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* Net sales grew by 5% to EUR 425.3 (404.7) million.
* Operating profit, excluding one-off items mainly related to the Performance Improvement Programme, amounted to EUR 36.7 (20.7) million, representing an operating margin of 8.6% (5.1).
* Operating profit, including one-off items of EUR 2.8 million, amounted to EUR 33.8 (20.7) million.
* Profit after taxes was EUR 23.7 (11.0) million.
* EPS amounted to EUR 0.33 (0.15).
* Net cash flow from operations amounted to EUR -5.7 (19.9) million.
* New strategy and operating model launched and new Leadership Team appointed.
* The Performance Improvement Programme progressed well.
Highlights - January-September
* Net sales totalled EUR 1 373.7 (1 281.1) million, up 7%.
* Operating profit, excluding one-off items mainly related to the Performance Improvement Programme, totalled EUR 107.5 (68.2) million, representing an operating margin of 7.8% (5.3).
* Operating profit including one-off items amounted to EUR 88.0 (65.1) million.
* Profit after taxes was EUR 58.7 (40.1) million.
* EPS amounted to EUR 0.81 (0.54).
* Net cash flow from operations amounted to EUR 112.8 (54.7) million.
Hannu Syrjälä, President and CEO: "In the third quarter, we performed well and were again able to improve our profitability. Thanks to the Performance Improvement Programme, we have increased our utilization rate and substantially improved quality in deliveries. In line with our strategy, we have also increased our resources in the global centres of excellence, where the number of our personnel has increased by almost 50% from last year.
Now that the times are tougher, it is important that we are able to support our customers as they seek to improve their performance. Our new operating model, based on industries, countries and service lines, helps us do this, as it will make us more sensitive in recognizing customer-specific needs and developing our offering to meet the demand. This, coupled with our investments in developing sharper competencies and more productized offerings, will result in more added value for our customers."
Market development In most sectors, the market situation remained fairly positive in the third quarter. However, there are signs of cautiousness regarding future IT investments in new solutions. Customers seek to rationalize their operations and this maintains healthy demand for application and ICT infrastructure management as well as maintenance in most sectors. These services account for approximately half of TietoEnator's net sales.
The anticipated effects of the economic slowdown on IT investments vary by customer segment. As the finance sector is in the core of the turmoil, banking is expected to be affected the most. The impact on the manufacturing industry is expected to be less negative. Since the continuity of IT systems is of utmost importance in these industries, demand for application and ICT infrastructure management is not expected to change. Rationalization measures have been ongoing for a long time in some areas, such as the public sector, i.e. government, healthcare and welfare, and TietoEnator anticipates that steady demand will continue.
Banking and insurance The overall market situation has changed rapidly in the finance sector. Due to the credit crisis, customers have adopted a cautious attitude towards IT investments and may thus delay some of their investment decisions. The weakened market conditions have not yet affected the market in Russia, where demand is still strong in certain product areas, such as Cards.
Telecom and media The first signs of a slowdown in the telecom sector appeared during the second quarter. As anticipated, overall IT demand in the telecom and media sectors weakened in the third quarter.
During the long and strong growth cycle in the sector, the industry has made big investments in new technologies, such as 3G and wireless IP access. Investments by operators and telecom equipment manufacturers will thus be lower for some time. Additionally, many customers have launched cost-saving initiatives. Due to these factors, demand for network R&D has levelled off in Europe.
In the telecom sector, there is an ongoing trend to consolidate service purchases in the hands of a few key contractors. The upshot is that the volumes of each selected contractor will most likely grow. As the leading R&D service provider, TietoEnator has been a key partner to many of its customers. The company expects this trend to favour TietoEnator in the future as well.
Government, manufacturing and retail Overall demand has remained solid in all of these areas as customers are seeking to improve performance and productivity. Government customers plan to start several development projects in the coming years. For example, the Finnish government sector will reorganize its regional administration and this will open up new opportunities.
The positive trend in the manufacturing industry has continued. Although uncertainty in the global markets has increased, manufacturing companies have continued to invest in IT, but may tighten their IT budgets in future. Retail customers are in the market for IT systems to help them provide new ways to manage customer demand more accurately. The economic slowdown has not yet impacted on retail business in Finland, unlike in the Baltic countries where the first signs of weakening demand are already visible.
Healthcare and welfare Demand in the Finnish healthcare market has been steady. The national patient archive is one of the market drivers in Finland. The general trend in Sweden and Norway is to consolidate regional systems, but market development is slow. The Nordic welfare market, however, is active in all countries. The economic slowdown might even increase the demand for IT services as customers seek to boost efficiency, especially in the public sector. The private sector generates only a small share of TietoEnator's sales.
Forest and energy In the forest sector, restructuring in the industry, customers' cost-saving initiatives and the tight finance market may increase uncertainty in the short term, but on the other hand, restructuring opens up new opportunities. Nordic customers are closing down excess capacity in the Nordic countries, but are expanding business in Russia and Asia, especially China.
In the energy sector, the market situation is good for both the oil and gas segment and the utilities sector. The worldwide long-term trend is that demand for energy is growing fast, especially in countries like China, India, Russia and Brazil. Despite great fluctuations in the price of oil, investments in finding new oil reservoirs and utilizing old ones also serve to maintain IT investments at a healthy level. In the utility segment, both the rising demand for energy and the deregulation of the sector in Europe ensure IT investments in the coming years. Infrastructure outsourcing The market for infrastructure outsourcing in the Nordic countries has remained active and is growing steadily. The need to rationalize operations may speed up customers' new outsourcing decisions. Customers are looking for more flexible solutions and request broader service agreements that provide end-to-end business process coverage. Price pressure persists in new outsourcing contracts and contract renewals.
TietoEnator's business transactions and major agreements in January-September Following the consolidation of Sampo Bank and Danske Bank, TietoEnator's business volumes to these customers have decreased. For this reason, Primasoft Oy's operations and ownership have been reorganized. In April, TietoEnator acquired the entire share capital of Primasoft Oy, a joint venture previously owned by TietoEnator (60%) and other parties (40%). In connection with the agreement, parts of Primasoft's application management business were sold. These transactions will have a negative impact of around EUR 20 million on the full-year net sales of Banking & Insurance and Processing & Network in 2008.
In January, TietoEnator opened a new office in Chengdu to expand its operations in China. The Chengdu centre serves TietoEnator's telecom customers and offers services for mobile devices and network manufacturers as well as for operators.
In March, Sjukvårdsrådgivningen SVR AB (the Swedish Healthcare Advisory Organization) chose TietoEnator as a supplier of a solution for a national patient overview (NPO). The agreement will run for five years and the total value of the agreement is at least EUR 12 million.
In May, TietoEnator, OP-Pohjola Group Central Cooperative (OPK) and Ilmarinen Mutual Pension Insurance Company concluded an agreement on the delivery of ICT operations management services for the OP Pohjola Group and Ilmarinen for the next seven years starting on 1 June 2008. The services are produced by the joint venture FD Finanssidata, of which TietoEnator owns 60%, OPK 36% and Ilmarinen 4%.This is one of the largest agreements TietoEnator has made in recent years. In June, TietoEnator concluded another major agreement when TeliaSonera renewed its IT and application operations agreement.
In September, the City of Stockholm and TietoEnator extended their agreement on the end-to-end provision of IT and telephony. The extended agreement comes into effect on 1 August 2010 and runs until 31 July 2012. The delivery to the City of Stockholm will be made in co-operation with SYSteam, SiriusIT, Aditro and TeliaSonera. The order is valued at approximately EUR 41 million, of which TietoEnator's share is approximately EUR 26 million.
Net sales
Net sales in the third quarter Third-quarter net sales grew by 5% to EUR 425.3 (404.7) million or by 7% in local currencies. Organic growth totalled 5%.
Net sales Organic Q3 net sales Q3 organic growth in growth in growth, % growth, % Jan-Sep, % Jan-Sep, % Banking & Insurance 4 6 3 5 Telecom & Media -1 -1 6 5 Government, 7 8 5 6 Manufacturing & Retail Healthcare & Welfare 21 21 17 17 Forest & Energy 0 0 1 1 Processing & Network 12 12 15 15 Total incl. Group 5 5 7 8 eliminations
In Banking & Insurance, net sales grew by 4%. The sale of parts of Primasoft's application management business as well as the winding down of German operations in 2007 had a negative impact on the net sales. The trend in net sales was particularly good in certain product areas, such as Cards and Capital Markets, and the partnership business.
Telecom & Media held on to its strong market position in the third quarter. Due to weak market development in the telecom sector, especially in network R&D, the net sales of the business area remained at the same level as in the third quarter of 2007.
Processing & Network's net sales grew by 12%, clearly outpacing the relevant market. The business area concluded several major agreements in the second half of 2007 and the first half of 2008. The most significant of these agreements were made with TeliaSonera, Op-Pohjola Group and Ilmarinen.
In Government, Manufacturing & Retail, steady demand has continued in all sectors. In Healthcare & Welfare, growth was good in all market areas and units, although the progress in the healthcare business in Finland has been slower than expected in some projects. The business area concluded several mid-sized and large new agreements in the second half of 2007 and the first half of 2008. Sweden was the strongest growing market for Healthcare & Welfare.
Forest & Energy's sales growth remained weak partly due to lower sales to one major customer in the utilities sector. The energy market remained active, but a shortage of resources hampered growth in some areas. Despite the challenging market in the forest sector, the business segment grew its net sales.
Net sales in January-September TietoEnator's nine-month net sales grew by 7% to EUR 1 373.7 (1.281.1) million or 8% in local currencies. Organic growth totalled 8%.
The most solid performance has been seen in Healthcare & Welfare and Processing & Network. In Telecom & Media, the modest increase in net sales reflects the cautious stance on investments in the telecom sector.
Net sales grew by 8% in Finland and by 5% in Sweden. In Norway, net sales grew by 10% thanks to Banking & Insurance's strong performance. In Germany, net sales declined by 5%, mainly due to the closure of Banking & Insurance's operations in 2007.
The telecom and media sector's share of consolidated net sales amounted to 35% (36). The banking and insurance sector generated 22% (22) of net sales, whereas the public sector's contribution was 15% (16). The forest sector's contribution was 5% (5) and the energy sector's 6% (5).
The order backlog, which only comprises services ordered with binding contracts, amounted to EUR 1 140.9 (1 194.9) million at the end of the period. Processing & Network's share of the order backlog is 45%. In total, 26% (27) of the backlog is expected to be invoiced in 2008.
Performance Improvement Programme The Performance Improvement Programme is expected to generate annual cost savings of EUR 130 million as from the end of 2009. A major part of the actions related to this programme will be implemented in 2008. The benefits are expected to materialize with an over 50% run-rate effect from the end of 2008 and in full from the end of 2009.
The programme has progressed well. The actions taken by the end of September amount to annualized savings of EUR 86 million, of which close to EUR 30 million has already impacted 2008 performance. The savings reached to date will come into full effect in 2009. Almost two thirds of this improvement is employee related. The rest comes from transferring production to the global centres of excellence as well as better procurement conditions.
The costs related to these actions have impacted and will continue to impact TietoEnator's profitability during 2008. The restructuring costs, provisions and impairments related to the programme are expected to amount to approximately EUR 160 million of which one-off costs of EUR 104.7 million materialized in 2007. In January-September 2008, TietoEnator booked EUR 20.8 million in one-off items. The company will book EUR 15-20 million in costs related to the programme in the fourth quarter of 2008, and the rest during 2009.
Profitability
Profitability in the third quarter All business areas improved their profitability in the third quarter and the operating margin has now risen to a higher level. Operating profit, excluding one-off items related to the Performance Improvement Programme, improved substantially in the third quarter and amounted to EUR 36.7 (20.7) million, representing a margin of 8.6% (5.1). The actions related to the Performance Improvement Programme were the main contributor to the rise in margin.
In the third quarter of 2008, TietoEnator booked EUR 2.8 million in one-off costs related to the programme. There were no capital gains (capital gain of EUR 0.1 million in 2007) in the quarter. Third-quarter operating profit, including one-off items, amounted to EUR 33.8 (20.7) million.
Operating Operating Operating profit Operating profit margin of of the margin of of the the underlying the underlying underlying business (1) underlying business (1) business (1) in business (1) in in Q3/2008, in Jan-Sep, Jan-Sep, % EUR million Q3/2008, % EUR million Banking & 5.7 8.8 20.3 9.4 Insurance Telecom & Media 14.1 9.3 42.2 8.4 Government, 4.4 10.2 14.3 9.9 Manufacturing & Retail Healthcare & 2.7 7.1 5.0 4.3 Welfare Forest & Energy 3.6 8.6 9.3 7.0 Processing & 15.0 13.4 40.6 12.0 Network Group operations -8.8 -24.2 Total 36.7 8.6 107.5 7.8
1) Excl. one-off items related to the Performance Improvement Programme, capital gains/losses, badwill and impairment losses
In Banking & Insurance, the operating margin of the underlying business improved to 8.8% (-5.2). In the third quarter of 2007, the business area suffered from a few loss-making projects. The margin improvement is also attributable to decreased use of subcontractors and lower personnel and other costs.
In Telecom & Media, the operating margin improved to 9.3% (8.3). Due to the summer vacations, the second and third quarters are usually weaker for Telecom & Media. Despite the negative impact of fewer working days, the margin has improved from the previous quarter's levels. The margin improvement is mainly attributable to the actions related to the Performance Improvement Programme.
In Processing & Network, the operating profit amounted to EUR 15.0 (12.6) million, representing an operating margin of 13.4% (12.7). The third quarter is the strongest season for the business area.
In Government, Manufacturing & Retail, strong performance was achieved thanks to a higher utilization rate and cost savings related to the Performance Improvement Programme. In Healthcare & Welfare, the positive trend continued, driven primarily by a higher utilization rate and better management of deliveries in the solution-based business. The healthcare business in Scandinavia and Central Europe has improved but continues to struggle with unsatisfactory profitability.
Profitability improved somewhat in the Forest & Energy business area. The improvement was attributable mainly to better performance in the utilities sector.
Net financial expenses stood at EUR 3.5 (2.9) million in the third quarter. Net interest expenses were EUR 2.3 (2.2) million and one-time net losses from foreign exchange transactions EUR 2.2 (0.4) million. Other financial income and expenses amounted to EUR positive 1.0 (negative 0.3) million.
Third-quarter earnings per share (EPS) totalled EUR 0.33 (0.15).
Operating profit (EBIT) includes EUR 2.7 (2.4) million from amortization on allocated intangible assets. The costs arising from share-based payments of EUR 1.7 (1.2) million are included in employee benefit expenses.
Profitability in January-September Operating profit, excluding one-off items mainly related to the Performance Improvement Programme, amounted to EUR 107.5 (68.5) million, representing a margin of 7.8% (5.3). Substantial improvement in Banking & Insurance's profitability and Processing & Networks' excellent performance had a significant impact on the margin development.
In the nine-month period, TietoEnator booked EUR 20.8 million in one-off items related to the Performance Improvement Programme. Out of these items, costs from personnel restructuring totalled around EUR 13 million. Additionally, the company booked an income of EUR 1.3 million from badwill recognition. Nine-month operating profit, including one-off items, amounted to EUR 88.0 (65.1) million.
Nine-month net financial expenses stood at EUR 12.2 (6.0) million. Net interest expenses were EUR 6.8 (5.6) million and one-time net losses from foreign exchange transactions EUR 4.5 (positive 0.1) million. Other financial income and expenses amounted to EUR -0.9 (-0.5) million.
Nine-month earnings per share totalled EUR 0.81 (0.54).
Operating profit (EBIT) for the nine-month period includes EUR 7.6 (7.3) million from amortization on allocated intangible assets. The costs arising from share-based payments of EUR 4.4 (3.2) million are included in employee benefit expenses.
The 12-month rolling return on capital employed (ROCE) was 8.9% and the return on shareholders' equity (ROE) -2.4%.
Financing and investments Third-quarter net cash flow from operations amounted to EUR -5.7 million (positive 19.9). Operating profit contributed EUR 51.8 million (38.3) and the increase in net working capital consumed EUR 46.5 million (11.2). The increase in net working capital of EUR 46.5 million was mainly due to payment of vacation pay and related social costs and payroll tax.
In the nine-month period, net cash flow from operations amounted to EUR 112.8 (54.7) million. Operating profit contributed EUR 139.4 (119.3) million and the increase in net working capital consumed EUR 5.3 (47.9) million. Tax payments amounted to EUR 16.3 (13.5) million.
Dividends of EUR 35.8 million were paid in April.
Acquisitions totalled EUR 6.6 million in the nine-month period.
The equity ratio was 42.0% (43.0). Gearing improved to 34.3% (39.2). Net debt totalled EUR 169.7 (215.4) million, including EUR 223.5 million in interest-bearing debt, EUR 14.7 million in finance lease liabilities, EUR 10.1 million in finance lease receivables and EUR 58.2 million in cash and cash equivalents.
The interest-bearing debt consists of one seven-year bond at EUR 100 million (maturing in December 2013) and one seven-year private placement at EUR 50 million (maturing in July 2012) and usage of EUR 55 million from the short-term EUR 250 million commercial paper programme and EUR 15 million from the five-year 250 million committed syndicated loan facility (maturing in December 2011).
Accrual-based investments totalled EUR 85.1 (65.4) million for the period. Capital expenditure, including financial leasing, accounted for EUR 70.4 (37.5) million and investments in subsidiary and associated company shares for EUR 14.5 (28.0) million.
Personnel The number of full-time employees totalled 16 392 (15 823) at the end of September. Acquisitions and new outsourcing contracts added 56 employees in the nine-month period.
The 12-month rolling employee turnover stood at 13.5% (10.5) at the end of September. The average number of full-time employees was 16 355 (15 359) in the nine-month period.
As a result of the national salary raises agreed in the collective labour agreements in Finland and Sweden, wage inflation in Finland and Sweden is expected to be about 4-5% in 2008.
At the end of September, the number of employees in global centres of excellence had increased by close to 50% from last year and totalled about 3 950 (2 700), or 23% (16) of the total headcount. According to the company strategy, operations in India and China grew fast and personnel in these countries more than doubled.
Board of Directors In September, TietoEnator's Board of Directors decided on changes in the composition of its Compensation and Nomination Committee and Audit and Risk Committee. Anders Ullberg was elected the new Chairman of the Compensation and Nomination Committee replacing Kalevi Kontinen, who will continue as a member of the Board of Directors. Olli Riikkala was elected the Chairman of the Audit and Risk Committee replacing the current Chairman Anders Ullberg, who will continue as a member of the committee.
New strategy, operating model and Leadership Team According to its new strategy published in July, TietoEnator seeks to be the leading IT service company in Northern Europe by 2011. The company has special growth initiatives planned for the global telecom industry as well as for Sweden and Russia. The main markets for TietoEnator will be the Nordic countries, Germany and Russia.
TietoEnator differentiates itself from its competitors through superior customer centricity resulting from a deep understanding of its customers' businesses and needs. In order to maximize customer value, TietoEnator combines its country- and industry-level resources and thereby further strengthens the company's sales and customer service organization.
In September, TietoEnator announced its new operating model and appointed the new Leadership Team as of 1 January 2009. The new Leadership Team will comprise:
Hannu Syrjälä, President and CEO Eva Gidlöf, Executive Vice President, Country Head of Sweden Kavilesh Gupta, Executive Vice President, Head of Service lines Seppo Haapalainen, Executive Vice President, Chief Financial Officer (CFO) Ari Karppinen, Executive Vice President, Country Head of Finland Bengt Möller, Executive Vice President, Head of Telecom and Media industries Johanna Pyykönen-Walker, Executive Vice President, Head of HR Ari Vanhanen, Executive Vice President, Head of Industries Pekka Viljakainen, Executive Vice President, Head of International and Head of Customer and Marketing Operations (CMO)
The Head of Financial Services will be recruited during the coming months and will be a member of the Leadership Team as well.
Transactions with related parties The related parties of TietoEnator are its Board of Directors, President and CEO, the Corporate Management Team (CMT) and the Group's associated companies.
The bonus levels of the President and CEO and CMT members were reviewed with effect from the beginning of 2008. The President and CEO's bonus is a maximum of 100% of his annual base salary and is based on the Group's net sales and operating profit. The reward factors for the CMT members are based on the financial performance of the Group and their own units. In addition, the Board has implemented a retention plan for the CEO and CMT members connected to the public tender offer that was on-going during the second quarter of 2008.
Two Board members, Olli Riikkala and Risto Perttunen, were given a special assignment by the Board during the public tender offer that was on-going in the second quarter. For this work they were paid a special compensation totalling approximately EUR 80 000.
Transactions with associated companies are not considered to be material.
Shares and options At the end of September, the total number of shares amounted to 72 023 173 and the share capital to EUR 75 841 523. The number of shares in TietoEnator's possession totalled 361 650, representing 0.5% of the total number of shares and voting rights. The accounting countervalue of the shares in the company's possession amounts to EUR 383 349. The outstanding number of shares, excluding the shares in the company's possession, was 71 661 523 at the end of September.
In the third quarter, JPMorgan Chase & Co. announced that its holding in TietoEnator had increased to 5.1%. OP-Pohjola Group Central Cooperative (OPK) flagged its ownership twice. According to the latest information, it held 4.7% of the company shares in August.
Some items affecting 2008 The total costs related to the public tender offer are estimated to amount to EUR 12 million in 2008. This estimate includes the retention compensation for a number of key managers and the President and CEO.
TietoEnator receives a discount for occupational pension premiums in Sweden in 2008. The total impact of the discount on TietoEnator's operating profit in 2008 is around EUR 6 million. The effect is evenly spread over the year.
The company will book EUR 15-20 million in costs related to the Performance Improvement Programme in the fourth quarter of 2008. In January-September this year, TietoEnator has booked EUR 20.8 million in one-off items related to this programme.
Risks and uncertainties The economic slowdown might have a negative impact on volume growth and increase price pressure towards the year-end. On top of this, high personnel turnover, the availability of competent employees and the cost of resources remain among the main risks in 2008.
Implementing the new strategy and company structure may create uncertainty within the company in the short term. The ability to control ever more complex multinational deliveries also poses a continuous risk. Due to a more commoditized market and fierce competition, price pressures continue.
A comprehensive description of the long-term risks is available in the Report by the Board of Directors 2007.
Prospects for 2008 TietoEnator anticipates the overall IT market to grow at a modest rate during the rest of 2008 due to the economic slowdown. Price pressure exists, but on average, prices are expected to either stay approximately at the same level or be higher than in 2007. TietoEnator expects the labour market to cool down towards the end of 2008.
A major part of the actions related to TietoEnator's Performance Improvement Programme will be implemented in 2008. The costs related to these actions have impacted and will continue to impact TietoEnator's profitability during 2008. The positive impacts of the programme have started to materialize in 2008.
TietoEnator expects its full-year revenue growth in 2008 to follow the overall development in the relevant market. The estimate does not include business acquisitions, divestments or closures.
Accounting policies The interim report has been prepared in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting, as adopted by the EU. The accounting policies adopted are consistent with those used in the annual financial statements for the year ended 31 December 2007 and as described in the annual financial statements.
The figures in this report are unaudited.
Financial calendar in 2009 Interim report for January-December 2008 and Financial Statement Bulletin for 2008 on 10 February 2009 Financial Review and Annual Review 2008 on TietoEnator's website in week 10 Annual General Meeting on 26 March 2009 Interim report for January-March 2009 on 24 April Interim report for January-June 2009 on 17 July Interim report for January-September 2009 on 21 October
Return on equity rolling 12 months, % -2.4 13.6 -4.9 -7.7 -2.4 13.6 -5.7 Return on capital employed rolling 12 months, % 8.9 18.9 8.8 7.2 8.9 18.9 7.8 Equity ratio % 42.0 43.0 38.8 38.0 42.0 43.0 40.2 Net interest-bearing liabilities, EUR million 169.7 215.4 138.1 139.7 169.7 215.4 164.5 Gearing, % 34.3 39.2 29.3 31.0 34.3 39.2 34.4 Investments, EUR million 25.7 25.2 23.2 36.2 85.1 65.4 87.7
*) Excluding one-off items related to the Performance Improvement Programme, goodwill impairment, badwill and capital gains and losses.
Income statement, EUR million 2008 2007 2008 2007 change 2007 7-9 7-9 1-9 1-9 % 1-12 Net sales 425.3 404.7 1 373.7 1 281.1 7 1 772.4 Other operating income 2.2 1.8 8.4 9.2 -9 13.3 Employee benefit expenses 227.1 223.1 777.2 734.3 6 1 021.3 Depreciation and amortization 16.7 17.1 49.3 49.3 0 77.0 Impairment of goodwill - - - - 40.0 Other operating expenses 149.9 145.7 467.6 441.7 6 646.2 Share of associated companies' result 0.0 0.1 0.0 0.1 0.1 Operating profit (EBIT) *) 33.8 20.7 88.0 65.1 35 1.3 Net interest expenses -2.3 -2.2 -6.8 -5.6 21 -7.1 Net exchange losses/gains -2.2 -0.4 -4.5 0.1 Neg. -0.7 Other financial income and expenses 1.0 -0.3 -0.9 -0.5 80 -2.1 Profit before taxes 30.3 17.8 75.8 59.1 28 -8.6 Income taxes -6.6 -6.8 -17.1 -19.0 -10 -22.6 Net profit for the period 23.7 11.0 58.7 40.1 46 -31.2
Net profit for the period attributable to Shareholders of the parent company 23.7 10.8 58.3 39.6 47 -32.3 Minority interest 0.0 0.2 0.4 0.5 -20 1.1 23.7 11.0 58.7 40.1 46 -31.2
Earnings attributable to the shareholders of the parent company per share, EUR
Employee benefit expenses include rental payments on company cars and non-statutory employee benefits, such as meals, healthcare and leisure time activities.
The result-based bonuses were EUR 22.3 million (17.6 previous year) and stock option expenses (share based payments) were EUR 4.4 million (3.2).
*) Operating profit 2008 includes one-off items of EUR 20.8 million related to the Performance Improvement Programme in the nine-month period and EUR 2.8 million in the third-quarter. In addition, the nine-month profit is negatively impacted by the cost of EUR 9.7 million related to the occurred public tender offer and by EUR 2.4 million in the third quarter.
Number of shares 2008 2008 2008 2008 2007 7-9 4-6 1-3 1-9 7-9
Finance lease liability 14.7 5.2 183 1.4 Other interest-bearing loans 150.1 150.9 -1 150.5 Deferred tax liabilities 29.6 26.2 13 23.4 Pension obligations 22.4 39.9 -44 22.0 Provisions 27.5 5.2 429 35.9 Other non-current liabilities 1.7 3.3 -48 1.7 Total non-current liabilities 246.0 230.7 7 234.9 Trade and other payables 451.7 450.9 0 461.7 Current income tax liabilities 14.2 15.8 -10 11.6 Interest-bearing loans 73.4 125.3 -41 96.9 Total current liabilities 539.3 592.0 -9 570.2 Total equity and liabilities 1 279.8 1 371.6 -7 1 282.7
Net working capital in the balance sheet, EUR million 2008 2007 change 2007 30 Sep 30 Sep % 31 Dec
Accounts receivable 317.2 336.2 -6 391.2 Other working capital receivables 231.5 248.6 -7 168.4 Working capital receivables included in assets 548.7 584.8 -6 559.6
Operative accruals 217.5 209.2 4 225.4 Other working capital liabilities 225.1 233.3 -4 228.6 Pension obligations and provisions 50.0 45.2 11 57.9 Working capital liabilities included in current liabilities 492.6 487.7 1 511.9
Net working capital in the balance sheet 56.1 97.1 -42 47.7
The change in net working capital in the balance sheet does not equal to that in the cash flow due to acquisitions and disposals.
Cash flow from operations Net profit 23.7 11.0 18.7 16.3 58.7 40.1 -31.2 Adjustments Depreciation, amortization and impairment 16.7 17.1 16.3 16.3 49.3 49.3 117.0 Share of associated companies' result 0.0 -0.1 0.0 0.0 0.0 -0.1 -0.1 Share-based payments 1.3 0.8 1.1 0.8 3.2 2.1 2.3 Profit/loss on sale of fixed assets and shares 0.0 -0.2 0.2 0.0 0.2 2.9 0.0 Other adjustments 0.0 0.0 -1.3 0.0 -1.3 0.0 1.3 Net financial expenses 3.5 2.9 5.8 2.9 12.2 6.0 9.9 Income taxes 6.6 6.8 5.1 5.4 17.1 19.0 22.6 Change in net working capital -46.5 -11.2 19.5 21.7 -5.3 -47.9 8.4 Cash generated from operations 5.3 27.1 65.4 63.4 134.1 71.4 130.2 Net financial expenses paid -4.2 -2.5 -0.6 -0.2 -5.0 -3.2 -4.6 Income taxes paid -6.8 -4.7 -10.9 1.4 -16.3 -13.5 -9.9 Net cash flow from operations -5.7 19.9 53.9 64.6 112.8 54.7 115.7
Cash flow from investing activities Acquisition of Group companies and business Operations, net of cash acquired -3.8 0.2 5.2 -8.0 -6.6 -12.3 -28.3 Capital expenditures -21.7 -12.8 -17.0 -14.5 -53.2 -37.5 -48.6 Disposal of business operations and associated company 0.0 0.7 0.0 0.0 0.0 0.9 4.6 Other investing activities 0.2 -15.4 1.2 0.1 1.5 -11.0 8.0 Net cash used in investing activities from operations -25.3 -27.3 -10.6 -22.4 -58.3 -59.9 -64.3
Cash flow from financing activites Dividends 0.0 0.0 -36.0 0.0 -36.0 -88.5 -88.5 Repurchase of own shares - -30.0 - - - -30.0 -32.1 Payment of finance lease liabilities -0.9 -2.9 -0.8 -0.9 -2.6 -8.6 -12.1 Change in interest-bearing liabilities -3.1 26.9 2.5 -27.5 -28.1 46.3 17.1 Change in loan receivables -0.1 0.4 -2.2 0.0 -2.3 4.5 -1.2 Net cash used in other financing activities -0.1 0.1 1.4 -1.4 -0.1 0.7 0.5 Net cash used in financing activities from operations -4.2 -5.5 -35.1 -29.8 -69.1 -75.6 -116.3
Change in cash and cash equivalents -35.2 -12.9 8.2 12.4 -14.6 -80.8 -64.9
Cash and cash equivalents at beginning of period -93.4 -70.9 -85.0 -72.9 -72.9 -138.9 -138.9 Foreign exchange differences 0.0 0.3 -0.2 0.3 0.1 0.4 1.1 Cash and cash equivalents at end of period 58.2 57.7 93.4 85.0 58.2 57.7 72.9 -35.2 -12.9 8.2 12.4 -14.6 -80.8 -64.9
Statement of changes in shareholders' equity
Parent shareholders' equity Minority Total interest equity Share issue Trans- premiums lation and Share other Own diffe- Retained EUR million capital reserves shares rences earnings
Balance at 31 Dec 2006 75.8 68.8 -52.3 -6.6 536.7 4.0 626.4 Translation difference -1.1 0.4 2.5 1.8 Minority interest -1.1 -1.1 Cancellation of own shares 43.3 -43.3 0.0 Share based payments recognized against equity 2.1 2.1 Dividend -88.3 -88.3 Own shares purchased -32.1 -32.1 Exercise of share options 0.0 0.0 0.0 Net profit for the period 39.6 0.5 40.1 At 30 September 2007 75.8 67.7 -41.1 -6.2 449.3 3.4 548.9
Balance at 31 Dec 2007 75.8 39.6 -41.1 -12.5 411.8 4.0 477.6 Translation difference -1.3 -16.0 13.3 -4.0 Translation difference on net investment, net of tax -3.2 0.8 -2.4 Minority interest 0.3 -3.0 -2.7 Cancellation of own shares 32.1 -32.1 0.0 Transfer between restricted and non-restricted equity -2.2 2.2 0.0 Share based payments recognized against equity 3.1 3.1 Dividend -35.8 -35.8 Net profit for the period 58.3 0.4 58.7 At 30 September 2008 75.8 36.1 -9.0 -31.7 421.9 1.4 494.5
Net sales by business area, EUR million (primary segment)
From Jan 2008, 12 persons were moved from Government, Manufacturing & Retail to Forest & Energy. Figures for 2007 have been restated. The change had minor effect on Net sales and EBIT 2007 in the business areas.
The personnel figures for the associated companies under TietoEnator's management responsiblity are reported according to our holding. Personnel figures including these associated companies to 100% give a total of 16 662 (16 215) at the end of the period.
Total assets by business area, EUR million (primary segment) 2008 2007 Change 2007 30 Sep 30 Sep % 31 Dec Banking & Insurance 219.0 260.4 -16 215.8 Telecom & Media 452.3 458.1 -1 474.9 Government, Manufacturing & Retail 55.4 61.2 -9 51.2 Healthcare & Welfare 80.4 86.2 -7 96.0 Forest & Energy 110.0 117.4 -6 116.8 Processing & Network 212.0 176.7 20 178.1 Group elimination -19.3 -23.7 -18 -21.9 Business areas 1 109.8 1 136.3 -2 1 110.9 Group Operations 170.0 235.2 -28 171.8 Total assets 1 279.8 1 371.6 -7 1 282.7
Total liabilities by business area, EUR million (primary segment) 2008 2007 Change 2007 30 Sep 30 Sep % 31 Dec Banking & Insurance 144.0 113.5 27 127.6 Telecom & Media 171.1 189.5 -10 187.5 Government, Manufacturing & Retail 37.8 37.3 1 49.4 Healthcare & Welfare 36.1 36.5 -1 44.3 Forest & Energy 74.3 72.2 3 72.1 Processing & Network 69.6 68.7 1 64.4 Group elimination - 14.8 -21.3 -31 -17.3 Business areas 518.1 496.4 4 528.1 Group Operations 267.3 326.3 -18 277.0 Total liabilities 785.3 822.7 -5 805.1
Segment assets by country, EUR million (secondary segment)
2008 2007 Change 2007 30 Sep 30 Sep % 31 Dec Finland 387.0 338.2 14 348.4 Sweden 289.1 323.2 -11 333.8 Norway 77.8 96.6 -20 94.7 Germany 172.3 174.5 -1 160.9 Great Britain 41.2 90.1 -54 45.7 Other 142.6 113.7 25 127.5 Business areas 1 109.8 1 136.3 -2 1 110.9
Depreciation, EUR million 2008 2007 Changes 2008 2007 Changes 2007 7-9 7-9 % 1-9 1-9 % 1-12 Processing & Network 10.5 9.4 12 30.9 27.4 12 40.0 whereof Finland 8.7 8.0 8 25.4 23.1 10 34.1 Sweden 1.7 1.3 29 4.9 3.8 29 4.9 Other countries 0.2 0.2 39 0.6 0.6 10 0.9 Other 3.5 5.3 -34 10.8 14.6 -25 27.2 Group total 14.0 14.7 -5 41.7 42.0 -1 67.2
Amortization on allocated intangible assets from acquisitions, EUR million
2008 2007 Change 2008 2007 Change 2007 7-9 7-9 % 1-9 1-9 % 1-12 Processing & Network 19.1 9.3 104 56.2 26.0 116 36.1 whereof Finland 17.6 7.4 138 48.0 21.5 123 29.7 Sweden 1.5 1.9 -21 8.2 4.5 82 6.4 Other countries 0.0 0.0 - 0.0 0.0 - 0.0 Other 4.1 3.5 17 14.2 11.5 23 16.8 Group total 23.2 12.8 81 70.4 37.5 88 52.9
2008 2007 Commitments and contingencies, EUR million 30 Sep 31 Dec change %
For TietoEnator obligations Pledges - - On behalf of joint ventures Guarantees 1.8 1.8 0 Other TietoEnator obligations Rent commitments due in one year 54.9 56.0 -2 Rent commitments due in 1-5 years 109.9 129.4 -15 Rent commitments due after 5 years 20.9 25.6 -19 Operating lease commitments due in one year 13.9 9.3 50 Operating lease commitments due in 1-5 years 14.2 15.0 -5 Operating lease commitments due after 5 years 0.0 0.0 Other commitments *) 15.6 53.7 -71
Operating lease commitments are principally three-year lease agreements that do not include buyout clauses.
*) Including in 2007 commitment mainly for purchase of hardware and software. In 2008 the commitment is presented in finance lease liabilities and operating lease commitments.
Notional amounts of derivative financial 2008 2007 instruments, EUR million 30 Sep 31 Dec
Includes the gross amount of all notional values for contracts that have not yet been settled or closed. The amount of notional value outstanding is not necessarily a measure or indication of market risk, as the exposure of certain contracts may be offset by that of other contracts.
Fair values of derivatives, EUR million The net fair values of derivative financial instruments at the 2008 2007 balance sheet date were: 30 Sep 31 Dec
On-going legal disputes TietoEnator has an ongoing VAT disupute with the Finnish tax authorities concerning a sum of EUR 5.3 million. Certain other old legal disputes are also ongoing; as these are minor and insubstantial, no provisions have been made for them.
Contingent assets The Finnish tax authorities have confirmed an additonal loss EUR 41.0 million (of which a deferred tax asset EUR 10.7 million could be recognized) on the loss incurred by the parent company in connection with the intra-group transaction carried out in April 2004, but the decision has been contested.
Based on ownership records of the Finnish and Swedish central security depositories.
In August, JPMorgan Chase & Co. announced that its holding in TietoEnator Corporation was 3 670 254 shares, which represents 5.10% of the shares and voting rights.
Press conference for analysts and media will be held in Stockholm, Scandic Anglais Hotel, Humlegårdsgatan 23, cabinet Birk, at 9.00 am CET (10.00 am EET, 8.00 am UK time). The results will be presented in English by Hannu Syrjälä, President and CEO. Notification of attendance to sirpa.salo@tietoenator.com, tel. +358 2072 68714.
The conference will be webcast and published live on TietoEnator's website www.tietoenator.com and there will be a possibility to present questions on-line. An on-demand video will be available after the conference.
Conference call hosted by the management starting at 2.15 pm CET, (3.15 pm EET, 1.15 pm UK time) will also be available as live audio webcast on www.tietoenator.com. Callers may access the conference directly at the following telephone numbers: US callers: +1 866 966 5335, non-US callers: +44 20 3023 4402, no code. Lines are to be reserved ten minutes before start of conference call.
An on-demand audiocast of the conference will also be published on TietoEnator's website later during the day. A replay will be available until 4 November 2008 in the following numbers: US callers: +1 866 583 1035, non-US callers: +44 20 8196 1998, access code: 141833#.
TietoEnator publishes financial information in English, Finnish and Swedish. All releases are posted in full on TietoEnator's website www.tietoenator.com as soon as they are published.
TietoEnator is a professional service company providing IT, R&D and consulting services. With approximately 16 000 experts, we are among the leading IT service companies in Northern Europe and the global leader in selected segments. We specialize in areas where we have the deepest understanding of our customers' businesses and needs. Our superior customer centricity and Nordic expertise set us apart from our competitors. www.tietoenator.com
DISTRIBUTION Helsinki Stock Exchange Stockholmsbörsen Principal Media
TietoEnator Corporation Business ID: 0101138-5
Aku Korhosentie 2-6 PO Box 38 FI-00441 HELSINKI, FINLAND Tel +358 2072010 Fax +358 207268898 Registered office: Espoo
Kronborgsgränd 1 SE-164 87 KISTA, SWEDEN Tel +46 8 632 1400 Fax +46 8 632 1420
mail: info@tietoenator.com www.tietoenator.com
This announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
