ARVOS GmbH

Kassel

Befreiender Konzernabschluss zum Geschäftsjahr vom 01.04.2022 bis zum 31.03.2023

Arvos Midco S.à r.l.

Luxemburg

Consolidated Financial Statements

For the financial year 1 April 2022 - 31 March 2023 with Independent Auditor's Report

Audit report

To the Shareholders of

Arvos Midco S.à r.l.

Report on the audit of the consolidated financial statements

Our opinion

In our opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of Arvos Midco S.à r.l. (the "Company") and its subsidiaries (the "Group") as at 31 March 2023, and of its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

What we have audited

The Group's consolidated financial statements comprise:

―	the consolidated statement of financial position as at 31 March 2023;
―	the consolidated statement of comprehensive income for the year then ended;
―	the consolidated statement of changes in equity for the year then ended;
―	the consolidated cash flow statement for the year then ended; and
―	the notes to the consolidated financial statements, which include a summary of significant accounting policies.

Basis for opinion

We conducted our audit in accordance with the Law of 23 July 2016 on the audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) as adopted for Luxembourg by the "Commission de Surveillance du Secteur Financier" (CSSF). Our responsibilities under the Law of 23 July 2016 and ISAs as adopted for Luxembourg by the CSSF are further described in the "Responsibilities of the "Réviseur d'entreprises agréé" for the audit of the consolidated 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.

We are independent of the Group in accordance with the International Code of Ethics for Professional Accountants, including International Independence Standards, issued by the International Ethics Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by the CSSF together with the ethical requirements that are relevant to our audit of the consolidated financial statements. We have fulfilled our other ethical responsibilities under those ethical requirements.

Other information

The Board of Managers is responsible for the other information. The other information comprises the information stated in the annual report including the Business Report but does not include the consolidated financial statements and our audit report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated 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 consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, 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.

Responsibilities of the Board of Managers for the consolidated financial statements

The Board of Managers is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs as adopted by the European Union, and for such internal control as the Board of Managers determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the Board of Managers is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Managers either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Responsibilities of the "Réviseur d'entreprises agréé" for the audit of the consolidated financial statements

The objectives of our audit are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an audit 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 the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF 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 consolidated financial statements.

As part of an audit in accordance with the Law of 23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

―	identify and assess the risks of material misstatement of the consolidated 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 Group's internal control;
―	evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Managers;
―	conclude on the appropriateness of the Board of Managers' 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 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 audit report to the related disclosures in the consolidated 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 audit report. However, future events or conditions may cause the Group to cease to continue as a going concern;
―	evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation;
―	obtain sufficient appropriate audit evidence regarding the financial information of the entities and 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.

Report on other legal and regulatory requirements

The Business Report is consistent with the consolidated financial statements and has been prepared in accordance with applicable legal requirements.

Luxembourg, 30 May 2023

PricewaterhouseCoopers, Société coopératif

Represented by Patrick Schon

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(in thousands of Euro)

ASSETS

	Notes	31 March 2023	31 March 2022
Non-current assets
Goodwill	10	333,331	335,918
Intangible assets	11	35,710	52,095
Property, plant and equipment	8	28,704	29,491
Right-of-use-assets	9	11,447	8,149
Financial assets	12	770	684
Income tax assets		273	285
Deferred tax assets	25	18,442	16,767
		428,677	443,389
Current assets
Inventories	13	27,553	21,197
Trade receivables	15	49,667	49,610
Contract assets	14	38,216	25,816
Income tax assets		375	1,509
Financial assets	12	407	934
Non-financial assets	16	7,309	5,542
Cash and cash equivalents	17	19,771	23,169
		143,298	127,777
TOTAL ASSETS		571,975	571,166

The accompanying notes form an integral part of these consolidated financial statements.

By: Monika Horvath, Title: Manager

By: Joakim Lindström-Formicola, Title: Manager

EQUITY AND LIABILITIES

	Notes	31 March 2023	31 March 2022
Equity
Capital stock	18	15	15
Capital reserves	18	18,285	18,285
Accumulated loss	18	-575,077	-479,768
Accumulated other comprehensive income	18	19,127	20,157
Total equity		-537,650	-441,311
Non-current liabilities
Provisions for pensions and similar obligations	20	17,532	22,616
Other provisions	19	5,416	9,039
Loans and borrowings due to banks	21	421,518	399,772
Loans and borrowings due to shareholders	21	472,761	425,234
Income tax payable		1,640	0
Other financial liabilities	23	40	1,521
Leasing liabilities	31	17,126	6,427
Deferred tax liabilities	25	11,158	13,419
		947,191	878,028
Current liabilities
Other Provisions	19	16,690	12,770
Loans and borrowings due to banks	21	40,436	36,570
Loans and borrowings due to shareholders	21	470	470
Trade and other payables	22	40,442	40,080
Contract liabilities	14	48,054	32,704
Leasing liabilities	31	3,624	3,104
Income tax payable		821	941
Other financial liabilities	23	662	1,018
Other non-financial liabilities	24	11,235	6,792
		162,434	134,449
Total liabilities		1,109,625	1,012,477
TOTAL EQUITY AND LIABILITIES		571,975	571,166

The accompanying notes form an integral part of these consolidated financial statements.

By: Monika Horvath, Title: Manager

By: Joakim Lindström-Formicola, Title: Manager

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in thousands of Euro)

	Notes	1 April 2022 - 31 March 2023	1 April 2021 - 31 March 2022
Continuing operations
Revenue	26	303,390	259,584
Cost of sales	29	-225,080	-200,346
Gross profit		78,310	59,238
Other operating income	27	6,195	4,398
Research and development expenses	29	-3,405	-2,766
Selling and distribution expenses	29	-32,376	-30,418
Administrative expenses	29	-28,077	-24,176
Other operating expenses	27, 29	-3,643	-5,196
Total operating expenses before impairment loss		-61,306	-58,158
Impairment loss	10	0	-87,007
Operating gain/ (loss) after impairment loss		17,004	-85,927
Finance income	28	1,528	6,127
Interest expenses	28	-106,063	-72,819
Finance Cost	28	-115,898	-80,455
(Loss) before income tax from continuing operations		-97,366	-160,255
Income tax gain or (loss)	25	2,057	-795
(Loss) for the period from continuing operations		-95,309	-161,050
Attributable to:
Equity holders of the parent		-95,309	-161,050
		-95,309	-161,050

The accompanying notes form an integral part of these consolidated financial statements.

By: Monika Horvath, Title: Manager

By: Joakim Lindström-Formicola, Title: Manager

	Notes	1 April 2022 - 31 March 2023	1 April 2021 - 31 March 2022
Other comprehensive (loss)
Other comprehensive income to be reclassified to profit or loss in subsequent periods (net of tax):
Exchange differences on translation of foreign operations		-4,567	-7,355
Net other comprehensive income (loss) to be reclassified to profit or loss in subsequent periods		-4,567	-7,355
Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods (net of tax):
Re-measurement gain or loss on defined benefit plans	20, 25	3,537	2,330
Net other comprehensive income(loss) not to be reclassified to profit or loss in subsequent periods		3,537	2,330
Other comprehensive income (loss) for the year, net of tax		-1,030	-5,025
Total comprehensive income (loss) for the year, net of tax		-96,339	-166,075
Attributable to:
Equity holders of the parent		-96,339	-166,075
		-96,339	-166,075

The accompanying notes form an integral part of these consolidated financial statements.

By: Monika Horvath, Title: Manager

By: Joakim Lindström-Formicola, Title: Manager

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(in thousands of Euro)

				Accumulated other comprehensive income
	Capital stock	Capital reserve	Accumulated loss	Foreign currency translation reserve	Actuarial gains and losses from defined benefit plans	Deferred tax
At 1 April 2021	15	18,285	-318,718	24,292	1,186	-296
Profit or loss for the period	0	0	-161,050	0	0	0
Other comprehensive income/loss	0	0	0	-7,355	3,190	-860
Total comprehensive income/loss	0	0	-161,050	-7,355	3,190	-860
At 1 April 2022	15	18,285	-479,768	16,937	4,376	-1,156
Profit or loss for the period	0	0	-95,309	0	0	0
Other comprehensive income/loss	0	0	0	-4.567	4,885	-1,348
Total comprehensive income/loss	0	0	-95,309	-4,567	4,885	-1,348
At 31 March 2023	15	18,285	-575,077	12,370	9,261	-2,504

	Total Equity
At 1 April 2021	-275,236
Profit or loss for the period	-161,050
Other comprehensive income/loss	-5,025
Total comprehensive income/loss	-166,075
At 1 April 2022	-441,311
Profit or loss for the period	-95,309
Other comprehensive income/loss	-1,030
Total comprehensive income/loss	-96,339
At 31 March 2023	-537,650

For more information on the equity movement see note 18.

The accompanying notes form an integral part of these consolidated financial statements.

By: Monika Horvath, Title: Manager

By: Joakim Lindström-Formicola, Title: Manager

CONSOLIDATED CASH FLOW STATEMENT

(in thousands of Euro)

	Notes	1 April 2022 - 31 March 2023	1 April 2021 - 31 March 2022
Loss before income tax from continuing operations		-97,366	-160,255
CASH FLOWS FROM OPERATING ACTIVITIES
Adjustments to reconcile profit before income tax to net cash provided by operations
Goodwill impairment	10	0	87,007
Depreciation and impairment of property, plant and equipment and Right of Use assets	8, 9	7,799	8,099
Amortization and impairment of intangible assets	11	18,981	18,541
Net foreign exchange differences		1,202	-2,940
Other non-cash expenses		-60	425
Other non-cash income		-166	0
Finance income		-46	-96
Finance costs		113,017	80,142
Gain from derivatives		-878	-2,236
Gain on disposal of property, plant and equipment	8,27	-4,656	43
Movements in net defined benefit liabilities		-410	-158
Increase in provisions		64	-55
Increase in inventories		-7,075	7,195
Decrease in receivables from construction contracts		3,787	8,322
Increase in trade and other receivables		-1,632	5,337
Increase in other financial assets		-223	3,452
Increase in non-financial assets		-1,958	1,117
Increase in trade payables		1,738	-11,807
Decrease in income tax payable		-73	0
Decrease in other financial liabilities		-184	667
Increase in other non-financial liabilities		4,615	-678
		36,476	42,122
Income tax paid		-651	-7,368
Net cash flows from operating activities (continuing)		35,825	34,754
Net cash flows from operating activities		35,825	34,754

The accompanying notes form an integral part of these consolidated financial statements.

By: Monika Horvath, Title: Manager

By: Joakim Lindström-Formicola, Title: Manager

	Notes	1 April 2022 - 31 March 2023	1 April 2021 - 31 March 2022
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment	8	-8,355	-2,252
Proceeds from sale of property, plant and equipment		16,750	0
Purchase of intangible assets	11	-2,595	-474
Net cash flows used in investing activities (continuing)		5,800	-2,726
Net cash flows used in investing activities		5,800	-2,726
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans and borrowings due to banks	21	8,000	11,037
Repayment of loans and borrowings due to banks	21	-10,523	-11,507
Transaction cost on long-term financing	21	-2,993	0
Repayment of lease liabilities	31	-3,125	-3,074
Other interest		-1,517	-1,399
Interest paid	21	-34,230	-30,250
Net cash flows from financing activities (continuing)		-44,388	-35,193
Net cash flows from financing activities		-44,388	-35,193
Net (decrease)increase in cash and cash equivalents		-2,763	-3,165
Net foreign exchange difference		-635	249
Cash and cash equivalents at 1 April 2022		23,169	26,085
Cash and cash equivalents at 31 March 2023		19,771	23,169

The accompanying notes form an integral part of these consolidated financial statements.

By: Monika Horvath, Title: Manager

By: Joakim Lindström-Formicola, Title: Manager

1. Corporate information

The consolidated financial statements of Arvos Midco S.à r.l. and its subsidiaries (collectively, the Group) for the financial year ended 31 March 2023 were authorised for issue in accordance with a resolution of the managers dated 31 May 2023. Arvos Midco S.à r.l. (the Parent) is a limited company incorporated and domiciled in Luxembourg. The registered office is located at 2, rue Edward Steichen, L-2540, Luxembourg. Under Luxembourg law, the financial statements are approved by the shareholders at the Annual General Meeting.

The Group is an industrial equipment and service provider. The Group is active in both the new equipment and aftermarket service markets across its divisions:

The Ljungström Division serves the thermal power plant market with two key applications: Air preheaters and Gas-Gas heaters, based on a similar technology platform of rotary regenerative heat exchangers. With an approximate market share of about 30 - 35 percent, In addition, an approximate 20 percent of the global market uses equipment supplied by our former Ljungström® licensees. The Ljungström Division continuously strives to stay in the ever adapting power generation field and during the current financial year, 30% of its orders came from recently diversified fields namely, offshore wind projects and improved heat recovery technology projects.

The Schmidt'sche Schack Division is a leading designer and manufacturer of high-temperate and high-pressure process heat transfer equipment for the chemical, petrochemical, metallurgical- and waste-to-value industries. Its products are especially used in ethylene production plants, in gasification- and steam reformer plants to recover valuable process heat and as the basis for methanol, hydrogen or ammonia production, and as high temperature products applied in the carbon black industry and direct reduced iron process.

Group set-up

Arvos Midco S.à r.l. was founded on 20 March 2014. On the same day, Arvos Midco S.à r.l. established Arvos Bidco S.à r.l. and Arvos Property S.à r.l. as its immediate subsidiaries. In turn, Arvos Bidco S.à r.l. established Arvos Holding GmbH, Arvos Holding K.K., and Arvos Holding Netherlands B.V as its immediate subsidiaries. Also, Arvos Holding GmbH established a subsidiary, Arvos Holding LLC since renamed Arvos Raymond Bartlett Snow Holding LLC, which was sold on 29 June 2018.

Effective 29 August 2014, the subsidiaries of Arvos Midco S.à r.l. acquired the steam auxiliary components business from Alstom Group's Thermal Power segment.

Information on the Group's structure is provided in note 3. Related party information is provided in note 32.

2. Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted in the European Union (EU).

The consolidated financial statements have been prepared on a historical cost basis, except for plan assets due to post-employment benefits, which are measured in accordance with the requirements of IAS 19 "Employee benefits" at fair value. Derivatives are also recorded on the balance sheet at fair value.

The Group's financial year starts on 1 April and ends on 31 March of the following year.

The consolidated financial statements are expressed in Euros and all values are rounded to the nearest thousand (€ 000), except when otherwise indicated. Rounding differences may occur.

The Group secured, by an Amend & Extent Agreement (A&E) on August 26, 2022 its main credit facilities; (Revolving Credit Facility (RCF), Bonding Facility and the Term loans until May 31, 2024 and August 29, 2024 respectively, together with a reset of financial covenants. All plans and forecasts show that the Group will be compliant with the set financial covenants at all times until the maturity dates -with sufficient headroom.

There are, in addition to the financial covenants, some non-financial covenants agreed upon relating to the restructuring of the group within a specified timeframe. It is important to point out that, in case these dates cannot be met, this would be no automatic event of default, but an event of default would only occur, if

―	the Group would fail to agree with the lenders on waiving these covenant dates beforehand and
―	lenders would agree by qualified majority to classify the non-compliance with these dates as an event of default, which they would only do, if this classification would be in their interest.

Both events are highly unlikely, the combination of both is even much more unlikely.

The Group has already started discussions with its main lenders in order to extend the current maturity dates for all of the above mentioned facilities far beyond the currently set dates. Although these discussions are at an early stage, first indications show strong support from the main lenders for such an extension.

In addition to the main credit facilities there are a few bilateral cash facilities in place, which the Group utilises from time to time. These are overdraft cash facilities with two banks with an amount of EUR 17,500 thousand in total, fully backed by ancillary lenders. As of March 31, 2023, these facilities have been used in an amount of EUR 9,249 thousand. Due to the nature of overdraft facilities, their extensions are always agreed upon short term. The current maturity dates are December 31, 2023 and March 31, 2024. If required, the Group will apply for these facilities to be extended. Normally this is done one to two months before expiration. In both cases extension is highly likely partly due to the fact that both facilities are backed by bank guarantees from the main bonding facility, so these are a zero-risk business for the banks involved.

In the unlikely event of non-prolongation of both facilities the Group is prepared to raise additional funds through specific transactions with third parties. Preparatory work on such transactions has been done already in order to be able to react even at short notice, if necessary. The indication for the additional cash to be generated by these transactions will exceed the total value of the loan facilities described in the preceding paragraph.

Plans and forecasts of the Group are prepared on a going concern basis, meaning the continuation and further improvement of the businesses of the Group, without a material sale of business and/or large assets. In addition, scenario analyses with projections are prepared on how the Group would develop in case an important transaction were to occur. From both perspectives the economic development of the Group shows a positive outlook without any major constraints for longer than one year. Liquidity forecasts are performed at a detailed level and renewed every month. These forecasts usually cover 12 months into the future, split into weekly forecasts numbers for the next quarter and monthly forecasts numbers for the time thereafter. At regular intervals a 2-years-liquidity forecast is also prepared. Here it is important to note that mitigating actions will be specified as a target to achieve. Mitigating actions can be a full refinancing, additional bilateral credit lines, more strict working capital management and more as required by the circumstances.

The Group has a negative equity position on its consolidated balance sheet. This is a very common situation for a private equity portfolio company and does not affect the development of the Group and its businesses. It is the clear understanding that the negative equity will be removed from the balance sheet by the selling proceeds as soon as all businesses of the Group will be divested at a later stage.

Losses accrued over time are wholly from interest expenses on the Term Loans and on the Preferred Equity Certificates, not from the operating business.

The equity situation of the legal entities of the Group is closely monitored so that all legal requirements in respect of the equity are met in the respective jurisdictions.

Management prepared the consolidated financial statements on a going concern basis.

3. Basis of consolidation and Group information

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 March 2023. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

―	Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee),
―	Exposure, or rights, to variable returns from its involvement with the investee,
―	The ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

―	The contractual arrangement with the other vote holders of the investee,
―	Rights arising from other contractual arrangements,
―	The Group's voting rights and potential voting rights.

The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests to have a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, noncontrolling interest and other components of equity while any resultant gain or loss is recognised in the statement of profit or loss. Any investment retained is recognised at fair value.

The consolidated financial statements of the Group include:

Company name	Place of business	% equity 31 Mar 2023	% equity 31 Mar 2022
Arvos Property S.à r.l	Luxembourg/Luxembourg	100.00	100.00
Arvos Bidco S.à r.l	Luxembourg/Luxembourg	100.00	100.00
ARVOS Holding GmbH	Heidelberg/Germany	100.00	100.00
ARVOS GmbH	Kassel/Germany	100.00	100.00
ARVOS Ljungström GmbH	Heidelberg/Germany	100.00	100.00
Arvos Ljungstrom LLC	Wellsville/USA	100.00	100.00
Arvos Schmidtsche Schack Holding LLC	Camden, Delaware/USA	100.00	100.00
Arvos Ljungstrom Holding LLC	Camden, Delaware/USA	100.00	100.00
Arvos Schmidtsche Schack LLC	Camden, Delaware/USA	100.00	100.00
Arvos Holding Netherlands B.V	Amsterdam/Netherlands	100.00	100.00
Arvos Ljungstrom Energy India Private Limited	Noida/India	100.00	100.00
Arvos K.K	Kobe/Japan	100.00	100.00
Arvos Schmidtsche Schack K.K	Kobe/Japan	100.00	100.00
ARVOS Ljungström s.r.o	Zidenice/Czech Republic	100.00	100.00
ARVOS Ljungström S.p. z.o.o	Poznan/Poland	100.00	100.00
Ljungström Arvos New Energy Technology (Shanghai) Co., Ltd	Shanghai/China	100.00	100.00
Arvos Schmidtsche Schack (Shanghai) Thermal Equipment Co., Ltd	Shanghai/China	100.00	100.00
Nantong Ljungström Environmental Tech Co., Ltd	Nantong/China	100.00	100.00
Ljungstrom Pty Ltd	Sydney/Australia	100.00	100.00
Arvos Schmidtsche Schack India Private Limited ¹⁾	Thane/India	100.00	100.00

¹⁾ Arvos Schmidtsche Schack India Private Ltd incorporated in November 2019, consolidated for the first time in March 2022

The holding Company

The next senior holding companies of Arvos Midco S.à r.l. are Alison Luxco S.à r.l and Triton Luxembourg II GP Alison S.C.A., (controlled by Alison Luxco S.à.r.l), which are based in Luxembourg. The ultimate holding and parent company of Arvos Midco S.à r.l. is Triton Fund IV L.P., which is based in Jersey.

The parent companies do not prepare consolidated financial statements. Arvos Midco S.à r.l prepares consolidated financial statements for the largest group of companies.

4. New accounting standards and changes in accounting policies

New and amended standards and interpretations

The Group applied all standards and interpretations (including amendments) as adopted by the EU in its consolidated financial statements, which are mandatory for the financial year starting on or after 1 April 2022. For the fiscal year, the Group applied the following new and revised IFRS standards and interpretations that were endorsed by the EU:

Standard/ Interpretation	Issued by IASB	Effective Date	Endorsement EU	Name
IFRS 3/ IAS 16/ IAS 37/DIV	May 2020	January 22	June 21	Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Assets and Annual Improvements 2018 - 2020

None of the pronouncements above had a material impact on the consolidated financial statements.

Standards issued but not yet effective

The Group intends to adopt these standards, if applicable, when they become effective. None of these standards and interpretations are expected to have a material impact on the Group.

Standard/ Interpretation	Issued by IASB	Effective Date	Endorsement EU	Name
IAS 1	January 20/July 20/October 22	January 24	Pending	Amendments to IAS 1 Presentation of Financial Statements:
				• Classification of Liabilities as Current or Non-current Date;
				• Classification of Liabilities as Current or Non-current - Deferral of Effective Date; and
				• Non-current Liabilities with Covenants
IFRS 16	September 22	January 24	Pending	Amendments to IFRS 16 Leases: Gains or losses arising from Sale and Leaseback transactions
IFRS 17	December 21	January 23	September 22	Amendment to IFRS 17 Insurance Contracts set out in Initial Application of IFRS 17 and IFRS 9 - Comparative Information
IFRS 17	May 17/June 20	January 23	November 21	IFRS 17 Insurance Contracts; including Amendments to IFRS 17
IAS 1	February 21	January 23	March 22	Amendment to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of material accounting policies
IAS 8	February 21	January 23	March 22	Amendment to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors: definition of accounting estimates
IAS 12	May 2021	January 23	August 22	Amendments to IAS 12: Income Taxes: Deferred tax related to assets and liabilities arising from a single transaction

5. Summary of significant accounting policies

Cash and short-term deposits

Cash and short-term deposits comprise cash at banks and on hand and short-term deposits with a maturity at acquisition of three months or less, which are subject to an insignificant risk of change in value. Due to government regulations and cash collateral requirements, parts of the Group's cash is not available for current use and is considered restricted cash. The Group held EUR 342 thousand in restricted cash as at 31 March 2023 and EUR 150 thousand as at 31 March 2022, respectively. These balances are not part of the Group's cash balance and are classified under Current Financial Assets.

Business Combinations and Goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any noncontrolling interests in the acquiree. For each business combination, the Group elects whether to measure the noncontrolling interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.

Goodwill represents the excess of the consideration transferred over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (badwill) it is recognised in profit or loss. Capitalised goodwill is not subject to amortisation. Goodwill has an indefinite useful life and is tested for impairment annually and at any other time when triggering events for impairment exist.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. The impairment test conducted in the previous financial year, dated December 31, 2021 resulted in the Group, for the first time since initial recognition, having to recognise an impairment loss on Goodwill to the amount of EUR 87,007 thousand in the statement of profit and loss (also see notes 10 and 11). For the current financial year, the impairment test dated 31 December 2022 did not result in an impairment.

Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit or loss in the expense category that is consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the statement of comprehensive income when the asset is derecognised.

Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:

―	The technical feasibility of completing the intangible asset so that the asset will be available for use or sale
―	Its intention to complete and its ability and intention to use or sell the asset
―	How the asset will generate future economic benefits
―	The availability of resources to complete the asset
―	The ability to measure reliably the expenditure during development

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete, and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in cost of sales. During the period of development, the asset is tested for impairment annually.

Research and development cost

Research costs are costs incurred for original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. They are expensed as incurred. Development costs are capitalised only after technical and commercial feasibility of the asset for sale or use have been established.

Concessions and licences

Concessions and licences acquired by the Group are carried at cost less accumulated amortisation and impairment losses. They are amortised over their expected useful lives which for the Group are within a range of three to ten years.

Trademarks

Trademarks were acquired through business combinations and measured initially at their fair value at the date of their acquisition. They have indefinite useful lives and are therefore not amortised but they have to be tested for impairment annually. The assessment of their indefinite lives is reviewed annually to determine whether the indefinite life continues to be supportable.

Customer relationships

Customer relationships were acquired through business combinations and measured initially at their fair value at the date of their acquisition. They have definite useful lives and they are amortised over their expected useful lives which for the Group are within a range of ten to fifteen years.

Property, plant and equipment

Construction in progress, plant and equipment is stated at cost less subsequent accumulated depreciation and impairment losses, if any. Such cost includes the cost of replacing part of the plant and equipment for long-term construction projects if the recognition criteria are met. When significant parts of plant and equipment are required to be replaced at intervals, the Group depreciates them separately based on their specific useful lives. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, as follows:

―	Buildings 10 to 25 years
―	Plant, machinery and equipment 3 to 11 years

An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income when the asset is derecognised.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

Taxes

Current income tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates and generates taxable income.

Current income tax relating to items recognised directly in equity is also recognised in equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

Deferred tax

Deferred tax is recognised using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

―	Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
―	In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised except:

―	Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
―	In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted at the end of the reporting period.

Deferred income tax relating to items recognised in other comprehensive income or directly in equity is recognised in other comprehensive income or directly in equity and not in the profit or loss.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, are recognised subsequently if new information about facts and circumstances change. The adjustment is either treated as a reduction in goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or recognised in profit or loss.

Value-added tax

Revenues, expenses and assets are recognised net of the amount of Value-added tax ("VAT") except:

―	If VAT incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case VAT is recognised as part of the cost of acquisition of the asset or as part of expense item as applicable; and
―	Where receivables, payables and finance lease liabilities are stated with the amount of VAT included.

The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the consolidated statement of financial position.

Foreign currencies

The Group's consolidated financial statements are presented in Euros, which is also the parent company's functional currency. That is the currency of the primary economic environment in which the Group operates. For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.

Foreign currency transactions and balances

Transactions in foreign currencies are initially recorded by the Group's entities at their respective functional currency spot rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.

Differences arising on settlement or translation of monetary items are recognised in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.

Foreign operations

The Group has analysed the group companies and concluded that for each company the currency of origin represents the functional currency. Foreign currency gains and losses can result from intragroup financing arrangements.

During consolidation, all assets and liabilities of group companies denominated in foreign currencies are translated into Euros at the closing rate. Income and expenses are translated at average exchange rates. The exchange differences arising on the translation are recognised in other comprehensive income.

On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is recognised in profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the closing rate.

Financial instruments

Financial assets

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

IFRS 9 comprises a classification and measurement approach for financial assets based on the business model within which they are held and their contractual cash flow characteristics. The following categories of financial instruments are possible under IFRS 9:

―	Debt instruments at amortised cost;
―	Debt instruments at fair value through other comprehensive income (FVOCI) with cumulative gains and losses reclassified to profit or loss upon derecognition of the financial asset (reclassification adjustment);
―	Debt instruments, derivatives and equity instruments at fair value through profit or loss (FVTPL);
―	Equity instruments at fair value through other comprehensive income (FVOCI) with gains and losses remaining in other comprehensive income (no reclassification adjustment).

Details on the classification of financial assets is provided below.

Category: Financial assets measured at amortised cost

Financial instruments that satisfy the following criteria are allocated to this category:

―	Financial instruments are held within a business model whose objective is to hold these in order to collect contractual cash flows.
―	The contractual terms of financial instruments give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Category: Financial instruments at fair value through profit or loss

If one of the above criteria is not satisfied or if the fair value option is exercised, the instruments are measured at fair value through profit or loss.

Category: Financial instruments at fair value through other comprehensive income

If the financial instrument is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the cash flows of the financial instrument are solely payments of principal and interest and if the financial instrument is not designated at fair value through profit or loss, the instruments are measured at fair value through other comprehensive income. In addition, there is an option relating to equity instruments that are not held for trading. These can be recognised either through other comprehensive income or through profit or loss.

Recognition and measurement

A regular way purchase or sale of financial assets is recognised and derecognised using date accounting or settlement date accounting. The method used must be applied consistently for all purchases and sales of financial assets that belong to the same category under IFRS 9. Arvos Group applies the trade date accounting method.

In accordance with IFRS 9, upon initial recognition all financial assets and financial liabilities are measured at fair value irrespective of the measurement category to which a financial instrument is allocated. Transaction costs are included in the carrying amount for financial instruments that are subsequently measured at amortised cost.

The subsequent measurement of financial assets depends on their classification. They are measured either at i) amortised cost, ii) fair value through profit or loss, or ill) fair value through other comprehensive income.

The effective interest method is used for instruments measured at amortised cost and for instruments measured at, fair value through other comprehensive income (FVOCI).

Impairment of financial assets

The basic principle of impairment in IFRS 9 allows distinguishing between three levels that differ in terms of period considered, loss allowances and recognition of interest revenue. In addition, impairment losses are recognised in profit or loss. Financial instruments are generally allocated to level 1 with the explicit exception of financial assets that are credit-impaired already at initial recognition.

―	Level 1 : Financial instruments whose credit risk at the reporting date has not increased significantly since initial recognition are recognised through profit or loss at the amount of the 12-month expected credit loss (ECL). Interest income is recognised based on gross carrying amount;
―	Level 2: If the credit risk has increased significantly as of the reporting date, a loss allowance is recognised at the amount of the lifetime ECL. The ECL is a probability-weighted estimate of credit losses. Interest income is recognised in the same way as in level 1 ;
―	Level 3: If there is objective evidence that a financial instrument is credit-impaired, it is allocated to level 3. The loss allowance is also recognised at the amount of the lifetime ECL. However, interest income is adjusted in subsequent periods such that the amount of interest is based on net carrying amount in future.

Loss allowances for trade receivables are generally calculated and recognised based on the lifetime ECL. The Group has not had any losses on contract assets to date.

Additionally, a financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired.

Objective evidence that financial assets are impaired includes default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in profit or loss.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost the reversal is recognised in profit or loss.

Financial assets together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group.

Financial liabilities

Financial liabilities are classified, at initial recognition, as

―	financial liabilities at fair value through profit or loss and
―	other financial liabilities measured at amortised cost.

All financial liabilities are recognised initially at fair value and, in the case of financial liabilities measured at amortised cost, net of directly attributable transaction costs.

Liabilities measured at amortised cost is the only category relevant to the Group within non-derivative financial instruments as of the reporting date and the previous period and includes loans and borrowings due to banks loans and borrowings due to shareholders, and trade and other payables. The Group has not designated any financial liability at fair value through profit or loss within non-derivative financial instruments. After initial recognition, the financial liabilities are subsequently measured at amortised cost using the effective interest rate method. Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the effective interest rate amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. The effective interest rate amortisation is included in interest expenses in the statement of comprehensive income.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

Derivative financial instruments

Foreign exchange swaps and forward contracts are currently not accounted for using hedge accounting under IFRS. Foreign exchange swaps and forward contracts are accounted for as either financials assets or financial liabilities at fair value through profit and loss (FVTPL); hence all changes in the fair value of the foreign exchange swaps and forward contracts are directly recognised in the profit and loss statement.

Connected with the EUR B3 loan, multiple embedded derivatives, which qualifies for bifurcation, were identified. These derivatives consist of an interest rate floor and a prepayment option. Both derivatives are to be measured at fair value through profit or loss (FVTPL), thus all changes in the fair value of the interest rate floor are recognised in the profit and loss statement.

Assets held for sale and discontinued operations

Non-current assets are to be classified as held for sale when the respective carrying amount is mainly realised through sale and not from continued use and various criteria are met indicating that a sale of the asset is highly probable. The non-current assets and disposal groups held for sale are separately recognised in the statement of financial position and are measured at the lower of either their carrying amount or fair value minus costs of disposal. The depreciation of assets or disposal groups ends with the classification as held for sale. There may be uncertainties in determining the fair value, minus costs to sell, which result from the use of estimates and assumptions.

A discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale, and represents a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale.

Inventory

Inventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and conditions are accounted for as follows:

―	Raw materials: purchase cost on a first in, first out basis,
―	Work in progress: cost of direct materials as well as labour and a proportion of manufacturing overheads based on the normal operating capacity but excluding borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Impairment of non-financial assets

Acquired goodwill is not subject to amortisation. It is assessed annually for impairment and can be assessed more frequently, if there might be any indication for impairment during the year. Intangible assets with indefinite useful lives are also subject to an annual impairment test and not to amortisation.

Apart from the annual impairment test of goodwill and intangible assets with indefinite useful lives, the Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. The recoverable amount of an asset is defined as the higher of its fair value less costs of disposal and its value in use. In assessing the value in use, the estimated future cash flows are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit (CGU). If the carrying amount exceeds the recoverable amount, the difference is recognised as an impairment loss in the income statement. For the impairment test, assets are reflected at the lowest level for which cash flows are separately identifiable. If the cash flow for an asset is not separately identifiable, the impairment test is conducted on the basis of the CGUs to which the asset belongs.

Goodwill is allocated to CGUs to perform an annual impairment test on goodwill. The allocation is made to those CGUs or groups of CGUs that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment.

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGUs and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed even in case of subsequent increase in value. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed, if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Measurement of fair values

A number of the Group's accounting policies and disclosures require the determination of fair value for both financial instruments and non-financial assets and liabilities. Fair value is defined by IFRS 13 as 'the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When measuring the fair value of an asset or liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

―	Level 1 : quoted prices (unadjusted) in active markets for identical assets or liabilities
―	Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices)
―	Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

If the inputs to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

Provisions for pensions and similar obligations

The Group operates several defined benefit pension plans, which require contributions to be made to a separately administered fund. The assets held by that fund qualify as plan assets. These plan assets are measured at fair value and netted off against the pension liability recorded.

The Group also provides certain additional post employment healthcare benefits to employees in the United States. These benefits are unfunded.

The cost of providing benefits under the defined benefit plan is determined using the projected unit credit method. Remeasurements, comprising of actuarial gains and losses, the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability and the return on plan assets (excluding amounts included in net interest on the net defined benefit liability), are recognised immediately in the statement of financial position with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.

Past service costs are recognised in profit or loss on the earlier of:

―	The date of the plan amendment or curtailment, and
―	The date that the Group recognises related restructuring costs.

Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. These costs are recognised as finance cost. The Group recognises service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements in the net defined benefit obligation under 'cost of sales', 'administration expenses' and 'selling and distribution expenses' in consolidated statement of comprehensive income (by function).

Payments for defined contribution plans are recognised as expenses at the time the employees render the service. These payments include contributions to statutory pension insurance. Under defined contribution plans, the Group pays contributions to public or private pension insurance schemes on the basis of statutory requirements or contractual terms or on a voluntary basis. The Group does not have any other benefit obligations beyond the payment of contributions. Current contributions are recognised as an expense in the relevant year.

Other Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in profit or loss net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. If discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Provisions for warranty-related costs are recognised when the product is sold or service is provided to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is reviewed annually.

Revenue recognition

Revenues comprise sales of products, construction contract sales and aftermarket sales and services.

Sale of products

Under IFRS 15, the recognition of sales with customers is based on the point in time at which the respective performance obligation(s) is (are) fulfilled for Arvos Group, i.e. the control over the product transfers to the customer. This is fulfilled when the customer has the opportunity to utilise the asset and essentially receives all of the economic benefit of the asset. Revenue is recognised when the expected consideration can be reliably measured and it is expected that the economic benefits associated with the sale will flow to the Group.

The Group considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction price for the sale of products and the provision of services, the Group considers the effects of variable consideration, the existence of significant financing components, and consideration payable to the customer (if any).

Revenues for the sale of products are shown under sale of goods (see note 26).

Construction contracts in progress - Revenue recognition over a period of time

Revenue from contracts with customers is recognised over a period of time, if the Group's performance creates or expands an asset over which the customer has control, or an asset is created for which the Group has no alternative use and the customer simultaneously receives the benefit with the performance and the Group has a right to receive consideration for the work already performed.

If the relevant criteria are fulfilled, Arvos Group recognised revenues over a period of time according to the stage of completion of the contract. The stage of completion of a contract is determined by an output oriented method (milestone method). Arvos Group satisfies a performance obligation and recognises revenue over a period of time, since it does not have an alternative use for the combined output/main product and has a right to payment in the case of a premature contract termination by the customer.

Revenue is recognised in profit or loss in the accounting periods in which the work is performed if the outcome of a construction contract can be estimated reliably. Contract costs are recognised as an expense in profit or loss in the accounting periods in which the work to which they relate is performed. However, any expected excess of total contract costs over total contract revenue for the contract is recognised as an expense immediately and separately presented as onerous contract provision.

Generally, a customer contract can either have a positive balance (contract asset) or a negative balance (contract liability).

A contract asset is recognised if the Group performs by transferring goods or services to a customer before the customer pays consideration or before payment is due. Contract assets are subject to the impairment approach according to IFRS 9.

A contract liability is recognised if a customer pays consideration before the Group transfers goods or services to the customer. Contract liabilities are recognised as revenue when the respective performance is fulfilled under the contract.

Revenues for construction contracts in progress are shown under sale of goods (see note 26).

Aftermarket sales and services

Revenue from aftermarket sales is recognised when the transfer of control to the customer is completed, the consideration can be reliably determined and it is probable that the associated receivables will be collected.

Revenue from aftermarket sales is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the equipment. For revenue to be recognised the consideration needs to be reliably determined and it needs to be probable that the associated receivables will be collected.

Revenues from the rendering of services are recognised over time, using an input method to measure progress towards complete fulfillment of the service, since the customer simultaneously receives and consumes the benefits provided by the Group's performance.

Revenues for aftermarket sales and services are shown under the same heading (see note 26).

Leases

A lessee is required to recognise the rights and obligations from all leases in the balance sheet as right-of-use assets and lease liabilities. Lease liabilities are measured at the present value of the future lease payments at the commencement date. Right-of-use assets comprise the amount of the initial measurement of the lease liability plus any lease payments made at or before the commencement date, less any lease incentives received, and plus initial direct costs and any restoration obligations. Variable lease payments are not included in the lease liability.

The Group applies the practical expedient relating to leases for which the lease term ends within twelve months and accounts for such leases as short-term leases, including the associated cost within the disclosure of lease expenses. The Group additionally exercises the option not to apply the recognition and measurement principles of IFRS 16 for leases of low-value assets.

In subsequent measurement, the carrying amount of the lease liability is increased using the applied interest rate and reduced to reflect the lease payments made. Right-of-use assets are subsequently depreciated over the term of the lease.

The remaining economic useful lives are as follows:

Remaining useful lives of Right-of-use assets

Right-of-use assets for land and buildings	1 - 7 years
Right-of-use assets for technical equipment and machines	1 - 7 years
Right-of-use assets for other equipment	1 - 4 years

The straight-line method of depreciation is used for the right-of-use assets.

Share-based payment awards

The owners of Arvos Group operate an incentive program under which senior executives and other employees hold indirect investments in Arvos Midco S.à r.l. This management participation is accounted for as share-based payment plan under IFRS 2. Based on the terms and conditions of the plan, the plan was classified as equity-settled plan. At grant date it was determined whether a benefit was granted to participants of this plan. Any such benefit would be recognised over the applicable vesting period or any earlier divestiture. Refer to note 32.

Government grants

Government grants related to income are shown as other operating income or as a reduction of the respective expense. The Group applies and receives subsidies for personnel expenses, which were directly offset against the respective expenses, i.e. cost of sales, selling and distribution expenses, research and development expenses, and administrative expenses. Additionally, in FY2022 some entities in the Group received COVID -19 related subsides. In the current year, EUR 300 thousand in business support-based government subsidies have been received. In the previous year, EUR 359 thousand was received which was a mix of business support and COVID-19 related government subsidies

6. Significant accounting judgments, estimates and assumptions

Since its outbreak in late 2019, the COVID-19 decease caused by the coronavirus had spread globally within a six month period. To counter this spread, restrictions were placed on public life which significantly impacted the worldwide economy. The damaging effects to many businesses still persists although not as severely as in the previous years. ARVOS Group companies have production and sales locations in several countries and hence, were impacted globally. However, the COVID-19 financial impact has reduced significantly during the current financial year 2022/2023 for the markets in which the Group is active.

For the Group, the recovery to pre-pandemic levels has already taken place in the current year and this is expected to continue into the next 3 year planning period. There had been a general decline in order intake and sales at Ljungstrom division during the previous years when compared to pre-COVID-19 years.

Towards the end of the last financial year 2021/2022, a number of countries (including the EU) imposed sanctions against certain entities and individuals in Russia as a result of the official recognition of the Donetsk People Republic and Lugansk People Republic by the Russian Federation. Due to the growing geopolitical tensions, since February 2022, there has been a significant increase in volatility on the securities and currency markets, as well as a significant depreciation of the ruble against the US dollar and the euro. These events affect the activities of Russian enterprises in various sectors of the economy. Furthermore, in view of the war in Ukraine and the energy crisis, the euro came under pressure against the US dollar, falling sharply to a 20-year low of 0.95 US dollars to the euro in September, before recovering in the following month.

Arvos Group has a very limited exposure to Russia and this conflict and has managed even any indirect impact from this crisis relatively well, materializing in additional supply chain disruptions, sharp price increases for supplies and energy and a more reluctant behaviour in the economic sector again. High inflation and the war in Ukraine are likely to continue weighing on the global economy. Although the Group does not expect an increasing impact of the Russia-Ukraine war on the Group's business activities, it is difficult to foresee the further development of this crisis and its precise impact on the markets relevant for Arvos Group.

Although neither the company's performance nor its operations, at the date of this report, have been significantly impacted by the war in Ukraine, the Board of Directors continues to monitor the evolving situation and its impact on the financial position and results of the company.

The preparation of consolidated financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts. These estimates are based on information available as at the end of the reporting period. Actual results could differ from these estimates. The key judgments, estimates and assumptions concerning the future and other key sources of estimation uncertainty at the end of the reporting period that represents a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities in the next financial year are discussed in the following section.

Judgments

Loans and borrowings

The Group has issued preferred equity certificates (PECs) to its shareholders (see note 21). The respective PECs bear an annual fixed interest of 11 %. By analysing the interest level with its external debt as well as the interest yield on the market for instruments with similar terms issued by companies with a similar rating, the Group concluded that the fixed rate of 11% fairly presents a market rate and does not include any advantages given by or to the shareholders.

In February 2021 an Amend & Extend of credit facilities (A&E), plus a one-year extension option to August 2024 was agreed with the lenders. The one-year extension option was exercised in August 2022, For the one-year extension new transaction costs of EUR 2,993 thousand were incurred and reduced the respective liabilities for all loans as these were recalculated and extended to the new dates. The one-year extension option of the loans created an additional one-off adjustment in the current financial year on the carrying values of all loans. The one-off adjustment was expensed immediately and was EUR 21,340 thousand.

As previously, the loans include several embedded derivatives like embedded interest floors and prepayment options. By analysing the terms as well as the market environment (regarding market interest rates) the Group concluded that those identified embedded derivatives can be considered as closely related to the host contract and hence a bifurcation was not considered to be necessary for the EUR B1 and B2 as well as for the USD B1 and B2 loans. With regards to the EUR B3 loan, which was drawn in May 2017, it was concluded that multiple embedded derivatives included in the loan agreement, qualify for bifurcation at the inception of the loan in general. Given the specific facts and circumstances at inception of the loan in terms of a rather short term maturity and no significant possibilities and advantages of an early prepayments it was concluded that these derivatives have a fair value close to nil.

Estimates

Goodwill impairment test

Goodwill is tested annually for impairment on the basis of value in use. This impairment test is based on cash flows derived from management's forecasts. In addition, it requires significant estimates, such as the discount rate and growth rate applicable to each CGU to which goodwill was allocated. These inputs need to be reviewed on each impairment testing date and may change as a result of current developments related to the business and capital markets.

In the previous financial year FY2021/2022, the impairment test dated December 31, 2021 showed an impairment loss of EUR 87,007 thousand for CGU Ljungstrom since its value in use was below the carrying amount. For the current financial year, the impairment test dated 31 December 2022 did not result in an impairment.

Further details are given in note 10.

Warranty provisions

The estimated warranty costs are based on historical product performance. On a regular basis, the Group assesses, and updates if necessary, its accounting estimates used to calculate the standard warranty provision based on the latest actual historical warranty expenses and expected future warranty expenses. The actual product performance may differ, and in those cases the Group adjusts our warranty reserves accordingly. Future warranty expenses may exceed our estimates, which could lead to an increase in our cost of sales. Reversal of warranty provisions are also recorded in cost of sales.

Further details are given in note 19.

Defined benefit liability

The cost of the defined benefit pension plan and other post-employment medical benefits and the present value of the pension obligation are determined using actuarial valuations including the fair value valuation of the plan assets, generally involving certain specialists. An actuarial valuation involves making various assumptions that may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexities involved in the valuation and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions. All assumptions are reviewed at each reporting date.

The parameter most subject to change is the discount rate. In determining the appropriate discount rate, management considers the interest rates of corporate bonds in currencies consistent with the currencies of the postemployment benefit obligation with at least an 'AA' rating or above, as set by an internationally acknowledged rating agency, and extrapolated as needed along the yield curve to correspond with the expected term of the defined benefit obligation. The underlying bonds are further reviewed for quality. Those having excessive credit spreads are excluded from the analysis of bonds on which the discount rate is based, on the basis that they do not represent high quality corporate bonds.

The mortality rate is based on publicly available mortality tables for the specific countries. Those mortality tables tend to change only at intervals in response to demographic changes. Future salary increases and pension increases are based on expected future inflation rates for the respective countries.

The Group's plan assets are measured at fair value on each reporting date. Where these plan assets are not actively traded, their fair values need to be determined using accepted valuation techniques.

Further details about pension obligations are given in note 20.

Revenue recognition under IFRS 15 over a period of time

The assessment of the stage of completion of long-term construction contracts is based on the percentage of completion of the respective performance obligation, subject to certain conditions being met. When applying this method, it is necessary to evaluate the stage of completion of the contract. Moreover, it is necessary to provide estimates of total contract costs and total contract revenue and make an assessment of the risks attached to the contract, including technical, political and regulatory risks. Total expected revenue and cost on a contract reflect management's current best estimate of the probable future benefits and obligations associated with the contract. Assumptions to calculate present and future obligations take into account current technology as well as the commercial and contractual positions, assessed on a contract-by-contract basis.

Obligations on contracts may result in penalties due to late completion of contractual milestones, or unanticipated costs due to project modifications, suppliers or subcontractors' failure to perform or delays caused by unexpected conditions or events. Warranty obligations are affected by product failure rates, material usage and service delivery costs incurred in correcting failures.

Although the Group makes individual assessments on contracts on a regular basis, there is a risk that actual costs related to those obligations may exceed initial estimates. Estimates of contract costs and revenues at completion in case of contracts in progress and estimates of provisions in case of completed contracts may then have to be reassessed.

Changes in estimates may lead to an increase or decrease in revenue. Further details about revenues from construction contracts recognised overtime are given in note 14.

Leases

In accordance with IFRS 16 right-of-use assets and the corresponding lease liabilities have been recognised on the balance sheet of the Group. In determining the amounts of the recognised assets and liabilities certain judgements were necessary. These judgements mainly relate to the determination of the respective discount rate, the expected lease terms as well as the exercise of options to extend the leases. Changes in these estimates may lead to a change in the right-of-use assets and the lease liability. Further details are given in note 31.

Deferred tax asset recoverability

Deferred tax assets (see Note 25) are recognised to the extent that it is probable that they will be recovered, which is dependent on the generation of sufficient future taxable profit. Assumptions about the end of future taxable profits depend on management's estimates of future cash flows. These judgments and estimates are subject to risks and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets recognised at the reporting date. In such circumstances, some, or all, of the carrying amount of recognised deferred tax assets may require adjustment, resulting in corresponding credit or charge to the income statement.

Further details about deferred taxes are given in note 25.

Loans and Borrowings

The above mentioned PECs, issued in two tranches, August 2014 and February 2021 have final maturity in 2044 and 2051 respectively but earlier redemptions are possible. They are amortised using the effective interest rate method on the basis of its final maturity date.

Further details about the PECs are given in note 21. Also refer to the accounting judgements related to the PECs described earlier.

Non-current assets held for sale and discontinued operations

Under the criteria as set by IFRS 5, no segment of Arvos Group is considered as an asset for sale in the financial statements per 31 March 2023. The Group is not showing any Assets held for sale nor any Liabilities associated with assets held for sale. Furthermore, none of the Group's segments or business units is considered as a discontinued operation in FY 22/23.

7. Capital management

The Group analyses its capital based on the equity attributable to the equity holders of the parent, including all components of equity, and the shareholder loans as shown on the face of the consolidated statement of financial position. The primary objective of the Group's capital management is to maximise the value of the Group.

It is the objective of the capital management of the Group to ensure, amongst other things, that it meets the financial covenants attached to its credit agreements (see note 21). The Group's Credit Agreements that were renegotiated in FY2021 as an Amend and Extend Agreement (A&E) (see note 21) defined a set of financial covenants which have to be met over the term. For the financial year ending March 31, 2023 the following financial covenants had been set. For the first three quarters of the financial year the two applicable covenants were: i) a minimum EBITDA adjusted and ii) a minimum liquidity level. For the final quarter of the year, the minimum EBITDA adjusted is not applicable and was replaced by a Net Debt Leverage Covenant (NDLC). Breaches in meeting any financial covenant would permit the banks to immediately call in all loans and borrowings. The Group was not in breach of any of the covenants, as applicable, during the financial year ended March 31, 2023.

The NDLC which came in force from quarter 4 of FY2023 onwards is not a springing covenant, but applicable as a fixed covenant and is defined as Net Debt divided by EBITDA adjusted. Applicable covenant levels are taken as a maximum ratio from the Independent Business Report/S6 Report provided by an external advisor in the course of the A&E refinancing. The NDLC is tested quarterly and for March 31, 2023 it is predefined at 9.5x. For the next financial year, at June 30 it is predefined at 9.5x whereas for September 30 and December 31 it is predefined at 7.1x and for March 31, 2024 it is predefined at 8.1x.

The second covenant is the reporting of the achieved and the expected liquidity level over a 4 to 5 weeks (one month) actual period and a 13-week forecast period respectively, where the liquidity level must not fall below EUR 10,000 thousand for more than a defined very short period of time. Both covenants are key performance indicating numbers, used by ARVOS management for purposes of management reporting and lenders reporting.

As at March 31, 2023 the achieved NDLC stood at 7.9x for covenant testing purposes. The net debt amounted to EUR 405,673 thousand and the EBITDA adjusted LTM was at EUR 51,071 thousand (PY covenant: EUR 49,759 thousand). The available liquidity level was (on the last week's end of financial year 2023) at EUR 33,733 thousand (PY: EUR 39,546).

The Group, for purposes of reporting to lenders and others, defines Net Debt as 1 ^st lien debt Term loans plus utilised portion of the revolving credit facility, including all PIK, less cash and short-term deposits but those from discontinued operations. Debt values in this calculation represent nominal levels and differ from balances in note 21. EBITDA adjusted LTM is the consolidated adjusted EBITDA of the Group for the most recent four fiscal quarter periods ended and excludes all effects from PPA and from discontinued operations. EBITDA adjusted is the operational earnings before deducting depreciation, amortisation, interest and tax and with normalised costs (Adjustments) added back. Adjustments either have to meet a defined criteria for restructuring measurements or one-time effects or they result from fair value valuations of open hedging contracts which are presented as part of the financial result below EBITDA. P&L effects from IFRS 16 accounting are included because of their ongoing nature.

The Group manages its capital structure and makes adjustments in light of changes in economic conditions. The Group monitors capital by monitoring the NDLC that it would not rise above 85% of a pre-defined level.

The minimum Liquidity Covenant is tested every month for the specified weeks mentioned below. The covenant would be breached if the available cash of EUR 10,000 thousand for the Group (with a special correction for the countries China and India) would not be achieved on 2 Fridays of the reporting month or on 2 consecutive Fridays of the 13 weeks forecast period, or on any 3 Fridays during the 13 weeks forecast period. Available cash is the cash at hand plus available, but not drawn credit facilities. The Group pays special attention to credit facilities which are running out and the prolongation or renewal is asked for where required.

No changes were made in the objectives, policies or processes for managing capital during the year ended 31 March 2023.

8. Property, plant and equipment

	Land and buildings €000	Plant and machinery € 000	Construction in progress € 000	Other equipment €000	Total € 000
Cost
At 1 April 2022	22.381	24.500	2.133	4.436	53.450
Additions	714	635	6.317	689	8.355
Disposals	-6.080	-2.642	0	-621	-9.343
Transfers between categories	2.697	507	-3.264	60	0
Exchange differences	65	0	-161	-22	-118
At 31 March 2023	19.777	23.000	5.025	4.542	52.344
Depreciation
At 1 April 2022	8.401	13.371	0	2.188	23.960
Depreciation for the year	1.391	2.718	0	677	4.786
Disposals	-2.128	-2.642	0	-617	-5.387
Exchange differences	56	209	0	16	281
At 31 March 2023	7.720	13.656	0	2.264	23.640
Net book value
At 1 April 2022	13.980	11.129	2.133	2.248	29.490
At 31 March 2023	12.057	9.344	5.025	2.278	28.704

Cost	Land and buildings € 000	Plant and machinery € 000	Construction in progress € 000	Other equipment € 000	Total €000
At 1 April 2021	21.626	23.747	754	4.493	50.620
Additions	248	390	1.282	332	2.252
Disposals	-68	-314	0	-435	-817
Transfers between categories	0	0	0	0	0
Exchange differences	575	677	97	46	1.395
At 31 March 2022	22.381	24.500	2.133	4.436	53.450
Depreciation
At 1 April 2021	6.798	10.072	0	1.983	18.853
Depreciation for the year	1.296	3.180	0	623	5.099
Disposals	-33	-314	0	-427	-774
Exchange differences	340	433	0	9	782
At 31 March 2022	8.401	13.371	0	2.188	23.960
Net book value
At 1 April 2021	14.828	13.675	754	2.510	31.767
At 31 March 2022	13.980	11.129	2.133	2.248	29.490

9. Right-of-use assets

The right-of-use assets and the respective development of these assets is shown within the following table.

	Land and buildings € 000	Plant and machinery €000	Other equipment € 000	Total €000
Cost
At 1 April 2022	16,854	721	1,066	18,641
Additions	4,748	1,602	221	6,571
Disposals	-18		-232	-250
Exchange differences	-610	-30	2	-638
At 31 March 2023	20,974	2,293	1,057	24,324
Depreciation
At 1 April 2022	9,606	340	546	10,492
Depreciation for the year	2,541	181	291	3,013
Disposals	-18		-232	-250
Exchange differences	-379	-2	3	-378
At 31 March 2023	11,750	519	608	12,877
Net book value
At 1 April 2022	7,248	381	520	8,149
At 31 March 2023	9,224	1,774	449	11,447

Cost	Land and buildings €000	Plant and machinery €000	Other equipment €000	Total €000
At 1 April 2021	17,077	700	1,047	18,824
Additions	778	88	330	1,196
Disposals	-1,131	-84	-364	-1,579
Exchange differences	130	17	53	200
At 31 March 2022	16,854	721	1,066	18,641
Depreciation
At 1 April 2021	8,147	295	619	9,061
Depreciation for the year	2,605	124	271	3,000
Disposals	-1,131	-84	-364	-1,579
Exchange differences	-15	5	20	10
At 31 March 2022	9,606	340	546	10,492
Net book value
At 1 April 2021	8,930	405	428	9,763
At 31 March 2022	7,248	381	520	8,149

Land and building additions contain a single transaction for EUR 2,561 thousand which was the successful completion of the "sale and leaseback" of a production facility at Kassel, Germany. The Gain from this transaction amounted to EUR 4,562 thousand and is included in Note 27 among Income from sale of assets.

10. Goodwill and intangible assets with indefinite useful lives

Goodwill acquired through business combinations was allocated to the CGUs Ljungstrom (LJU) and Schmidtsche Schack (SCS), which were also operating and reportable segments for impairment testing. The Group performed its annual impairment test of the Goodwill in December 2022.

Goodwill and trademark break down as follows:

FY 22/23	LJU 31.03.2023 € 000	SCS 31.03.2023 € 000	Total 31.03.2023 €000
Goodwill (net)	154,848	178,483	333,331
Trademark	3,931	1,506	5,437
Total	158,779	179,989	338,768

In the previous financial year FY2021/2022, the impairment test dated December 31, 2021 showed an impairment loss of EUR 87,007 thousand for CGU Ljungström since its value in use was below the carrying amount.

FY 21/22	LJU 31.03.2022 €000	SCS 31.03.2022 €000	Total 31.03.2022 €000
Goodwill (net)	157,174	178,744	335,918
Trademark	3,855	1,506	5,361
Total	161,029	180,250	341,279

The impairment is presented separately in the previous year profit and loss account under the title "Impairment losses". Circumstances and events leading to the impairment are described on page 35. On the date of the impairment test the Euro equivalent impact recorded in the statement of profit and loss was €87m. The value in the table above is at the year ending March 31, 2022 and includes fx effects of €1.1 m see note 11.

Goodwill is tested for impairment at least once a year or when there is an impairment trigger by comparing the carrying amounts of the CGUs to which goodwill is allocated with their value in use. Value in use is determined using the discounted cash flow method based on the current planning for the CGU concerned.

The principal planning assumptions are:

1. Revenue/EBITDA Margin

2. Price trends for materials and external services

3. Discount Rates

4. Growth rate, which was used for the extrapolation of the cash-flow forecasts outside the financial planning period

Revenue/EBITDA-Margin - the budgeted revenues and results for each CGU are based on freely available economic and industry-specific data and take into account past trends and occurrences alongside current market forecasts. For the goodwill impairment test, cashflow forecasts based on the most recently approved budget from FY2024 to FY2026 are extrapolated by management.

Price trends for materials and external services - Estimations are based on published price indices for the countries from which the company purchases its raw materials, as well as data for the specific raw materials required. Third party forecasts are only considered if these are freely available in the public domain. If this is not the case, past price trends are used to estimate future price developments.

Discount Rates - The underlying discount rates reflect the current market forecasts with regards to the CGU specific risks, including interest rate and asset specific risks, for which no adjustments regarding the forecasted future cash flows were made. The calculation of the discount rate takes into account the specific circumstances of the group and its business units, as well as being based on the group's weighted average cost of capital (WACC). The weighted average cost of capital takes into account the characteristics of the capital structure of the peer-group and considers both equity and debt financing. The individual business risk is reflected through the use of a peer-group specific beta-factor. The beta-factor is calculated annually based on freely available market data.

The input parameter of the impairment test performed are stated for each CGU in the table below. No impairment had to be recognised since the values in use exceed the carrying amounts of the respective CGUs.

As at 31 March 2023 the group's input parameters were as follows:

	LJU	SCS
Post-tax WACC	9.20%	8.99%
Pre-tax WACC	12.02%	12.18%
Long-term growth	1.00%	1.00%

The impairment test dated December 31, 2021 showed an impairment loss of EUR 87,007 thousand for CGU LJU since its value in use was below the carrying amounts. Only the goodwill amount was subject to impairment on the basis of this annual test. The impairment loss is recognised in the consolidated statement of comprehensive income which presents expenses by function. As this loss could not be allocated to any of the specific functions, it is shown separately. This loss is assigned to entities of the CGU LJU.

As at 31 March 2022 the group's input parameters were as follows:

	LJU	SCS
Post-tax WACC	7.54%	7.37%
Pre-tax WACC	10.47%	10.36%
Long-term growth	1.00%	1.00%

Since its outbreak in late 2019, the COVID-19 decease caused by the coronavirus had spread globally within a six month period. ARVOS Group companies have production and sales locations in several countries and were impacted globally and there had been a general decline in order intake and sales at Ljungström division when compared to pre-COVID-19 years. During the current financial year 2022/2023 a recovery to pre-pandemic levels has taken place in and this upward trend is expected to continue into the next 3 year planning period. This is true for all the markets in which the Group is active.

Cash flows are forecasted on the basis that revenue and cost projections for each CGU to which goodwill is allocated. Goodwill is only impaired if the CGU's value in use is less than the carrying amount.

Following sensitivity analyses have been performed:

―	WACC has been increased by 0.5% and long-term growth rate has been decreased by 0.2% simultaneously
―	WACC has been increased by 1.0% and long-term growth rate has been decreased by 0.5% simultaneously
―	CGU SCS having a lower headroom was further tested to ascertain at what stage of WACC increase and growth decrease it would not have any headroom

For the first scenario no impairment would occur for either CGU. For the second scenario there would no impairment for the CGU LJU however, the CGU SCS would face an impairment in the amount of EUR 13,926 thousand in the current year. The original test for the CGU SCS gave a headroom of EUR 20,615. A WACC increase of 0.5% and a growth decrease of 0.34% respectively would result in a break-even scenario for the CGU SCS.

11. Intangible assets

Cost	Goodwill €000	Customer Relations €000	Order Backlog €000	Technology and Licences €000	Other €000	Trademark €000
At 1 April 2022	421,841	159,791	46,776	28,627	68	5,361
Additions (from internal development)	0	0	0	32	0	0
Additions	0	0	0	2,546	17	0
Disposals	0	0	0	-13	0	0
Exchange differences	-3,855	-1,788	-437	232	-47	76
At 31 March 2023	417,986	158,003	46,339	31,424	38	5,437
Amortisation and impairment
At 1 April 2022	85,923	120,633	46,776	21,087	32	0
Amortisation for the year	0	15,755	0	3,189	37	0
Disposals	0	0	0	-13	0	0
Exchange differences	-1,268	-1,636	-437	151	-43	0
At 31 March 2023	84,655	134,752	46,339	24,414	26	0
Net book value
At 1 April 2022	335,918	39,158	0	7,540	36	5,361
At 31 March 2023	333,331	23,251	0	7,010	12	5,437

Cost	Total €000
At 1 April 2022	662,464
Additions (from internal development)	32
Additions	2,563
Disposals	-13
Exchange differences	-5,819
At 31 March 2023	659,227
Amortisation and impairment
At 1 April 2022	274,451
Amortisation for the year	18,981
Disposals	-13
Exchange differences	-3,233
At 31 March 2023	290,186
Net book value
At 1 April 2022	388,013
At 31 March 2023	369,041

	Goodwill € 000	Customer Relations € 000	Order Backlog €000	Technology and Licences €000	Other € 000	Trademark € 000
Cost
At 1 April 2021	421,287	157,696	46,506	27,426	76	5,148
Additions	0	0	0	438	36	0
Disposals	0	0	0	-181	0	0
Exchange differences	554	2,095	270	944	-44	213
At 31 March 2022	421,841	159,791	46,776	28,627	68	5,361
Amortisation and impairment
At 1 April 2021	0	103,726	46,506	17,571	30	0
Amortisation for the year	0	15,469	0	3,029	43	0
Impairment losses	87,007	0	0	0	0	0
Disposals	0	0	0	-181	0	0
Exchange differences	-1,084	1,438	270	668	-41	0
At 31 March 2022	85,923	120,633	46,776	21,087	32	0
Net book value
At 1 April 2021	421,287	53,970	0	9,855	46	5,148
At 31 March 2022	335,918	39,158	0	7,540	36	5,361

	Total € 000
Cost
At 1 April 2021	658,139
Additions	474
Disposals	-181
Exchange differences	4,032
At 31 March 2022	662,464
Amortisation and impairment
At 1 April 2021	167,833
Amortisation for the year	18,541
Impairment losses	87,007
Disposals	-181
Exchange differences	1,251
At 31 March 2022	274,451
Net book value
At 1 April 2021	490,306
At 31 March 2022	388,013

Trademarks are intangible assets with indefinite useful lives that have been acquired as part of a business combination. Given the consistency and strength of the brands, indefinite useful lives are assumed, and these intangible assets are not subject to scheduled amortization. The trademarks are measured at cost and are tested within the framework of the of the annual Goodwill impairment test, or if there is an indication that their value has declined.

In the previous financial year ending March 31, 2022 year the Group showed an impairment of Goodwill. The events leading up to and the timing of the impairment of Goodwill shown above are described separately in note 10.

Arvos Group R&D activities are carried out with company resources. Only the Ljungström Division capitalized EUR 2,419 thousand (PY: EUR 0) of development related activities, which are linked to their diversification towards sustainable energy. A Pilot Plant was completed in financial year 2022/2023 with all tests successfully working and finalised for, the improved heat recovery technology. R&D activities in SCS Division focused mainly on technology improvements and cost optimization of the current product portfolio.

12. Financial assets

	31 March 2023 €000	31 March 2022 €000
Non-current
Investments	500	500
Deposits	137	96
Restricted Cash	133	0
Other	0	88
Total	770	684

	31 March 2023 €000	31 March 2022 €000
Current
Derivatives	59	672
Restricted Cash	209	150
Other	139	112
Total	407	934

Restricted Cash 150k EUR was shown in Other in prior year financial statements.

13. Inventories

	31 March 2023 €000	31 March 2022 €000
Raw materials and supplies	6,748	5,559
Work in progress	13,501	9,611
Finished goods and goods for resale	3,120	1,136
Advance payments to suppliers	4,184	4,891
Total	27,553	21,197

During the year ending 31 March 2023, EUR 144,485 thousand (PY: EUR 113,496 thousand) is recognised as material expenses. This is recognised in cost of sales. Refer to note 29.

14. Contract assets and contract liabilities

Contract assets arise when revenue can be recognised over a period of time depending on the stage of completion according to IFRS 15 and when the Group has a right to payment for goods and services already transferred to the customer and that right is conditional on something other than the passage of time, i.e. the entity's future performance. The costs and estimated profits include directly allocable costs and all production related overheads. Contract assets are all due within one year.

A contract liability is an entity's obligation to transfer goods or services to a customer for which the Group has received consideration (or the amount is due) from the customer.

The following table provides information about receivables, contract assets and contract liabilities from contracts with customers.

Revenue recognised that was included in the balance of contract liabilities at the beginning of the period amounts to EUR 51,147 (PY: EUR 51,977 thousand).

	31 March 2023 €000	31 March 2022 €000
Receivables, which are included in 'Trade and other receivables'	1,693	3,834
Contract assets	38,216	25,816
Contract liabilities	48,054	32,704

Contract liabilities which refer to contracts for which revenue is recognised at a point of time, amount to EUR 28,964 thousand (PY: EUR 18,443 thousand).

The following table shows the transaction price allocated to the remaining performance obligations and the respective expected timing as of 31 March 2023:

€000	2024	2025	2026	Total
	45,112	2,257	0	47,369

The following table shows the transaction price allocated to the remaining performance obligations and the respective expected timing as of 31 March 2022:

€000	2023	2024	2025	Total
	32,221	5,954	0	38,175

There is no impairment of contract assets in the current financial year (PY: EUR 19 thousand). There are no assets recognised from the costs to obtain or fulfil contracts with customers.

15. Trade receivables

	31 March 2023 €000	31 March 2022 €000
Gross Amount	51,010	51,192
Expected Credit Losses	-1,343	-1,582
Total	49,667	49,610

Trade receivables are non-interest bearing and are generally on terms of 30 to 90 days.

	Individually impaired €000	Collectively impaired €000	Total €000
At 1 April 2022	574	1,008	1,582
Charge for the year	82	2	84
Utilised	-196	-48	-244
Unused amounts reversed	0	-6	-6
Exchange differences	-18	-55	-73
At 31 March 2023	442	901	1,343

	Individually impaired €000	Collectively impaired €000	Total € 000
At 1 April 2021	313	737	1,050
Charge for the year	230	225	455
Utilised	0	-7	-7
Unused amounts reversed	0	-23	-23
Exchange differences	31	76	107
At 31 March 2022	574	1,008	1,582

As of 31 March 2023, the ageing analysis of trade receivables including the expected loss rate is as follows:

€ 000	not past due	< 30 days	30-60 days	60-90 days	90-120 days	>120 days
Expected loss rate (in %)	< 1%	2%	2%	2%	2%	28%
Trade receivable (gross)	44,117	1,441	755	321	413	3,963
Expected credit loss	189	28	18	5	7	1,096

As at 31 March 2022, the ageing analysis of trade receivables including the expected loss rate was as follows:

€ 000	not past due	< 30 days	30-60 days	60-90 days	90-120 days	>120 days
Expected loss rate (in %)	< 1%	< 1%	3%	11%	15%	22%
Trade receivable (gross)	41,962	1,843	226	608	266	6,287
Expected credit loss	75	8	6	65	39	1,389

See note 30 on credit risk of trade receivables, which explains how the Group manages and measures credit quality of trade receivables that are neither past due nor impaired.

16. Non-financial assets

	31 March 2023 €000	31 March 2022 €000
Prepayments	1,819	1,885
Tax assets (other than income tax)	3,197	1,602
Deposit	1,332	1,252
Allowances to Employees	12	23
Others	949	780
Total	7,309	5,542

The increase in tax assets is due to high volume of input VAT on purchases during March 2023. Deposits are mainly for office rentals. Other assets mainly include other small item accruals.

17. Cash and cash equivalents

	31 March 2023 €000	31 March 2022 €000
Cash at banks and hand	19,771	23,169
Total	19,771	23,169

Cash and cash equivalents is cash at banks and hand, which is subject to an insignificant risk of changes in value. Cash at banks earns interest at floating rates based on daily bank deposit rates.

Due to government regulations and cash collateral requirements, parts of the Group's cash is not available for current use and is considered restricted cash. The Group held EUR 342 thousand in restricted cash as of 31 March 2023 and EUR 150 thousand as of 31 March 2022, respectively. These balances are not part of the Group's cash at banks but classified under Financial Assets (see Note 12).

18. Equity

Capital stock

On March 20, 2014 Arvos Midco S.à r.l. was founded with a capital stock of EUR 12.5 thousand composed of 1,250,000 ordinary shares with a nominal value of EUR 0.01 paid in cash.

On November 24, 2014 the share capital was increased from EUR 12.5 thousand to EUR 15 thousand by the issue of 250,000 new ordinary shares. This subscription was paid by the contribution of shareholder loans initially provided by Alison Luxco S.à r.l. in the amount of EUR 9,461 thousand and Triton Luxembourg II GP Alison S.C.A. in the amount of EUR 1,670 thousand. Alison Luxco S.à r.l. subscribed to 25,000 ordinary shares with a nominal value of EUR 0.01 each, and Triton Luxembourg II GP Alison S.C.A. subscribed to 225,000 ordinary shares with a nominal value of EUR 0.01 each and became a new shareholder. The exceeding amount of EUR 11,128 thousand was recorded as capital reserve. Therefore, at the reporting date, Alison Luxco S.à r.l. holds circa 84%, and Triton Luxembourg II GP Alison S.C.A. holds circa 16% of the shares of the Group.

In December 2019, 1,000 new preference shares with share premium were issued in the amount of EUR 7,157 thousand. This capital increase was subscribed by a contribution in kind of Alison Luxco S.à r.l. PECs and accrued interest in the same amount (also refer to note 21).

The nominal value of both the 1,500,000 ordinary and the 1,000 preference shares is EUR 0.01 per share as at the reporting date.

All of the Company's stock is issued and fully paid. Fully paid ordinary shares carry one vote per share and carry a right to dividends.

	Number of ordinary shares	Number of preference shares
At 1 April 2022	1,500,000	1,000
Change in FY 22/23	0	0
At 31 March 2023	1,500,000	1,000

	Number of ordinary shares	Number of preference shares
At 1 April 2021	1,500,000	1,000
Change in FY 21/22	0	0
At 31 March 2022	1,500,000	1,000

Capital reserves

Capital reserves represent additional paid-in or contributed capital provided by shareholders. These amounts may only be distributed in the future if certain legal requirements are met.

The capital reserves of EUR 18,285 thousand consist of EUR 11,128 thousand of the contribution made in the past and the capital increase of EUR 7,157 thousand in December 2019 as stated above.

Accumulated loss

Accumulated loss includes the current year's consolidated loss for the period. The legal and contractual obligations of the Group to banks - mainly based on the 1st Lien Credit Agreement - to shareholders and by law, include restrictions with regards to dividend distributions by several ratios, thresholds and preconditions. The Group is monitoring all existing and agreed ratios, thresholds and required qualifications prior to distributing any profits. Under Luxembourg law, a limited liability Company is obliged to transfer 5% of its profit for the year to the legal reserves until this reaches 10% of the capital stock.

Accumulated other comprehensive income (OCI)

Accumulated other comprehensive income includes currency translation differences, remeasurements and related income taxes. The foreign currency translation reserve comprises foreign currency differences arising from the translation of the financial statements of foreign operations. The net amount of foreign currency differences relating to a foreign operation will be reclassified to the statement of profit & loss upon its disposal.

Remeasurements comprise of actuarial gains and losses from defined benefit plans recognised in other comprehensive income according to IAS 19. The amounts recorded in this component of equity will never be reclassified to the statement of profit & loss.

Income taxes comprise deferred income taxes on items relating to the amounts recognised in accumulated other comprehensive income.

19. Other Provisions

The movements of the provisions during the period and corresponding maturities are as follows:

€000	Warranty	Other	Personnel	Total
At 31 March 2021	7,054	7,673	6,085	20,812
Arising during the period	1,581	4,305	4,915	10,801
Utilised	-721	-2,974	-2,070	-5,765
Unused amounts reversed	-2,409	-1,927	-228	-4,564
Unwinding and changes in discount rate	75	99	110	284
Exchange differences	150	211	-120	241
At 31 March 2022	5,730	7,387	8,692	21,809
Arising during the period	1,733	3,171	5,850	10,754
Utilised	1,080	-4,304	-4,399	-7,623
Unused amounts reversed	-996	-1,334	-193	-2,523
Exchange differences	-212	-73	-26	-311
At 31 March 2023	7,335	4,847	9,924	22,106
thereof:
long-term	1,103	872	3,441	5,416
short-term	6,232	3,975	6,483	16,690

Warranty provisions have been recognised for legal and contractual warranty obligations.

Other provisions consist of project related provisions for onerous contracts and similar obligations.

Personnel provisions mainly comprise provisions for vacation, wages and salaries, bonuses and other employee benefits.

20. Provisions for pensions and similar obligations

Provisions for pensions and other post-employment benefit plans are made for the Group's pension obligations and retirement benefits assured to former and currently employed employees. The pension plans are operated only in Germany and the U.S.

In Germany Arvos GmbH and Arvos Ljungström GmbH provide pension benefits through a plan set up by the seller before the acquisition of the business in August 2014. As agreed with the local worker's council, entitlements to pensions earned before the mentioned acquisition date will remain, but no future increases will take place. Arvos Ljungstrom LLC in the U.S. sponsors a pension plan for hourly paid employees of the Air Preheater Division.

In the German plans, defined benefit pensions were generally granted after a pre-defined qualifying period up to six months. In the US, starting FY 2022, pension plan access was removed for new hires in the manufacturing employees. Entitlement is mainly dependant on the length of service with the Group. The amount of commitments predominantly depends on the period of service and salary of the employees.

The following pension benefits are granted:

―	Retirement benefits and advanced retirement benefits,
―	disability retirement benefits for complete reduction in earning capacity and
―	survivor's pension benefits.

The change in net defined benefit liabilities at 31 March 2023 is presented in the following table:

	Defined benefit obligation €000	Fair Value of plan assets €000	Net defined benefit liability €000
Present value at 01 April 2022	43.368	20.752	22.616
Recognised in profit or loss (net pension expenses):
Service cost	328	-380	708
(Net) Interest expense	1.219	744	475
Sub-total included in profit or loss	1.547	364	1.183
Benefits paid	-3.063	-2.203	-860
Recognised in other comprehensive income (actuarial gains/losses):
Changes from return on plan assets	0	-2.116	2.116
Changes from financial assumptions	-6.588	0	-6.588
Changes from demographic assumptions	0	0	0
Changes from experience-based assumptions	-423	0	-423
Sub-total included in other comprehensive income	-7.011	-2.116	-4.895
Contributions by employer	0	668	-668
Exchange differences	696	541	155
Present value at 31 March 2023	35.538	18.006	17.532

The change in net defined benefit liabilities at 31 March 2022 is presented in the following table:

	Defined benefit obligation €000	Fair Value of plan assets €000	Net defined benefit liability €000
Present value at 01 April 2021	46,528	20,897	25,631
Recognised in profit or loss (net pension expenses):
Service cost	285	-269	554
(Net) Interest expense	949	612	337
Sub-total included in profit or loss	1,234	343	891
Benefits paid	-2,949	-2,150	-799
Recognised in other comprehensive income (actuarial gains/losses):
Changes from return on plan assets	0	179	-179
Changes from financial assumptions	-3,199	18	-3,217
Changes from demographic assumptions	78	0	78
Changes from experience-based assumptions	128	0	128
Sub-total included in other comprehensive income	-2,993	197	-3,190
Contributions by employer	0	336	-336
Exchange differences	1,548	1,129	419
Present value at 31 March 2022	43,368	20,752	22,616

Service costs are recognised under cost of sales and administrative expenses. Net interest expenses are recognised as a finance cost.

The plan assets consist of reinsurances and funds, which are not directly quoted in an active market. Plan assets are exposed to financial market risks through their underlying investments. That could lead to variations between the actual and expected returns.

The average duration of the defined benefit plan obligation at the end of the reporting period is 10.0 years. (PY: 11.75 years).

The main principal assumptions underlying the calculation for the net defined benefit liabilities are taken directly from the final actuarial reports and are as follows:

	Germany	USA
Discount rate	3.60%	4.78%
Estimated future wage and salary increase	2.75%	N/A
Inflation	2.00%	N/A

The assumptions for FY 2021/2022 are shown within the following table:

	Germany	USA
Discount rate	1,70%	3,59%
Estimated future wage and salary increase	2,75%	N/A
Inflation	2,00%	N/A

The mortality assumption in Germany follows the Richttafeln 2018 G, in the USA the Society Actuaries' Pri-2012 Blue Collar mortality table and Pri-2012 Blue Collar Contingent Survivor mortality table with the mortality improvement scale MP-2019.

Keeping all other assumptions constant, a possible change in the discount rate as of the reporting date would have affected the defined benefit obligation as follows:

	Defined benefit obligation
Effects in €000	Increase	Decrease
Discount rate (50 basis points change)	34,016	36,232

Expected pension expenses estimated for the fiscal year ending 31 March 2024 are EUR 848 thousand. Thereof EUR 200 thousand comprises service cost and EUR 648 thousand net interest expenses.

The expected cash outflows for the benefit payments directly from the company in the following year amount to EUR 3,895 thousand.

Contributions to the German state pension system amount to EUR 741 thousand (PY: EUR 741 thousand). Contributions to other plans amount to EUR 1,252 thousand (PY: EUR 1,146 thousand).

21. Loans and borrowings

The Group's debt financing at 31 March 2023 is based on the following components:

				Carrying amounts of loans and borrowings at 31 March 2023
Component	Currency	Effective interest rate	Maturity	Non- current (€ 000)	Current (€ 000)	Total (€ 000)
Preferred Equity Certificates (PECs)	EUR	11,00%	27.08.2044	459,296	0	459,296
Preferred Equity Certificates (PECs)	EUR	11,00%	03.02.2051	13,090	0	13,090
Shareholder loans ²	EUR		-	375	470	845
Loans and borrowings due to shareholders				472,761	⁴⁷⁰	473,231
Term Loan 1st Lien B1	EUR	7.86%	29.08.2024	64,482	1,183	65,665
Term Loan 1st Lien B1	USD	7.17%	29.08.2024	80,760	2,230	82,990
Term Loan 1st Lien B2	EUR	7.83%	29.08.2024	77,203	1,416	78,619
Term Loan 1st Lien B2	USD	7.17%	29.08.2024	80,760	2,230	82,990
Term Loan 1st Hen B3	EUR	8.56%	29.08.2024	114,605	2,128	116,733
Revolving Credit Facility ¹	EUR	5.50%	31.05.2024	0	22,000	22,000
Other Bank Loan	JPY	0.70%	31.10.2025	3,708	5,528	9,236
Loans and borrowings due to banks				421,518	36,715	458,233
Total				894,279	37,185	931,464

	31 March 2022
Component	Total (€ 000)
Preferred Equity Certificates (PECs)	413,211
Preferred Equity Certificates (PECs)	11,777
Shareholder loans ²	716
Loans and borrowings due to shareholders	425,704
Term Loan 1st Lien B1	62,614
Term Loan 1st Lien B1	77,187
Term Loan 1st Lien B2	74,919
Term Loan 1st Lien B2	77,188
Term Loan 1st Hen B3	111,206
Revolving Credit Facility ¹	14,000
Other Bank Loan	10,215
Loans and borrowings due to banks	427,329
Total	853,033

¹ can be redrawn at any time until maturity.

² for explanations on the shareholder loan please refer to note 30 and 32.

A bank overdraft as at March 31, 2023 in an amount of EUR 3,721 thousand (PY: EUR 9,012 thousand) is not included in the current loans and borrowings due to banks, in the table above.

The total current carrying amount in the table above of EUR 36,715 thousand added to the overdraft equates to the current loans and borrowings due to banks of EUR 40,436 thousand as shown on the face of the consolidated statement of financial position.

The Other Bank Loans are locally arranged facilities by the Group's Japanese subsidiary ARVOS K.K.

Preferred Equity Certificates (PECs)

In August 2014, Arvos Midco S.à r.l. issued 20,540,323,200 PECs with a nominal value of EUR 0.01 each, representing a total initial nominal amount of EUR 205,403 thousand. All PECs have been subscribed by Alison Luxco S.à r.l. (shareholder loan). Interest is based on a fixed rate of 11 % per annum and is payable on an annual basis on the last day of December provided that certain conditions (including amongst others a declaration by the board of managers as well as sufficient equity and funds available) are met. At maturity, Arvos Midco S.à r.l. shall redeem all of the outstanding PECs at the nominal amount plus accrued unpaid interest. Before that date, Arvos Midco S.à r.l. can elect to do optional redemptions. The PECs rank senior to shares, but junior to all other present and future obligations of Arvos Midco S.à r.l. whether secured or unsecured. The issuance of the PECs caused no material transaction cost. The effective interest rate is stated in the table above. In FY 2019/2020, PECs amounting to EUR 7,157 thousand were used as contribution in kind as settlement for new share capital issue. The settlement was split between principal and interest as follows, EUR 4,533 thousand of the principal amount and EUR 2,623 thousand referred to accrued interest (refer also to note 18).

In February 2021 Midco S.à r.l., issued 1,041,970,754 PECs with a nominal value of EUR 0.01 each, representing an amount of EUR 10,420 thousand. These PECs carry the same terms and conditions as the one issued in previous years.

The total interest expenses accrued on PECs in the period ending 31 March 2023 amount to EUR 47,398 thousand (PY: EUR 42,639 thousand).

1st Lien Credit Agreement

In August 2014, Arvos Bidco S.à r.l., Arvos Holding GmbH and Arvos Raymond Bartlett Snow Holding LLC (formerly Arvos Holding LLC) (as borrowers) and Arvos Midco S.à r.l. (as parent Group and guarantor) entered into a 1st Lien Credit Agreement, which was partly amended in 2017 and renegotiated in February 2021 as an Amend & Extend of credit facilities (A&E) to August 2023, plus a 1-year extension option to August 2024 that was exercised in August 2022, with a consortium of banks on:

―	Term loans in an aggregate principal amount of USD 200,000 thousand available to Arvos Raymond Bartlett Snow Holding LLC (formerly Arvos Holding LLC) (B1) and Arvos Bidco S.à r.l. (B2). As of 31 March 2017, the B2 loan has been transferred to Arvos Holding GmbH. After the reporting date, the B2 loan has been transferred to Arvos Raymond Bartlett Snow Holding LLC (formerly Arvos Holding LLC), the final borrower. Due to the sale of Arvos Raymond Bartlett Snow Holding LLC both loans (B1 and B2) have been transferred to Arvos Ljungström LLC. Both loans (B1 and B2) remain with Arvos Lungström LLC after the A&E.
―	Term loans in an aggregate principal amount of EUR 293,000 thousand available to Arvos Bidco S.à r.l. (B1) and Arvos Holding GmbH (B2). As of 31 March 2017, the B1 loan has been transferred to Arvos Holding GmbH. In May 2017 an EUR loan of EUR 130,000 thousand (B3) was entered into by Arvos Holding GmbH, substituting the 2 ^nd lien (USD 163 thousand), which was repaid in May 2017. All three loans (B1, B2 and B3) remain with Arvos Holding GmbH after the A&E.
―	A EUR 200,000 thousand multicurrency letter of credit facility for the issuance, from time to time, of letters of credit available to all borrowers and additional entities of the Group if certain conditions are met. This facility has been reduced from EUR 200,000 thousand down to the current EUR 112,000 thousand.
―	A EUR 40,000 thousand multicurrency revolving credit facility for the making, from time to time, of revolving loans and swing line loans available to all borrowers and additional entities of the Group if certain conditions are met. In August 2019, the facility was reduced to EUR 33,000 thousand. In February 2021, the facility was reduced to EUR 28,000 thousand.

If a borrower and a lender agree, the lender may provide all or part of its revolving credit commitment as a revolving ancillary facility or all or part of its letter of credit commitment as a letter of credit ancillary facility. A revolving ancillary facility may be by way of an overdraft facility, a guarantee, bonding, documentary or stand-by letter of credit facility, a short-term loan facility, a foreign exchange facility, a derivative facility or any other facility or accommodation required in connection with the business of the Group and which is agreed. A letter of credit ancillary facility shall only be by way of a guarantee, bonding, documentary, or stand-by letter of credit facility.

All amounts due to the 1 st Lien Credit Agreement are guaranteed, collectively, by the borrowers as well as by Arvos Property S.à r.l. and Arvos Midco S.à r.l. In addition, to secure the amounts there are various pledges and covenants in place. The pledges include, amongst others, pledges over current and future equity interests in material subsidiaries, bank accounts held, intellectual property and real property. In addition, there is an assignment of receivables including intra-group receivables and insurance receivables. The covenants include affirmative covenants and negative covenants.

The letter of credit facility and the revolving credit facility mature on 31 May 2024 at the latest. The USD and EUR term loans shall be repaid in consecutive quarterly scheduled instalments in an amount equal to 0.25 % of the original principal amount and on the maturity date as stated in the table above the remainder of the principal amount outstanding on such date, together in each case with accrued and unpaid interest on the principal amount to be paid. However, the borrowers may at any time or from time to time voluntarily repay loans in whole or in part without premium or penalty, except this prepayment is in connection with, or is resulting in, any repricing event as defined in the 1st Lien Credit Agreement. Any voluntary prepayments shall be accompanied by all accrued interest thereon and, in case of term loans, be applied to the remaining scheduled instalments of the respective tranche. All loans shall be repaid in the currency in which they were made.

The USD and EUR term loans as well as loans drawn under the revolving credit facility bear interest based on a variable rate plus applicable margin, which is determined as follows:

Group's net leverage ratio	Applicable margin per annum
> 3.75:1.00	5.50 %
< 3.75:1.00	5.25 %

As at 31 March 2023 the applicable margin is 5.5% per annum (PY: 5.5% per annum). The variable rate is LIBOR for the USD term loans. The USD LIBOR will be replaced by SOFR in June 2023. The EURIBOR for EUR term loans and the revolving credit loans in all currencies other than USD. For USD and EUR term loans, the variable rate is floored at 1 % per annum. The interest is payable on a quarterly basis.

In addition, since the refinancing was agreed in February 2021 (FY2021) a PIK margin of 2.5% compounded quarterly has been applicable on all 1st Lien Term Loans and the RCF. In August 2022, once the 1-year extension had been agreed, the PIK margin increased to 4.5% compounded quarterly. The PIK is subject to a 1% increase if the Group does not adhere to the refinancing clauses during the next financial year. Furthermore, the Group pays commitment fees based on a fixed rate of 1.95 % per annum on the RCF commitments not utilised. The total expenses on these commitment fees in the period ending 31 March 2023 amount to EUR 222 thousand (PY: EUR 159 thousand).

The PIK amount is payable only but immediately at the occurrence of one of the following events:

―	Change in control of the Group
―	Sale of all or substantially all assets of the Restricted Group
―	A refinancing in full of the facilities

For the 1-year extension new transaction costs of EUR 2,993 thousand were incurred and reduced the respective liabilities for all loans as these were recalculated and extended to the new dates. The one-year extension option of the loans created an additional one-off adjustment in the current financial year on the carrying values of all loans. The one-off adjustment was expensed immediately and was EUR 21,340 thousand. For the B3 loan the interest floor, which is included in the credit agreement was bifurcated at inception of the loan and is accounted for separately as a derivative financial instrument. The option of prepayment is considered to have a fair value close to nil given the fact that prepayment would only result in higher cost of refinancing and is not considered given the relatively short maturity of the loan. The fair value of the interest floor at inception also reduced the liability at initial measurement by EUR 6,009 thousand. The bifurcation did not alter due to the A&E.

The effective interest rates applicable as of 31 March 2023 are stated in the table on top of this note. The total interest expenses on USD and EUR term loans as well as loans drawn under the revolving credit facility, in the period ending 31 March 2023, amount to EUR 58,665 thousand (PY: EUR 30,180 thousand).

A letter of credit ancillary facility is contracted with a banking syndicate. Usage of the letter of credit ancillary facility bears an average fee of 3.91% per annum (PY: 2.65% per annum). The total fee expenses on letter of credit obligations in the period ending 31 March 2023 amount to EUR 3,817 thousand (PY: EUR 4,213 thousand). Furthermore, the borrowers pay commitment fees based on a fixed rate of 1.4 % per annum and the actual daily amounts by which the aggregate revolving credit commitments and the aggregate letter of credit commitments exceed the outstanding amounts of revolving credit loans or letter of credit obligations, respectively. The commitment fees accrue until the maturity dates and are due and payable quarterly. The total expenses on commitment fees in the period ending 31 March 2023 amount to EUR 461 thousand (PY: EUR 668 thousand).

The 1st Lien Credit Agreements include further mandatory prepayments based on the excess cash flow, based on disposal of property or other assets. Furthermore, the unpaid principal amount of all outstanding loans, including all interest accrued and unpaid thereon, can be declared to be immediately due and payable upon an event of default, which includes amongst others non-payment, cross-default, insolvency proceedings, breaches of specific covenants (please refer to note 7), representations and warranties or change of control.

All assets of the Group, including amongst others financial assets, are pledged as security for loans (1 ^st lien) as of the balance sheet date at their respective carrying amounts.

The following table shows the changes in liabilities arising from movements in the bank borrowings and PECs.

			Non-cash changes
in €000	31 March 2022	Cash flows	Foreign exchange movements	Additional I liabilities	Interest cost	31 March 2023
Loans and borrowings due to banks	427,330	-30,792	1,946	0	59,867	458,351
Loans and borrowings due to shareholders	425,704	0	0	129	47,398	473,231
Bank overdrafts	9,012	-5,195	-96	0	0	3,721
Total	862,046	-35,987	1,850	129	107,265	935,303

The Cashflow of EUR 35,987 thousand comprises the following events.

For FY 2022/2023, in addition to interest payments of EUR 30,471 thousand (PY: EUR 26,337 thousand) the Group made the regular quarterly repayments on its borrowing from banks amounting to EUR 4,886 thousand (PY: EUR 4,708 thousand). There was a payment of EUR 2,993 thousand (PY EUR 0) in fees in order to complete the 1-year extension of the A&E. Inflows from the RCF amounted to EUR 8,000 thousand (PY: EUR 1,999 thousand). A group subsidiary had in previous years drawn two loans from 3 ^rd party banks. This subsidiary had repaid EUR 442 thousand (PY EUR 0) in the year ending March 31, 2023.

During the year, the Group holding entity in Germany continued to make use of overdraft facilities available. The table above also shows the entity repaid EUR 5,195 thousand (PY 1,586 thousand) of bank overdrafts during the year.

In addition to the above, bond & guarantee fees of EUR 3,759 thousand (PY EUR 3,912 thousand), lease payments excluding interest of EUR 3,125 thousand (PY 3,074 thousand) and finally other interests including interest on leases amounted to EUR 1,517 thousand (PY EUR 1,399 thousand) were made.

The EUR 129 thousand are additions to operational borrowings from the shareholder in FY 2022/2023 (PY: EUR 40 thousand).

The total for interest costs amounting to EUR 107,265 includes the interest cost of EUR 106,063 thousand relates exclusively to the two major borrowings, the Term Loans and the PECs (see note 28) and the RCF interest of EUR 1,084 thousand and EUR 118 thousand in interest paid by the subsidiary on the 3 ^rd party loans.

Restated			Non-cash changes
in €000	31 March 2021	Cash flows	Foreign exchange movements	Additional liabilities	Interest cost	31 March 2022
Loans and borrowings due to banks	407,555	-20,008	8,498	0	31,355	427,400
Loans and borrowings due to shareholders	383,025	0	0	40	42,639	425,704
Bank overdrafts	15,811	-6,799	0	0		9,012
Total	806,391	-26,807	8,498	40	73,994	862,116

The Cashflow of EUR 26,807 thousand comprises the following events.

For FY 2021/2022, in addition to interest payments of EUR 26,337 thousand (PY: EUR 22,531 thousand) the Group made the regular quarterly repayments on its borrowing from banks amounting to EUR 4,708 thousand (PY: EUR 4,671 thousand). Inflows from the RCF amounted to EUR 1,999 thousand (PY: EUR 852).

A group subsidiary drew an additional amount of EUR 3,196 thousand from a loan from a 3rd party bank. During the current financial year, this subsidiary took out an additional loan from a second 3rd party bank equalling EUR 5,842 thousand as at March 31, 2022.

During the year, various Group entities continued to make use of overdraft facilities available at banks in Germany and India. The table above also shows the entities repaid EUR 6,799 thousand of bank overdrafts during the year.

In addition to the above, bond & guarantee fees of EUR 3,913 thousand (PY EUR 3,584 thousand), lease payments excluding interest of EUR 3,074 thousand (PY 3,115 thousand) and finally other interests including interest on leases amounted to EUR 1,399 thousand (PY EUR 1,744 thousand) were made.

The EUR 40 thousand are additions to operational borrowings from the shareholder in FY 2021/2022 (PY: EUR 56 thousand).

The total for interest costs amounting to EUR 73,994 includes RCF interest of EUR 1,105 thousand and EUR 70 thousand in interest paid by the subsidiary on these loans. The balance of EUR 72,819 thousand relates to the Term Loans and the PECs (see note 28).

22. Trade and other payables

	31 March 2023 €000	31 March 2022 €000
Trade and other payables	40,442	40,080
Total	40,442	40,080

For explanations on the Group's liquidity risk management processes refer to note 30.

23. Other financial liabilities

Non-current	31 March 2023 €000	31 March 2022 €000
Interest Derivative	40	1,521
Total	40	1,521

Current	31 March 2023	31 March 2022
FX Derivatives	251	261
Financial liabilities to employees	68	484
Other	344	273
Total	662	1,018

24. Other non-financial liabilities

Current	31 March 2023	31 March 2022
Non-financial liabilities to employees (incl. social security)	6,920	3,561
Tax liabilities (excludes income taxes)	1,488	1,788
Deferred income	0	48
Advance payments from customers	135	0
Others	2,692	1,395
Total	11,235	6,792

Other non-financial liabilities are due within one year. Liabilities to the employees (incl. social security) are mainly related to the entities in the US and Japan due to higher bonuses accrued. Others contain higher cost accruals than usual as some purchase invoices had not been received in time.

25. Tax

The major components of income tax expense for the period ended 31 March 2023 are:

Profit or loss	1 April 2022 - 31 March 2023 €000	1 April 2021 - 31 March 2022 €000
Current income tax (expense)	-3,356	-3,665
Deferred income tax income	5,413	2,870
Income tax income/(expense) reported in profit or loss	2,057	-795

Deferred tax in OCI:

Other comprehensive income/loss	1 April 2022 - 31 March 2023 €000	1 April 2021 - 31 March 2022 €000
Deferred tax related to items recognised during the year:
Net (loss)/gain on actuarial gains and losses	-1,348	-860
Deferred tax charged to other comprehensive income	-1,348	-860

Reconciliation of tax expense and the accounting loss for the period ended 31 March 2023:

	1 April 2022 - 31 March 2023 €000	1 April 2021 - 31 March 2022 €000
Profit/loss before income tax	-97,366	-160,255
Anticipated tax (tax rate of 24.94%, prior year 24,94%)	24,283	39,968
Tax rate differences	2,208	3,038
Tax rate changes	1,193	-2
Tax exempt income	109	7
Non deductible expenses	-9,129	-8,543
Taxes for previous periods	908	2,182
Change in unrecognized deferred tax assets (temporary differences)	-1,725	-7,745
Change in unrecognized deferred tax assets (tax loss carry-forwards)	-16,908	-16,233
Other effects	1,118	-13,467
Tax income/(expense) reported in profit or loss	2,057	-795

The tax rate changes for the period ended 31 March 2023 mainly result from effects due to an increase in state tax rates in the US in the amount of EUR 1,172 thousand.

The changes in unrecognized deferred tax assets from temporary differences originate in impairments of deferred tax assets from temporary differences of entities in the USA and China.

Changes in unrecognized deferred tax assets on tax loss carry-forwards originate in the impairments of deferred tax assets on tax loss carry-forwards of entities in Luxembourg, USA, China and India.

The other effects for the period ended 31 March 2022 result from impairment of goodwill in the amount of EUR -13.038 thousand.

The Group tax rate of 24.94 % (PY: 24.94 %) reflects the nominal Luxembourg corporate income tax plus surcharges as follows:

Tax rate as of 31 March 2023:

		Mrz 23
Corporate Income Tax		17.00%
Employment Fund Surcharge	(7% on 17%)	1.19%
Municipal Business Tax Luxembourg City		6.75%
Total Income Tax		24.94%

Tax rate as of 31 March 2022:

Corporate Income Tax		17.00%
Employment Fund Surcharge	(7% on 17%)	1.19%
Municipal Business Tax Luxembourg City		6.75%
Total Income Tax		24.94%

Deferred taxes relate to the following:

	Deferred tax assets 31 March 2023 €000	Deferred tax liabilities 31 March 2023 €000
Intangible assets	2,817	9,184
Property, plant and equipment	1,626	1,787
Financial assets	848	59
Inventories ¹	24,393	382
Receivables and other current assets	795	9,046
Right of use assets	0	2,783
Provisions	4,031	826
Liabilities	8,253	27,691
Leasing Liabilities (current and non-current)	5,527	0
Tax loss carry-forward	10,754	0
Total deferred taxes	59,043	51,759
Net balance of deferred tax assets and liabilities	7,284

	Deferred tax assets 31 March 2023 €000	Deferred tax liabilities 31 March 2023 €000
Reflected in the statement of financial position as follows:
Deferred tax assets	18,442
Deferred tax liabilities		11,158
Deferred tax asset, net	7,284

¹ Temporary differences within the inventories result from the use of revenue recognition over time which is not applicable for tax purposes.

Short term elements realized within the next twelve months of deferred taxes are not recognized separately but are shown under non-current assets or non-current liabilities. The short-term deferred tax assets amount to EUR 35,728 thousand and short-term deferred tax liabilities amount to EUR 43,483 thousand prior offsetting.

	€000	Change in deferred tax liability €000
Net deferred tax liability in the closing balance	-7,284
Net deferred tax liability at the opening balance	-3,347
		3,937
OCI movement		1,348
FX impact		128
Deferred tax expense		5,413

	Deferred tax assets 31 March 2022 €000	Deferred tax liabilities 31 March 2022 €000
Intangible assets	3,137	16,791
Property, plant and equipment	1,513	269
Financial assets	416	621
Inventories	24,141	7
Receivables and other current assets	413	7,758
Provisions	5,622	0
Liabilities	8,413	24,883
Tax loss carry-forward	10,022	0
Total deferred taxes	53,676	50,329
Net balance of deferred tax assets and liabilities	3,347

	Deferred tax assets 31 March 2022 €000	Deferred tax liabilities 31 March 2022 €000
Reflected in the statement of financial position as follows:
Deferred tax assets	16,767
Deferred tax liabilities		13,419
Deferred tax liabilities, net	3,347

	€000	Change in deferred tax liability €000
Net deferred tax liability in the closing balance	-3,347
Net deferred tax liability at the opening balance	-1,280
		2,067
OCI movement		860
FX impact		-58
Deferred tax expense		2,869

The Group offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authority.

The Group did not recognise deferred tax assets on temporary differences in the amount of EUR 14,760 thousand (PY: EUR 11 thousand). No deferred tax assets were recognised in respect of corporate income tax loss carry-forwards totalling EUR 10,191 thousand (PY: EUR 16,216 thousand). of the non-recognised corporate income tax loss carry-forward, an amount of EUR 191,377 thousand (PY: EUR 150,891 thousand) will expire within 5 to 10 years. Deferred tax assets have not been recognised in case it is not probable that the company will be able to generate enough taxable profits during the planning period. EUR 10,753 thousand (PY: EUR 10,022 thousand) deferred tax assets are recognized on loss carry-forwards, the use of these loss carry-forwards is probable based on positive plans, in particular the increase in orders already received for upcoming financial years and the improved margin on projects.

At 31 March 2023, no tax liability was recognised for taxes that would be payable on the unremitted earnings of certain of the Group's subsidiaries. The Group has determined that undistributed profits of its subsidiaries will not be distributed in the foreseeable future.

The temporary differences associated with investments in subsidiaries, for which a deferred tax liability has not been recognised, aggregate to EUR 3,980 thousand (PY: EUR 4,978 thousand).

26. Revenue

	1 April 2022 - 31 March 2023 €000	1 April 2021 - 31 March 2022 €000
Net Sales New Equipment	103,229	93,392
Net Sales Aftermarket	186,532	163,868
Net Sales Other	13,629	2,324
Net Sales	303,390	259,584

The presentation of the split of net sales was adapted to the view that is also used for management reporting purposes.

The following table presents a further disaggregation of revenues.

		Segments		Total
	€000	Schmidtsche Schack 1 April 2022 - 31 March 2023	Ljungström 1 April 2022 - 31 March 2023	1 April 2022 - 31 March 2023
Primary geographical markets
USA		25.223	71.957	97.180
China		41.868	12.138	54.006
Japan		3.407	33.195	36.602
Vietnam		0	11.979	11.979
Germany		5.096	6.167	11.263
Saudi Arabia		4.472	5.252	9.724
India		2.821	6.264	9.085
Singapore and Malaysia		3.807	5.185	8.992
Netherlands		4.686	1.577	6.263
Czech Republic and Slovakia		1.640	4.617	6.257
Russia		6.181	0	6.181
Taiwan		2.791	1.694	4.485
Canada		3.983	458	4.441
Columbia, Mexico and Brazil		2.325	1.466	3.791
Philippines		0	3.062	3.062
Bulgaria		2.800	0	2.800
South Korea		2.763	0	2.763
Belgium		2.298	89	2.387
Indonesia		0	2.123	2.123
Others		11.485	8.521	20.007
Total		127.646	175.744	303.390
Uzbekistan 686k and Spain 627k included in Others for current year.
Major products/service lines
Air Preheater		0	140.210	140.210
Transfer Line Exchanger		76.995	0	76.995
Gas Gas Heater		0	21.438	21.438
Gasification		14.424	0	14.424
Wind		0	12.453	12.453
High Temperature Product Other		10.298	0	10.298
Waste Heat Steam Generator		8.949	0	8.949
Process Gas Boiler		7.406	0	7.406
Sludge		5.138	0	5.138
Carbon Black Air Preheater		3.140	0	3.140
Others		1.296	1.644	2.940
Total		127.646	175.744	303.390
Timing of revenue recognition
Products transferred at a point in time		28.047	130.177	158.224
Products and services transferred over time		99.599	45.567	145.166
Total		127.646	175.744	303.390

Disaggregation of revenues for the prior year are shown in the table below:

		Segments
	€000	Schmidtsche Schack 1 April 2021 - 31 March 2022	Ljungström 1 April 2021 - 31 March 2022	Total 1 April 2021 - 31 March 2022
Primary geographical markets
USA		11,773	43,156	54,929
Japan		3,078	42,195	45,273
China		16,570	20,919	37,489
Russia		23,550	0	23,550
Germany		10,405	2,805	13,210
India		2,620	6,017	8,637
Estonia and Finland		7,180	0	7,180
Singapore and Malaysia		3,887	3,234	7,121
Bangladesh		0	5,539	5,539
Saudi Arabia		2,018	3,518	5,536
Uzbekistan		5,253	0	5,253
Taiwan		1,669	2,787	4,456
Columbia, Mexico and Brazil		3,091	725	3,816
Spain		3,697	0	3,697
Czech Republic and Slovakia		0	3,446	3,446
Canada		2,487	371	2,858
Australia		0	2,632	2,632
Others		13,507	11,455	24,962
Total		110,785	148,799	259,584
Major products/service lines
Air Preheater		0	115,969	115,969
Transfer Line Exchanger		54,808	0	54,808
Gas Gas Heater		0	20,121	20,121
High Temperature Product Other		4,369	9,640	14,009
Process Gas Boiler		13,408	0	13,408
Gasification		13,053	0	13,053
Waste Heat Steam Generator		10,039	0	10,039
Carbon Black Air Preheater		7,717	0	7,717
Sludge		3,129	0	3,129
Others		4,262	3,069	7,331
Total		110,785	148,799	259,584
Timing of revenue recognition
Products transferred at a point in time		23,945	111,078	135,023
Products and services transferred over time		86,840	37,721	124,561
Total		110,785	148,799	259,584

27. Other operating income and expenses

Other operating income	1 April 2022 - 31 March 2023	1 April 2021 - 31 March 2022
Income from sale of assets	4,668	0
Scrap sales	603	892
Government subsidies	300	359
Income from non-recurring items	297	328
Supplier discount	116	59
Licence fees	85	114
Tax items (excise and customs)	36	26
Insurance Income	1	204
Other third party receivables (see Note 13)	0	1,146
Liquidated damages	0	347
FX derivatives	0	268
FX effects	0	165
Other income	89	490
Other operating income	6,195	4,398

Income from sale of assets included a gain of EUR 4,562 thousand on the sale and leaseback transaction. See Note 11. Other, comprises amongst others, release of provisions.

Other operating expenses	1 April 2022 - 31 March 2023	1 April 2021 - 31 March 2022
Project one off costs	1,650	997
Personnel related expenses	772	705
Scrap costs	322	114
Tax items (excise and customs)	307	134
FX Derivatives	44	789
Disposal of fixed assets	19	43
Restructuring costs	0	1,075
Other expenses	529	1,339
Other operating expenses	3,643	5,196

Other expenses include amongst others, Corona related expenses and expenses for allowances of bad debts. Previous years restructuring costs relate mainly to the entity ARVOS GmbH.

28. Finance income and finance costs

	1 April 2022 - 31 March 2023 €000	1 April 2021 - 31 March 2022 €000
Interest and similar income	1,528	3,151
Foreign exchange differences	0	2,976
Finance income	1,528	6,127

	1 April 2022 - 31 March 2023 €000	1 April 2021 - 31 March 2022 €000
Interest expenses	106,063	72,819
Foreign exchange differences	1,873	0
Other financing expenses	7,962	7,636
Finance cost	115,898	80,455

Interest expenses refer to the cost of the Group's long-term financing and includes an effect of EUR 21,340 thousand in connection with the revision of the effective interest calculation due to the 1-year extension in August 2022. Other financing expenses refer to interest expenses on the RCF, subsidiary bank loans (see note 21) and those resulting from the discounting of long-term provisions and leasing and to bank guarantees. In the current financial year these expenses also include fees in the amount of EUR 2,993 thousand for the one-year extension of the Term Loan facilities.

29. Operating expense

€000			Expenses included in
	1 April 2021 - 31 March 2022	1 April 2022 - 31 March 2023	Cost of sales	Research and development expenses	Selling and distribution expenses	Administrative expenses
Material expenses	113,645	144,682	144,485	105	36	56
Employee benefits expense	77,638	89,849	54,681	2,408	14,257	17,731
Depreciation expense	8,099	7,799	5,684	90	485	1,540
Amortisation expense	18,541	18,981	2,706	437	15,756	82
Other expenses	44,979	31,270	17,524	365	1,842	8,668
Total expenses	262,902	292,581	225,080	3,405	32,376	28,077

€000	Expenses included in Other operating expenses
Material expenses	0
Employee benefits expense	772
Depreciation expense	0
Amortisation expense	0
Other expenses	2,871
Total expenses	3,643

For detailed information on other operating expenses please refer to note 27. Reversals of expected credit losses of EUR 239 thousand (PY: cost 532 thousand) are included in Other Operating Expenses.

30. Additional disclosures regarding financial instruments and risk management

The following table shows the carrying amounts and fair values of all financial instruments recognised in the consolidated statement of financial position by category under IFRS 9:

€000		31 March 2023
ASSETS	Category according to IFRS 9	Carrying amount	Fair value	Fair Value Level
Trade receivables	FAAC	49,667	49,667
Financial assets		1,177	1,177
Other receivables	FAAC	618	618	2
FX derivatives	FVtPL	59	59	2
Investments	FVOCI	500	500	3
Cash and cash equivalents	FAAC	19,771	19,771
Total of financial assets		70,615	70,615
LIABILITIES
Trade accounts payable	FLAC	40,442	40,442
Trade and other payables	FLAC	40,442	40,442
Financial debt		935,887	550,576
Financial liabilities (amortised cost)		935,185	549,874
USD Liabilities	FLAC	165,981	146,393	3
EUR Liabilities	FLAC	734,247	368,524	3
Revolving Credit Facility	FLAC	22,000	22,000	2
Account Overdraft	FLAC	3,721	3,721	2
Other Bank Loan	FLAC	9,236	9,236	2
Other financial liabilities		702	702
Other financial liabilities	FLAC	411	411	2
Interest derivative	FVtPL	40	40	2
FX derivatives	FVtPL	251	251	2
Total of financial liabilities		976,329	591,018

€000		31 March 2022
ASSETS	Category according to IFRS 9	Carrying amount	Fair value	Fair Value Level
Trade receivables	FAAC	49,610	49,610
Trade receivables	FAAC	49,610	49,610
Financial assets		1,618	1,618
Other receivables	FAAC	446	446	2
FX derivatives	FVtPL	672	672	2
Investments	FVOCI	500	500	3
Cash and cash equivalents	FAAC	23,169	23,169
Total of financial assets		74,397	74,397
LIABILITIES
Trade and other payables	FLAC	40,080	40,080
Financial debt		864,585	678,383
Financial liabilities (amortised cost)		862,046	675,844
USD Liabilities	FLAC	154,375	148,992	3
EUR Liabilities	FLAC	674,444	493,625	3
Revolving Credit Facility	FLAC	14,000	14,000	2
Account Overdraft	FLAC	9,012	9,012	2
Other Bank Loan	FLAC	10,215	10,215	2
Other financial liabilities		2,539	2,539
Other financial liabilities	FLAC	757	757	2
Interest derivative	FVtPL	1,521	1,521	2
FX derivatives	FVtPL	261	261	2
Total of financial liabilities		904,665	718,463

The carrying amounts of trade receivables and cash and cash equivalents as well as of trade accounts payable equal their fair values, since for short-term items the carrying amount is considered to be a sufficient approximation of fair value. Financial liabilities (amortised cost) include trade payables.

The investment is in an unquoted security and is categorised as Fair value through other comprehensive income. Since there is no quoted market price available the fair value cannot be reliably measured. As the Investment is of low materiality, it is measured at cost.

The fair value of USD liabilities and EUR liabilities equals the present value of expected cash flows. Discounting is based on interest rates applicable as of the balance sheet date. Hence the 1 ^st Lien Credit Agreements reflect inherent credit risks due to floating margins dependent on the Group's net leverage ratio, they are assumed to be measured fairly in line with the market.

All Credit Agreements are categorised as fair value Level 3. The fair value hierarchy reflects the significance of the inputs used to determine fair values. Financial instruments with fair value measurement based on quoted prices in active markets are disclosed in Level 1. Level 2 determination of fair values is based on observable inputs, for example foreign exchange rates. Level 3 comprises financial instruments for which the fair value measurement is based on unobservable inputs. All fair values of the 1 ^st Lien as well as the PECs are calculated based on assumptions regarding credit risks of Arvos Group, which are considered in the discount rates of future cash flows. The discount rates used consist of a corporate bond yield curve, which is equivalent to the Group's credit rating, and a credit spread. The credit spread is calculated based on the assumption, that the fair value of the credit agreement at issue date - calculated using the risk adjusted corporate bond curve for discounting - should equal the nominal amount at issuance date. Therefore, for fair value measurement at reporting date, the credit spread is kept constant while the current corporate bond yield curve at reporting date is used for discounting the future cash flows.

No financial instruments were set off and no enforceable master netting arrangements or similar agreements are in place as of 31 March 2023.

The following table shows net gains and losses from financial instruments by measurement categories according to IFRS 9:

Measurement according to IFRS 9	31 March 2023 €000	31 March 2022 €000
Financial assets measured at amortised cost	166	-425
Financial liabilities measured at amortised cost	-106,063	-72,819
Financial assets and liabilities through profit and loss	878	2,236
Result in P&L	-105,019	-71,008

Net gains and losses mainly comprise interest expenses of financial liabilities measured at amortised cost.

Financial assets and financial liabilities at fair value through profit or loss comprise FX derivatives also shown under financial assets and financial liabilities respectively in the balance sheet. The fair values of all FX derivatives shown in the table above are calculated based on observable currency swap yields. Financial liabilities through profit and loss also comprise the interest floor, which was bifurcated from the 1st lien B3 EUR loan as an embedded derivative.

Nature and extent of risks arising from financial instruments

The Group's principal financial liabilities comprise loans and borrowings, trade and other payables. The main purpose of these financial liabilities is to finance the Group's operations and to provide guarantees to support its operations. The Group's principal financial assets include trade and other receivables as well as cash and cash equivalents that derive directly from its operations.

The Group is exposed to market risk, credit risk and liquidity risk. The group treasury oversees these risks. The Group's senior management is supported by group treasury that advises on financial risks for the Group.

Trading of derivatives for speculative purposes is not practiced and against Group policies. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

Market risk

Market risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, foreign currency risk and other price risk, such as equity price risk and commodity price risk. Financial instruments affected by market risk include mainly loans and borrowings.

The sensitivity analyses in the following sections relate to the position as of 31 March 2023 and 31 March 2022. The sensitivity analyses have been prepared on the basis that the amount of net liabilities, the ratio of fixed to floating interest rates of the liabilities and the proportion of financial instruments in foreign currencies are all constant. The analyses exclude the impact of movements in market variables on the carrying values of pension and other postretirement obligations, provisions, and the non-financial assets and liabilities of foreign operations.

The sensitivity analyses demonstrate how profit or loss items are affected by the assumed changes in respective market risks. Based on the position as of 31 March 2023, there is no sensitivity of equity.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group's exposure to the risk of changes in market interest rates relates primarily to the Group's non-current loans and borrowings due to banks with floating interest rates.

The Group does not enter into separate interest rate derivatives. At 31 March 2023, based on nominal amounts, approximately 50 % of the Group's loans and borrowings are at a fixed rate of interest.

Interest rate sensitivity

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. The interest rate floor, which was bifurcated from the B3 EUR loan for accounting purposes, is included within the interest rate sensitivity calculation for the B3 loan, in order to reflect the economic risk exposure of the Group. At 31 March 2023, with all other variables held constant, the Group's profit before tax is affected through the impact on floating rate loans and borrowings, as follows:

Assumed change in interest rates	-100 Basis Points	+ 100 Basis Points	+ 150 Basis Points
Change in interest expense (€ 000) due to change in EURIBOR	-5,540	10,760	12,175
Change in interest expense (€ 000) due to change in USD LIBOR	-6,959	10,279	11,109
Total change in interest expense (€ 000) due to changes in interest rates	-12,499	21,039	23,284

Interest rate sensitivities as of 31 March 2022 are shown in the table below:

Assumed change in interest rates	-100 Basis Points	+ 100 Basis Points	+ 150 Basis Points
Change in interest expense (€ 000) due to change in EURIBOR	-140	140	307
Change in interest expense (€ 000) due to change in USD LIBOR	0	1,485	2,257
Total change in interest expense (€ 000) due to changes in interest rates	-140	1,625	2,564

Interest rate sensitivities of the interest rate derivative amount to EUR +32 thousand (PY: EUR +801 thousand) when a movement of +100 basis points in the EURIBOR is assumed, respectively EUR -108 thousand (PY: EUR -1,148 thousand) in case of a -100 basis points change of EURIBOR and EUR +37 thousand (PY: EUR +1,001 thousand) for an assumed change of +150 basis points of EURIBOR.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group's exposure to the risk of changes in foreign exchange rates relates primarily to the Group's financing and operating activities (when trade and other receivables and loans and other borrowings are denominated in a foreign currency). During the reporting period no hedge accounting was applied. FX exposures are being secured with FX derivatives centrally by group treasury. The FX amounts traded by group treasury are passed on to the subsidiaries based on intercompany agreements.

Foreign currency sensitivity

As part of the disclosures concerning market risk, IFRS 7 requires a sensitivity analysis showing the effects of hypothetical changes in relevant risk variables on equity and earnings pre-tax. The periodic effects are determined by applying the hypothetical changes in the risk variables to the non-derivative financial instruments held at the reporting date. This implies the assumption that the holding at the reporting date is representative for the whole year.

	Change in USD against EUR		Change in JPY against EUR		Change in USD against JPY
Assumed change in exchange rates	+ 70%	- 70%	+ 70%	- 70%	+ 70%	- 70%
Effect on profit or loss (€ 000)	-884	1,965	1,498	-1,518	-1,213	1,483

Foreign currency sensitivities as of 31 March 2022 are shown below:

	Change in USD against EUR		Change in JPY against EUR		Change in USD against JPY
Assumed change in exchange rates	+ 10%	- 10%	+ 10%	- 10%	+ 70%	- 70%
Effect on profit or loss (€000)	59	735	2,116	-2,111	-655	801

The movement in the pre-tax effect (corresponding to the effect on equity) is the result of a change in the fair value of monetary assets and liabilities denominated in currencies other than the functional currency of the respective entity. The changes in USD against EUR result mainly from loans from affiliated companies at one US entity amounting to USD 41,353 thousand equal to EUR 38,055 thousand. The movement of JPY against EUR results mainly from the loans from affiliated companies at Arvos K.K. that amount to JPY 1,374,434 thousand equal to EUR 9,497 thousand. Additionally, a USD loan has been issued by the German Holding company amounting to USD 50,100 thousand equal to EUR 46,105 thousand.

Foreign currency sensitivities of the FX Derivatives amount to EUR 28 thousand when a movement of -10% change of the underlying currency against EUR is assumed, respectively EUR-34 thousand in case of a +10% change of the respective underlying currency against EUR.

Other price risk

The Group is not directly affected by the price volatility of certain actively traded commodities. However, the Group's operating activities require the ongoing purchase and handling of processed steel. In this context the Group actively observes price developments to minimise price risks. The Group is not entered into any commodity derivatives.

Credit risk & risk concentration

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss.

Concentration risks arising from the delivery of goods to major customers are subject to a special credit watch. Default risk is taken into account by valuation allowances. The maximum exposure to credit risk of financial assets - without taking any collateral into account - is represented by the corresponding carrying amounts of the financial assets.

Credit risk is managed at Group level. Credit risks arise from cash and cash equivalents, current financial e assets, trade receivables and other receivables. The Group ensures the security of its cash deposits by placing these at institutions with good standing. Customer risks are systematically recorded, analysed and managed in the respective subsidiary, whereby both internal and external information sources are used.

The Group considers a financial asset to be credit-impaired when the probability is remote that the debtor will be able to pay all its credit obligations due to the Group without the Group having to revert to measures such as selling collateral (if provided).

Credit risks arise especially in connection with trade receivables and other receivables. To the extent that credit risks are identifiable, these are countered with active receivables management as well as credit ratings of customers.

At each reporting date, Arvos Group assesses whether any financial assets measured at amortised cost are credit-impaired. A financial asset is credit-impaired when one or more events that have a detrimental impact on the estimated future cash flows of that financial asset have occurred:

Indicators that a financial asset is credit-impaired include observable data about the following events:

―	significant financial difficulty of the customer
―	a breach of contract, such as a default or a significant past due event
―	restructuring of a loan or credit facility by the Group that it would not otherwise consider
―	it is becoming probable that the borrower will enter bankruptcy or other financial reorganisation
―	the disappearance of an active market for that financial asset because of financial difficulties

A financial asset's gross carrying amount is reduced when the Group has no reasonable expectation of recovering the financial asset in its entirety or a portion thereof.

In accordance with IFRS 9, Arvos Group applies the simplified expected credit losses approach for trade receivables based on lifetime expected losses. The expected losses are calculated on the basis of the customer's historical payment patterns. At each reporting date, the expected loss over the remaining term is calculated as a percentage in relation to the number of days past due. The estimated expected credit losses per maturity band were calculated using historical credit loss experience over the past three years. Arvos Group calculated the expected credit losses with respect to the number of days past due.

The risk of impairment increases significantly for outstanding trade receivables that are more than 120 days past due. Unless the outstanding balance is immaterial, item-by-item measurement is performed to estimate expected credit losses.

The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments. The Group does not hold any collateral as security. There were no significant credit risks or concentration risks as of 31 March 2023.

Financial instruments and cash deposits

Credit risk from balances with banks and financial institutions is managed by the Group's treasury department in accordance with the Group's policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Group's Board of Directors on an annual basis and may be updated throughout the year subject to approval of the Group's Finance Committee. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through a counterparty's potential failure to make payments.

Liquidity risk

The Group provides sufficient liquidity to several entities by cash pooling. The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans and preferred equity certificates. The Group has access to a sufficient variety of sources of funding and debt. In December 2018 the Group used a refinancing to adjust the Revolving Credit Facility and Bonding Facility to appropriate levels. Until end of August 2019 the Group had access to a Revolving Credit Facility of EUR 40,000 thousand, thereafter the facility was reduced to EUR 33,000 thousand. In February 2021, the facility was reduced to EUR 28,000 thousand.

To counteract any COVID-19 impact on liquidity, the Group has acted to maintain the high liquidity reserve built up at the end of the previous financial year and at the beginning of the current financial year. Furthermore, the Group has implemented strict cost management in order to maintain a good liquidity level at the decreased sales volume.

As at the reporting date EUR 22,000 thousand of this facility was drawn with EUR 6,000 thousand still available. The Group's Bonding Facility was cut from EUR 200,000 thousand down to EUR 112,000 thousand in August 2019.

In addition, there are other bilateral credit facilities in place with third-party banks. One facility represents a bonding / guarantee facility with two banks with a total amount of EUR 37,000 thousand. From February 2021 this facility was reduced to EUR 32,000 thousand. From August 2021 this facility was reduced to EUR 12,000 thousand. From November 2022 this facility is not available. Furthermore, there are overdraft cash facilities with two banks with an amount of EUR 17,500 thousand (PY: EUR 14,700 thousand) in total, fully backed by ancillary lenders. The total amount of letter of credit is granted by a banking syndicate of five banks and two insurers of which EUR 100,200 thousand (PY: EUR 110,400 thousand) have been utilised at reporting date.

In March 2022 the Group started negotiations with the lenders to utilise an additional 1 - year extension to the maturity dates of the Term Loan facilities. These negotiations were finalised and the extension agreed in August 2022.

The following table shows future undiscounted cash outflows from financial liabilities based on contractual agreements:

At 31 March 2023 (€ 000)	Less than 3 months	3 to 12 months	1 to 5 years	5 to 10 years	More than 10 years
Bank liabilities and borrowings	32,415	40,062	447,643	0	0
Trade payables	33,914	6,529	0	0	0
Preferred Equity Certificates (PECs)	0	0	0	0	4,685,065
Other shareholder loans	0	0	266	109	470
Bank overdraft (on demand)	3,721	0	0	0	0
Derivatives	69	182	40	0	0
Other financial liabilities	363	49	0	0	0
Total	70,482	46,822	447,949	109	4,685,535

In the current year, the Group has an expected cash outflow of EUR 4,685,065 thousand (PY: EUR 4,685,065 thousand) from PECs. Refer also to note 21.

At 31 March 2022 (€ 000)	Less than 3 months	3 to 12 months	1 to 5 years	5 to 10 years	More than 10 years
Bank liabilities and borrowings	21,693	29,326	419,838	0	0
Trade payables	38,212	827	966	75	0
Preferred Equity Certificates (PECs)	0	0	0	0	4,685,065
Other shareholder loans	470	0	181	64	0
Bank overdraft (on demand)	9,012	0	0	0	0
Derivatives	196	65	1,521	0	0
Other financial liabilities	66	691	0	0	0
Total	69,649	30,909	422,506	139	4,685,065

Collateral

The Group has various financial liabilities with an amount of EUR 976,337 thousand (PY: EUR 904,665 thousand). The largest part of these liabilities (46%) consists of the 1st lien loans (note 21).

All assets of the Group, including amongst others financial assets, are pledged as security for the loans (1st lien) as of the balance sheet date at their respective carrying amounts.

31. Lease liabilities

The lease arrangements include mainly office leases as well as leases for technical equipment and cars.

A maturity analysis of contractual undiscounted cash flows is shown in the table below.

	31.03.2023 €000	31.03.2022 €000
Less than one year	4,621	3,627
One to five years	11,240	6,768
More than five years	10,104	538
Total undiscounted lease liabilities	25,966	10,933
Lease liabilities included in the statement of financial position	20,750	9,531
Current	3,624	3,104
Non-current	17,126	6,427

The total cash outflows for leases amount to EUR 4,101 thousand (PY: EUR 3,973 thousand). The classification of these cash flows within the cash flow statement is shown in the following table.

	31.03.2023 €000	31.03.2022 €000
Cash payments for the principal portion of the lease liability
within financing activities	3,125	3,074
Cash payments for the interest portion of the lease liability
applying the requirements in IAS 7 for interest paid	715	675
Short-term lease payment, payments for leases of low-value
assets and variable lease payments not included in the
measurement of the lease liability within operating activities	261	224

The following amounts for leases were recognised within profit or loss:

	31.03.2023 €000	31.03.2022 €000
Interest expense on lease liabilities	715	658
Expense relating to short-term leases	247	215
Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets	14	8
Total	976	881

Future minimum rentals payable under non-cancellable leases, which are not included within lease liabilities as of 31 March 2023 amount to EUR 10 thousand (PY: EUR 3 thousand).

The movement in lease liabilities during the current financial year are analysed in the table below:

Lease Liabilities

	Non Current €000	Current €000	Total liabilities €000
Opening Balance At 1 April 2022	6,427	3,104	9,531
Additions	14,164	485	14,649
Other	21	0	21
Contract changes	668	27	694
Foreign exchange	-212	-94	-306
Lease payments	-3,942	102	-3,840
Closing Balance At 31 March 2023	17,126	3,624	20,750

The additions include effects of the Sale and leaseback transaction of EUR 7,593 thousand for Non-current liabilities and EUR 485 thousand for Current liabilities.

32. Related party disclosures

The Group's related parties are its parent companies, their controlling shareholders, and all entities controlled by them or over which they can exercise significant influence as well as the key management. The parent companies comprise:

―	Alison Holdco S.à r.l.
―	Triton Masterluxco 4 S.à r.l.
―	Alison Luxco S.à r.l.
―	Triton Luxembourg II GP Alison S.C.A.

Alison Holdco S.à r.l. provided EUR 470 thousand to finance the basic set-up for Arvos Bidco S.à r.l.. This loan does not bear interest. Furthermore, shareholder advances of EUR 266 thousand (PY: EUR 181 thousand) were granted to Arvos Midco S.à r.l. as well as EUR 109 thousand (PY: EUR 64 thousand) to Arvos Property S.à r.l.. These advances are 3 ^rd party invoices settled by the Shareholders on behalf of the Group Holding entities and are considered as ordinary payables to the shareholder.

Interest bearing Preferred Equity Certificates - or PECs - (see note 21) amount to EUR 472,386 thousand as of 31 March 2023 (PY: EUR 424,988 thousand). PECs in an amount of EUR 469,422 thousand (PY: EUR 379,950 thousand) are provided by Alison Luxco S.à r.l. and an amount of EUR 2,964 thousand (PY: EUR 2,666 thousand) was transferred to Triton Luxembourg II GP Alison S.C.A (shareholder loan). In FY 2017/2018, the terms and conditions of the PECs were modified related to the calculation method of the interest. Included within the balance provided by Alison Luxco S.à r.l. are PECs issued 4 February 2021 with a nominal value of EUR 10,420 thousand. These PECs carry the same terms and conditions as the one issued in previous years.

Triton Advisors Limited and West Park Management Services Limited provided different legal and professional services to the Group. Expenses related to these services amount to EUR 988 thousand (PY: EUR 416 thousand).

Expenses for remuneration to key management personnel amounted to EUR 1,067 thousand (PY: EUR 1,081 thousand) for the financial year from 1 April 2022 to 31 March 2023 and comprised exclusively short-term benefits. The following table presents compensation, including social security costs and other personnel expenses. Compensation figures of executives and authorised officers of the entity have been included in the ensuing table:

	31.03.2023 €000	31.03.2022 €000
Salaries and fees	725	714
Variable payments	323	246
Other benefits	19	121
Total	1,067	1,081

A total number of 10 participants are in the Management Incentive Programme (MIP) in the Arvos Midco Group. In line with the usual practice of Private Equity Portfolio Companies 7 Senior Executives and 3 former Non Executives of the Arvos Group are participating in an investment vehicle with privately invested money on 31 March 2023. This investment vehicle holds shares in Arvos Group through Arvos Midco S.à r.l. Most of the respective contracts have been signed in April 2016. Eight out of the ten investors who currently hold shares in the investment vehicle are still with the company, two left the organization before March 31, 2023.

The total, both former and current, number of participants is seventeen. The total, both former and current, number of participants is seventeen. Aside from the ten who remain in MIP, 7 have returned their shares, and 5 of those that have returned their shares have left the organization before 31 March 2023. Two are still part of the organization as at March 31, 2023 but have sold their shares back to an investment vehicle named by Triton. There were no returns upon such sale.

The returns on the invested amounts are dependent on the returns for the main shareholder, Triton Fund IV, and will therefore in general only apply in case of a complete sale of the Arvos Group or parts of the Group (the sale of the Raymond Bartlett Snow business by 29 June 2018, was not handled as a partial sale with any impact on equity holders in Arvos Midco S.à r.l.). The returns will be paid from the proceeds of such sale and will in no circumstance be an expense of any company in Arvos Group. This management participation will be accounted for by Arvos Group as an equity-settled share-based payment plan. No compensation expense will be recognised under this plan if no benefit is provided at the grand date to the managers as a result of the award.

During the period ended 31 March 2023, no related party was indebted to the Group.

During the period ended 31 March 2023, the Group has not been a party to any other transactions, or proposed transactions, in which any related party had or was to have a direct or indirect material interest.

33. Additional disclosures on the consolidated statement of comprehensive income

Personnel expenses comprised of:

Employees Benefit Expenses	1 April 2022 - 31 March 2023	1 April 2021 - 31 March 2022
Wages and salaries	74,865	62,985
Social security taxes	7,489	9,288
Other expenses for pensions and retirements	7,495	5,365
Total	89,849	77,638

The annual average number of employees is as follows:

Employees	1 April 2022 - 31 March 2023	1 April 2021 - 31 March 2022
Production	779	692
Sales & Marketing	133	140
Research & Development	36	18
General & Administrative	108	124
Total	1,056	974

Auditors' fees and services

Auditors' fees and services recognised as expense are categorised as follows:

	1 April 2022 - 31 March 2023 €000	1 April 2021 - 31 March 2022 €000
Audit fees	738	883
Tax fees	68	91
Total	807	975

34. Events after the reporting period

Management has no knowledge of any substantial matters after the closing date of the financial year, ending at 31 March 2023, which are not reflected in the consolidated group financial statements.

Luxembourg, 26 May 2023

Arvos Midco S.à r.l.

By: Monika Horvath, Title: Manager

By: Joakim Lindström-Formicola, Title: Manager

Business Report of ARVOS Group (Arvos Midco S.à r.l., Luxembourg/Luxembourg) for the financial year 1st April 2022 to 31st March 2023

A. ARVOS Group

ARVOS Group (ARVOS Group or Group) is composed of legal entities controlled and consolidated by Arvos Midco S.à r.l., in Luxembourg, as per the organizational structure shown on page 3.

I. Business Model

ARVOS Group is a leading global industrial equipment and service provider. The group is active both in the new equipment and aftermarket service markets across its two operational divisions. For over 100 years ARVOS Group businesses have been highly recognized for high-quality equipment and solutions under the brands Ljungström®, Schmidt'sche® and Schack®.

The ARVOS Group's businesses are technology and market leaders in their fields. Providing best in class heat exchanging and advanced lifetime services, ARVOS Group supports its customers in growing their businesses whilst simultaneously contributing sustainably to environmental protection through enhanced energy efficiency.

With its products, the Ljungström Division serves the thermal power plant market with two key applications: Air preheaters and Gas-Gas heaters, based on a similar technology platform of rotary regenerative heat exchangers. With an approximate market share of about 30 - 35 percent, ARVOS Group is one of the global leaders in design, manufacturing, installation and maintenance of Ljungström® air preheaters. In addition, an approximate 20 percent of the global market uses equipment supplied by our former Ljungström® licensees. Together, this results in more than 15,000 Ljungström® air preheaters supplied globally, making it the most widely used brand of rotary regenerative heaters in the industry.

The Schmidt'sche Schack Division is a leading designer and manufacturer of high-temperate and high-pressure process heat transfer equipment for the chemical, petrochemical, metallurgical- and waste-to-value industries. Its products are especially used in ethylene production plants, in gasification- and steam reformer plants to recover valuable process heat and as the basis for methanol, hydrogen or ammonia production, and as high temperature products applied in the carbon black industry and direct reduced iron process.

Ljungström Division has made further progress in 2022/2023 with its strategic diversification objectives. During the financial year 2022/2023, Ljungström Division had a total of 76.6m€ of diversification orders, which included 70.4m€ for offshore wind project and 5.7m€ of AdvX heat recovery technology projects as well as SBS injection process projects to reduce flue gas SO3 levels. Additionally, our EMEA region (Europe, Middle East, Africa) has made favorable progress in the new carbon capture market.

The Ljungström Division serves the following markets: New Equipment, Aftermarket, Off-Shore Wind, Carbon Capture and Others. The Schmidt'sche Schack Division serves the markets of New Equipment and Aftermarket.

Headquartered in Luxembourg, ARVOS Group operates six (prior year: six) global manufacturing facilities and has additional sales execution offices in Australia, China, Czech Republic, Germany, India, Japan, Poland and the USA.

ARVOS Group owned by funds, advised by Triton, employed a workforce of 1.065 as at March 31, 2023.

II. Organizational Structure

The Consolidated Financial Statements of Arvos Midco S.à r.l., in Luxembourg/Luxembourg includes, apart from the parent company, the following affiliated companies:

Company name	Place of business	% equity 31 Mar 2023
Arvos Property S.à r.l	Luxembourg/Luxembourg	100.00
Arvos Bidco S.à r.l	Luxembourg/Luxembourg	100.00
ARVOS Holding GmbH	Heidelberg/Germany	100.00
ARVOS GmbH	Kassel/Germany	100.00
ARVOS Ljungström GmbH	Heidelberg/Germany	100.00
Arvos Ljungstrom LLC	Wellsville/USA	100.00
Arvos Schmidtsche Schack Holding LLC	Camden, Delaware/USA	100.00
Arvos Ljungstrom Holding LLC	Camden, Delaware/USA	100.00
Arvos Schmidtsche Schack LLC	Camden, Delaware/USA	100.00
Arvos Holding Netherlands B.V	Amsterdam/Netherlands	100.00
Arvos Ljungstrom Energy India Private Limited	Noida/India	100.00
Arvos K.K	Kobe/Japan	100.00
Arvos Schmidtsche Schack K.K	Kobe/Japan	100.00
ARVOS Ljungström s.r.o	Zidenice/Czech Republic	100.00
ARVOS Ljungström S.p. z.o.o	Poznan/Poland	100.00
Ljungström Arvos New Energy Technology (Shanghai) Co., Ltd	Shanghai/China	100.00
Arvos Schmidtsche Schack (Shanghai) Thermal Equipment Co., Ltd	Shanghai/China	100.00
Nantong Ljungström Environmental Tech Co., Ltd	Nantong/China	100.00
Ljungstrom Pty Ltd	Sydney/Australia	100.00
Arvos Schmidtsche Schack India Private Limited ¹⁾	Thane/India	100.00

¹⁾ Consolidated for the first time in 2021/2022

Holding companies are in bold

Arvos Midco S.à r.l., together with Arvos Bidco S.à r.l. were established under Luxembourg law on March 20, 2014. Since August 29, 2014, these two companies lead the ARVOS Group and are responsible for the strategic direction and operational leadership for all affiliated companies.

To emphasize the independence of the Group, as well as fulfilling legal requirements, the legal entities of the Group were renamed to the extent possible to ARVOS - the main name for the entire Group, while the divisions of the Group took over their heritage product names and trade under the names of

―	Ljungström (Air Preheaters)
―	Schmidt'sche Schack (Heat Transfer Solutions)

There are no structural changes in the financial year 2022/2023.

In the previous financial year 2021/2022 Arvos Schmidtsche Schack India Private Limited (incorporated November 2019) was consolidated for the first time, whilst Arvos Schmidtsche Schack Asia Pacific PTE., Ltd. was sold in December 2021.

III. Research and Development

All R&D activities were carried out with company resources. For Ljungström Division, approximately 1.4% of sales were spent on R&D related activities in financial year 2022/2023 (prior year: 1.5%); for Schmidt'sche Schack Division, approximately 1.2% of sales were spent on R&D related activities in financial year 2022/2023 (prior year: 0.9%). In general, R&D expenses are not capitalized in the ARVOS Group. Only the Ljungström Division capitalized 2.4m€ of development related activities, which are linked to their diversification strategy (i.e., ORLEN AdvX Pilot Plant). The Pilot Plant was completed in financial year 2022/2023 with all tests successfully proving the technology.

In the financial year ending on March 31, 2023, the Ljungström Division, either successfully completed or made big progress in several R&D projects:

―	Further enhancement of our AdvX Technology, with new pilot design to improve the performance and cleanability of heavy fuel oil fired boilers through the use of soot blower and element combinations.
―	A comprehensive program to enhance our Air Preheater (APH) Technology to strengthen detailed technical knowledge of heating element product behavior in various flue gas environment and multiple cleaning scenarios.
―	Continued building up internal capabilities to support aftermarket growth. Higher performing TF4A was the main focus for heating element.
―	Investment in Hydrogen fuel cell technology with computational flow dynamics (CFD) analysis.
―	Evaluation of carbon capture systems and use of Ljungström gas gas heaters (GGH) in CCS amine systems and rotary adsorption machine (RAM).
―	Multiple finite element analysis (FEA) performed on Ljungström offshore wind manufacturing fixtures.

R&D activities for the Ljungström Division focused mainly on diversification strategy and increasing order intake by offering superior service and differentiated technologies for rotary heat exchangers.

R&D activities in Schmidt'sche Schack Division focused mainly on technology improvements and cost optimization of the current product portfolio. In continuation of the successful achievements of past years, the future R&D targets will be product optimization, further development on digitalization and the further optimization of fabrication processes (automation), predictive maintenance and product monitoring activities. A significant number of these developments are undertaken in close collaboration with our business partners.

B. Business Performance

I. Business Set up and Conditions

ARVOS Group had a very successful financial year 2022/2023. Great progress was made with the diversification initiatives and most key financial KPIs were achieved or exceeded budget and prior year.

The order intake increased overall significantly by 51.9% (prior year: +28.5%). The order intake of Schmidt'sche Schack rose by 33.3% (prior year: +22.8%). The order intake of Ljungström (LJU) increased by 68.2% (prior year: +33.8%).

The positive development of business during the financial year was based on a friendly market environment trading into a very good Order Intake for ARVOS Group. Covid-19 pandemic impacts did not affect our market environment and the Russia/Ukraine crisis did not impact the business activities of ARVOS substantially.

The aforementioned positive development of order intake led to an all-time high order intake of 178.6m€ at Schmidt'sche Schack in the financial year 2022/2023. The high Order Intake in Schmidt'sche Schack led to an increase of revenues in the financial year of 15,3% compared to the previous financial year. Business development of Ljungström (LJU) during the financial year was characterized by a significant up-tic in core aftermarket orders (+45.3%), mainly in the USA coupled with securing two additional USA Off-Shore Wind Projects totaling 70.4m€. The revenues of Ljungström (LJU) increased by 18.1%. The Ljungström (LJU) revenues increase largely coming from core aftermarket business in the USA, EMEA region (Europe, Middle East, Africa) and SEA region (Southeast Asia).

II. General economic conditions

The extent to which the global economy recovered in 2022 from the disruptive impact of the coronavirus pandemic was significantly less pronounced than had been generally expected at the beginning of the year. According to the provisional calculations of the International Monetary Fund (IMF), global gross domestic product (GDP) grew by 3.4 % year-on-year in 2022 (2021: +6.3 %).

The eurozone economy as a whole grew by 3.5 % year-on-year in 2022 (2021: +5.4 %), influenced by the war in Ukraine and the rise in interest rates as a result of high inflation. With a growth rate of 1.8 %, Germany recorded the lowest increase in economic activity, mainly reflecting the impact of supply bottlenecks and higher energy prices, both of which hit the export-oriented German economy harder than others (2021: +2.6%). By contrast, the economies of France increased by +2.6 % (2021: +6.8 %), Italy by + 3.7 % (2021: +7.0 %) and Spain by + 5.5 % (2021: +5.5 %) all managed to grow faster in 2022.

GDP grew in the UK by 4.0 % year-on-year in 2022 (2021: +7.6 %). In the USA, the economy grew by 2.1 % in the reporting period, reflecting the impact of interest rate hikes already made or expected to be made by the US Reserve Bank (Fed) to combat the very high rate of inflation still prevailing in the USA (2021: +5.9 %).

China's economy grew by 3.0 % year-on-year in 2022 (2021: +8.4 %) and therefore at a significantly slower pace than one year earlier, mainly due to the recurrent coronavirus-induced lockdowns in a number of cities in light of the Chinese government's zero-Covid strategy.

The Japanese economy recovered only slightly during the year under report. The growth rate of 1.1 % was due to weaker demand, particularly from private households (2021: +2.1 %).

GDP Growth in Real Terms in 2021 and 2022

REAL GDP (ANNUAL CHANGE IN PERCENT)

Development of exchange rates and international interest rate environment

Supply chain bottlenecks and significantly higher energy prices contributed to rising inflation in the world's major economies in 2022. In response to this development, many central banks tightened their monetary policies markedly over the course of the year.

In view of the war in Ukraine and the energy crisis, the euro came under pressure against the US dollar, falling sharply to a 20-year low of 0.95 US dollars to the euro in September, before recovering in the following month. In financial year 2022/2023, the US currency fluctuated between 1.10 and 0.95 US dollars to the euro. In light of high inflation rates, both the European Central Bank (ECB) and the Fed tightened their monetary policy during the period under report and raised their benchmark interest rates significantly in a series of steps.

Energy and raw materials prices

As a result of global supply bottlenecks and the war in Ukraine, the year under report was also marked by significantly higher energy and raw materials prices. Prices for natural gas in Europe, for instance, had effectively almost doubled between march and end of august 2022. In the meantime, however, prices for energy and materials have returned to their previous year's levels.

Projections of GDP Growth in Real Terms of 2023 and 2024

REAL GDP (ANNUAL CHANGE IN PERCENT)

The International Monetary Fund has raised its global growth projection for 2023 to 2.8 %. Despite this upward revision, economic growth over the coming year is nevertheless likely to be significantly weaker than in 2022. In 2022, the growth rate was 3.4%. High inflation and the war in Ukraine are likely to continue weighing on the global economy. New virus variants, renewed pandemic-related restrictions and prolonged supply bottlenecks could additionally slow the pace of economic growth.

Forecasts for the eurozone as a whole indicate slight growth to 0.8% in 2023 (2022: +3.5%). In this context, corresponding rates of economic growth are predicted for France at 0.7% (2022: +2.6 %), Italy at 0.7% (2022: +3.7 %) and Spain at 1.5% (2022: +5.5 %). In the case of Germany, a recession cannot be ruled out in 2023 (-0.1 %), with private consumption held down by high inflation and industrial production potentially affected by the energy crisis. Moreover, the global economic slowdown could result in falling demand for German export goods. In the calendar year 2022 the growth rate was +1.8 %.

Economic output in the UK is also expected to shrink in 2023 by -0.3% (2022: +4.0 %).

The growth rate in the US is forecast to slow to 1.6 % in 2023 (2022: +2.1%). The Fed's interest rate hikes and the resulting unfavourable financing conditions available on the market are forcing companies and households alike to cut back on spending.

Following the easing of pandemic-related restrictions, the Chinese economy is expected to be significantly stronger again in 2023 and grow by 5.2 % (2022: +3.0%).

Japan's growth rate in 2023 is projected to increase moderately by 1.3% (2022: + 1.1 %).

III. Business Divisions

(1) Division Ljungström (LJU)

The Ljungström Division order intake was 259.5m€. This is an increase of 105.2m€ or 68.2% as compared to financial year 2021/2021. The increase is mainly a USA aftermarket post pandemic catch-up and major USA off-shore wind projects.

Air Preheater (APH) aftermarket orders increased by 51.5m€ or 45.3% as compared to financial year 2021/2021.

Aftermarket improvement occurred across most Ljungström entities. The Ljungström Division continues to retain very high market share in the home countries of Japan and USA.

New equipment orders decreased by 4.0m€ or 14.6% as compared to financial year 2021/2022. The primary decrease came in the China due to reduced investment in the steel industry gas gas heaters (GGH) market.

Orders in other categories increased by 57.7m€ or 437.1%. USA Off-Shore Wind market orders were higher than the prior year by 59.4m€. Two USA East Coast projects were secured during financial year 2022/2023. Order intake for AdvX/SBS, i.e. projects using AdvX heat recovery technology and SBS injection processes to reduce flue gas SO3 levels, was 5.7m€ and favorable to prior year by 4.1m€. This order intake was achieved in the USA and Japan markets.

(2) Division Schmidt'sche Schack (SCS)

The business development of the division during the financial year was characterized by further recovery of both the Aftermarket and the New Equipment business since the Covid-19 pandemic. Fortunately, the Russia-Ukraine conflict had not a significant impact on the business despite the fact, that the global market is once again characterized by uncertainties.

The upswing in the markets led to an order intake for the reporting period of 178.6m€. This is significantly above the order intake of 134.1m€ achieved in the previous year, and also higher than the forecasted order intake of 149.2m€. The most important inventory line item, work in progress, was broadly financed by customer payments. The factory in Kassel was utilized according to plans for most parts of the financial year.

IV. Initiatives of ARVOS Group

ARVOS Group's current structure was established at inception in order to create a higher enterprise value. Several initiatives, some of which were started in financial year 2014/2015, some that were started in later years have also continued to contribute since and into the financial year 2022/2023. The most important ones are presented below:

―	SC=C (previously EF) - mainly a cost optimization and efficiency enhancement project, especially targeting cost of goods sold reductions
―	Lean and Continuous Improvement - a longer term program, specifically targeting a higher shop floor efficiency through streamlined manufacturing and supply chain processes (e.g. layout improvement and workflow reorganization of the Transfer Line Exchangers product)
―	Project pricing analysis and optimization
―	Pricing initiate aiming to improve the order intake margin
―	Trade Working Capital Management - several detailed initiatives to reduce accounts receivable, especially overdue and Inventories, extending accounts payable and customer prepayments, improving initial contractual T&Cs
―	Digitalization - a full program with several digitalization initiatives have been continued in both divisions; it will provide additional revenue streams, enhance the products, service portfolios and will create new opportunities in production, field service and design
―	Diversification - a business development program that expands the product portfolio targeted at sustainable environmental compliance while providing heat recovery, reliability improvement and operating flexibility for power and industrial applications
―	LJU N100 PMO Organization and Governance - a business initiative program targeted at driving diversification order intake.
―	DEI (Diversification, Equity, and Inclusion) - an organizational initiative linked to the overall business strategy.
―	ESG (Environmental, Social, Governance) - a business initiative encompassing the organization's impact on the environment and society, as well as a broad range of issues that can impact a company's long-term sustainability and performance.

Several of these initiatives have already resulted in substantial cost savings.

C. Business Development overall

The financial year 2022/2023 was dominated by a number of ongoing global challenges, in particular pandemic-related lockdowns in China and the impact of the war in Ukraine. Despite the resulting volatile business environment, the ARVOS Group can be satisfied with the overall positive course of business during the financial year 2022/2023. The ARVOS Group's improved earnings situation is reflected in the financial performance, financial position and net assets reported for the financial year 2022/2023.

(1) Financial performance

	1 Apr 22 - 31 March 2023		1 Apr 21 - 31 March 2022
	m€	( ^*)	m€	( ^*)
Continuing operations
Revenue	303.4		259.6
Cost of sales	-225.1	74.2%	-200.4	77.2%
Gross profit	78.3	25.8%	59.2	22.8%
Other operating income	6.2	2.0%	4.4	1.7%
Research and development expenses	-3.4	1.1%	-2.8	1.1%
Selling and distribution expenses	-32.4	10.7%	-30.4	11.7%
Administrative expenses	-28.1	9.3%	-24.2	9.3%
Other operating expenses	-3.6	1.2%	-5.2	2.0%
Total operating expenses before impairment loss	-61.3	20.2%	-58.2	22.4%
Impairment loss	0.0		-87.0
Operating gain/loss after impairment loss	17.0	5.6%	-86.0	-33.1%
Finance result	-114.4	37.7%	-74.3	28.6%
Loss before income tax from continuing operations	-97.4	32.1%	-160.3	61.8%
Income tax gain/loss	2.1	-0.7%	-0.8	-0.3%
Loss for the period from continuing operations	-95.3	31.4%	-161.1	62.1%
Loss for the period	-95.3		-161.1

^(*) % of Revenue

Revenues for the financial year 2022/2023 amounted to 303.4m€ versus revenues of 259.6m€ in the prior year (+16.9%). The sales volume was higher at the Ljungström Division as its contribution increased by +26.9m€ (+18.1%) when compared to the previous year. Nevertheless, the Schmidt'sche Schack Division also significantly increased its contributions by 16.9m€ (+15.3%). The overall aftermarket sales improved from 163.9m€ to 186.5 m€. The analysis of sales, per product category, per country and per division are shown in the tables below. Revenues from products and services transferred over time contributed 158.2.6m€ or 52.1% to the Group's total sales.

Sales per product category

	1 Apr 22 - 31 March 2023 m€	1 Apr 21 - 31 March 2022 m€
New Equipment	103.2	93.4
Aftermarket	186.5	163.9
Others	13.7	2.3
	Total 303.4	259.6

Sales per country of destination

	1 Apr 22 - 31 March 2023 m€	1 Apr 21 - 31 March 2022 m€
USA	97.2	54.9
China	54.0	37.5
Japan	36.6	45.3
Vietnam	12.0	1.1
Germany	11.3	13.2
Saudi Arabia	9.7	5.5
India	9.1	8.6
Singapore and Malaysia	9.0	7.1
Netherlands	6.3	1.5
Czech Republic and Slovakia	6.3	3.4
Russia	6.2	23.6
Taiwan	4.5	4.5
Canada	4.4	2.9
Columbia, Mexico and Brazil	3.8	3.8
Philippines	3.1	0.4
Bulgaria	2.8	0.0
South Korea	2.8	0.0
Belgium	2.4	1.9
Indonesia	2.1	1.2
Others	20.0	43.1
Total	303.4	259.6

Sales by Division

	1Apr 22 - 31 March 2023 m€	1 Apr 21 - 31 March 2022 m€
Ljungström (LJU)	175.7	148.8
Schmidtsche Schack (SCS)	127.7	110.8
	Total 303.4	259.6

The main expenses in cost of sales are material and personnel costs. Compared to the prior year, cost of sales increased as a function of the significantly higher sales. The costs of sales as a percentage of revenue decreased from 77.2% to 74.2%, mainly due to improved margin orders in different parts of the Group.

The gross profit amounted to 78.3m€ compared to 59.2m€ in the prior year. This reflects a gross margin of 25.8%, which is higher than the prior year's gross margin (22.8%), due to the aforementioned higher margin orders of the Group.

Other operating income amounted to 6.2m€, an increase of 1.8m€ in comparison to prior year. The increase is largely due to the income from the sale of a fixed asset in the current year.

Research and development expenses amounted to 3.4m€ which corresponds to 1.1% of sales and is 0.6m€ above the prior year's level (1.1% of sales). The moderately higher amount in comparison to the prior year is mainly attributable to some additional R&D activities in the current year.

Selling and distribution expenses amount to 32.4m€ or 10.7% of sales, which is 1.0 percentage points lower as the prior year's level and are explained by higher current sales level.

Administrative expenses amount to 28.1m€, or 9.3% of sales. This is 3.9m€ above the prior year's admin expenses but is the same percentage as prior year's level and are also explained by higher current sales level.

Other operating expenses amount to 3.6m€, which is 1.6m€ less than the prior year. In the previous year foreign exchange derivates created a loss of 0.8m€. This did not repeat in the current year.

The group shows an operating gain after impairment loss of 17.0m€. No impairments were recognized in the financial year 2022/2023. In the previous year, the group reported an operating loss after impairment of 86.0m€, which was attributable to an impairment of 87.0m€ at Ljungstrom division.

Overall, the operating gain for the financial year 2022/2023 totaled 17.0m€ (EBIT margin +5.6%), which represents an increase of 16.0m€ compared to the prior year (EBIT margin +0.4%). The increase is mainly due to improved sales margins. The Group's EBIT for financial year 2022/2023 remained above budgeted expectations.

The net finance result was -114.4m€ versus -74.3m€ for the prior year. Finance income was at 1.5m€ almost all from derivates. Finance cost of 115.9m€ for the financial year 2022/2023 mainly comprise interest expenses on Preferred Equity Certificates (PECs) and Term Loans. Most of the current year's unusually high finance costs are primarily attributable to the one-year extension of the Term Loans when a cost of -21.3m€ was recognized that arose due to the recalculation of Term Loans balances under the Effective Interest Method used by the Group. An increase of 5.6m€ occurred in the interest costs as a higher interest rate kicked in, due to the one-year extension, during 2022/2023 on the Term Loans balances. The interest expenses for preferred equity certificates were 4.8m€ higher than the prior year due to their compounding effect. Additionally, there were -1.9m€ currency exchange rate costs as the Euro was stronger against other currencies the Group operates in.

Loss before income tax from continuing operations shows at 97.4m€ versus 160.3m€ for the prior year. In the prior year, the result of continuing operations before tax would have shown a loss of 73.3m€ excluding the impairment loss of 87.0m€. The negative result in the current year is a mixture of higher revenues offset by even higher finance costs as mentioned above. The income tax gain amounted to 2.1m€ versus an income tax loss of 0.8m€ for the prior year. After-tax net loss comes to 95.3m€ (prior year: 161.1m€). The comparable after-tax net loss, for the period, from continuing operations is 95.3€ (prior year: loss of 74.1m€).

(2) Financial and assets position

Assets

	31 March 2023 m€	31 March 2022 m€
ASSETS
Non-current assets
Goodwill	333.3	335.9
Intangible assets	35.7	52.1
Property, plant and equipment	28.7	29.5
Right-of-use-assets	11.4	8.1
Financial assets	0.8	0.7
Income tax assets	0.3	0.3
Deferred tax assets	18.4	16.8
	428.7	443.4
Current assets
Inventories	27.5	21.2
Trade receivables	49.7	49.6
Contract assets	38.2	25.8
Income tax assets	0.4	1.5
Financial assets	0.4	0.9
Non-financial assets	7.3	5.6
Cash and cash equivalents	19.8	23.2
	143.3	127.8
TOTAL ASSETS	572.0	571.2

The total assets amounted to 572.0 € as of 31 March 2023, 0.7m€ more than of 31 March 2022 (571.2m€).

Non-current assets in total decreased by 14.8m€. The Group conducted its annual impairment test for the carrying amount of Goodwill against a value in use calculation based on cashflow projections from its 3-year financial budget. As a result of this testing the group has recognized no impairment in the financial year 2022/2023. In the previous financial year, the group had recognized an impairment charge of €87.0m at the Ljungstrom division. The overall decrease in the Goodwill balance is 2.6 m€ (2021/2022: 85.9m€) which is due to foreign currency movements (2021/2022: increase of 1.1m€).

Intangible assets that comprise mainly customer relationships, licenses and trademarks were lower by 16.4m€. This is primarily due to the amortisation of customer relationships assets by 15.8€ and of technology and licenses assets by 3.2m€. These decreases were mitigated somewhat by additions of techno logy and licenses of 2.6m€. Property, plant and equipment is lower by 0.8m€ due to disposals (4.0m€) and higher level of investments than depreciations (3.2m€). The right-of-use-assets increased by 3.3m€ primarily due to additions of the financial year. Deferred tax assets increased by 1.6m€ mainly due to temporary tax differences between local and IFRS accounting for revenue recognition milestones (see current assets below) and the Group's bank loans.

Current assets in total increased by 15.5m€. Overall Inventories increased by 6.3m€ mainly due to an increase in Work-in-progress (3.9m€) as well as of finished goods and goods for resale (2.0m€). Trade receivables increased slightly by 0.1m€. The contract assets increased significantly by 12.4m€ in the financial year. The income tax asset decreased by 1.1m€. Cash and cash equivalents decreased by 3.4m€ to 19.8m€ as at 31 March 2023.

Equity and Liabilities

	31 March 2023 m€	31 March 2022 m€
EQUITY AND LIABILITIES
Equity	-537.7	-441.3
Non-current liabilities
Provisions for pensions and similar obligations	17.5	22.6
Other provisions	5.4	9.1
Loans and borrowings due to banks	421.5	399.8
Loans and borrowings due to shareholders	472.8	425.2
Income tax payable	1.6	0.0
Other financial liabilities	0.1	1.5
Leasing liabilities	17.1	6.4
Deferred tax liabilities	11.2	13.4
	947.2	878.0
Current liabilities
Other Provisions	16.7	12.8
Loans and borrowings due to banks	40.4	36.6
Loans and borrowings due to shareholders	0.5	0.5
Trade and other payables	40.5	40.1
Contract liabilities	48.1	32.7
Leasing liabilities	3.6	3.1
Income tax payable	0.8	0.9
Other financial liabilities	0.7	1.0
Other non-financial liabilities	11.2	6.8
	162.5	134.5
Total liabilities	1109.7	1012.5
TOTAL EQUITY AND LIABILITIES	572.0	571.2

Non-current liabilities in total increased by 69.2m€. The change is mainly due to the increase of 47.6m€ in the loans and borrowings due to shareholders. There was also an increase of 21.7m€ on loans and borrowing due to banks. The change of non-current loans and borrowings due to shareholders and loans and borrowings due to banks is largely due to interest costs.

Provisions for pensions and similar obligations decreased by 5.1m€. The decrease is mainly due to actuarial losses, which are mostly driven through changes in financial assumptions. Furthermore, the other non-current provisions decreased by 3.7m€. The non-current leasing liability increased by 10.7m€ in the financial year primarily due to the addition of a sale and leaseback liability. There was an increase in the income tax payable of 1.6m€ and deferred tax liabilities decreased by 2.2m€.

Current liabilities in total increased by 28.0m€. Other Provisions increased by 3.9m€, mainly due to higher provisions for warranties and other provisions. Trade and other payables increased slightly by 0.4m€. Contract liabilities increased significantly by 15.4m€ in the financial year. The leasing liability increased slightly by 0.5m€ in the financial year primarily due to above mentioned additions. Net current income tax liabilities decreased by 0.1m€ as these continue to be settled during the year. Other financial liabilities that mainly relate to derivatives decreased by 0.3m€. Other non-financial liabilities increased by 4.4m€ and mainly relate to amounts owed to employees.

Loans & borrowings:

2023:

31 March 2023 (book values)	m€	Effective interest rate
Preferred Equity Certificates (PECs) EUR:	472.4	n/a
1 ^st Lien B1 EUR:	65.7	7.86%
1 ^st Lien B2 EUR:	78.6	7.83%
1 ^st Lien B3 EUR:	116.7	8.56%
1 ^st Lien B1 USD:	83.0	7.17%
1 ^st Lien B2 USD:	83.0	7.17%
Revolving credit facility (RCF):	22.0	n/a
Shareholder Loans	0.8	0.00%
Total loans and borrowings	922.2

In addition to the Group loans shown above, an overdraft facility amounting to 3.7€m was drawn as of 31 March 2023 and a subsidiary had bank loans amounting to 9.2m€. Effective interest does not apply to both Preferred Equity Certificates (PECs) and the Revolving Credit Facility (RCF). The interest rates are 11.0% and 5.5% respectively.

2022:

31 March 2022 (book values)	m€	Effective interest rate
Preferred Equity Certificates (PECs) EUR:	425.0	n/a
1 ^st Lien B1 EUR:	62.6	7.86%
1 ^st Lien B2 EUR:	74.9	7.83%
1 ^st Lien B3 EUR:	111.2	8.56%
1 ^st Lien B1 USD:	77.2	7.17%
1 ^st Lien B2 USD:	77.2	7.17%
Revolving credit facility (RCF):	14.0	n/a
Shareholder Loans	0.7	0.00%
Total loans and borrowings	842.8

In addition to the Group loans shown above, an overdraft facility amounting to 9.0€m was drawn as of 31 March 2022 and a subsidiary had bank loans amounting to 10.2m€. Effective interest does not apply to both Preferred Equity Certificates (PECs) and the Revolving Credit Facility (RCF). The interest rates are 11.0% and 5.5% respectively.

ARVOS Group's capital is based on the 1 ^st Lien (1L) Credit Agreements, as well as shareholder equity. The debt is divided into shareholders' loans in the shape of Interest-bearing Preferred Equity Certificates (PECs) and 1L bank loans. The 1L bank loans are divided into separate tranches.

In total, the PECs amount to 472.4m€ as at 31 March 2023 (previous year: 425.0m€). PECs in an amount of 469.4m€ (previous year: 422.3m€) thousand are provided by Alison Luxco S.à r.l. and an amount of 3.0m€ (previous year: 2.7m€) are provided by Triton Luxembourg II GP Alison S.C.A. The total amount of PECs interest expenses allocated to the financial year 2022/2023 amounts to 47.4m€ (previous year: 42.6m€).

During financial year 2022/2023 the Group exercised the A&E one-year extension option to move the maturity of the Term Loans facility to 29 August 2024. Also, both the Revolving Credit Facility and Bonding Facility were prolonged to May 31, 2024.

The bonding line is 112m€. The Group's access to the Revolving Credit Facility is 28m€. As at the reporting date the Group had utilized 22m€ with a total of 6m€ still available.

All amounts due to the 1st Lien Credit Agreement are guaranteed, collectively, by the borrowers as well as by Arvos Property S.à r.l. and Arvos Midco S.à r.l. In addition, to secure the amounts, there are various pledges in place. The pledges include, amongst others, pledges over current and future equity interests in material subsidiaries, bank accounts held, intellectual property and real property. In addition, there is an assignment of receivables including intra-group receivables and insurance receivables. Based on the 1st Lien Credit Agreements, financial covenants apply for the entire group. Continuous close monitoring of the performance of the covenants is conducted to avoid any issues in meeting financial covenants. For further detail, please see the note on Financial and liquidity risks.

(3) Cash Flow Statement

	1 Apr 22 - 31. Mrz 23 m€	1 Apr 21 - 31. Mrz 22 m€
Net cash flows from operating activities	35.8	34.8
Net cash flows used in investing activities	5.8	-2.8
Net cash flows from financing activities	-44.4	-35.2
Net (decrease)/increase in cash and cash equivalents	-2.8	-3.2
Net foreign exchange difference	-0.6	0.3
Cash and cash equivalents at 01 April	23.2	26.1
Cash and cash equivalents at 31 March	19.8	23.2

Cash inflow from continuing operating activities was at +35.8m€ for the reporting period and increased by +1.0m€ in comparison to prior year. Contributing to this was the year-on-year level of cash flows from cash effective earnings before tax in an amount of +9.1m€ and changes in net working capital of -14.7m€, which contains changes compared to previous year in inventories by - 14.3m€, receivables from construction contracts by -4.5m€, trade and other receivables by - 6.9m€, other financial assets by -3.7m€, non-financial assets by -3.1m€ and trade payables by +13.5m€, current other financial liabilities by -0.9m€, income tax payable by -0.1m€ current other non-financial liabilities by +5.3m€, provisions by +0.2m€ and from movements in net defined benefit liabilities by -0.2m€. The cash-outflows for income tax paid decreased by +6.7m€.

Net cash inflows from investing activities of +5.8m€. Here expenditure of 11m€ was off-set by proceeds of 16.8m€ from the sale and leaseback of a manufacturing site. The expenditure is a mix between the categories within property, plant and equipment and development as described in the R&D section.

Net cash flows from financing activities reflect mainly the movements within the reporting year for loans and borrowing to banks. Significant interest payments in the amount of 34.2m€ and repayments in the amount of 4.9m€ on Term Loans to the banks were made during the current financial year. Overall, same as in the prior year, the Group on a net basis made a repayment to the banks in its long and short-term financing transactions with the banks. Total current year net repayment including the above-mentioned Term Loan repayment were 2.5m€. Finance costs and interest paid in the current financial year also include commitment and letter of credit fees. Additionally, transaction expenses for the one-year extension option of 3.0m€ were also made during the financial year. An amount of 3.1m€ for the principal portion of the lease liabilities was paid during the financial year. An amount of 1.5m€ were paid in other interests which includes interest on leases.

The cash balance as of 31 March 2022 was at 23.2m€ and has decreased to 19.8m€ by end of the financial year 2022/2023.

Due to improved trading conditions, the group was able to continue making net repayments on borrowings from the banks and keep up with interest payments despite base rate increases. The outflow of this factor adds up to 2.8m€ and looking at the picture excluding these, the Group would have had a positive net cash flow, before the impact of fx, at the end of the financial year 2022/23. The currently available revolving credit facility and the overdraft facilities will cover all liquidity requirements.

(4) Investment activities

Total capital expenditure for the Group amounted to 10.6m€ (previous year: 2.7m€).

Historically, the primary focus of the Ljungstrom Division's investment efforts has always been geared towards cost reduction, growth and efficiency improvements. In the financial year 2022/2023, 8.8m€ of capital investment was incurred, targeted specifically at upgrading, efficiency, improving productivity and EHS (Environment, Health and Safety), and diversification of the business product portfolio and markets.

Investment activities of 1.8m€ in the Schmidt'sche Schack Division during the financial year 2022/2023 were mostly upgrades and investments in infrastructure.

Total capital expenditure for the Group of 8.7m€ are planned for the next year, this will be financed from cash flows from operating activities.

The Ljungstrom Division has planned overall capital investments of 5.8m€ for the financial year 2023/2024, with nearly 40% targeted for USA WIND market. To date, 7.8m€ of Governmental Clean Energy grants and tax credits have been secured, most of which will be realized over a 10 to 15-year period.

Investment activities of 2.9m€ are planned at the Schmidt'sche Schack Division for 2023/2024.

(5) Employment

Headcount	31 March 2023	31 March 2022
LJU	704	613
SCS	349	331
Corporate	12	12
	1,065	956

Ljungström Division employment increased by 91 or 14.8% as compared to financial year 2021/2022, which has been primarily driven by the off-Shore Wind diversification strategy. USA accounts for 40.4%, Japan accounts for 22.6% of Ljungström's total workforce.

Schmidt'sche Schack Division continues to apply a strategy of flexible employment adjustment tailored to meet the workshop load during the past financial year to adjust to high and normal load periods.

Environmental protection is, like Health & Safety, a very important goal for the ARVOS Group and it is an integral part of the strategy of the Group. The companies of the Group are committed to comply with all legal requirements for the protection of the environment. All employees of the Group are encouraged to work together to ensure responsible and sustainable handling of environmental protection.

D. Events after the reporting period

The Management has no knowledge of any substantial matters after the closing date of the financial year, ending on 31 March 2023, which are not reflected in the consolidated group financial statements.

E. Risks and Opportunities Report

In view of more rapid market changes, growing uncertainty, increasing complexity of general conditions that vary widely around the world, corporate decisions are increasingly dependent on the reliable assessment of potential risks. As a globally operating Group with a heterogeneous product portfolio, ARVOS is exposed to a wide range of risks which vary depending on the business, industry and region. Corporate policy is geared towards taking opportunities that present themselves, leveraging and expanding success potential while at the same time avoiding, minimizing or offsetting associated risks as far as possible. The goal is to retain corporate flexibility and financial diligence while increasing the enterprise value on a sustainable basis.

The risk management of ARVOS Group is based on a standard set of risks which are reassessed regularly.

(1) Risk report

Russian-Ukrainian War

Arvos Group has a very limited exposure to Russia and this conflict and has managed even any indirect impact from this crisis relatively well, materializing in additional supply chain disruptions, sharp price increases for supplies and energy and a more reluctant behavior in the economic sector again. High inflation and the war in Ukraine are likely to continue weighing on the global economy.

Although the Group does not expect an increasing impact of the Russia-Ukraine war on the Group's business activities, it is difficult to foresee the further development of this crisis and its precise impact on the markets relevant for Arvos Group.

The direct impact from the Russian-Ukraine war on turnover in FY 23 was zero. No revenues which would have come from the order book to Russia in FY 23 had to be cancelled. The sales to Russia were carried out by SCS in full compliance with applicable sanctions before the respective sanctions came into force. There is no ongoing business into Russia, which would have not come through and which Arvos Group would have lost.

Although neither the company's performance nor its operations, at the date of this report, have been significantly impacted by the war in Ukraine, the Board of Directors continues to monitor the evolving situation and its impact on the financial position and results of the company.

To ensure sanctions compliance and policies are met, every Sales project is brought to attention of Group Legal. Each division has an Export Control Manager to ensure sanction compliance adherence for all end customers. The sanction compliance report is issued to the relevant Sales/Project Manager, as well as to the Managing Board. By this closed loop consistent compliance with sanctions regimes as well as with other export restrictions are ensured.

Corona virus crisis

Due to the longer than initially expected, the damaging impact on the economy of Covid-19 put the global business environment through difficult times. Even though the coronavirus pandemic is not considered as a public health emergency, it is still considered a global threat.

During the pandemics hard hitting days, ARVOS Group companies undertook several health focused and cost saving measures as it has production and sales locations in several countries and was impacted worldwide.

It is now possible to say that for ARVOS Group, the negative impact on the economy triggered by the pandemic is no longer a threat and it is behind us. That said, the ARVOS Group is prepared if in the financial year 2023/2024 the coronavirus raises its head in any of the markets in which ARVOS Group is active. Furthermore, after this prolonged crisis we stay vigilant in case a reduction in the creditworthiness of customers and business partners arises. We continue to monitor cash flows on both procurement and sales side.

Macroeconomic risks, market risks and competition risks

The IMF's spring report of 23 April 2023 forecasts an increase in global economic for 2023 to 2.8% (2022: 3.4%). For China, which has become increasingly important to global supply chains and raw materials markets, the IMF forecasts an economic growth of 5.2% (2022: 3.0%). For the United States, the world's largest economy, the forecast predicts a growth in GDP of 1.6%, versus 2.1% in 2022. The IMF's spring report forecasts for euro zone a growth in GDP of 0.8% (2022: 3.5%).

Important opportunities and risks for earnings are associated with uncertainty regarding market growth. Unforeseen disruptions in global economic relations can have highly unpredictable effects for the risk and opportunity situation in 2023/2024. The uncertainties for the global economy are primarily characterized by the following factors. The coronavirus pandemic and its impact remain a potential risk to the global economy. With regards to the war in Ukraine, there is a risk of a further escalation of the conflict and therefore of further sanctions imposed by Western countries on Russia as well as possible counter-sanctions by Russia. In the trade war between the US and China, the focus is currently shifting from simple tariff increases to further import and export restrictions on specific technologies. The tougher rhetoric on the status of Taiwan may heighten geopolitical tensions and pose an additional risk. Another risk could be a possible recession in Germanys or other countries. Further interest rate hikes by the central banks due to high inflation could slow economic growth over the long term. If the higher interest rates do not take effect quickly or effectively enough, lower real incomes and a corresponding widespread drop in demand may have a negative impact. In addition, the recent turbulence in the US and European banking sectors brought new uncertainties for the further development of the global economy.

The changes in political, social, macroeconomic factors and cyclical changes result in opportunities for ARVOS Group but are also associated with risks. A deterioration in general economic condition in the sales regions can adversely impact the sales and earnings situation of the ARVOS Group. The product portfolio of the divisions and the continued efforts to internationalize the sectors help to ensure that temporary economic fluctuations can be offset, in part, by more favorable developments in other regions and markets. As previously said, ARVOS Group no longer considers to be negatively impacted by coronavirus. The Russia-Ukraine conflict also has not impacted the Group yet.

Market risks are always present. Additional focus on diversification strategies, high-end market segments, process improvements, production and capacity adjustments and strict cost management all contribute to the strengthening of competitiveness in each of the company's industries.

Overall, the competitive pressure in the markets is always relevant. Sales risks include the potential loss of significant key accounts, loss of market share due to technological innovation and new advances by competitors. Due to ARVOS Group's position as a very strong niche player with high market shares and a very strong technological position, such risks can be confined and the relevant market mechanisms can, at the same time, be used as an opportunity within global competition.

On top of that, our well-established system of local sourcing and regional production will protect ARVOS Group from most of the potential market and competition risks created by punitive tariffs. ARVOS sees itself in a good position in the competitive area.

Technology risks

For technology companies, technological strength is a key success factor. Fundamental changes in customer demand, that were not foreseen or responded to adequately, can lead to a decline in demand as well as deterioration in our competitive and economic situation. ARVOS Group has a diversified product portfolio which enables the Group to balance these risks.

The general technological risks are mitigated by strong efforts in product innovation. Some of these innovations have been successfully presented to the markets.

Investment risks

We review investment decisions carefully over several stages. Unforeseen changes in general conditions can lead to higher investment costs or cause delays to facilities being commissioned. We stay in close touch with our customers which helps make the need for unforeseeable changes less likely.

Production risks

Production operations can be compromised by unexpected technical disruptions and unforeseen events such as natural disasters, fire, accidents and human error, even though high technical and safety standards apply. Reasonable insurance cover has been taken out, where available, as it is usual in the industry to ensure that the financial consequences of potential risks are contained or completely offset. Although the existing insurance cover is regularly reviewed, in terms of covered risks and insured sums and if necessary adjusted, it may in certain cases prove insufficient. We are not aware of any insufficient insurance coverage.

Production interruption risks are counteracted by timely replacement of redundant machinery and tools. Production risks are also minimized by flexible workshop handling, involving sub-contractors and continuous productivity improvements through automation. In addition, innovations in production processes provide opportunities to improve cost structure and working conditions. Digitalisation projects in the production area can open the door to potential performance and efficiency improvements.

Procurement risks

Procurement risks may arise due to raw materials, parts and components required to manufacture products, applications and systems not being available or not in a suitable quality and necessary quantity. Additionally, adverse price development of supplies may include economic risks. Delivery delays, shortfalls or quality problems can lead to disruptions in production and claims for compensation. Some of these procurement related risks have materialized in the past, e.g., in respect of pricing and availability of the required steel grades and other supply parts. ARVOS balances these risks with a sound supplier base, supplier assessments, second sourcing and other appropriate actions, and was able to do so again in the course of the most recent difficulties in some supply markets.

Additionally, both divisions mitigate price risks through agreements on purchase prices at the same time as product prices with customers are agreed.

Project risks

The complexity of projects can entail risks in planning, calculating, implementing and processing. These include not only uncertainty in calculations, but also unexpected technical problems, underestimations of the level of complexity, cost increase, capacity and supply bottlenecks as well as quality problems with business partners or suppliers, unforeseeable developments during assembly and deferred dates of acceptance and settlement. These risks are minimized, utilising professional project management, project milestones, verification levels for each project stage, comprehensive quality management measures and the appropriate wording of contracts. Strict processes and procedures for the control and mitigation of project risks are implemented.

Quality risks

Inadequate quality, either in processes or products delivered would result in cost due to non-quality and expose us to reputational risks with our customers. Therefore, in both divisions, sound processes are established however these are reviewed and if required, enhanced in both divisions under a continuous improvement process. Probable cost occurrence due to non-quality is monitored closely. Our quality management system is certified in accordance with ISO 9001 (Quality Management Systems).

IT risks

In an age of ongoing digitalization, data is exposed to a wide range and in some cases rapidly increasing threats with regard to availability, confidentiality and integrity. Increasing data volumes, short access times and structured information provision require highly available, fail-safe and designed IT systems and applications as well as state-of-the-art communication infrastructures for managing complex, IT-driven businesses. A wide range of causes can result in faults or damage occurring, can severely impact business operations of the company with serious ramifications for business.

Operational disruptions and interruptions can result in inability to access or use networks. Data can be falsified, destroyed or stolen as a result of program/user errors, manipulation or external influences such as espionage or hacker attacks. The increasing threat of cyberattacks forced ARVOS, like many other companies, to implement further tactical modern measures in fiscal year 2022/2023. Cyber security and the continuous protection of IT systems against cyber-attacks is and will therefore remain a focus of ARVOS.-During the fiscal year, the ARVOS Group therefore continued to invest in its IT infrastructure and implemented a high-level Cyber security and threat protection program to counter the ever-increasing cybersecurity risks. To highlight the importance of this issue, the operating units and headquarters will continue to jointly and proactively assess and manage cyberattack risks for ARVOS. To fully address the risks, which are not only influenced by Hard/Software vulnerabilities but also by user behavior, we have implemented a state of the art Security Awareness Training & Simulated Phishing Platform with the help of which we train our employees not only once a year but many times a year.

In addition to the deployment of products from leading suppliers, high security standards combined with corporate process and security guidelines, technical and organizational emergency, protective and precautionary measures, the restrictive issue of access rights, limits the risk of serious interruptions and disruptions to complex systems and networks. In addition, an IT security and data protection check was carried out to assess technical, procedural and organizational vulnerable points with regard to the new Data Protection Regulation BDGVO and to define potential for improvement in the areas of technical IT security, IT security organization & concepts and IT security policies. Previously conducted tests included a full security scan for all systems were very comprehensive and included all global systems and locations of the group. All the recommended measures were implemented.

In order to make the IT of the divisions self-reliable, a program for stand-alone IT environments in both divisions was successfully implemented. As a result, ARVOS established a global IT Organization per division and manages group-wide IT infrastructure & operations per division.

Personnel risks

The attainment of ambitious corporate targets and sustainable business success depends on staff with above-average qualifications and many experienced specialists. High levels of personnel fluctuation among executives and employees in key positions can result in important expert knowledge and skills being lost. Good working relationships, clear leadership and enriched responsibilities for important roles are the ARVOS ways to mitigate these risks. The turnover in key roles of all divisions was in most countries particularly low in the past years. In addition, Schmidt'sche Schack location in Kassel is certified according to the international standard OHSAS 18001 (Occupational Health and Safety Assessment Series).

Pension risks

The ARVOS Group's companies in Germany, the USA and other countries operate defined benefit plans for their employees and invest in plan assets to fund those plans. The development of inflation and longevity represent risks. These risks are very limited since they are contained and mitigated by making use of pension commitments, use defined contribution systems wherever possible and fund pension obligations externally when possible and appropriate. The value of pension assets is subject to market risks, especially interest rate, spread and share risks.

Environmental requirements

A large amount of land owned by the ARVOS Group has been subject to industrial usage for decades. For this reason, it cannot be ruled out that pollution has also been generated during this time. ARVOS operates an active environmental management system in order to control and mitigate these risks.

Legal risks, Compliance risks and Regulatory risks

ARVOS aims to avoid legal disputes. Nevertheless, on national, European or international level in our relevant markets legal risks can arise in our normal course of business due to legal disputes with competitors, business partners, customers or authorities and as a result of changes to the legal or regulatory framework. These include, in particular, risks arising from technical product performance issues which may result in repair, replacement and/or damage claims arising out of general product warranties given to customers, product liability, export controls, competition and cartel law, patent law and tax law. In order to control and mitigate these risks, external legal advice is sought, second opinions are taken into account whenever appropriate, insurance coverage is implemented and appropriate coverage by provisions on the balance sheets is ensured. Negation of and legal wording in contracts is a major focus area. On March 31, 2023 the Group has four ongoing litigations with customers or other business partners worldwide. ARVOS Group believes it has powerful arguments and sufficient provision for any remaining risks.

Compliance cases can cause many different types of damage and can have serious consequences. There is also the risk of significant and lasting damage to the Group's reputation. The examination and clarification of alleged cases can result in considerable internal and external costs. The Group compliance organization is designed to ensure proper modes of conduct and behavior on the part of the various legal entities and their employees and therefore has implemented a robust compliance management system.

Regulatory and legislative changes may involve risks that could negatively affect our earnings situation. For example, this applies to new laws and other amended legal frameworks, e.g. export controls. Monitoring of regulatory and legislative changes is conducted on a continuous basis in order to foresee and mitigate any potential risks.

Tax risks

Tax risks can result from changes in the legal or tax structure of the Group or from assessment periods which are still open. The differing assessment of circumstances during audits can lead to claims on the part of the tax authorities. There is also the risk that the tax burden for the ARVOS Group could increase because of changes to tax legislation or court decisions. Tax risks are controlled by close monitoring and awareness of imminent changes in tax legislations, under the tax planning and the sound legal structure within the Group. External tax advice is sought on any untested complex issue. However, changes in national taxation and tariff schemes can also create opportunities. As of March 31, 2023 a wage tax audit for the period July 2018 to December 2020 at the German Holding is finalized without finding and at Arvos Ljungström GmbH the wage tax audit has reached its final stages and for now, with no finding. Additionally, the appeal of Arvos KK Japan to its National Tax Tribunal in Osaka due to the withholding tax assessed as payable under the tax audit for the years 2017 to 2019 was dismissed in July 2022.

All possible risks are covered by a tax provision.

Financial and liquidity risks

ARVOS is facing various financial risks as part of its ordinary business activities, for example liquidity risks, counterparty risks and market price risks such as currency exchange rates and interest rates, which can have a large effect on the Group's earnings and assets.

The risk that existing or future payment obligations will not be met or will not be met when due, is identified and analyzed as part of the rolling 24 month planning. The projected net liquidity position is compared with existing financing facilities to identify potential financing gaps at least 12 months in advance.

The Amend & Extend of the Credit Facilities had a built-in, one-year extension option that was exercised in August 2022 rolling the 1 ^st Lien(1L) Term Loans facilities to August 29, 2024 and the Revolving Credit Facility to May 31, 2024 respectively. Apart from the 1L Facilities ARVOS Group has access to a further 112.0m€ Bonding Facility. As of reporting date the Revolving Credit Facility has been utilized to 22m€. Available forecasts show that the cash and bonding reserves and headroom are sufficient for at least the next year/twelve months.

The Group has engaged 3 ^rd party consultants in preparation for discussions with the lenders to either extend the current credit agreements further or to apply for new facilities within the next 6 months as dictated by business development.

Prepayments are a key element of the contracting process and an important instrument to reduce liquidity risks. Guarantees must be regularly provided for these. Liquidity risks are always monitored diligently. Strict working capital management and working capital reduction are important elements of risk reduction.

Counterparty risks exist with customers, suppliers and with financial institutions for deposits and financing commitments. The risks are controlled and mitigated by a close monitoring of the payment behavior of all customers, especially of overdues, and other operational partners as well as by a diversified range of banking relationships. In consequence, financing capacities contain reserves and any other counterparty risks almost never materialized in the past.

ARVOS is generally exposed to risks and opportunities from changes in market prices. Market-price changes can have a negative or positive influence on the Group's profitability, cash flows and financial position. ARVOS manages and monitors market-price risks and opportunities primarily in the context of its operational business and financing activities and applies derivative financial instruments for hedging purposes whenever possible, thus limiting both market price risks and opportunities.

The ARVOS Group's global orientation means that its business operations are connected with risks and opportunities related to fluctuations in currency exchange rates. An exchange rate risk or opportunity arises primarily when revenue or loans are generated in a currency different to local currency. Focusing on closing contracts in the local currency has significantly reduced the exchange rate risk. The Group uses the standardized derivates to minimize exchange rate risks.

Changes in interest rates can create risks and opportunities for ARVOS Group. Interest rate risks arise from changes in money and capital market base rates. In the case of fixed interest financial instruments, fair values fluctuate as a function of interest rates.

Based on the loan agreements, financial covenants apply for the entire group. The Group's ability to meet the loan covenants depends on the future performance of the group companies. For the financial year 2022/2023 the Group conducted continuous close monitoring of the applicable covenants. For the first three quarters of 2022/2023 the two applicable covenants were the EBITDA adjusted, and the available liquidity level. As a result of the Group's policy of close monitoring, all covenants applicable during 2022/2023, stayed within the prescribed limits. EBITDA adjusted covenant which expired by March 31, 2023 did not fall below 75% of a pre-defined EBITDA adjusted level. In the fourth quarter the minimum EBITDA adjusted is not applicable and was replaced by a Net Debt Leverage Covenant. which is net debt divided by EBITDA adjusted and this comes into force from March 31, 2023 onwards, but not as a springing covenant, but as a fixed covenant; applicable covenant levels are taken as a maximum ratio from the Independent Business Report/S6 Report provided by an external advisor in the course of the A&E refinancing. The Net Debt Leverage Covenant is tested quarterly, and the Group defines Net debt as Term Loans including PIK and RCF utilization but excluding overdrafts, less cash and short-term deposits, excluding discontinued operations. It is to be tested quarterly and for March 31, 2023 it is predefined at 9.5x.

In 2023/2024, the Net Debt Leverage Covenant for September 30 and December 31, 2023 is predefined at 7.1x and for March 31, 2024 it is predefined at 8.1x.

The second covenant, a minimum liquidity covenant to be achieved is that within the 4 past weeks, during which the available liquidity level must not fall below EUR 10,000 thousand in more than one week, and the expected available liquidity level over a 13-week period, during which the cash available to the Group must not fall below EUR 10,000 thousand in more than 2 weeks. Available cash is the cash at hand plus available, but not drawn credit facilities. The minimum liquidity covenant continues to apply in 2023/2024.

The company will continue its close monitoring of performance in line with covenants compliance and will report on this monitoring on a monthly basis. Breach of financial covenants would give the lenders the right in general to terminate the main facilities and insist on the repayment of loans. Available forecasts and budgets of the company do not indicate any breach of financial covenants.

Plans and forecasts of the Group are prepared on a going concern basis, meaning the continuation and further improvement of the businesses of the Group, without a material sale of business and/or large assets. In addition, scenario analyses with projections are prepared on how the Group would develop in case an important transaction were to occur. From both perspectives the economic development of the Group shows a positive outlook without any major constraints for longer than one year. Liquidity forecasts are performed on a detailed level and renewed every month. These forecasts usually cover 12 months into the future, split into weekly forecasts numbers for the next quarter and monthly forecasts numbers for the time thereafter. At regular intervals a 2-years-liquidity forecast is prepared. Here it is important to note that mitigating actions will be specified as a target to achieve. Mitigating actions can be a full refinancing, additional bilateral credit lines, more strict working capital management and more as required by the circumstances.

The Group has a negative equity position on its consolidated balance sheet. This is a very common situation for a private equity portfolio company and does not affect the development of the Group and its businesses. It is the clear understanding that the negative equity will be removed from the balance sheet by the selling income/proceeds as soon as all businesses of the Group are divested at a later stage. Losses accrued over time wholly from interest expenses on the Term Loans and on the Preferred Equity Certificates, not from the operating business. The equity situation of the legal entities of the Group is closely monitored so that all legal requirements in respect of the equity are met in the respective jurisdictions. In the case of shareholder loans there are subordination contracts in place.

(2) Opportunities

Macroeconomic opportunities

Market growth is considered an important opportunity. The definitive end of the coronavirus pandemic, or a de-escalation of geopolitical conflicts, for example the Russia-Ukraine War, or the tensions between the United States and China would result in better-than-expected growth effects. The entities of ARVOS Group are well positioned to pick up on these opportunities.

Market opportunities and opportunities from political developments

The development in several markets may turn out to be much more positive than anticipated before. The divisions of ARVOS would use these opportunities very consequently.

Political measures could also give rise to opportunities. For example, environmental legislation and increased environmental protection can increase the demand for the products of ARVOS Group as the new products are usually much more environmentally friendly than the ones used in the installed base.

The consequences of the ongoing Ukraine crisis and the associated high energy prices may also have further positive effects on the energy transition. The ARVOS Group believes that the realization of projects in this area will be accelerated. Therefore, ARVOS expects further major projects from this sector, both for the European and for the North American market.

Opportunities from product development

Innovations create additional market and sales opportunities. ARVOS Group continuously enhances products and solutions in order to maintain competitive ability. The divisions of the ARVOS Group have developed new products for the industry which are well perceived. This product development presents opportunities for increased order intake, market share, and especially better access into markets like China, India and Southeast Asia.

The expansion of Schmidt'sche Schack product portfolio for ecological applications under the flag of the "energy transition" for the areas of reducing carbon dioxide production (carbon footprint), hydrogen production, electrification of processes and the circular economy for economic recyclability of waste materials into higher-quality materials has already opened additional opportunities for the business areas of ARVOS Group. The first reference systems with our devices are successfully in operation and serve as a benchmark for further projects.

Better market penetration

We believe there is significant room for growth in both divisions in our current and new markets of operations.

We see the opportunity to grow in these markets with our relatively low current market share hence, significantly expand our market share. In our two divisions, we have seen market share gains in several markets in recent years.

Opportunities from increasing internationalization

Although both divisions already have an international presence, the market positions and market shares are very different in the geographical markets. This offers the opportunity to grow in those geographical markets with relative low market shares today. To name a few of these as an example, Schmidt'sche Schack will benefit probably from growth opportunities in the USA, Southeast Asia, China and Middle East and Ljungstrom too will benefit probably from additional volume opportunities in China, India and Southeast Asia. In the last years, ARVOS Group was able to improve market positions and market shares in several countries, China and Southeast Asia being good examples of this.

Opportunities from M&A options

An M&A agenda was established for each division in ARVOS Group to identify options for the acquisition of or for partnering with other small or mid-sized businesses. All divisions have their preferred targets. Options are mainly around businesses delivering additional opportunities in other geographical markets, synergetic products and/or cost synergies.

Opportunities due to strong brands

ARVOS Group revived the very strong brand names Ljungstrom and Schmidt'sche Schack at the acquisition of the Group by Triton. These brand names enjoy a very good reputation in their markets which opens up additional growth opportunities.

Opportunities from a highly focused management team

High motivation and professional focus within the division management and teams, as well as dedication towards team spirit coupled with an ambition to increase the Group's value strongly and consistently will benefit and enhance the Group's value in the long term. Aligned incentive schemes, along with other additional options from different areas of each division will further strengthen the value in the upcoming years.

(3) Consolidated statement about risks and opportunities

The assessment of the overall risk situation is based on a consolidated view of all significant individual risks to which the ARVOS Group is exposed.

The ARVOS Group's risk situation level has improved: while risks from the Covid 19 pandemic can be considered as over the geopolitical conflicts may deliver additional risks however, for now, no negative impact has been detected. We continue to monitor the situation closely.

Nevertheless, ARVOS Group is well prepared to control and mitigate the mentioned risks and is well positioned to take advantage of the mentioned opportunities. According to our assessment, there is no significant individual risk that poses a threat to the continued existence of the ARVOS Group. The same applies to the sum of individual risks. Ultimately, however, residual risks remain in all entrepreneurial activities that cannot be ruled out, even by risk management.

The Group secured, by an Amend & Extent Agreement (A&E) on August 26, 2022, its main credit facilities; (Revolving Credit Facility (RCF), Bonding Facility and the Term loans until May 31, 2024 and August 29, 2024 respectively, together with a reset of financial covenants. All plans and forecasts show that the Group will be compliant with the set financial covenants at all times until the maturity dates - with sufficient headroom.

There are, in addition to the financial covenants, some non-financial covenants agreed upon relating to the restructuring of the group within a specified timeframe. It is important to point out that, in case these dates cannot be met, this would be no automatic event of default, but an event of default would only occur, if

―	the Group would fail to agree with the lenders on waiving these covenant dates beforehand and
―	lenders would agree by qualified majority to classify the non-compliance with these dates as an event of default, which they would only do, if this classification would be in their interest.

Both events are highly unlikely, the combination of both is even much more unlikely.

The Group has already started discussions with its main lenders in order to extend the current maturity dates for all of the above mentioned facilities far beyond the currently set dates. Although these discussions are at an early stage, the first indications show strong support from the main lenders for such an extension.

In addition to the main credit facilities there are a few bilateral cash facilities in place, which the Group utilises from time to time. These are overdraft cash facilities with two banks with an amount of EUR 17,500 thousand in total, fully backed by ancillary lenders. As of March 31, 2023, these facilities have been used in an amount of EUR 9,249 thousand. Due to the nature of overdraft facilities, their extensions are always agreed upon short term. The current maturity dates are December 31, 2023 and March 31, 2024. If required, the Group will apply for these facilities to be extended. Normally this is done one to two months before expiration. In both cases extension is highly likely partly due to the fact that both facilities are backed by bank guarantees from the main bonding facility, so these are a zero-risk business for the banks involved.

In the unlikely event of non-prolongation of both facilities the Group is prepared to raise additional funds through specific transactions with third parties. Preparatory work on such transactions has been done already in order to be able to react even at short notice, if necessary. The indication for the additional cash to be generated by these transactions will exceed the total value of the loan facilities described in the preceding paragraph.

Plans and forecasts of the Group are prepared on a going concern basis, meaning the continuation and further improvement of the businesses of the Group, without a material sale of business and/or large assets. In addition, scenario analyses with projections are prepared on how the Group would develop in case an important transaction were to occur. From both perspectives the economic development of the Group shows a positive outlook without any major constraints for longer than one year. Liquidity forecasts are performed at a detailed level and renewed every month. These forecasts usually cover 12 months into the future, split into weekly forecasts numbers for the next quarter and monthly forecasts numbers for the time thereafter. At regular intervals a 2-years-liquidity forecast is also prepared. Here it is important to note that mitigating actions will be specified as a target to achieve. Mitigating actions can be a full refinancing, additional bilateral credit lines, more strict working capital management and more as required by the circumstances.

The Group has a negative equity position on its consolidated balance sheet. This is a very common situation for a private equity portfolio company and does not affect the development of the Group and its businesses. It is the clear understanding that the negative equity will be removed from the balance sheet by the selling proceeds as soon as all businesses of the Group will be divested at a later stage.

Losses accrued over time are wholly from interest expenses on the Term Loans and on the Preferred Equity Certificates, not from the operating business.

The equity situation of the legal entities of the Group is closely monitored so that all legal requirements in respect of the equity are met in the respective jurisdictions.

Management prepared the consolidated financial statements on a going concern basis.

F. Forecasting report for the financial year 2023/2024

The economic impact of the Covid19 pandemic is obviously over now and was over for the major part of the financial year 2022/23 already. In several parts of the worldwide economy this negative impact was replaced by the negative impact from the war of Russia against Ukraine and the subsequent geopolitical tensions, a high level of overall uncertainties and supply chain issues arising from the war directly and indirectly.

Fortunately, ARVOS Group has a very limited exposure to countries like Ukraine, Russia, Belarus and similar. Furthermore, mitigating actions in respect of supply chains were started already more than one year ago. Consequently, the economic impact of this war directly and indirectly on ARVOS Group in FY 22/23 was very limited and we are not expecting this impact to increase in FY 23/24.

We closed FY 22/23 with a long-time high in order intake in both Divisions, Ljungström and Schmidt'sche Schack. We saw an order growth of more than 50% in comparison to the previous year - partly due to order delays from the pandemic in the years before, partly due to brought forward orders into FY 22/23, but mainly due to a stable growth trend in the relevant markets of our businesses in the year. Consequently we are expecting a double-digit growth in sales in the FY 23/24, ultimately of more than +20%, despite some technical recession fears for the year in the overall economy of some countries still, while it will be impossible to repeat the extra-high order intake of FY 22/23 in FY 23/24 again.

The growth trend in the relevant markets for ARVOS Group is increasingly based on diversification products for Ljungström (offshore wind tower parts, AdvX systems and beginnings in CO ₂ capture), while it is the classical transfer line exchanger business plus the growth trend in gasification which fuels the growth in Schmidt'sche Schack.

The trend for growth will not be the same in all countries. The sales growth will be driven by countries like the US, China and Australia in the Ljungström business.

The development of margins and absolute earnings versus the previous year is very encouraging. The positive margin trend in FY 22/23 was attributable to both cost reductions and active margin management in the markets. We are expecting further profit margin increase in FY 23/24.

The outlook for raw materials and semi-finished parts is broadly unchanged to one year ago: although there are clear expectations that we have seen the climax of price increases and that inflation rates will reduce over time, there is no expectation of that to happen quickly and no expectation of returning to previous price levels. Although we are broadly able to pass on price increases on the supply side to our customers, as we usually agree on supply prices at the same time we commit to sales prices with customers, high supply prices and price increases will probably be a challenge in the financial year 23/24 still.

Although we were successful expectedly in extending our main credit and guarantee facilities for another year only 9 months ago (with maturity dates on May 31, and August 29, 2024 respectively) plus the appropriate adjustment of the financial and non-financial covenants, we are already in the process of a new financing for the times after the current maturity dates. Initial feedback we received from lenders was positive and encouraging.

We are having a high level of comfort in the positive development of our cash reserves and in the agreement on our overall financing.

Luxembourg, 26 May 2023

Arvos Midco S.à r.l.

By: Monika Horvath, Title: Manager

By: Joakim Lindström-Formicola, Title: Manager