• The company published its Q4'23/2023 results today ahead of the trading session. An earnings conference call with management is scheduled for Thursday (14:00).

• Q4'23 revenues amounted to PLN 137.9m (-41% y/y), 19% below our expectations. The Distribution segment continued to contribute high revenues (PLN 97m, +71% y/y), but at a lower level than in Q3'23. The Installations segment contributed PLN 41m in revenue (-76% y/y, +18% q/q, the effect of a decrease in the importance of a perimeter contract on the border with Belarus).

• Gross margin (9.9%) - significantly lower y/y and clearly below our assumptions (we assumed 13.5% vs. 17.3% a year ago). Profitability was probably affected by the further consolidation of Zeus.

• On a standalone level, profitability was 12.4%, weaker y/y but reasonably close to our assumptions. On the other hand, we note that the Installations segment at the standalone level (the contract on the Belarusian border was included here so far) had PLN 44m in revenue and a gross loss of PLN -4.6m on sales (-10.3% margin, compared to 15.0% in Q1-3'23).

• We note an increase in long-term warranty provisions at the standalone level from PLN 2.0m after Q3'23 to PLN 12.2m at the end of Q4'23. The company reports that PLN 9.5m of the provision relates to a contract with the Border Guard (border with Belarus).

• Zeus had a net loss of PLN -23.5m in 2023, after Q1-3'23 loss of PLN -11.6m. Revenues, on the other hand, were PLN 14.0m in 2023 vs. PLN 17.2m after Q1-3'23. The carrying values were reported at liquidation value, which affected Q4'23 results. This implies Elektrotim's consolidation of Zeus' ca. PLN -12m EBIT loss and 'negative' revenues in Q4'23 (the difference between consolidated and standalone results assuming that the results of the subsidiary Ostoya were negligible in Q4'23).

• At the same time, Elektrotim sold its stake in Zeus at the end of Q1'24 (amount not stated). Management indicates that in Q1'24 it will show a PLN 20.5m consolidated gain on the sale of the Zeus stake (the excess of the sale price over the negative net asset value). • Strongly negative Q4'23 other operating income (PLN -7.7m, we assumed PLN 0m, probably due to Zeus consolidation)

• EBITDA in Q4'23 amounted to PLN -1.7m (vs. PLN +26.6m a year ago). Note that the loss is a result of: a) further consolidation of Zeus's losses in Q4'23 (bringing balance sheet values to liquidation level), b) setting up high guarantee reserves.

• Financial activities with a slightly negative impact of PLN -1.0m.

• Consolidated net loss in Q4'23 at PLN -4.3m.

• Cash flows from operations amounted to PLN +33m in Q4'23. The Company had PLN 27m net cash at the end of the period