prices and general costs. The rising costs and uncertainty have impacts on disposable income, purchase choices and consumer behavior, among other things. These can present both challenges and opportunities to the development of the Group’s business.
On 7 February 2023, the Group announced in its subsidiary, Vesivek Oy, that it would start employee cooperation negotiations in its Lahti unit. The negotiations were completed in March 2023, as a result of which the Company decided to discontinue the roofing business of the Lahti unit and to only continue the rainwater system and roof safety business in the area in connection with the premises of Vesivek Tuotteet Oy.
At the beginning of April 2023, the Board of Directors of the Company issued a change negotiation proposal concerning the entire Kuopio unit of Vesivek Oy and Vesivek Salaojat Oy. The change negotiation will address the plan according to which the Kuopio unit will focus on the gutter and roof safety business and the drainage business in the future. With regard to the roofing business, the plan is to partially implement sites in the area from other nearest units (Jyväskylä, Joensuu, Mikkeli).
HLRE Holding Oy’s responsibility report as part of the Board of Directors' report
VESIVEK BUSINESS MODEL
Vesivek Group is Finland’s leading provider of rainwater systems, roof and drainage renovations for single-family and terraced homes and Sweden’s leading provider of roof renovations for single-family and terraced homes. The company carries out more than 5,000 roof renovations nationwide every year in Finland and more than 1,000 roof renovations in Sweden in the Stockholm and Northern Sweden Kalix areas, as well as approximately 700–800 drainage renovations around Finland. In addition to roof and drainage renovations, Vesivek manufactures, installs and sells more than 15,000 rainwater systems and roof safety products annually.
The company’s business model has been conceptualised and its replicability has enabled organic expansion in Finland and Sweden in the roof renovation of single-family and terraced homes and, through an acquisition, the expansion of the service range into drainage renovations.
With its services, the company creates value for people and society, resulting in safer, more comfortable and longer-lasting properties. In addition, the Company takes minor individual measures related to responsibility. For example, to compensate for the carbon footprint of its employees, the Company annually plants trees in Finnish forests. The company has also established a tradition of an annual Christmas concert, in which the collected funds are directed to mental health work for children and young people in Finland.
SUSTAINABLE DEVELOPMENT
Sustainable development is increasingly important to Vesivek’s customers and stakeholders, and Vesivek wants to be a market pioneer by seeking and providing solutions. With decades of expertise in building a foundation for a better life, Vesivek’s goal is to make housing and living more sustainable and healthy for people, businesses and society. Vesivek’s services extend the life cycle of buildings and thus the well-being of society and people. Through its own choices and actions, the company wants to mitigate climate change and conduct responsible business every day.
Vesivek’s sustainability work is based on our values: Attitude, Together, Results. Corporate responsibility is part of the company’s strategy, and responsibility is part of our day-to-day operations.
Risks
Environmental aspects
The increase in extreme weather events related to climate change, in the form of heavy rainfall and snowstorms, makes roof and drainage installation more difficult and increases the risk of occupational accidents.  
The weather risk is managed, for example, through scaffolding installation adopted in the Group’s roof installations in 2018, which has significantly reduced the annual number of occupational accidents.
Changes in legislation due to climate change may affect the Company’s business operations in the short term. In order to minimize the risk, the Company strives to proactively identify changes in legislation and customer preferences.
Social affairs and personnel
The Group's ability to maintain and grow its roofing and drainage business in Finland and Sweden is largely dependent on its ability to recruit, train and motivate a sufficient number of skilled personnel at the Group level and in the business units.
The Group has invested in the occupational safety of its personnel in roof installations through crane-assisted installation and scaffolding. The aim is to create a safe working and living environment for all parties.
The Group organises regular internal and external training for its employees and strives to build career paths in sales, installation and administration.
Respect for human rights, anti-corruption and anti-bribery
The Group does not have any cases of human rights violations, corruption or bribery in progress or in the course of its history. The Group has a written Code of Conduct and ethical guidelines for door-to-door sales. The Group organises internal training for all its employees, emphasising zero tolerance for unethical behaviour.  
The Group’s sales function is entirely in-house. This ensures uniform operating methods of the function.
GUIDING PRINCIPLES
The Vesivek Group operates in accordance with sustainable development, the Code of Conduct and a working atmosphere of high morale. At the core of the Code of Conduct are the company’s values: “Attitude, Together, Results”. The values are printed as a separate value board in the break rooms of each unit and can be found on the Company’s intranet.
The objective of the Code of Conduct is to define common operating methods for personnel in their day-to-day work and business decision-making.  Its areas include equality and non-discrimination, occupational safety, careful processing of personal data and corporate responsibility. The Company does not tolerate discrimination, corruption, bribery, harassment in the workplace or other illegal activities. The processes related to these operating principles are described in the company’s Code of Conduct. The Code of Conduct is part of the induction programme for new employees and the company’s training.
The purpose of the Vesivek Code of Conduct and guidelines is to detect unethical activities, misconduct and prevent inappropriate or illegal activities. Any deviations and breaches can be reported anonymously through internal or external reporting channels. The Vesivek Group uses an ethical reporting (“Whistleblowing”) channel to ensure fairness and transparency as well as compliance with laws and operating principles. Notifications are processed in accordance with the EU Whistleblower Directive and confidentially using a third-party notification channel. A link to the Whistleblower channel is available on Vesivek’s website.
The Group’s biggest sustainability risks are related to, for example, HR, reputation and brand risks and customer management. Damage risks can cause accidents, property damage, interruptions in production, environmental impacts or liability for damages. The Group’s risk management process aims to identify and assess the risks, after which measures are planned and implemented with regard to each risk. The measures can include avoiding the risk, mitigating it by different means, transferring the risk through insurance policies or contractually, or taking the risk in a managed and conscious manner. Control functions or measures refer to safeguarding and verifying procedures that mitigate risks and ensure that risk management measures are taken.
ENVIRONMENT
The Vesivek Group’s operations are guided by principles that aim to manage the environmental impacts of business operations and to comply with legislation and official regulations to protect the environment. The Company complies with environmental laws, regulations and recommendations in its operations.
Vesivek’s services influence the environmental burden of properties by controlling the waters of residential and other low-rise properties efficiently and ecologically.  This, together with the Company’s roof safety services, increases living comfort, safety and the lifecycle of buildings.
The most important materials for installation work are stainless steel and wood. Vesivek buys all the materials it needs for its business operations in Finland, except for aluminium, bought from Italy due to the lack of its domestic availability. Vesivek only operates with reliable material and service suppliers. The continuity of suppliers’ appropriate and reliable practices is ensured through annual cooperation meetings. Vesivek aims to reduce the risks related to the availability of the material through long-term supplier partnerships and the maintenance of alternative procurement channels.
Vesivek takes care of its environment both at the renovation worksite and in the waste management of its locations. Efficient logistics and recycling play a key role in managing the environmental impacts of business. In the implementation of each roof renovation, it is ensured that all construction material is delivered to the site at once and demolition waste is sorted and taken away for recycling.
At its own sorting centre in Pirkkala, Vesivek utilises wood waste directly as wood chips to fuel its thermal power for thermal energy. The heat production of Vesivek’s Pirkkala property and the plant’s profile production takes place entirely using the property’s own heating plant with demolition wood and wood chips from renovation sites. The share of renewable energy in the electricity of Vesivek’s Pirkkala property is increased by solar panels installed on the property. In 2022, 29.3 MWh of electricity produced by the solar panels was sold to the national grid, 100.53 MWh of electricity produced by solar panels was used in-house and 454.08 MWh of electricity was purchased externally. This means that approximately 18% of the total annual consumption of 554.6 MWh of electricity at the Pirkkala property was covered with solar panels installed in the property, in addition to which 29.3 MWh of electricity produced with solar panels was sold to the national grid. With the solar panels, the company was able to reduce its CO2 emissions by 70,914 kilogrammes in 2022.
The following is a description of the recycling concept for waste material from roof renovations in Finland:
In Finland, Vesivek has AN ISO 9001:2015 quality management certificate validated by Bureau Veritas and environmental practices audited and validated by Rakentamisen Laatu Rala ry.
PERSONNEL
During the financial year, Vesivek Group had 836 full-time employees. Nearly two-thirds of the personnel work in installation or production tasks. The key focus areas of Vesivek’s personnel strategy are enabling a healthy and safe working environment, attracting, developing and committing talent, and investing in the employer image.
At Vesivek, new employees receive internal occupational safety training as a mandatory part of the induction process. The occupational safety culture and related risk management are developed at Vesivek based on the principle of continuous improvement. Proactive investment in safety through active monitoring, reporting and risk analysis in order to prevent risk situations is essential in improving occupational safety. One of the key measures taken to improve occupational safety has been to invest in scaffolding that functions as fall protection at all locations as the first operator in the roof renovation industry. According to the law, working platforms, i.e. scaffolding, are the primary and safest solution in occupational safety. The ergonomics of employees are at a good level when the work is performed at the right height. The quality of the work improves, especially when it comes to finishing work, when the work can be done at the right height without reaching out. The scaffolding also provides security for the residents, as it makes the passageways safer. With the introduction of scaffolding in 2018, the number of occupational accidents in all installation units in Finland has decreased by approximately 80% between 2016 and 2020.
The risk related to personnel is related to attracting, retaining and training personnel who are competent enough to provide Vesivek's high-quality services. In relation to this, Vesivek has invested and invests in the professional development of its employees through regular training. Vesivek Academy, launched in 2021, aims to develop leadership and project management. From 2021 onwards, the managers and supervisors of Vesivek’s units in Finland have been offered the opportunity to complete the Specialist Vocational Qualification in Management and Business Management (JYEAT) organised by Taitotalo.
With regard to personnel, the indicators to be monitored regularly in the business units are:
-          sickness absence rate
-          accident frequency
-          in addition, the Group has started regular NPS surveys of all personnel every three (3) months.
GOOD CORPORATE GOVERNANCE
Vesivek’s operations are based on values and ethical principles (Code of Conduct). Vesivek also has a separate ethical guideline for door-to-door sales, which aim to provide salespersons with clear operational instructions for meeting customers with respect.
The Group requires its contract suppliers to have responsible operating models that are committed to the Vesivek Code of Conduct, which means, among other things, that the suppliers oppose corruption, bribery or child and forced labour. In 2022, no cases related to human rights, corruption or bribery were reported to Vesivek.
Vesivek’s responsibility is monitored by the Audit Committee of the Board of Directors, and a representative of the Board of Directors participates in the planning and monitoring of responsibility-related reporting. The Group CEO is in charge of responsibility reporting.
In January 2023, of the six (6) members of the Group’s Board of Directors, 17% were women and 83% were men. Of the six (6) members of the Group Management Team, 17% were women and 83% men.
Taxonomy reporting
The European Union’s sustainable finance classification system (EU Taxonomy) was published in 2020. The six environmental objectives defined by the EU taxonomy are:
1.     climate change mitigation
2.     climate change adaptation
3.     sustainable use and protection of water and marine resources
4.     transition to a circular economy
5.     pollution prevention and control
6.     protection and restoration of biodiversity and ecosystems
Vesivek has conducted an EU taxonomy review of turnover, capital expenditure and operating expenditure related to the first two objectives, climate change mitigation or adaptation.
The following section presents the share of the Group’s net sales, capital expenditure and operating expenditure for the financial year 2023 that is related to taxonomy-eligible economic activity of the first two environmental objectives.
DNSH criteria ('Does Not Significantly Harm')
Economic Activities (1) Code (2) Absolute turnover (3) Proportion of Turnover (4) Biodiversity and ecosystems (10) Climate Change Mitigation (11) Climate Change Adaptation (12) Water
(13)		 Pollution
(14)		 Circular Economy
(15)		 Biodiversity
(16)		 Minimum Safeguards
(17)		 Taxonomy aligned
proportion
of total turnover,
year N (18)**		 Taxonomy aligned
proportion
of turnover,
year N-1 (19)
 Category
(enabling
activity)
(20)		 Category
(transitional
activity)
(21)
Text Millions,
local CCY		 % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N % % E T
A. TAXONOMY-ELIGIBLE ACTIVITIES 0%
A.1. Environmentally sustainable activities (Taxonomy-aligned)
0% 0% 0%                -   
0% 0% 0%                -   
0% 0% 0%                -   
Turnover of environmentally sustainable activities (Taxonomy-aligned) (A.1) 0,00 0% 0% Y Y Y Y Y Y Y 0%                -    0% 0%
Renovation of existing buildings 0,00 0%
0%
Turnover of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) 0,00 0%
Total (A.1+A.2) 0,00 0%
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
Turnover of Taxonomy-non-eligible activities 129,50 100%
Total (A+B) 129,50 100%
DNSH criteria ('Does Not Significantly Harm')
Economic Activities (1) Code (2) Absolute CapEx (3) Proportion of CapEx (4) Biodiversity and ecosystems (10) Climate Change Mitigation (11) Climate Change Adaptation (12) Water
(13)		 Pollution
(14)		 Circular Economy
(15)		 Biodiversity
(16)		 Minimum Safeguards
(17)		 Taxonomy aligned
proportion
of total CapEx,
year N (18)**		 Taxonomy aligned
proportion
of turnover,
year N-1 (19)
 Category
(enabling
activity)
(20)		 Category
(transitional
activity)
(21)
Text Millions,
local CCY		 % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N % % E T
A. TAXONOMY-ELIGIBLE ACTIVITIES 0%
A.1. CapEx of environmentally sustainable activities (Taxonomy-aligned)
0% 0% 0%                -   
0% 0% 0%                -   
0% 0% 0%                -   
CapEx of environmentally sustainable activities (Taxonomy-aligned) (A.1) 0,00 0% 0% Y Y Y Y Y Y Y 0%                -    0% 0%
A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned)
Renovation of existing buildings (CapEx A) 0,00 0%
Renovation of existing buildings (CapEx B) 0,00 0%
Renovation of existing buildings (CapEx C) 0,00 0%
CapEx of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) 0,00 0%
Total (A.1+A.2) 0,00 0%
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
Capex of Taxonomy-non-eligible activities 7,215 100%
Total (A+B) 7,215 100%
DNSH criteria ('Does Not Significantly Harm')
Economic Activities (1) Code (2) Absolute OpEx (3) Proportion of OpEx (4) Biodiversity and ecosystems (10) Climate Change Mitigation (11) Climate Change Adaptation (12) Water
(13)		 Pollution
(14)		 Circular Economy
(15)		 Biodiversity
(16)		 Minimum Safeguards
(17)		 Taxonomy aligned
proportion
of total OpEx,
year N (18)**		 Taxonomy aligned
proportion
of turnover,
year N-1 (19)
 Category
(enabling
activity)
(20)		 Category
(transitional
activity)
(21)
Text Millions,
local CCY		 % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N % % E T
A. TAXONOMY-ELIGIBLE ACTIVITIES 0%
A.1. Environmentally sustainable activities (Taxonomy-aligned)
0% 0% 0%                -   
0% 0% 0%                -   
0% 0% 0%                -   
OpEx of environmentally sustainable activities (Taxonomy-aligned) (A.1) 0,00 0% 0% Y Y Y Y Y Y Y 0%                -    0% 0%
A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities)
Renovation of existing buildings (OpEx A) 0,00 0%
Renovation of existing buildings (OpEx B) 0,00 0%
Renovation of existing buildings (OpEx C) 0,00 0%
OpEx of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) 0,00 0%
Total (A.1+A.2) 0,00 0%
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
OpEx of Taxonomy-non-eligible activities 2,71 100%
Total (A+B) 2,71 100%
HLRE Holding Group
Consolidated Statement of Comprehensive Income
1000 EUR Footnote Note 1.2.2022-31.1.2023 1.2.2021-31.1.2022
HLRE Holding Group
REVENUE 4 129 455 130 352
Other operating income 5 1 064 1 063
Material and services 6 -47 702 -45 375
Employee benefits expense 7 -49 747 -50 257
Depreciation and amortisation 6 -7 757 -7 855
Other operating expenses 6 -22 844 -23 572
OPERATING PROFIT 2 469 4 356
Finance income 16 2 018 1 146
Finance costs 16 -4 450 -4 148
Finance income and costs total -2 432 -3 003
PROFIT/LOSS BEFORE TAX 36 1 353
Tax on income from operations 21 -374 -663
PROFIT/LOSS FOR THE PERIOD -338 691
Profit attributable to:
Owners of the parent company -458 623
Non-controlling interests 120 68
-338 691
Items that may be reclassified subsequently to profit or loss
Exchange differences on translating foreign operations -147 -54
TOTAL COMPREHENSIVE INCOME -484 637
Total comprehensive income attributable to:
Owners of the parent company -591 574
Non-controlling interests 107 63
-484 637
1) This means the share of associates’ other comprehensive income attributable to owners of the associates, ie it is after tax and non-controlling interests in the associates. In this example, the other comprehensive income of associates consists only of items that will not be subsequently reclassified to profit or loss. Entities whose associates’ other comprehensive income includes items that may be subsequently reclassified to profit or loss are required by paragraph 82A(b) to present that amount in a separate line.
Earnings per share calculated on profit attributable to equity holders of the parent 1.2.2022-31.1.2023 1.2.2021-31.1.2022
Profit attributable to equity holders of the parent company -457 666 622 614
Average number of shares 16 599 173 16 621 927
Undiluted and dilution-adjusted earnings per share -0,03 0,04
HLRE Holding Group
Consolidated Statement of Financial Position
1000 EUR Footnote Note 31.1.2023 31.1.2022
ASSETS
NON-CURRENT ASSETS
Goodwill 9 40 304 40 304
Intangible assets 9 976 657
Property, plant, equipment 10 26 261 27 188
Other non-current financial assets 48 48
Loan receivables 15 17 7
Non-current prepayments and accrued income (from others) 15 0 26
Deferred tax assets 21 235 169
NON-CURRENT ASSETS 67 841 68 400
CURRENT ASSETS
Inventories 11 15 756 15 464
Trade and other receivables 12 9 870 9 494
Loan receivables 15 53 625
Income tax receivable 158 198
Cash and cash equivalents 3 557 5 201
CURRENT ASSETS 29 394 30 524
ASSETS 97 235 98 923
EQUITY AND LIABILITIES
Owners of the parent company
Share capital 18 80 80
Reserve for invested unrestricted equity 18 18 002 18 002
Translation differences 18 -151 -17
Retained earnings 18 9 511 9 935
Owners of the parent company 27 442 28 000
Non-controlling interests 71 -37
EQUITY 27 512 27 963
NON-CURRENT LIABILITIES
Finance and lease liabilities 15 50 349 51 197
Employee benefit obligation 15 427 422
Deferred tax liabilities 21 150 216
NON-CURRENT LIABILITIES 50 926 51 834
CURRENT LIABILITIES
Finance and lease liabilities 15 4 742 4 633
Other current liabilities 13 12 433 13 528
Derivatives 15 1 461 484
Income tax liabilities 161 482
CURRENT LIABILITIES 18 797 19 126
Liabilities 69 722 70 960
EQUITY AND LIABILITIES 97 235 98 923
HLRE Holding Group
Consolidated Statement of Changes in Equity Attributable to owners of the Company
1000 EUR Note Share capital Reserve for invested unrestricted equity Translation differences Retained earnings Total Non-controlling interests Total equity
18
EQUITY 1.2.2021 3 18 079 32 9 309 27 423 93 27 515
Comprehensive income
Profit/loss for the period 623 623 68 691
Other comprehensive income:
Translation differences 0 0 -49 0 -49 -5 -54
TOTAL COMPREHENSIVE INCOME 0 0 -49 623 574 63 637
Transactions with owners
Acquisition of treasury shares -28 -28 0 -28
Sale of treasury shares 0 0 102 102 0 102
Reclassifications 78 -78 -24 -24 0 -24
Other changes 0 -38 -38 -15 -53
Total transactions with owners 78 -78 11 11 -15 -3
Proceeds from loans 0 0 0 0
Repayments 0 0 0 0
Transaction costs 0 0 0 0
Equity related bond 0 0 0
Changes in ownership interests in subsidiaries
Changes in ownership interest without loss of control 0 0 -7 -7 1 -6
Changes in ownership interest resulting in a loss of control 0 0 0 0 -179 -180
Changes in equity total 77 -78 -49 627 578 49 628
TOTAL EQUITY 31.1.2022 80 18 002 -17 9 935 28 000 -37 27 963
Attributable to owners of the Company
1000 EUR Note Share capital Reserve for invested unrestricted equity Translation differences Retained earnings Total Non-controlling interests Total equity
18
EQUITY 1.2.2022 80 18 002 -17 9 935 28 000 -37 27 962
Comprehensive income
Profit/loss for the period -458 -458 120 -338
Other comprehensive income:
Translation differences 0 0 -133 0 -133 -13 -147
TOTAL COMPREHENSIVE INCOME 0 0 -133 -458 -591 107 -484
Transactions with owners
Other changes 0 23 23 9 31
Total transactions with owners 0 0 23 23 9 31
Changes in ownership interests in subsidiaries
Changes in ownership interest without loss of control 0 0 10 10 -7 3
TOTAL EQUITY 31.1.2023 80 18 002 -151 9 510 27 442 71 27 513
HLRE Holding Group
Consolidated Statement of Cash Flows, indirect
1000 EUR Footnote Note 1.2.2022-31.1.2023 1.2.2021-31.1.2022
TEXT2000P Cash flows from operating activities
994989P -1 PROFIT/LOSS FOR THE PERIOD -338 691
Adjustments to the profit/loss for the period
695999FP 1 Depreciation, amortisation and impairment 6 7 757 7 855
SUM5025P 1 Financial income and expenses 16 3 437 3 633
992999P 1 Tax on income from operations 21 374 663
IFRS5040P -1 Other adjustments -1 051 415
Adjustments total 10 517 12 565
TEXT2020P Working capital changes
SUM5100P -1 Increase / decrease in inventories 11 -394 -4 278
SUM5110P -1 Increase /decrease in trade and other receivables 12 -429 1 137
SUM5115P -1 Increase / decrease in trade payables 13 -934 784
SUM1040P -1 Interest paid 16 -2 483 -2 469
SUM1060P -1 Interest received 16 65 21
SUM1070P -1 Other financial items 16 -203 -432
SUM1090P -1 Income taxes paid 21 -776 -687
SUMCF010P -1 Net cash from operating activities 5 026 7 332
TEXT2040P 1 Cash flows from investing activities
SUM2000P -1 Purchase of tangible and intangible assets 9,10 -1 987 -3 160
SUM2010P -1 Proceeds from sale of tangible and intangible assets 9,10 245 326
SUM2020P -1 Acquisition of subsidiaries, net of cash acquired 9,20 0 -201
SUM2030P -1 Disposal of subsidiaries 8 0
Loans granted -18 -27
SUM2090P -1 Proceeds from repayments of loans 21 298
SUMCF020P -1 Net cash used in investing activities -1 731 -2 762
TEXT2050P 1 Cash flows from financing activities
SUM3020P -1 Purchase of treasury shares 0 -28
SUM3030P -1 Proceeds from sale of treasury shares 9 78
SUM3050P -1 Repayment of current borrowings 15 -6 -25 820
SUM3060P -1 Addition / deduction of current borrowings 0 8
SUM3070P -1 Proceeds from non-current borrowings 15 0 29 074
SUM3090P -1 Payment of lease liabilities -4 942 -4 900
SUMCF030P -1 Net cash used in financing activities -4 938 -1 588
SUMCF040P -1 Net change in cash and cash equivalents -1 644 2 982
TEXT2090P Cash and cash equivalents, opening amount 15 5 201 2 219
TEXT2060P Net increase/decrease in cash and cash equivalents -1 644 2 982
SUM3186P 1 Cash and cash equivalents 15 3 557 5 201
HLRE Holding Group
Notes to the consolidated financial statements
INFORMATION ABOUT THE CONSOLIDATED FINANCIAL STATEMENTS
These consolidated financial statements are the financial statements of a group of companies comprised of HLRE Holding Oyj, Business ID 2611405-7 (hereinafter referred to as “HLRE Holding”, “the Company” or “the parent company”) and its subsidiaries, which are jointly referred to as “HLRE”, “HLRE Group” or “the Group”.
The parent company of the Group is domiciled in Pirkkala, and its registered address is Jasperintie 273, FI-33960 Pirkkala, Finland. A copy of the financial statements is available from the address Jasperintie 273, FI-33960 Pirkkala, Finland.
These consolidated financial statements include the consolidated statement of comprehensive income, consolidated balance sheet, consolidated cash flow statement and consolidated statement of changes in equity for the financial years ended 31 January 2023 and 31 January 2022 and notes thereto. The Company’s Board of Directors approved the consolidated financial statements for publication on 28 April 2023.
In accordance with the Finnish Limited Liability Companies Act, shareholders can adopt or reject the financial statements at a general meeting of shareholders held after their publication. The general meeting has the right to amend the consolidated financial statements.
1.     Accounting principles
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) and interpretations published by the IFRS Interpretations Committee (IFRS IC) applied by companies reporting under the IFRS standards as approved for application in the European Union. The notes to the financial statements also meet the requirements of the Finnish legislation on accounting and companies which supplement the IFRS.
The measurement of assets and liabilities is based on cost, with the exception of certain financial assets and liabilities (derivative instruments and financial assets at fair value through profit or loss), which are measured at fair value.
The consolidated financial statements are presented as thousands of euros, unless otherwise specified, and the numbers are rounded off to the nearest thousand. Because of this, the sum of individual figures can deviate from the reported total. The operating currency of the Company is the euro, which is also the reporting currency of the Company and Group. The assets included in the financial statements of the subsidiaries included in the Group are measured in the currency of the primary operating environment of each subsidiary.
Business continuity
The financial statements for the financial period 1 February 2022–31 January 2023 have been prepared based on the going concern principle, assuming that the Company will be able to liquidate its assets and settle its liabilities as part of normal business operations in the foreseeable future.
The Group’s loss for the financial year ended 31 January 2023 was EUR 0.3 million, cash flow from operating activities EUR 5.0 million and net debt EUR 52 million. The SEK 300 million bond issued by the Company in February 2021 will fall due for payment in February 2024 and the EUR 2 million credit line from Danske Bank A/S Finland Branch will fall due six (6) months before the maturity of the bond.
The Company’s management has prepared financial forecasts of the development of turnover, expenses and investments during the next 12 months. The Company’s current liquid assets and projected operating cash flow are insufficient to cover the repayment of the SEK 300 million bond due in February 2024 without additional funding. There is a risk that the Company will not be able to refinance the bond or restructure the credit line.
As no binding decisions on additional financing have yet been issued by the date of adoption of the financial statements, the adequacy of financing constitutes a significant uncertainty that may give rise to significant doubts about the Company’s ability to continue as a going concern. If the Company is unable to raise additional financing and the going concern assumption is therefore no longer valid, the situation might require the assets to be remeasured at the recoverable amount and any additional liabilities to be recognized
Translation of items denominated in foreign currencies
Transactions denominated in foreign currencies are translated into EUR at the exchange rates of the transaction dates, or if the items have been re-measured, at the exchange rates of the measurement dates. Foreign exchange gains and losses arising from sales and purchase payments associated with actual business operations are recognized above operating profit, and financing-related exchange rate differences are recognized in financial items in the income statement.
The assets and liabilities of the Swedish subsidiary are translated into EUR monthly at the exchange rate of the closing date. The income and expenses of the Swedish subsidiary are translated into EUR at the average exchange rate for the financial year. Translation differences arising from the translation of a subsidiary’s financial statements are recognized in other comprehensive income, and they are accumulated in a separate Translation differences item under shareholders’ equity.
In its financial statements, the HLRE Holding Group focuses on information that it considered to be relevant to its stakeholders and other readers of the financial statements. The notes to the consolidated financial statements are divided into six sections, with each section containing the related relevant accounting principles. These sections are information about the consolidated financial statements, key information relating to profit, personnel, assets and liabilities used in business operations, capital structure and financing, and other notes. The purpose of this presentation method is to provide the reader with a clear idea of the Group’s financial position and result and the chosen accounting principles.
2.     Management discretion and sources of uncertainty
Preparing the consolidated financial statement requires the management to use estimates and assumptions that have impacts on applying the accounting principles and amounts of assets, liabilities, income and expenses recognized in the financial statements. Significant estimates or discretionary decisions are reviewed in the following notes:
·         Business continuity, note 1
·         impairment of goodwill, note 9
·         leases, note 10
·         measurement of inventories, note 11
·         impairment of trade receivables, Note 17
The estimates and discretionary decisions are continuously reviewed. They are based on prior experience and other factors, such as expectations of future events with potential financial impacts on the company and which are considered to be reasonable under the circumstances in question.
The COVID-19 coronavirus pandemic that began in spring 2020 continued during the financial period, especially during the first half of the financial year. The agreed operating models were continued during the extended pandemic in all units in Finland and Sweden, monitoring the current infection situation in each area and the guidelines and recommendations issued by the local authorities.
As stated in note 1, the Company’s management has assessed the Company’s ability to continue as a going concern for the foreseeable future. The Company’s current liquid assets and projected operating cash flow are insufficient to cover the repayment of the SEK 300 million bond due in February 2024 without additional funding. The Company’s management estimates that it will be able to refinance the bond or obtain other additional financing. For this reason, the Company’s financial statements have been prepared on the going concern principle. If the Company is unable to raise additional financing and the going concern assumption is therefore no longer valid, the situation might require the assets to be remeasured at the recoverable amount and any additional liabilities to be recognised
At the end of the financial year 2023, goodwill on the HLRE Holding Group’s balance sheet amounted to EUR 40.3 (40.3) million. Each year, the HLRE Holding Group tests goodwill for impairment and, if necessary, whenever there are indications that the value of the assets does not exceed their goodwill. During the financial year, HLRE Holding did not observe indications of not being able to recover the amount corresponding to the book value. Should there be negative changes in the profit and growth development of the HLRE Holding Group, this could lead to impairment of goodwill, which could have an unfavourable impact on the operating result and equity of the HLRE Holding Group.  
KEY INFORMATION RELATING TO INCOME STATEMENT
This section discloses information that is relevant to understanding the Group’s result of the financial period and performance.
3.     Segment information
The Board of Directors of HLRE Holding is the Group’s highest operational decision-making body, and operating segments have been specified based on the information reviewed by the Board of Directors in order to allocate resources and assess the profitability of business operations. The Board of Directors manages the HLRE Group as a single integrated business aggregate, and therefore HLRE has a single operating and reporting segment.
The profitability of the business aggregate is estimated internally in accordance with the Finnish Accounting Standards (FAS) based on revenue, EBITDA and operating profit. In FAS-compliant internal reporting, EBITDA is defined as operating profit before depreciation, amortisation and impairment.
EUR 1,000 FAS Adjustments IFRS
Consolidated income statement 1 February 2022-31 January 2023 1 February 2022-31 January 2023 Consolidated statement of comprehensive income
Revenue 129,455 129,455
EBITDA (*) 4,706
Depreciation, amortisation, and impairment -2,904 -4853 -7757 Depreciation, amortisation, and impairment
Operating profit 1802 667 2469 Operating profit
-2432 Financial income and expenses
36 Profit (loss) before taxes
-374 Income taxes
-338 Profit or loss for the financial period
EUR 1,000 FAS Adjustments IFRS
Consolidated income statement 1 February 2021-31 January 2022 1 February 2021-31 January 2022 Consolidated statement of comprehensive income
Revenue 130,352 130,352
EBITDA (*) 8,127
Depreciation, amortisation, and impairment -2,948 -4,907 -7,855 Depreciation, amortisation, and impairment
Operating profit 5,179 -823 4,356 Operating profit
-3,003 Financial income and expenses
1,353 Profit (loss) before taxes
-663 Income taxes
691 Profit or loss for the financial period
(*) FAS EBITDA = FAS operating profit + FAS depreciation, amortisation and impairment
The most significant differences between the Group’s net result reported internally in accordance with FAS and HLRE’s profit and loss for the financial period reported according to IFRS are comprised of the following item:
The Group’s depreciation, amortization and impairment reported according to FAS does not include the amortization of right-of-use assets included in the reported depreciation, amortization and impairment. The depreciation and amortization in internal FAS-compliant reporting does not include amortization of goodwill.
4.     Revenue
The revenue of the HLRE Holding Group is primarily generated by roofing and roof product installations for single-family homes and housing companies pursuant to the service concept developed by the Company, as well as project and direct sales of rainwater management systems and roof safety products. The entire service chain – product development, manufacturing, sales and installation – is managed in-house by the Group.
The “Weather protection in just one day” installation for a single-family home pursuant to the service concept is realised in two days in the best-case scenario. A two-day roofing renovation is made possible by skilled installation assisted by a crane, in which each work phase is planned and assigned in advance and the work phases have been prepared, as well as by a proprietary sheet metal roofing factory.
In addition, the Group acquired a majority holding in a company carrying out drainage renovations for small sites in Finland in February 2021. Drainage consists of a carefully considered installation concept for single-family houses and housing companies. With the help of the service package concept, the drainage renovation of a single-family house is carried out in an average of 3–5 days.
In Finland, receivables from roofing, roof product and drainage installations in accordance with the consumer service concept are primarily allocated to Laatutili. Laatutili is a renovation loan granted by the OP bank. Using a Laatutili loan, the customer can pay for the roofing renovation in a single interest-free and expense-free instalment with a term of payment of 30 days or over a longer repayment period as monthly instalments agreed separately with the OP bank. The term of payment for installations not realised under the Laatutili facility is 10 days. In direct sales, the term of payment varies from 14 to 30 days, depending on the customer.
The Group’s IFRS-compliant principles of revenue recognition are described in more detail under “Revenue: Accounting principle” on page 29 of these financial statements.
Breakdown of revenue by country for the financial year ended 31 January 2023
During the financial year ended 31 January 2023, the HLRE Holding Group operated in Finland and Sweden. The Swedish roofing renovation business was launched in the Stockholm region in 2016, and the Company’s second Swedish location was opened in the summer of 2018. The third location in Sweden was opened in Flen in the Stockholm region in the spring of 2019. In 2022, Vesivek Salaojat Oy expanded its operations into Oulu and Vaasa, operating as a separate business in conjunction with Vesivek Oy’s unit. In addition, a marginal share of the Group’s revenue came from direct sales of Vesivek Tuotteet Oy’s products to the Baltic countries (and, to a minor extent, to Russia during the comparison period and February 2022):
1000 EUR 1.2.2022-31.1.2023 SHARE   % 1.2.2021-31.1.2022 SHARE   %
Finland 107,387 83.0% 109,672 84.1%
Sweden 21,389 16.5% 20,055 15.4%
Baltic countries and Russia 679 0.5% 625 0.5%
TOTAL 129,455 100.0% 130,352 100.0%
Of the Group’s revenue for the financial year 1 February 2022–31 January 2023, Finland accounted for 83.0% (84.1%), Sweden for 16.5% (15.4%) and export sales to the Baltic countries and Russia for 0.5% (0.5%).
The Group’s non-current assets totalled EUR 67.8 million (EUR 68.4 million) on 31 January 2023, of which Sweden accounted for EUR 2.8 million (EUR 3.4 million) in euros.
Assets and liabilities based on contracts with customers
The trade and other receivables on the balance sheet include EUR 1,108 (674) thousand of non-invoiced revenue recognition based on the percentage of completion of roof and drainage renovations. Non-invoiced receivables are short-term by nature and typically due during the next reporting period.  The trade and other payables include EUR 10 (0) thousand of liabilities based on volume discounts and EUR 128 (95) thousand of advance payments from customers.
Accounting principle
The revenue of the HLRE Group was primarily generated from the sales of roofing, drainage and rainwater management systems and roof safety products and their installations during the financial year, as well as drainage renovations following the acquisition early in the financial year. The performance obligations are clearly identifiable in the customer contracts and orders.
IFRS 15 Revenue from Contracts with Customers includes a five-step guideline on the recognition of sales income which determines the amount and timing of recognizing sales income. A sale is recognized based on the transfer of control, either over time or at a point in time. When calculating revenue, sales income is adjusted for indirect taxes and discounts.
Roofing and roof product installations include the products and their installation service. Typically, the products are customised based on the customer’s needs, such as the dimensions of roofs, in conjunction with the installation. The customer has ordered turnkey delivery of a functional roof solution from the Company, which constitutes a single performance obligation. The installation takes place very quickly, usually over a few days, and the corresponding sale is recognised at a point in time once the turnkey delivery has been made.
Drainage for single-family houses consists of a carefully considered installation concept, including the installation of drainage products and ground and yard work. With the help of the service package concept, the drainage renovation of a single-family house can be carried out in an average of 3–5 days in thawed soil. The company has a very limited number of larger sites that take from a few weeks to slightly over a month to complete.
In winter, the drainage service package is divided into two deliveries made at different times: when the soil is not thawed, drainage work taking on average a few days, and finishing work in the yard in thawed soil. Finishing works carried out in thawed soil are mainly carried out within one day and their share of the total delivery of the drainage project is invoiced when the finishing work is completed. The customer may choose to carry out the finishing work on the yard themselves, in which case the drainage will be carried out quickly with one project during the non-thawed soil period and fully invoiced when the work is completed. The performance obligations are clearly identifiable in the customer contracts and orders.
With regard to product sales, individual products constitute a performance obligation, and the sale is recognized as revenue at a single point in time when control is transferred to the customer. Typically, this takes place at the time of delivery when the significant risks and benefits associated with ownership have been passed on to the buyer and the HLRE Holding Group does not have factual control over the sold goods and when receiving consideration is probable. The account receivable is recognised in connection with revenue recognition of the sale, because the Company is thereafter entitled to a payment that is only conditional on the passage of time. Because the performance obligations are fulfilled over a very short period or at a single point in time when control is transferred as described above, the Company makes use of the exemption allowed by the standard to not report the transaction price allocated to the remaining performance obligations.
The terms of payment of sold products are primarily less than 30 days.
Key management judgements and estimates
The Company’s management uses customer project-specific judgment to determine the recognition principle and to assess whether revenue has been recognized for the appropriate period at each balance sheet date, taking into account materiality. Although performance obligations are met and revenue is recognized at one point in time as a rule, materiality analysis is applied at each balance sheet date, which relates to whether larger projects in progress should be recognized according to the percentage of completion.
Image 'Notes to Income exc. tax'!E128
HLRE Holding Group
300000P -1 5.     Other operating income
300220P -1
Other operating income 1 February 2022–31 January 2023 1 February 2021–31 January 2022
Gain on disposal of property, plant and equipment and intangible assets 123 109
370989P -1 Rental income 145 119
371100 -1 Provision income 531 565
371000P -1 Other operating income 265 272
377989P -1 Other operating income 1 064 1 063
Other operating income is comprised of rent income from owned premises and equipment (mainly gutter machines) leased to external parties, insurance indemnities received and bank commissions from Laatutili customer financing.
6.     Operating expenses
Materials and services 1 February 2022–31 January 2023 1 February 2021–31 January 2022
403989P -1 Purchases during the period 6 -40 940 -40 934
363989P -1 Change in inventories of finished goods and work in progress 901 1 005
364989P -1 Work performed for own purposes and capitalised 43 24
443989P -1 Change in inventories of materials -490 3 257
445989P -1 External services -7 217 -8 728
445999P -1 Materials and services -47 702 -45 375
External services are comprised of scaffolding subcontracting expenses to a significant extent and, as of the beginning of the financial year 2022, of subcontracting costs associated with transports of the drainage business. Since 2019, Vesivek Oy has expanded scaffolding work into its own operations.
The company grants roof installations a fixed five-year installation warranty. Because the costs relating to repairs under warranty have not been significant, the company has not recognized a related provision.
The company also grants a limited five-year installation warranty for drainage installations. Moreover, the costs of repairs under the installation warranty have not been significant and the company has not entered a provision for them.
Depreciation, amortisation and impairment
Amortisation according to plan 1 February 2022–31 January 2023 1 February 2021–31 January 2022
102150P 1 Development expenses -17 -17
103150P 1 Intangible rights -143 -139
107150P 1 Other intangible assets 0 -2
670000P -1 Amortisation, intangibles (excl. goodwill and right-of-use) -160 -159
Depreciation according to plan
112150P Buildings and structures -2773 -2747
Machinery and equipment -4799 -4927
130150P 1 Other tangible assets -25 -19
671000P -1 Depreciation, tangibles (excl. right-of-use) -7597 -7693
Other operating expenses
-1 Costs for premises -1 629 -1 241
700539 -1 Machinery and equipment expenses -7 009 -6 543
700560 -1 Marketing costs -3 738 -3 705
761989P -1 Other operating costs -10 468 -12 082
761989P -1 Other operating expenses -22 844 -23 572
The other largest unspecified items are voluntary personnel costs of EUR 2,090 thousand (EUR 2,056 thousand) and mileage and daily allowances of EUR 2,401 thousand (EUR 2,368 thousand).
Auditor's fees
704400P -1 Statutory auditing -87 -91
704420P -1 To auditor: Other fees and services -31 -61
-1 -118 -152
PERSONNEL
This section provides information about how the HLRE Holding Group rewards its personnel and key managers. The section includes information about employee benefits and related party information relating to the key personnel as follows:
·         Employee benefit expenses
·         Information about key managers
7.     Employee benefit expenses
The employee benefit expenses and other personnel expenses are as follows:
1000eur 1 February 2022–31 January 2023 1 February 2021–31 January 2022
503989P -1 Wages, salaries and fees -39 714 -40 202
Pension expenses, defined contribution plans -6 733 -6 757
Other employee benefits -3 301 -3 298
641999P -1 -49 747 -50 257
Personnel expenses decreased by approximately one per cent during the financial period compared to the previous financial period.
Wages and salaries are mainly comprised of monthly salaries, hourly wages and performance bonuses paid to the employees. The employees are entitled to extensive occupational health care services, and some of the employees have company cars and phone benefits. In addition to statutory insurance, the employees are covered by leisure-time accident insurance.
In spring 2020, the Finnish government decided to lower the employment pension contributions of employers temporarily by 2.6 percentage points due to the COVID-19 pandemic. The decrease was in force from 1 May to 31 December 2020 with regard to employer’s statutory insurance contributions (“TyEL”) paid between May and December 2020. The decrease will be compensated for by increasing the employer’s pension contribution share in 2022–2025.
In Sweden, the government compensated employers for a certain proportion of sick pay starting from April 2020 until the end of 2021 in conjunction with the COVID-19 pandemic. The compensation was a certain proportion of the costs during sickness, depending on their amount, and in the financial year 2022, the compensation received totalled approximately EUR 58 thousand in euros and EUR 55 thousand in the financial year 2021. In the financial year 2023, no compensation was paid anymore.
Other social security contributions mainly include other social security expenses apart from pension expenses.
The Group has a reward scheme based on years of service. In accordance with the rewards for years of service, employees are paid a lump-sum reward for having worked a certain number of years as follows.
Liability and expense calculations relating to rewards for years of service pursuant to IAS 19 as Note 23. The calculations also include a forecast for the next financial year.
Accounting principle
Short-term benefits
Short-term employee benefits include wages and salaries, including fringe benefits and annual holiday pay to be paid within 12 months, and bonus and performance rewards connected to profit or personal performance. Short-term employee benefits are recognised in other liabilities with regard to work performed by the closing date and measured at the value expected to be paid once the liabilities are settled.
Post-employment benefits
The pension arrangements of the HLRE Holding Group are defined contribution plans. A defined contribution plan is a pension arrangement under which the Group makes fixed payments to a separate unit and has no legal or factual obligation to make additional payments if the said unit does not have adequate funds for paying all benefits relating to work performed during the current and previous financial years to all employees. Payments made to defined contribution plans are recognised directly through comprehensive income for the period to which the payments are connected.
Other long-term benefits
Other long-term employee benefits include leaves associated with long service or sabbaticals, anniversary benefits or other benefits relating to long service and long-term unemployment benefits.
8.    Information about key managers (incl. managers’ shareholdings) and share-based retention schemes
Remuneration of key management personnel
The Company’s Board of Directors appoints the CEO and the Deputy CEO and decides on the terms and conditions of their employment. The Board of Directors confirms the wages and other benefits paid to the management team based on the CEO’s proposal and the principles of remuneration of the Company’s other senior management
The salaries and other taxable benefits paid to the CEO and rest of the Group’s management team for the financial year ended 31 January 2023 are presented below. The compensation paid is comprised of fixed monthly salary and fringe benefits.
1000eur 1 February 2022–31 January 2023 1 February 2021–31 January 2022
Remuneration of the CEO
Salary, other remuneration and benefits 95 127
Pension expenses - defined contribution plans 12 10
Total 107 137
Remuneration of the group managing team (excluding the CEO)
Salary, other remuneration and benefits 552 436
Pension expenses - defined contribution plans 115 80
Total 667 516
Remuneration of Board members 36 45
Key management and Board of Directors total 810 698
The employment contract of CEO Kimmo Riihimäki can be terminated with a period of notice of three (3) months by either party. If the Company terminates the contract, the Company pays the CEO an amount corresponding to the total wages for three (3) months as a lump-sum compensation.
Kimmo Riihimäki is subject to a 24-month non-competition and non-solicitation clause, with a related contractual penalty of EUR 100,000 for each breach by the CEO. If the losses incurred by the Company exceed the above-mentioned contractual penalty, the CEO must compensate the amount of the loss in full.
The CEO contract will expire at the latest upon the retirement of Kimmo Riihimäki. The CEO’s retirement age is 65.
The members of the Group management team have periods of notice of three or six months. They are entitled to severance pay. In addition, the members of the management team are bound by non-competition and non-solicitation clauses with contractual penalties.
HLRE Holding Oyj realized share issues and transfers of treasury shares directed at the Group’s key personnel in 2014–2022. 1 February 2020–31 January 2021, the Company decided on a directed transfer of treasury shares, wherein the company’s key management personnel and other key employees were offered a total of 107,550 treasury shares to purchase at a price of EUR 1 per share.  The purchase price of the shares is considered to be equal to the fair value of the shares at the time of purchase. At the end of the financial period 1 February 2020–31 January 2021, the company had 77,550 treasury shares. The company’s key personnel acquired a total of 50,000 of these during the financial period 1 February 2021–31 January 2022. At the end of the financial period 1 February 2022–31 January 2023, the company held 27,550 treasury shares.
Because the key employees’ share purchases took place at fair value and at the same price as the share subscriptions of the company’s other shareholders, the schemes do not include a benefit pursuant to IFRS 2 and no expense has been recognised for them.
The key employees’ shareholdings include an obligation to work. The Company has the right, but not an obligation, to redeem the shares at the lower of original subscription prices of the share issues or fair value as specified in the shareholders’ agreement in case of resignations of the key employees.
Because HLRE Holding Oyj, or its subsidiary, has no contractual obligation or prior established practice to redeem shares from leavers, the arrangement is classified as an equity-settled arrangement under IFRS. The Company did not exercise its right of redemption during the financial period.
A share-based retention scheme has also been realised with the key personnel of Vesivek Sverige AB so that three key persons at Vesivek Sverige AB have holdings in Vesivek Sverige AB.
The shareholdings of Board members, the CEO and members of the management team in the Group’s parent company HLRE Holding Oyj on 31 January 2023 are presented in the following table:
Management shareholdings
The management held shares on 31 January 2022 as follows:
31.1.2023 31.1.2022
Management shareholdings Shares % Shares %
CEO 5,497,826 33 5,497,826 33
Other management team members 6,873 21,873
HLRE Holding Group
ASSETS AND LIABILITIES USED IN BUSINESS OPERATIONS
This section provides information about the assets used in business operations and liabilities incurred due to the Group’s business operations.
·         Goodwill and other intangible assets, including impairment testing
·         Property, plant and equipment
·         Trade and other receivables
·         Trade and other payables
9.    Goodwill and other intangible assets, including impairment testing
The table below presents changes in goodwill and other intangible assets:
1000 EUR Development expenses Intangible rights Other intangible assets Advance payments for intangible assets Goodwill Total
Cost 1.2.2022 85 1 410 21 126 40 304 41 946
Additions 0 29 0 419 0 448
Disposals 0 0 -21 0 0 -21
Reclassifications 0 0 0 31 0 31
Cost 31.1.2023 85 1 439 0 575 40 304 42 403
Cumulative amortisation and impairment 1.2.2022 -25 -939 -21 0 -984
Cumulative amortisation on disposals and reclassifications 0 0 21 0 21
Amortisation -17 -143 0 0 -159
Cumulative amortisation and impairment 31.1.2023 -42 -1 081 0 0 -1 122
Carrying amount 1.2.2022 60 471 0 126 40 304 40 961
Carrying amount 31.1.2023 43 358 0 575 40 304 41 280
1000 EUR Development expenses Intangible rights Other intangible assets Advance payments for intangible assets Goodwill Total
Cost 1.2.2021 144 1 396 21 107 39 437 41 105
Business combinations 0 0 0 0 867 867
Additions 0 10 0 19 0 29
Disposals -54 0 0 0 0 -54
Reclassifications -4 4 0 0 0 0
Cost 31.1.2022 85 1 410 21 126 40 304 41 946
Cumulative amortisation and impairment 1.2.2021 -62 -799 -19 0 -879
Cumulative amortisation on disposals and reclassifications 54 0 0 0 54
Amortisation -17 -139 -2 0 -159
Cumulative amortisation and impairment 31.1.2022 -25 -939 -21 0 -984
Carrying amount 1.2.2021 81 597 4 107 39 437 40 226
Carrying amount 31.1.2022 60 471 0 126 40 304 40 961
Intangible rights and other intangible assets are comprised of information systems and patents, trademarks and design rights applied for by group companies. Of the goodwill on the consolidated balance sheet, the majority arose in conjunction with the acquisition of Hämeen Laaturemontti Oy in 2014, when a fund managed by Sentica Partners Oy acquired a majority holding in what was then Hämeen Laaturemontti Oy, the current Vesivek Oy. The goodwill increased when HLRE Group Oy acquired the shares in the Nesco Invest group of companies in 2016. In February 2021, in connection with the reorganisation of financing, the Group company Vesivek Oy acquired a 71.63% holding in Salaojakympit Oy, a company controlled by the company’s CEO. The Company’s CEO acquired a holding of 71.63% in Salaojakympit Oy on 28 February 2020. In February 2021, Salaojakympit Oy was renamed to Vesivek Salaojat Oy. The acquisition generated goodwill of approximately EUR 0.9 million. Vesivek Salaojat Oy's business was merged into the roof and roof safety product business.
Accounting principle
Goodwill
Goodwill arises from the acquisition of subsidiaries, and it corresponds to the amount by which the acquisition cost exceeds the Group’s share of the net fair value of the assets and liabilities of the acquisition. For impairment testing, goodwill is allocated to cash-generating units or groups of units which are expected to benefit from the acquisition of the businesses resulting in the goodwill. Goodwill is tested for impairment annually or more frequently, if events or changes in circumstances indicate any impairment. The book value of the cash-generating unit with goodwill is compared to the recoverable amount, which is the higher of value of use or fair value less costs of sale. Any impairment loss is firstly allocated to goodwill and secondarily to other assets proportionally. Goodwill impairment losses recognised through profit or loss are not reversed.
Other intangible assets
Other intangible assets are recognized on the balance sheet when the asset is in the Company’s control, it is expected to yield future economic benefit to the Company and the acquisition cost of the asset can be reliably determined. The intangible asset is initially recognized at cost, which includes the purchase price and any direct expenses incurred due to the asset. Intangible assets are reported on the balance sheet at cost less accumulated amortization and impairment. Intangible assets are amortized using the straight-line method over the economic useful life of the asset. The appropriateness of the amortization times the methods is assessed at each closing date.
Research and development costs are recognised as expenses when internally developed intangible assets do not meet the criteria for capitalisation. An intangible asset resulting from development activities is capitalised when the product development project is likely to generate future economic benefits to the company and the products are estimated to be technically feasible and commercially viable.
The economic useful lives of the Company’s intangible assets are as follows:   
In the HLRE Holding Group, information systems are amortized over 5 years, patents/trademarks over 10 years and development expenses over 5 years. In April 2021, the IFRS Interpretations Committee (IFRIC) issued a final agenda decision on the accounting treatment of the costs of configuring and customising the systems implemented as cloud services (IAS 38 Intangible Assets). The Group has analyzed the impact of the agenda decision on the accounting principles applicable to the expenditure on the introduction of its information system projects. As a result of the analysis, the Group recognizes the costs capitalized in intangible assets in the separate companies as an expense on the basis of an agenda decision and, correspondingly, the depreciation of the capitalization in the separate companies is reversed. EUR 9 (83) thousand of investments and EUR 68 (49) thousand of depreciation were reversed in the current financial year.
Goodwill impairment testing
Key discretionary decisions and estimates
Key assumptions used in testing goodwill for impairment
The management makes significant estimates and discretionary decisions in determining the level at which goodwill is tested and whether there are indications of the impairment of goodwill.
According to the management’s view, the acquisition price exceeding the acquired net assets was paid for the business and business idea as a whole, and therefore it considers that the goodwill must be tested at the level of Vesivek Oy and Vesivek Salaojat Oy (roofing, roof safety and drainage product installations in Finland), which is a cash-generating unit in Finland, and at the level of the Nesco subgroup (manufacturing of rainwater management systems and roof safety products), which is managed as a separate operation and cash-generating entity.
Determining the recoverable amount of a cash-generating unit is based on value in use calculations, which require the use of estimates. The calculations use cash flow projections based on budgets and estimates approved by the management for a five-year period. The cash flow projections are based on the Group’s actual results and the management’s best estimates of future sales, development of costs, general market conditions and applicable tax rates. The years after the projected period are extrapolated using a growth estimate of 2%. The estimated future net cash flows are discounted to their current value when estimating the recoverable amount based on the pre-tax weighted average cost of capital. The weighted average cost of capital illustrates the current market view of the time value of money and risks associated with the tested units
The management tests the impacts of changes in significant assumptions by making sensitivity analyses as described below in this note. In these IFRS financial statements, goodwill is reported for the most recent balance sheet date and the one preceding it, 31 January 2023 and 31 January 2022.
The table below presents the allocation of goodwill to the Group’s cash-generating units:
Thousands of euros 31.1.2022 31.1.2022
Installation of roof and rainwater systems and underground drain renovations in Finland 35 434 35 434
Production of rainwater systems and roof safety products 4 870 4 870
The key assumptions used in the value in use calculations are as follows:
2023 EBITDA in 5 years period of time, % Long term EBITDA, % Discount rate before taxes, % Long term growth factor, %
Installation of roof and rainwater systems and underground drain renovations in Finland 8,1 6,0 10,2 2,0
Production of rainwater systems and roof safety products 14 14,0 10,00 2,0
2022 EBITDA in 5 years period of time, % Long term EBITDA, % Discount rate before taxes, % Long term growth factor, %
Installation of roof and rainwater systems and underground drain renovations in Finland 6,8 6 9,6 2,0
Production of rainwater systems and roof safety products 14,7 14,5 9,6 2,0
The profitability (measured by EBITDA) of CGU2 producing rainwater systems and roof safety products is expected to decline slightly over a period of 5 years and remain at the same, slightly lower level in the long term thereafter.
With regard to CGU 1 installing roof and roof safety products, in the latest financial year 2023 calculations, 5-year profitability (measured by EBITDA) will increase to 8.1% (6.8%%) and long-term profitability will remain at the lower level of 6.0% (6.0%). In the financial year 2023 calculations, the Board of Directors prepared different scenario calculations for CGU 1. As a result, the Board of Directors considers that the changes to GCU 1 initiated in autumn 2022 and planned in the organisation in 2023 will lead to an improvement in CGU 1’s profitability level (measured by EBITDA) over a 5-year period.
Sensitivity analysis
No impairment loss was recognized for the reported financial years as a result of the tests for impairment. The recoverable amount exceeded the book value on 31 January 2023 by EUR 3.9 million with regard to roofing, roof safety and drainage installations in Finland and by EUR 19.2 million with regard to the manufacturing of rainwater management systems and roof safety products (31 January 2022: by EUR 3 million with regard to roofing and roof safety product installations in Finland and by EUR 17 million with regard to the manufacturing of rainwater management systems and roof safety products).
The management has prepared sensitivity analyses of the key factors, and based on the analyses, the recoverable amounts equal the book value if the assumptions change one by one:
31.1.2023 31.1.2022
Installation of roof and rainwater systems and undergound drain renovations in Finland
Change in discount rate, percentage points 0,5 % 0,2 %
Decrease in EBITDA, percentage points -0,3 % -0,6 %
Production of rainwater systems and roof safety products
Change in discount rate, percentage points 6,8 % 5,0 %
Decrease in EBITDA, percentage points -5,9 % -6,5 %
Possible and significant changes in the value of the key assumptions are as follows:
1. The implementation of organisational changes in Finland is prolonged and/or the positive effects of the changes are smaller than planned/the negative effects of the changes are larger than anticipated during the current financial period. In this case, the projected return to profitability would be postponed. The effects would not be long-term.
2. The recruitment of new staff will become more difficult and the turnover of existing staff will increase. Growth in revenue would slow down and costs could increase significantly if wages were to be raised. Wage increases would probably be at least partly passed on to prices, as the whole sector would be affected by the problems.
3. Inflation continues to raise costs without it being possible to pass them to prices in full. In this case, profitability could be lower than forecast for a longer period of time. The effect would be perhaps about 1–2 percentage points in the margins.
HLRE Holding Group
10.    Property, plant and equipment and leases
1000 EUR Land and water Buildings and structures Machinery and equipment Other tangible assets Advance payments and work in progress Total
Cost 1.2.2022 319 22 322 36 925 324 197 60 087
Translation differences 0 -201 -331 -5 0 -537
Additions 0 3 879 2 916 0 390 7 185
Disposals 0 0 -1 772 0 -7 -1 779
Reclassifications 0 0 288 72 -390 -31
Cost 31.1.2023 319 26 000 38 026 391 190 64 925
Cumulative amortisation and impairment 1.2.2022 0 -12 778 -19 816 -305 -32 899
Translation differences 0 117 183 4 304
Cumulative amortisation on disposals and reclassifications 0 0 1 572 -45 1 527
Amortisation 0 -2 773 -4 799 -25 -7 597
Cumulative amortisation and impairment 31.1.2023 0 -15 434 -22 860 -370 -38 664
Carrying amount 1.2.2022 319 9 544 17 109 19 197 27 188
Carrying amount 31.1.2023 319 10 565 15 166 21 190 26 261
1000 EUR Land and water Buildings and structures Machinery and equipment Other tangible assets Advance payments and work in progress Total
Cost 1.2.2021 319 20 860 36 067 316 539 58 101
Translation differences 0 -81 -163 0 0 -244
Business combinations 0 0 2 087 0 0 2 087
Additions 0 2 526 5 890 8 777 9 201
Disposals 0 -984 -8 073 0 0 -9 057
Reclassifications 0 0 1 119 0 -1 119 0
Cost 31.1.2022 319 22 322 36 925 324 197 60 087
Cumulative amortisation and impairment 1.2.2021 0 -10 569 -20 615 -286 -31 469
Translation differences 0 46 75 0 121
Cumulative amortisation on disposals and reclassifications 0 494 5 376 0 5 870
Amortisation 0 -2 747 -4 651 -19 -7 418
Impairment 0 -3 0 0 -3
Cumulative amortisation and impairment 31.1.2022 0 -12 778 -19 816 -305 -32 899
Carrying amount 1.2.2021 319 10 292 15 452 30 539 26 632
Carrying amount 31.1.2022 319 9 544 17 109 19 197 27 188
Accounting principle
Property, plant and equipment is initially recognised at original cost, which includes the purchase price and other direct costs of acquisition needed to bring the asset into operating condition and the place where it functions as intended. The assets are recognised on the balance sheet at cost less accumulated amortisation and impairment. Leased tangible assets are treated in the same way as purchased assets in accounting. Repair and maintenance costs are expensed as they are incurred
Depreciation and amortisation is recognised using the straight-line method by allocating the cost to the estimated economic useful lives of the assets. The economic useful lives of assets are reviewed on each closing date and amended, as necessary.
Depreciation and amortisation times by asset category:
Buildings and structures 10-40 years
Machinery and equipment 3-12 years
Other tangible assets 5-10 years
Capital gains and losses on the sale of property, plant and equipment are included in other operating income or expenses on the statement of comprehensive income.
HLRE Holding Group
Leases
Right-of-use assets* 31.1.2023 31.1.2022
Buildings 8 103 6 826
Vehicles 5 089 5 902
13 192 12 728
* included in balance sheet item Property, plant and equipment
Lease liabilities* 31.1.2023 31.1.2022
Current lease liability 4 739 4 612
Non-current lease liability 8 648 8 297
13 387 12 909
* included in balance sheet items current and non-current finance and lease liabilities
HLRE Holding Group
Changes in right-of-use assets during the financial year:
1000 EUR Buildings and structures, right-of-use Machinery and equipment, right-of-use Total
Cost 1.2.2022 16 880 10 720 27 599
Translation differences -201 -176 -377
Business combinations 0 0 0
Additions 3 879 1 767 5 646
Disposals 0 -550 -550
Cost 31.1.2023 20 557 11 760 32 317
Cumulative amortisation and impairment 1.2.2022 -10 054 -4 818 -14 872
Translation differences 117 109 226
Cumulative amortisation on disposals and reclassifications 0 470 470
Amortisation -2 518 -2 432 -4 950
Cumulative amortisation and impairment 31.1.2023 -12 454 -6 672 -19 125
Carrying amount 1.2.2022 6 826 5 902 12 728
Carrying amount 31.1.2023 8 103 5 089 13 192
1000 EUR Buildings and structures, right-of-use Machinery and equipment, right-of-use Total
TEXT010P Cost 1.2.2021 15 418 7 523 22 941
TEXT020P Translation differences -81 -81 -161
102049P Additions 2 526 2 693 5 219
102069P Disposals -984 -1 338 -2 322
TEXT010P Cost 31.1.2022 16 880 10 720 27 599
TEXT090P Cumulative amortisation and impairment 1.2.2021 -8 098 -3 441 -11 540
TEXT100P Translation differences 46 40 87
102149P Cumulative amortisation on disposals and reclassifications 494 1 108 1 602
TEXT150P Amortisation -2 496 -2 524 -5 020
TEXT090P Cumulative amortisation and impairment 31.1.2022 -10 054 -4 818 -14 872
TEXT1200P Carrying amount 1.2.2021 7 320 4 082 11 402
TEXT1200P Carrying amount 31.1.2022 6 826 5 902 12 728
Included in profit and loss statement 1 February 2022–31 January 2023 1 February 2022–31 January 2023
1000 eur
Depreciation of right-of-use assets
112650P Buildings -2 518 -2 496
116650P Vehicles -2 432 -2 524
940450P -1 Interest expense (included in finance cost) -328 -360
700110P -1 Expense relating to short-term leases (included in other expenses) -821 -642
700210P -1 Expense relating to  leases of low-value assets that are -105 -97
not short-term leases (included in other expenses)
Cash outflow for lease agreements during the financial year 2022 totaled to EUR 6 388 (7 968) thousand.
Non-current assets pledged as collateral
Information about the Group’s non-current assets pledged as collateral is provided in note 15.
Accounting principle
The Group has leased diverse properties and vehicles. Leases on properties are usually made for a fixed term of 3 or 5 years, in which case the lease cannot be cancelled, including an option to extend the lease for a corresponding period of 3 or 5 years. The terms and conditions of the leases are negotiated on a case-by-case basis, and they involve various conditions. The lease agreements include no covenants, but the leased assets may not be used as collateral for loans. Leases on vehicles usually have a term of three years
A right-of-use asset and corresponding lease liability are recognised for leases when the leased asset is available to the Group to use. The right-of-use asset is comprised of the amount of the lease liability at the original value and rents paid by the start of the lease less incentives received in associated with the lease, initial direct expenses and any restoration expenses. Paid rents are divided into liabilities and financial expenses. The financial expense is recognised through profit or loss over the lease term so that the interest rate of the remaining liability balance is the same for each period. The right-of-use asset is amortised using the straight-line method over the shorter of its economic useful life or lease term.
Payments associated with short-term leases of leases of low-value assets are expensed in equal instalments. Leases with a maximum lease term of 12 months are considered to be short-term. Short-term leases primarily concern scaffolding and machines or lifting equipment used occasionally in production. Low-value assets are primarily comprised of office equipment.
Key management judgements and estimates
The duration of leases on business premises are annually measured at the management group level. The Group’s strategy is defined for a period of three years, and the management team estimates whether the leased business premises will be suitable for the Group’s use for the entire coming strategy period. With regard to leases valid until further notice, the property’s lease term in calculating lease liabilities is considered to be the strategy period of 3 years or any shorter period if moving out of the current premises before the end of the strategy period is considered to be necessary. Any extension periods of fixed-term leases based on options are only taken into account if using them involves economic benefits or if exercising the extension option is otherwise reasonably certain.
In discounting the current value of rents, the interest rate used is the actual interest rate on additional credit using the Group’s overdraft facility.
HLRE Holding Group
11.    Inventories
1000 EUR 1.2.2022-31.1.2023 1.2.2021-31.1.2022
Raw materials and consumables 8 878 8 948
Work in progress 2 172 2 707
Finished goods 4 707 3 809
Inventories 15 756 15 464
Accounting principle
Materials and supplies, work in progress and finished products are recognised at the lesser of cost or net realisable value. The cost of inventories includes all purchase costs, costs of production and other expenses incurred due to bringing the inventories to their current location and condition. Purchase costs include purchase price, import duties and other taxes, transport and handling costs and other expenses directly caused by the procurement of finished products, materials and services. The costs of production of inventories include direct expenses incurred due to materials and labour and appropriate share of variable and fixed overhead expenses, the latter of which are allocated based on normal operating capacity. The measurement of acquisition cost is based on the FIFO method.
Key management judgements and estimates
The measurement of inventories requires the management to make estimates and management judgements associated particularly with obsolescence and recognition of inventories at net realisable value based on expected selling prices, in addition to which the management estimates the general development of prices in the Company’s key markets. The net realisable value is the estimated actual selling price in ordinary business less estimated expenses required to complete the goods and realise the sale.
12.    Trade and other receivables
1000 EUR 1.2.2022-31.1.2023 1.2.2021-31.1.2022
Trade receivables 7 344 7 213
Other receivables 69 101
Current prepayments and accrued income (from others) 2 457 2 284
9 870 9 598
The maturity of trade receivables and the principles for measuring impairment are disclosed in Note 17 Financial risk management.
Accrued income is mainly comprised of advance payments of social security contributions and uninvoiced revenue recognitions pursuant to the percentage of completion of roofing renovations for housing companies in progress.
The book values of current trade and other receivables are considered approximate to their fair values. This is due to their short-term nature.
Accounting principle
The receivables are amounts that the Group expects to receive from other parties. Trade receivables are generated by sales of goods and services in ordinary business operations. Trade and other receivables are initially measured at fair value pursuant to the invoice sent to the customer, after which they are measured at the amount considered to be received from the customer (amortized cost). After initial recognition, trade and other receivables are measured at amortized cost less impairment losses. A simplified model for trade receivables has been applied, as described in Note 17.
13.    Other current liabilities
1000 EUR 1.2.2022-31.1.2023 1.2.2021-31.1.2022
Current advances received, interest- free 128 95
Current trade payables, interest-free 5 428 7 453
Current liabilities to others, interest-free 3 200 3 177
Current accrued liabilities to others, interest-free 3 677 2 803
12 433 13 528
Accrued charges are primarily comprised of amortised personnel expenses, interest liabilities and allocated purchases.
The book values of other current liabilities are considered to approximate to their fair values because the liabilities are short-term by nature.
Accounting principle
Trade payables are obligations to make a payment for goods or services procured from suppliers or service providers as part of ordinary business operations. Trade payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method.
HLRE Holding Group
CAPITAL STRUCTURE AND FINANCING
This section includes information about how the Group manages its capital structure and financing and exposure to risks:
·         Net debt
·         Loans
·         Financial assets
·         Derivative instruments
·         Financial income and expenses
·         Management of financial risks and capital
·         Shareholders’ equity
14.    Net debt
1000eur 31.1.2023 31.1.2022
Non-current interest-bearing liabilities 45 831 47 338
Capitalised interests, non-interest bearing 4 518 3 858
Current interest-bearing liabilities 4 742 4 633
Cash and cash equivalents -3 557 -5 201
51 534 50 628
Net debt reconciliation
Cash and cash equivalents Lease liability within one year Lease liability after one year Loan repayments within one year Loan repayments after one year Total
Net debt 1.2.2021 2 219 -4 005 -7 380 -25 805 -14 065 -49 036
Cash flow 2 982 4 900 25 812 -29 074 4 620
Increase -1 105 -4 097 -5 202
Exchange rate adjustments 55 1 086 1 141
Business combinations -488 -1 434 -11 -1 933
Other changes -3 985 4 614 -2 -846 -219
Net debt 31.1.2022 5 201 -4 627 -8 297 -6 -42 899 -50 628
Cash and cash equivalents Lease liability within one year Lease liability after one year Loan repayments within one year Loan repayments after one year Total
Net debt 1.2.2022 5201 -4627 -8 297 -6 -42 899 -50 628
Cash flow -1644 4762 6 2 3 127
Increase -1235 -4 412 -5 647
Exchange rate adjustments 146 2 165 2 311
Other changes -3789 4 062 -969 -696
Net debt 31.1.2023 3 557 -4 742 -8 647 0 -41 702 -51 534
15.    Loans and financial assets
1000eur 31.1.2023 31.1.2022
Non-current loans from financial institutions 26 143 28 000
Non-current capital loan liabilities 250 250
Non-current trade payables, interest-bearing 0 2
Non-current loans from related parties 10 789 10 789
Non-current lease liability 8 648 8 297
Capitalised interests 4 518 3 858
Non-current liabilities, interest-bearing 50 349 51 197 0,0
Current loans from financial institutions 0 6
Current trade payables, interest-bearing 2 15
Current lease liability 4 739 4 612
Current interest-bearing liabilities 4 742 4 633 0,0
Loans from financial institutions and other financing
The liabilities associated with the secured EUR 46,000,000 loan agreed by the Company with Danske Bank A/S Finland Branch on 22 February 2016 were repaid in full in conjunction with the reorganization of financing on 12 February 2021. At the same time, the Company redeemed the equipment concerned by the leaseback agreement with Danske Finance Oy in full at the residual value according to the leaseback agreement.
In connection with the reorganization of financing, the Group’s parent company HLRE Holding Oy (renamed to HLRE Holding Oyj in February 2021) issued a secured three-year SEK 300 million bond that includes an option of increasing the total loan by a maximum total of SEK 100 million to a maximum total of SEK 400 million in one or more tranches. The issuance of additional loans requires that the Group’s ratio of net debt to adjusted EBITDA does not exceed 3.00/2.75/2.50 one/two/three years after the original issue of the bond. The bond is an amortization-free bullet loan, and it includes a leverage covenant, according to which the Group’s ratio of net debt to adjusted IFRS EBITDA must not exceed 5.0/4.5/4.0 one/two/three years after the issue of the bond. The Company met the terms and conditions of the financing covenant at the time of signing the financial statements. The interest rate on the bond is variable 3-month STIBOR + 6.60%, with the reference interest rate limited to 0.00%. The bond has been listed on the Open Market segment of the Frankfurt Stock Exchange since February 2021 and on the Stockholm Stock Exchange regulated corporate bond list as of 8 February 2022.
In addition to the issue of the bond, the Company agreed on a secured EUR 2,000,000 overdraft facility with Danske Bank A/S Finland Branch on 12 February 2021. The overdraft facility involves a leverage financial covenant similar to the terms and conditions of the bond, according to which the Group’s ratio of net debt to adjusted IFRS EBITDA must not exceed 5.0/4.5/4.0 one/two/three years after the issue of the bond. The Company met the terms and conditions of the financing covenant at the time of signing the financial statements.
The following shares have been pledged as collateral for the bond and overdraft facility: HLRE Group Oy, Vesivek Oy, Vesivek Sverige AB and Vesivek Tuotteet Oy (formerly Nesco Oy). Furthermore, the following internal loans have been pledged as collateral for the bond agreement:
Loan granted by HLRE Holding Oyj to HLRE Group Oy totalling EUR 11,996,333
Loan granted by HLRE Holding Oyj to Vesivek Oy totalling EUR 1,442,609
Loan granted by HLRE Holding Oyj to Nesco Invest Oy totalling EUR 8,446.71
Loan granted by HLRE Holding Oyj to Vesivek Tuotteet Oy totalling EUR 4,510,442
The following business mortgages have been confirmed and pledged as collateral for the bond and overdraft facility:
HLRE Group Oy EUR 57,200,000
Vesivek Oy EUR 57,200,000
Nesco Invest Oy EUR 57,200,000
Vesivek Tuotteet Oy EUR 57,200,000
Vesivek Sverige AB SEK 20,000,000
The following real estate mortgages have been pledged as collateral for the bond and overdraft facility:
Nesco Oy Orimattila production plant EUR 13,673,200
Vesivek Oy industrial hall in Lieto EUR 46,800,000
Shareholder loan
The Group has shareholder loans from the parent company’s shareholders. At the end of the financial year 2023, the amount of shareholder loans was EUR 10.8 million. The interest accrued on the loans totalled EUR 4.5 million pursuant to the coupon rate of 6.00% p.a. The terms and conditions of the shareholder loan were renegotiated already during the financial year so that interest will be paid together with the principal at the latest when the bond issued during the financial year falls due. Therefore, the interest is classified as part of non-current liabilities.
The shareholder loans are subordinated to the bond, bank loans and other loans with regard to repayment and interest. The shareholder loans have no collateral.
Accounting principle
The Group’s financial liabilities are classified as financial liabilities at amortised cost or financial liabilities at fair value through profit or loss. A financial liability is presented as current unless the Group has an unconditional right to defer the settlement of the liability for at least 12 months after the balance sheet date. The financial liability is derecognised when the liability has ceased to exist, i.e. when the obligation specified in the agreement has been fulfilled or revoked or its validity has expired.
The loans taken out by the Group are classified as financial liabilities measured at amortised cost. They are initially measured at fair value less transaction costs. After initial recognition, the loans are measured at amortised cost using the effective interest method. The book value of bank loans is considered to be equal to their fair value because the interest level is considered to match the market interest level.
Financial assets
EUR1000 31.1.2023 31.1.2022
Non-Current
Other non-current financial assets 48 48
Loan receivables 17 7
65 56 -48,3
Current
Loan receivables 53 63
Cash and cash equivalents 3 557 5 201
3 610 5 265
Loan receivables are comprised of loans granted by the Company to its employees, loan granted to the Group’s CEO and loans granted to Vesivek Salaojat Oy (formerly Salaojakympit Oy). Loan receivables are measured at amortised cost. Related party loans are described in more detail in note 22.
Other investments include the company’s investments in other companies (both listed and unlisted shares).
Accounting principle
The Group’s financial assets are classified into the following categories: financial assets at amortised cost and financial assets at fair value through profit or loss. The classification of financial assets is based on their cash flow properties and business models used for their management and recognised on the value date.
Loan receivables are measured at amortized cost using the effective interest method. The expected credit losses of these items are estimated on a case by case basis. Losses are recognized in expected credit losses over 12 months or expected credit losses over the entire life, based on whether the credit risk has significantly increased.
Trade and other receivables are described in more detail in note 12, and they are measured at amortised cost. The associated credit risk and impairment matrix used in determining credit losses are described in note 17.
Investments are measured at fair value. Realized and unrealized changes in fair value are recognized in financial income and expenses.
Cash and cash equivalents are comprised of cash and demand deposits.
Derivative instruments
With regard to the currency hedging of the SEK 300 million bond, the Group’s Board of Directors approved the currency hedging proposed by Nordea Finland Branch to the Audit Committee at its meeting on 24 September 2021. This is a loss-limited forward contract. The company hedged SEK 200 million of the SEK 300 million bond, with the hedging rate of 10.16 while the bond was issued at a rate of 10.13. The structure consists of a synthetic forward (bought and sold option at the same rate) and a bought option. The structure is zero-cost in that the hedge did not have a cash impact at the time of its conclusion.
The fair value of the SEK 200 million currency hedge was EUR -1,461.1 (-484.3) thousand on 31 January 2023.
Accounting principle
All derivate instruments are classified as financial assets and liabilities measured at fair value through profit or loss. Derivatives are measured at fair value. Both realized and unrealized gains and losses from the measurement of derivatives at fair value are recognized in financial income and expenses in the statement of comprehensive income. Hedge accounting is not applied to derivatives.
Measurement of fair value
Financial instruments measured at fair value are classified in accordance with the following fair value hierarchy: instruments for which there is a publicly quoted price in an active market (level 1), instruments for which there is another  observable direct or indirect price than a quoted price pursuant to level 1 (level 2) and instruments for which there is no observable market price (level 3). These instruments measured at fair value include financial assets and liabilities measured at fair value through profit or loss.
The price of listed shares is based on their quoted price (Level 1) and of unlisted shares on the measurement method (Level 3). The price of derivatives is based on discounted cash flows and is included in Level 2 of the fair value hierarchy.
HLRE Holding Group
16.    Finance income and costs
1 February 2022–31 January 2023 1 February 2021–31 January 2022
Unrealised gain at fair value, derivatives 0 34
Interest income 65 10
Foreign exchange gain 1 952 1 101
Other finance income 1 2
Finance income Finance income 2 018 1 146
Interest on borrowings from others -2 964 -2 923
Interest expenses on lease -328 -360
Unrealised loss from a change in the fair value of financial assets and liabilities -977 -484
Foreign exchange loss -117 -123
Other financial cost -65 -258
Finance cost Finance cost -4 450 -4 148
Finance income and cost -2 432 -3 003
Accounting principle
Financial expenses are comprised of interest expenses on bank loans, overdraft facilities and other loans and lease liabilities, exchange rate differences in financial activities and realised and unrealised changes in the values of currency and interest rate derivatives.
Loan-related transaction expenses are expensed to the income statement using the effective interest method. The effective interest is the interest rate using which the estimated payments during the loan period lare discounted to the net book value of the financial liability. The calculation takes into account all fees and transaction expenses paid by the contracting parties.
Interest income is recognised using the effective interest method. If a loan receivable has become credit on account of a credit event, the effective interest rate is applied to the net carrying amount of the financial asset (after deduction of the loss allowance). Foreign exchange gains and losses from financing activities are reported in financial income or expenses.
HLRE Holding Group
17.    Management of financial risks
The Group has a risk management policy approved by the Board of Directors and management team that is monitored by the Board of Directors and its Audit Committee. The risk management process aims to identify and assess the risks, after which measures are planned and implemented. The measures can include avoiding the risk, mitigating it by different means, transferring the risk through insurance policies or contractually, or taking the risk in a managed and conscious manner. The Company’s Board of Directors and its Audit Committee review the most significant risks and related measures annually in conjunction with the strategy process.
The management of the HLRE Holding Group’s financial risks is seen to by the Group’s treasury functions in co-operation with the persons responsible for purchasing and other business functions. The Group’s treasury function is comprised of the CEO, CFO and financial and accounting manager, and it has operated in accordance with instructions given by the Board of Directors and Audit Committee. The operational management of the Group’s treasury functions is centralized with the Group’s financial administration. The purpose of the treasury function is to ensure that the Company has adequate funds for engaging in business activities at all times without restrictions and to minimize financing costs.
The treasury function of the HLRE Holding Group is responsible for the monitoring and operational management of the Group’s treasury functions and general financial position associated with financing, including each subsidiary’s financial risk exposures. The management of each subsidiary is responsible for managing their respective treasuries in accordance with the instructions laid down in the financial policy. Ultimately, the Board of Directors of HLRE Holding Oy also co-ordinates financial matters pursuant to the financial policy.
Liquidity risk
The Group’s business operations have been developed into year-round operations in recent years. However, it is not possible to completely get rid of the seasonality of the business, which can cause short-term liquidity risks. The treasury function controls the Group’s liquidity risk by foreseeing the Group’s need for financing and thereby aims to ensure the flexibility, availability and temporal balance of financing. At the same time, adequate unused overdraft facilities are continuously maintained to avoid the Group from breaching any withdrawal limits or covenants associated with its overdraft facility.
The liquidity reserve is comprised of the Group’s cash and cash equivalents and unused overdraft facilities. The financial administration of the HLRE Holding Group manages the Group’s liquidity instruments.
The cash and cash equivalents of HLRE Holding Group totalled EUR 3,557 thousand on 31 January 2023 (EUR 5,201 thousand on 31 January 2022). Furthermore, the HLRE Holding Group had binding overdraft facilities on 31 January 2023 with a total unused credit of EUR 2,000 thousand. The overdraft facilities are continuously available.
On 12 February 2021, the company issued a SEK 300 million 3-year, floating rate, secured non-amortising bond. The Company repaid the bank loans agreed with Danske Bank A/S Finland Branch together with interest and expenses and redeemed the equipment included in the leaseback agreement signed with Danske Finance Oy in 2019 with the funds borrowed with the bond. The bond will be repaid in one instalment on its date of maturity. The amortisation-free loan makes it easier to manage the liquidity of seasonal business compared to a regularly amortised loan, because instalments are not paid; only the interest specified in the bond is paid on a quarterly basis. In addition, the Company agreed on a secured EUR 2,000,000 overdraft facility with Danske Bank A/S Finland Branch on 12 February 2021, replacing the previous EUR 5,000,000 overdraft facility. The bond and overdraft facility involve financial covenants, which are described in note 15. Additional information about the bond and overdraft facility is provided in note 15.
The bond issued by the Company in February 2021 will fall due for payment in February 2024 and the credit line from Danske Bank A/S Finland Branch will fall due six (6) months before the maturity of the bond.
The Company’s current liquid assets and projected operating cash flow are insufficient to cover the repayment of the SEK 300 million bond due in February 2024 without additional funding. The Company’s management estimates that it will be able to refinance the bond or obtain other additional financing. For this reason, the Company’s financial statements have been prepared on the going concern principle. If the Company is unable to raise additional financing and the going concern assumption is therefore no longer valid, the situation might require the assets to be remeasured at the recoverable amount and any additional liabilities to be recognized
The management monitors the covenants and reports on them to the creditor on a quarterly basis. A breach of the covenants can result in increased financial expenses or the calling-in of the bank loans and overdraft facilities.
The tables below present the Group’s financial liabilities broken down into categories based on the remaining contractual maturities. The loans include both interest-bearing loans and the overdraft facility:
Maturities of contracts of financial liabilities 31 January 2023
1000 EUR No more than 12 months Over 1 year and no more than 2 years Over 2 years and no more than 5 years Over 5 years Total Book value
Trade payables 5 431 5 431 5 431
Lease liabilities 5 013 3 883 4 593 414 13 904 13 387
Bonds 2 547 26 520 29 067 26 143
Shareholder loans 15 976 15 976 15 308
Derivatives 0 1 461
Maturities of contracts of financial liabilities 31 January 2022
1000 EUR No more than 12 months Over 1 year and no more than 2 years Over 2 years and no more than 5 years Over 5 years Total Book value
Trade payables 7 468 2 7 470 7 470
Lease liabilities 4 887 4 330 3 898 323 13 438 12 909
Loans from financial instritutions 1 888 1 888 29 077 32 853 28 000
Shareholder loans 15 964 15 964 14 648
Derivatives 0 484
31 Jan 2023 31 Jan 2022
1000 EUR Fair value hierarchy level Carrying amount Fair value Carrying amount Fair value
Financial liabilities
Bonds 2 26 143 25 702 28 000 28 359
Shareholder loans 2 15 308 15 045 14 648 14 189
Derivatives 2 1461 1461 484 484
Credit risk and counterparty risk
Cash and cash equivalents as well as unpaid receivables from customers involve credit risk. The credit risk associated with cash and cash equivalents is minor because the counterparties are banks with high credit ratings from international rating agencies.
The Group’s credit loss policy defines the creditworthiness requirements for customers. The Group only grants credit to companies with appropriate credit ratings, and consumer customers in Finland are primarily directed to use the Laatutili service.
Vesivek Oy and Vesivek Salaojat Oy offer their consumer customers the Laatutili facility granted by the OP bank. Laatutili is a renovation loan. Using a Laatutili loan, the customer can pay for the roofing or drainage renovation in a single interest-free and expense-free instalment with a term of payment of 30 days or over a longer repayment period as separately agreed monthly instalments. The loan is granted by OP cooperative banks, and after payment is received from the bank, the Company no longer has interest in the receivable. The bank only grants a Laatutili loan if the customer’s credit rating is in order.
With regard to trade receivables and contractual assets, a simplified model in which the estimated amount of credit losses is based on the expected credit losses over the life of the receivables is used. Examples of events leading to impairment include severe financial problems of the debtor, the debtor’s probable bankruptcy or other financial arrangement.
The HLRE Holding Group applies a simplified procedure for recognizing an impairment concerning expected credit losses, according to which an impairment item concerning the expected credit losses for the entire period of validity for all trade receivables. For determining the expected losses caused by credit risk, trade receivables are grouped based on shared credit risk properties and how long payment is overdue. The impairment concerning the loss on 31 January is determined as a combination of a statistical model and case-specific analysis. Receivables from financing companies (Laatutili from OP Bank, Santander) is deducted from the balance of trade receivables in the calculation because the associated credit risk is minor.
31.1.2023            1000 eur Not due Up to 30 days 31 to 60 days 61 to 90 days 91 to 120 days Over 120 days Total
Expected loss rate 0,07 % 1,66 % 3,58 % 20,00 % 40,00 % 70,00 %
Gross carrying amount 5 443 385 273 118 74 408 6 702
Loss allowance provision, VAT 0% 3 5 8 19 24 230 290
31.1.2022            1000 eur Not due Up to 30 days 31 to 60 days 61 to 90 days 91 to 120 days Over 120 days Total
Expected loss rate 0,26 % 1,85 % 4,09 % 20,00 % 40,00 % 70,00 %
Gross carrying amount 5 628 367 68 53 74 211 6 401
Loss allowance provision, VAT 0% 12 5 2 9 24 119 171
Credit losses, 1000eur 2023 2022
At 1 February 171 84
Increase in loss allowance recognised in profit or loss during the period 185 408
Receivables recognized as unrecoverable credit losses in the period -66 -321
At 31 January 290 171
Key management judgements and estimates
The management has applied judgement and made assumptions in assessing whether the value of overdue receivables has been impaired. In its estimates, the management has aimed to also take macroeconomic factors into consideration.
Market risk – interest rates
Interest rate risk is defined as an uncertainty associated with the result of the HLRE Group caused by fluctuation in interest rates. Therefore, HLRE’s exposure to interest rate risk is due to its interest-bearing loans, which are variable-rate (with the exception of lease liabilities). The goal pursuant to the financial policy is to minimise the impact of changes in interest rates on the Group's annual result and financial position while aiming to optimise net financing within the defined risk limits.
The SEK 300 million 3-year, non-amortising bond issued by the company in February is a floating-rate bond. By the time of signing the financial statements, future interest payments were not hedged.
Foreign exchange risk
The Group engages in business activities in Finland and Sweden. The Group is exposed to SEK-related transaction and translation risk. The transaction risk associated with the Swedish subsidiary is primarily comprised of trade receivables and payables emerging in its operational business activities. Translation risk arises when the parent company’s investments in the Swedish subsidiary are converted into euros.
In February 2021, the company issued a SEK 300 million 3-year, non-amortising bond. The company has hedged SEK 200 million of this bond. The currency derivative contract was entered into in autumn 2021 and it is valid until the end of the maturity of the loan. The Group aims to finance a significant part of the unhedged portion of the bond, SEK 100 million, during the maturity period with SEK-denominated positive cash flow from Vesivek Sverige AB and a positive cash flow from the roofing installation business carried out by the Oulu Tornio office in northern Sweden.
Transaction risk
Transaction risk emerges from the commercial transactions and payments of the subsidiaries denominated in currencies other than the unit’s operating currency and when the associated incoming and outgoing cash flows differ in terms of amounts or timing.
The Swedish subsidiary purchases the goods associated with installation activities to a significant extent in euros, internally profile production steel sheets, rainwater management systems, externally timber and other supplies included in the concept. During the financial year ended 31 January 2023, approximately EUR 3.5 million of the Swedish subsidiary’s purchases of approximately EUR 5.7 million were made in euros.
The SEK-denominated trade payables and other current liabilities in the financial statements amounted to SEK 29 million (SEK 29 million), trade and other current receivables to SEK 33 million (SEK 29 million) and cash and cash equivalents to SEK 25.6 million (SEK 28.3 million). In 2022, the average exchange rate of the Swedish krona weakened by approximately five per cent from the previous year. At the previous year’s average exchange rate of the krona against the euro, the result for the financial year would have been approximately EUR 0.4 million higher.
Vesivek Oy’s Oulu unit sells and installs roofing and rainwater management systems to Northern Sweden, and the said sales/receivables are denominated in SEK. Vesivek Oy also has a SEK-denominated bank account. The other Group companies do not have significant external purchases, sales, receivables or liabilities in currencies other than the operating currency in each country
1000 eur
Foreign exchange gain and loss 1 February 2022–31 January 2023 1 February 2021–31 January 2022
Foreign exchange gain 1 952 1 103
Foreign exchange loss -207 -180
1 746 923
Translation risk
Translation risk covers the effects caused by the conversion of the Swedish subsidiary’s figures into EUR-denominated figures for consolidation purposes. Sweden accounted for approximately 16 per cent (15 per cent) of the Group’s business operations for the most recent financial year. Approximately 85–90% of the Group's foreign exchange flows are in euro, which is the home currency of all subsidiaries and businesses, except for the Swedish subsidiary Vesivek Oy and the Tornio unit’s installation operations in northern Sweden.
Commodity risk
The COVID-19 pandemic still in early 2022 and Russia’s attack against Ukraine have increased the risk relating to the availability and delivery times of commodities, mainly steel. This has been managed by forecasting future purchase needs with suppliers and increasing the Group’s inventories of certain critical products. With regard to steel, price risk has been managed by fixing purchase prices quarterly for the next 3 months, and a mention of an increase in selling prices due to increases in raw material costs has been added to the Group’s sales agreements.
The HLRE Holding Group did not have commodity derivatives during the financial year.
HLRE Holding Group
18.    Shareholders' equity
Shareholders:
Sentica Buyout IV -funds 8 783 695 52,8 %
Kimmo Riihimäki 5 497 826 33,1 %
Other key persons 1 878 498 11,3 %
Other shareholders 439 154 2,6 %
Own shares 27 550 0,2 %
16 626 723 100 %
The total number of shares in HLRE Holding Oy did not change during the financial year 1 February 2022–31 January 2023.
Share capital
The share capital is comprised of ordinary shares. The parent company has one series of shares, and all shares confer equal rights to dividends. Each share confers one vote at a general meeting. All shares issued by the parent company have been paid in full. The shares have no nominal value.
Reserve for invested unrestricted equity
In accordance with the Finnish Limited Liability Companies Act, the subscription price for new shares is recognised in share capital, unless the decision on the share issue orders it to be recognised in full or part in the reserve for invested unrestricted equity. The invested non-restricted equity reserve can also be accumulated without a share issue.
Dividends
The Board of Directors’ proposal to the general meeting is that no dividends be distributed for the financial year. No dividends were distributed for the comparison period.
Translation differences
Translation differences resulting from the translation of the financial statements of a foreign subsidiary are recognised in other comprehensive income and accumulated in the separate shareholders’ equity reserve as described in note 20. The accumulated amount is recognised through profit or loss when the net investment is divested.
Accounting principle
The Group’s shareholders’ equity is comprised of share capital, invested non-restricted equity reserve, translation differences and retained earnings. Changes in treasury shares are recognised in retained earnings. Expenses incurred directly due to the issue of new shares are reported less taxes in shareholders’ equity as a decrease in income from share issue.
19.    Capital risk management
The Group monitors the shareholders’ equity and net debt on the consolidated balance sheet. Net debt is calculated by deducting cash and cash equivalents from current and non-current interest-bearing liabilities, as calculated in note 14. The Group aims to grow further both in Finland and internationally in the next couple of years and maintain a flexible capital structure, which makes it possible to implement the growth strategy. The investments required by growth and seasonal fluctuations in business and thereby changes in liquidity and net working capital require flexible financing solutions and active liquidity management.
The Company issued a three-year secured non-amortising bond of SEK 300 million on 12 February 2021. In addition, the Company agreed on a secured EUR 2,000,000 overdraft facility with Danske Bank. The bond issued by the Company will fall due for payment in February 2024 and the credit line from Danske Bank A/S Finland Branch will fall due six (6) months before the maturity of the bond. There is a risk that the Company will not be able to refinance the bond and the restructured credit line, or financing will be arranged on significantly weaker terms than at present.
Additional information about the bond and overdraft facility is provided in note 15.
The most important monitored external capital indicator is the ratio of interest-bearing net debt to rolling 12-month EBITDA (leverage).  According to the leverage financial covenant, the Group’s ratio of net debt to adjusted IFRS EBITDA must not exceed 5.0/4.5/4.0 one/two/three years after the issue of the bond. The Company met the terms and conditions of the financing covenant at the time of signing the financial statements.
HLRE Holding Group
OTHER NOTES
This section includes information that the Group has to disclose to comply with the financial standards but are not considered to be significant from the point of view of understanding the Group’s financial position and result:
·         Group structure and preparation of the consolidated financial statements
·         Taxes
·         Related party transactions
·         Commitments and contingent liabilities
·         New reporting standards and reporting standards that will enter into force at a later date
·         Events after the reporting date
20.    Group structure
Name of entity Place of business Ownership interest held by the group % 31.1.202 Ownership interest held by the group % 31.1.2022 Principal activities
HLRE Group Oy PIrkkala 100 100 Administration and financial services
Vesivek Oy Pirkkala 100 100 Roof renovations
Vesivek Sverige AB Ruotsi 91 91 Roof renovations
Nesco Invest Oy Orimattila 100 100 Other technical services
Nesco Oy Orimattila 100 100 Manufacture of rainwater management systems and roof safety products
Tuusulan Peltikeskus Oy Tuusula 100 100 Sheet metal work
Vesivek Salaojat Oy Pirkkala 71 72 Drainage renovations
The share capital of the subsidiaries is exclusively comprised of ordinary shares held by the Group, and the holding corresponds with the voting rights held by the Group. The companies’ country of registration is also their primary operating country.
In February 2021, in connection with the reorganization of financing, the group company Vesivek Oy acquired a 71.63% holding in Salaojakympit Oy, a company controlled by the Group’s CEO. The Group’s CEO acquired a holding of 71.63% in Salaojakympit Oy on 28 February 2020. On 1 April 2021, Salaojakympit Oy was renamed to Vesivek Salaojat Oy. Vesivek Salaojat Oy is a company engaged in installing underdrains, and the regions of Ostrobothnia, Vaasa region, Central Ostrobothnia, Central Finland, Pirkanmaa, Kuopio and Uusimaa generate a significant share of its revenue. Salaojat operates in the same property as Vesivek Oy, under the same management of the area and unit.
Accounting principle
Subsidiaries are consolidated into the consolidated financial statements in full starting from the time of acquisition, which is the date on which HLRE obtains control, and consolidation continues until control ceases to exist. HLRE has control if it is exposed or entitled to variable income by being a party to the investment and can influence this income by exercising its power over the investment.
HLRE uses the acquisition method in consolidating business operations. Intra-Group transactions, balances and unrealised gains from transactions between Group companies are eliminated. Also unrealised losses are eliminated, unless the transaction provides evidence of impairment of the value of the transferred asset.
Subsidiaries’ results and shareholders’ equity attributable to non-controlling interests are reported as a separate income in the consolidated income statement, statement of comprehensive income, statement of changes in equity and balance sheet.
Transactions realised with non-controlling interests which do not lead to losing control are treated as transactions with owners. A change in holding leads to an adjustment of the book values of the holdings of the Group and non-controlling interests. The difference between the adjustment of non-controlling interests and consideration paid or received is recognised in a separate reserve under shareholders’ equity attributable to owners.
HLRE Holding Group
21.    Taxes
1000 EUR 1 February 2022–31 January 2023 1 February 2021–31 January 2022
Tax on income from operations -500 -738
Tax for previous accounting periods 4 -4
Deferred taxes 121 79
Income tax -374 -663
The reconciliation of the tax expense entered in the consolidated income statement and taxes calculated using the Finnish tax rate (20% for all financial years) is as follows:
1000 eur 1 February 2022–31 January 2023 1 February 2021–31 January 2022
Accounting profit before taxes 36 1 353
Tax calculated at the parent company’s tax rate of 20% -7 -271
Effect of different tax rates in foreign subsidiaries -5 -4
Tax-free income included in the accounting profit 12 4
Non-deductible expenses included in the accounting profit -402 -391
Tax for previous accounting periods 4 -4
Losses for which no deferred tax asset is recognised 1 1
Application of loss from previous periods, for which deferred tax asset not recognised 23 0
Tax expense on profit and loss statement -374 -663
HLRE Holding Group
1000 EUR 1.2.2022 Translation differences +/- Changes through income statement Recorded directly into equity Changes through business arrangements 31.1.2023
Deferred tax asset
Inventories, internal margin 195 -2 -33 0 0 160
Provision for credit losses 0 0 0 0 0 0
Unused tax loss 0 0 0 0 0 0
Other items 0 0 0 0 0 497
Total 195 -2 -33 0 0 657
1000 EUR 1.2.2022 Translation differences +/- Changes through income statement Recorded directly into equity Changes through business arrangements 31.1.2023
Deferred tax liability
Property, plant and equipment 601 -9 87 0 0 679
Other items 176 -3 -69 0 0 104
Total 777 -12 18 0 0 783
Deferred tax on balance sheet
Deferred tax asset 235
Deferred tax liability 150
Net deferred tax liability -85
1000 EUR 1.2.2021 Translation differences +/- Changes through income statement Recorded directly into equity Changes through business arrangements 31.1.2022
Deferred tax asset
Inventories, internal margin 177 -1 19 0 0 195
Provision for credit losses 17 0 17 0 0 34
Unused tax loss 0 0 -10 0 179 169
Other items 144 0 111 43 36 333
Total 337 -1 138 43 215 731
1000 EUR 1.2.2021 Translation differences +/- Changes through income statement Recorded directly into equity Changes through business arrangements 31.1.2022
Deferred tax liability
Property, plant and equipment 482 -5 124 0 0 601
Other items 241 0 -65 0 0 176
Total 723 -5 59 0 0 777
Deferred tax on balance sheet
Deferred tax asset 169
Deferred tax liability 216
Net deferred tax liability 47
On 31 January 2023, the Group had confirmed tax losses carried forward of EUR 1,378,097.32 for which no deferred tax assets have been recognised because the Group is not likely to accumulate taxable income against which the losses could be utilised. These losses will expire in 2025.
On 31 January 2023, the Group had related party interest carry forward of EUR 6,414,869 for which no deferred tax assets have been recognised because the Group is not, for the time being, considered to be likely that such carry forward will be utilised
Accounting principle
The income taxes for the financial year include taxes based on the taxable income for the period and deferred taxes. The taxes based on the taxable income for the period concern the financial year under review and they are based on tax rates prescribed or practically enacted by the closing date. The calculation of taxes based on the taxable income for the period is based on valid tax regulations in the countries in which the Company operates and accrues taxable income. The tax based on the taxable income for the period also includes adjustments concerning previous periods.
Deferred taxes are measured based on the tax rates (and legislation) prescribed or practically enabled by the closing date and which are expected to be applied when the deferred tax asset in question is realised or the deferred tax liability is paid
A deferred tax liability is recognised in full for all taxable temporary differences, unless the Group can order the time of cancellation of the temporary difference and the temporary difference is not likely to be cancelled in the foreseeable future. Deferred tax assets are recognised for tax-deductible temporary differences only to the amount that it is probable that the temporary difference will be cancelled in the future and there is taxable income available against which the temporary difference can be utilised.
Deferred tax assets and liabilities are offset against each other when the Group has a legally enforceable right to offset the tax assets and liabilities based on the taxable income for the period and when the deferred tax assets and liabilities are connected to income taxes charged by the same taxation authority from the same taxable entity or different taxable entities when the asset and liability are to be realised on a net basis.
HLRE Holding Group
22.    Related party transactions
The related parties of the HLRE Holding Group include the Group’s parent company and subsidiaries. The related parties also include members of the Board of Directors and Group management team, any deputy members and secretary, the CEO and any Deputy CEO, their family members and their controlled entities.
Related party transactions are treated in accordance with the related party guideline approved by the Board of Directors of HLRE Holding Oyj. The Company’s Board of Directors always decides on significant transactions with HLRE Holding Oyj and its related parties.
The subsidiaries are described in note 20 Group structure and remuneration of the management is disclosed in note 8 Information about key managers.
The following transactions have been realized with related parties:
1000 eur
With entities controlled by key management 31.1.2023 31.1.2022
Sales of goods and services 0 52
Purchases of goods and services 484 190
Repayment of lease liability 710 1289
Interest expense on lease liability 39 76
Trade payables 1 4
With shareholders and key management 31.1.2023 31.1.2022
Non-current liabilities 11 039 10 789
Interest liabilities 4 427 3 832
Interest expense 660 647
Loan receivables 47 0
Interest receivables 2 0
Interest income 2 0
The remuneration of key managers is reported in note 8 Information about key managers.
Shareholder loans included in non-current liabilities are reported in note 15. Loans and financial assets
23.    Long-term employee benefits
The Vesivek Group has a years of service reward scheme according to which an employee is entitled to additional pay amounting to pay for 1–3 weeks when the years of service pursuant to the bonus scheme are fulfilled. The accumulated benefits are determined annually based on calculations by actuaries. Any actuarial gains and losses are recognised through profit or loss in employee benefit expenses.
1000 eur 1 February 2022–31 January 2023 1 February 2021–31 January 2022
Employee benefit obligation
Balance sheet:
Defined benefit obligation 341 337
Statutory employee benefit expense 85 84
Employee benefit obligation 426 421
Opening net balance sheet liability 337 311
Items recognized in operating profit:
Expense (+)/income (-) recognised in Profit or Loss 68 87
Business combinations 0 16
Contributions paid -64 -77
Net defined benefit liability in balance sheet 341 337
Assummptions and census data statistics
Discount rate 3,3 % 0,5 %
Rate of inflation 2,6 % 2,0 %
Rate of salary increase 3,1 % 2,5 %
Employee turnover 15,0 % 15,0 %
The Group anticipates that it will pay EUR 74 thousand relating to years of service benefits during the financial year ending on 31 January 2024.
HLRE Holding Group
24.    Commitments and contingent liabilities
Guarantees given and contingent liabilities
Accounting principle
A contingent liability is a possible obligation arising due to previous events, the existence of which is only confirmed when an event beyond the control of the Group is realised. Also an obligation that probably does not require fulfilling a payment obligation or the amount of which cannot be reliably determined is considered to be a contingent liability.
25.    New IFRS-standards and standards that will enter into force at a later date
The IASB amended IAS 16 Property, Plant and Equipment to prohibit entities from deducting from the cost of an item of property, plant and equipment revenue that an entity receives from assets manufactured and sold before the introduction of the asset.
The IASB amended IAS 37 Onerous Contracts to clarify that the direct costs necessary to settle an obligation under a contract include both incremental costs incurred to settle the obligation and other costs that are attributable to the performance of the obligation under the contract.
These amendments will enter into force for financial periods beginning on or after 1 January 2022.
The IASB has made amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, according to which a consistent definition of “material” will be applied in all IFRS standards and the conceptual framework of financial reporting, it is clarified when information is material and guidelines are included on immaterial information.
The IASB has amended IAS 12 Income Taxes concerning a situation in which both an asset and a liability are recognized for an individual transaction, such as a lease. The amendment clarifies that the exceptions to the recognition of a deferred tax asset and a deferred tax liability in paragraphs 15 and 24 of the Standard do not apply in those situations.
These amendments will enter into force for financial periods beginning on or after 1 January 2023.
According to the Group’s current estimate, the amendments will not have impacts on the Group’s future financial statements, and it will continue its assessment of the impact of the amendments.
26.    Events after the reporting date
After the reporting period, in February 2023, the Board of Directors of the Company decided to start co-operation negotiations with the personnel at Vesivek Oy’s Lahti unit. The negotiations ended in March 2023. As a result of the negotiations, the roof installation business of the Lahti unit will be discontinued during Q1/2023 and Vesivek Oy will continue in the Lahti economic area only in the rainwater and roof safety business. The changes will lead to the termination of the employment of 12 people at the latest by the end of H1/2023.
At the beginning of April 2023, the Board of Directors of the Company issued a change negotiation proposal concerning the entire Kuopio unit of Vesivek Oy and Vesivek Salaojat Oy. The change negotiation will address the plan according to which the Kuopio unit will focus on the gutter and roof safety business and the drainage business in the future. With regard to the roofing business, the plan is to partially implement sites in the area from other nearest units (Jyväskylä, Joensuu, Mikkeli).
HLRE Holding Oyj
Parent company’s income statement, FAS
1000 EUR Note 1.2.2022-31.1.2023 1.2.2021-31.1.2022
REVENUE 325 472
Employee benefits expense -148 -185
Depreciation, amortisation and impairment -24 -24
Other operating expenses -153 -284
OPERATING PROFIT (LOSS) -1 -21
Finance income and expense
Finance income 4 518 3 529
Finance expense -2 654 -3 510
PROFIT (LOSS) BEFORE TAXES 1 864 -2
Income taxes -72 0
PROFIT (LOSS) FOR THE PERIOD 291 -2
HLRE Holding Oyj
Parent company’s balance sheet
1000 EUR Note 31.1.2023 31.1.2022
ASSETS
NON-CURRENT ASSETS
Intangible assets 22 46
Investments 19 803 19 803
NON-CURRENT ASSETS 19 824 19 848
CURRENT ASSETS
Non-current receivables 33 888 33 888
Current receivables 9 521 9 034
Cash and cash equivalents 36 61
CURRENT ASSETS 43 445 42 984
ASSETS 63 269 62 832
EQUITY AND LIABILITIES
EQUITY
Share capital 80 80
Other reserves
Reserve for invested unrestricted equity 18 002 18 002
Retained earnings 990 992
Profit/loss for the period 291 -2
EQUITY 19 363 19 072
LIABILITIES
Non-current liabilities 37 226 10 989
Current liabilities 6 681 3 341
LIABILITIES 43 906 43 760
EQUITY AND LIABILITIES 63 269 62 832
Image 'Signature'!C8
Signatures to the financial statements and report of the Board of Directors
Pirkkala, 28 April 2023
Board of Directors of HLRE Holding Oy
.
x
Image 'Auditor´s report'!D48 Image 'Auditor´s report'!D57 Image 'Auditor´s report'!D71
HLRE Holding Group
Auditor´s report
Auditor’s Report (Translation of the Finnish Original)
To the Annual General Meeting of HLRE Holding Oyj
Report on the Audit of the Financial Statements
Opinion
In our opinion
·  the consolidated financial statements give a true and fair view of the group’s financial position and financial performance and cash flows in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU
·  the financial statements give a true and fair view of the parent company’s financial performance and financial position in accordance with the laws and regulations governing the preparation of the financial statements in Finland and comply with statutory requirements.
Our opinion is consistent with the additional report to the Audit Committee.
What we have audited
We have audited the financial statements of HLRE Holding Oyj (business identity code 2611405-7) for the financial period for the year ended 31 January 2023. The financial statements comprise:
consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of
changes in equity, consolidated statement of cash flows and notes, including a summary of significant
accounting policies
the parent company’s balance sheet, income statement, cash flow statement and notes.
Basis for Opinion
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor’s Responsibilities for the Audit of Financial Statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, the non-audit services that we provided to the parent company and to
the group companies are in accordance with the applicable law and regulations in Finland and we have not
provided non-audit services that are prohibited under Article 5(1) of Regulation (EU) No 537/2014. The non-audit
services that we have provided are disclosed in note 6 Other operating expenses to the Financial Statements.
Material uncertainties related to going concern
We draw attention to note 1. Accounting principles of the consolidated financial statements to section Business
continuity and note 17. Management of financial risks to section Liquidity risk, to the note Business continuity to
the parent company’s financial statements, as well as to section Business continuity in Report of the Board of
Directors, where it is stated that the company's current liquid assets and forecasted cash flow from operating
activities are insufficient to cover the repayment of the SEK 300 million bond due in February 2024 without
additional funding.
As stated in note 1 Accounting principles of the consolidated financial statements under Business continuity and
in note 17. Management of financial risks under Liquidity risk, in the note Business continuity to the parent
company’s financial statements, as well as in section Business continuity in Report of the Board of Directors,
there are no binding decisions on additional funding by the date of approval of the financial statements, the
adequacy of funding constitutes an essential uncertainty factor, which may give significant reason to doubt the
parent company's and the group's ability to continue its operations.
Our Audit Approach
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we considered where management made subjective judgements; for example,
in respect of significant accounting estimates that involved making assumptions and considering future events
that are inherently uncertain.
Materiality
The scope of our audit was influenced by our application of materiality. An audit is designed to obtain reasonable
assurance whether the financial statements are free from material misstatement. Misstatements may arise due to
fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the financial statements.
Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the
overall group materiality for the consolidated financial statements as set out in the table below. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of
our audit procedures and to evaluate the effect of misstatements on the financial statements as a whole.
How we tailored our group audit scope
We tailored the scope of our audit, taking into account the structure of the group, the accounting processes and
controls, and the industry in which the group operates.
Our audit procedures covered all significant components of the group. The audit of the consolidated financial
statements was focused on the most significant locations in Finland and Sweden, where we performed an audit
based on the size of the companies and the characteristics of the risks. In other group companies we have
performed analytical audit procedures to mitigate the risk of material misstatements in the consolidated financial
statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of
the financial statements of the current period. These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
As in all of our audits, we also addressed the risk of management override of internal controls, including among
other matters consideration of whether there was evidence of bias that represented a risk of material
misstatement due to fraud.
Responsibilities of the Board of Directors and the Managing Director for the Financial Statements
The Board of Directors and the Managing Director are responsible for the preparation of consolidated financial
statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS)
as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and
regulations governing the preparation of financial statements in Finland and comply with statutory requirements.
The Board of Directors and the Managing Director are also responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and the Managing Director are responsible for
assessing the parent company’s and the group’s ability to continue as a going concern, disclosing, as applicable,
matters relating to going concern and using the going concern basis of accounting. The financial statements are
prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company
or the group or to cease operations, or there is no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in
accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
·   Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
·  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the parent company’s or the group’s internal control.
·  Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
·   Conclude on the appropriateness of the Board of Directors’ and the Managing Director’s use of the going
concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the parent company’s or the group’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw
attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the
date of our auditor’s report. However, future events or conditions may cause the parent company or the
group to cease to continue as a going concern.
·   Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view.
·   Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the consolidated financial statements. We are responsible for the direction,supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of
most significance in the audit of the financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure
about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Other Reporting Requirements
Appointment
We were first appointed as auditors by the annual general meeting on 29 March 2018. Our appointment
represents a total period of uninterrupted engagement of 5 years. HLRE Holding Oyj became a public interest
entity on 8 February 2022.
Other Information
The Board of Directors and the Managing Director are responsible for the other information. The other
information comprises in the report of the Board of Directors and the information included in the Annual Report
but does not include the financial statements and our auditor’s report thereon. We have obtained the report of the
Board of Directors prior to the date of this auditor’s report and the Annual Report is expected to be made
available to us after that date.
Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With
respect to the report of the Board of Directors, our responsibility also includes considering whether the report of
the Board of Directors has been prepared in accordance with the applicable laws and regulations.
In our opinion
the information in the report of the Board of Directors is consistent with the information in the financial
statements
the report of the Board of Directors has been prepared in accordance with the applicable laws and
regulations.
If, based on the work we have performed on the other information that we obtained prior to the date of this
auditor’s report, we conclude that there is a material misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Tampere 2 May 2023
PricewaterhouseCoopers Oy
Authorised Public Accountants
Markku Launis
Authorised Public Accountant (KHT)
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