TietoEnator Corporation Quarterly Report 27 April 2007, 8.00 am EET
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Key financials
* Net sales grew 8% to EUR 442.2 (409.8) million. Organic growth
10%.
* Operating profit EUR 34.5 (29.8) million, operating margin 7.8%
(7.3); these include EUR 1.7 (4.7) million of capital gains.
Operating margin excluding capital gains 7.4% (6.1).
* Profit before taxes EUR 32.4 (29.6) million.
* Profit after taxes EUR 24.1 (20.8) million.
* EPS EUR 0.33 (0.27).
General market overview
Market activity in the first quarter of 2007 continued to be
favourable. Customers are increasingly looking at ways to increase
their revenue growth by providing new types of services and to
differentiate themselves by superior customer service. Cost savings,
flexibility and business process efficiency are still required, but
these are seldom the only drivers of demand. In most areas prices areeither stable or slightly higher than the year before. Prices are
declining in infrastructure services, which is normal for that
business.
The labour market is very active and there is a lot of mobility.
Recruitment levels are generally high and there is pressure to
increase salaries.
Development of customer industries
Most of TietoEnator's business areas showed a good level of growth
and the markets are active in all customer industries.
Demand in the banking and insurance sector is very good. The sector
is highly competitive and there continues to be price pressure in
some areas. TietoEnator's strongest growth markets in the banking and
insurance sector were Sweden and the UK. TietoEnator's services
business in Finland was stable.
In January TietoEnator agreed to acquire Swedish Abaris AB, which
specializes in securities processing solutions. The company employs
some 86 people in Sweden, Finland and Norway and its net sales in
2007 are expected to amount to EUR 10 million. The acquisition took
effect on 1 January 2007.
In the telecom and media sector cost savings continue to be the main
investment driver for telecom operators, equipment vendors and media
companies in Europe. This means that prices are under pressure, but
it is also providing opportunities in consolidation and integration
of systems. TietoEnator's prospects in the telecom sector are
promising. In addition to cost savings, customers, especially
operators, are searching for new sources of revenue growth.
In January TietoEnator recruited 140 people formerly working for the
Taiwan-based BenQ's R&D centre in Wroclaw, southern Poland. At the
beginning of February TietoEnator took over Ericsson's design centre
in Aarhus, Denmark, with 86 employees. The design centre supplies IP
software building blocks used in Ericsson products. Expected net
sales for the unit in 2007 are EUR 10 million.
In the Finnish government sector overall market demand was good,
especially in the taxation area. Customers are looking for improved
government productivity, which requires efficient use of technology
and new ways to provide services. In the manufacturing sector and in
the retail sector the positive market situation continued and the
biggest growth potential is in ERP implementations. In all of these
sectors TietoEnator has a very strong position. Competition is tough
as customers are implementing multi-sourcing strategies.
The digitalization of healthcare services requires that old legacy
applications are replaced by modern electronic patient records and
integrated hospital information systems. Large customers have high
functionality demands and complicated IT environments, which makes
their transformation challenging. TietoEnator has a very strong
position in healthcare in Finland and the business is performing
well. Also the Nordic welfare business is developing positively.
In Sweden, Norway and Denmark some customers now prefer
transformation in phases and incremental renewal of systems. This
resulted in lower than normal number of new orders in late 2006 and
lower net sales in the first quarter of 2007. In Germany a product
upgrade was delayed, which resulted in postponed sales and
deliveries.
In January TietoEnator closed the acquisition of Provisio AB in
Sweden. The company specializes in operating room information systems
and has seven employees in Lund. In February TietoEnator divested its
holding in TietoEnator Libraries Oy to AXIELL bibliotek AB. The net
sales of the company in 2006 were EUR 2.4 million.
In the forest sector there are signs of market recovery after a long
period of cost savings. Harmonization of IT systems and
infrastructure is driving demand. TietoEnator's market position has
strengthened in Central Europe and in the Americas. In the energy
sector customers are willing to invest in IT as their financial
performance is good. In oil and gas demand is good in all market
segments. In the utilities area customers are mainly interested in
consolidating current systems or renewing systems in the billing and
self-service area.
The processing and network services market is very active, but prices
are under heavy pressure. TietoEnator's competitive position is
strong, but maintaining good profitability requires tight cost
control and increased use of global sourcing.
In January TietoEnator and ÅF Group, a Swedish technical consulting
company, agreed on TietoEnator taking over ÅF Group's internal IT
operations. TietoEnator will provide operational IT services and the
technical infrastructure for the ÅF Group. Around 20 people moved to
TietoEnator. Started in February 2007, the contract will run for
three years and has a value of around EUR 12 million.
Demand for digitalization services and self-service concepts
accelerated in the first quarter. TietoEnator is able to offer
solutions which combine industry-specific services with highly
advanced technology and cost-efficient hosting.
Net sales
First-quarter net sales grew 8% to EUR 442.2 (409.8) million or 7% in
local currencies. Organic growth improved clearly from 2006 to a good
level of 10% or 9% in local currencies.
Q1 2007 Q1 2006 Q1 2007
net sales growth net sales organic
% growth % growth %
Banking & Insurance 9 38 7
Telecom & Media 19 1 18
Government, Manufacturing & -24 10 2
Retail
Healthcare & Welfare 2 14 1
Forest & Energy 15 3 10
Processing & Network 8 5 8
In the first quarter of 2007 Telecom & Media had the strongest
growth, which is a remarkable improvement compared to its declining
net sales in 2006. Growth was driven by several new outsourcing
contracts and good general demand in the market. Prices have been
stable compared with the previous year. A similar development took
place in Forest & Energy, where the previous year's negative growth
numbers became strongly positive, driven mainly by growth in the
energy sector.
Government, Manufacturing & Retail's total growth was reduced by the
divestment of government businesses in Denmark, Norway and Sweden in
2006. Healthcare & Welfare's growth suffered from reorganization in
Norway and Sweden and the delay in the launch of a product upgrade in
Germany. Banking & Insurance was still growing strongly, but growth
was lower than in 2006 since new outsourcing contracts did not have
impact any longer. Processing & Network continued on a healthy growth
track.
In the first quarter of 2007 TietoEnator's growth came from outside
Finland. In Finland net sales were stable. Sweden grew 6%. Net sales
both in Germany and Denmark benefited from new outsourcing contracts.
Germany grew 61% and Denmark 37%. The decline in Norway, -22%, is
mainly explained by the divestment of the government business. In the
UK growth was also strong at 30%.
Telecom and media, growing strongly, increased its share of Group net
sales to 35% (31). The banking and insurance sector contributed 23%
(22) whereas public sector's contribution declined to 15% (18).
The order backlog, which comprises only services ordered with binding
contracts, amounted to EUR 1 341.5 million (1 131.0) at the end of
the period, 19% higher than a year before. Processing & Network's
share of the order backlog is about 29%. Approximately 49% (54) of
the backlog is expected to be invoiced in 2007.
Profitability
First-quarter operating profit amounted to EUR 34.5 (29.8) million
representing a margin of 7.8% (7.3). Excluding capital gains the
operating profit totalled EUR 32.8 (25.1) million representing a
margin of 7.4% (6.1).
Q1 2007 Q1 2006
EBIT % excl. EBIT % excl. capital
capital gains gains
Banking & Insurance 7.1 6.3
Telecom & Media 9.2 6.8
Government, Manufacturing & Retail 9.9 7.5
Healthcare & Welfare -1.6 4.2
Forest & Energy 8.1 6.7
Processing & Network 8.6 9.8
There were no material restructuring expenses nor any new material
project overruns in the quarter, which means that the underlying
operating profit was slightly higher than the year before at EUR 33
(32) million.
Almost all business areas improved their profitability in the first
quarter. Telecom & Media's profitability benefited from good
utilization. Government, Manufacturing & Retail's operating margin
improved due to the divestment of low-margin businesses. Forest &
Energy had less project overruns and Banking & Insurance's
profitability improved in countries outside Finland.
Healthcare & Welfare's profitability suffered from its challenging
business situation in Norway, Sweden, Denmark and Germany. For
Processing & Network profitability reflected lower prices.
Operating profit (EBIT) included EUR 2.5 (2.0) million from
amortization on allocated intangible assets in the first quarter. The
costs arising from share-based payments in the first quarter, EUR 0.5
(0.8) million, were included in employee benefit expenses.
Net financial expenses stood at EUR 2.1 (0.2) million in the first
quarter. Net interest expenses were EUR 1.5 (positive 0.1) million
and one-time net losses from foreign exchange transactions EUR 0.5
(0.2) million.
First-quarter earnings per share totalled EUR 0.33 (0.27). EPS was
affected by capital gains of EUR 0.02 (0.07) per share, amortization
on intangibles of EUR 0.03 (0.03) per share and stock option expenses
of EUR 0.00 (0.01) per share. Excluding these items EPS amounted to
EUR 0.34 (0.24).
The 12-month rolling return on capital employed (ROCE) was 21.8% and
the return on shareholders' equity (ROE) 17.5%.
Financing and investments
Cash flow amounted to EUR 38.8 (30.3) million in the quarter.
Operating profit contributed EUR 49.1 (40.0) million and the increase
in working capital consumed EUR 6.8 (-3.2) million. Tax payments were
very low at EUR 1.8 (12.0) million as the deferred tax asset was
further employed in Finland.
Payments for new acquisitions totalled EUR 9.3 million.
The equity ratio was 44.5% (34.7). Gearing decreased to 12.9% (43.9)
as Personec Group with a substantial amount of debt was divested in
December 2006. Net debt totalled EUR 72.6 (198.6) million including
EUR 161.6 million in interest-bearing debt, EUR 10.5 million in
finance lease liabilities, EUR 9.4 million in finance lease
receivables and EUR 89.6 million in cash and cash equivalents.
The interest-bearing debt consists of a seven-year EUR 100 million
private placement bond, a seven-year EUR 50 million private placement
bond and usage of EUR 10 million from the short-term commercial paper
programme. At the end of the quarter unused credit facilities
totalled about EUR 486 million.
Accrual-based investments totalled EUR 27.3 (24.5) million for the
period. Capital expenditure including financial leasing accounted for
EUR 12.1 (15.7) million, investments in business activities for EUR
0.0 (3.0) million, and investments in subsidiary and associated
company shares for EUR 15.2 (5.8) million.
Personnel
The number of full-time employees totalled 15 182 (14 157) at the end
of the first quarter. Acquisitions and new outsourcing contracts
added about 195 employees during the quarter. The number of people
recruited during the period grew strongly: a total of 879 (458)
employees were hired. The highest recruitment numbers were in
Finland, Poland and Sweden.
In total about 50 employees were affected by personnel adjustments
during the first quarter mostly in Telecom & Media and Banking &
Insurance.
Employee turnover has continued to increase as the labour market is
very active. The 12-month rolling figure stood at 9.7% (7.5) at the
end of March.
The average number of full-time employees was 15 026 (14 117) in the
first quarter.
At the end of the first quarter the number of people in countries
with favourable cost levels totalled about 2 300 or 14% of the total
headcount. The recruitment activity in Poland added about 140 people
in January 2007. The implementation of TietoEnator's global sourcing
strategy progressed as planned.
Board of Directors and management
TietoEnator's Annual General Meeting on 22 March 2007 re-elected the
following previous Board members: Mariana Burenstam Linder, Bengt
Halse, Kalevi Kontinen, Matti Lehti, Olli Riikkala and Anders
Ullberg. In addition, the meeting elected Bruno Bonati as a new
member.
The Board of Directors elected Matti Lehti as its chairman and Anders
Ullberg as its vice chairman. The Board also appointed a Compensation
and Nomination Committee, comprising Kalevi Kontinen (chairman),
Mariana Burenstam Linder and Bengt Halse and an Audit and Risk
Committee, comprising Anders Ullberg (chairman), Bruno Bonati and
Olli Riikkala.
Transactions with related parties
The related parties of TietoEnator are its Board of Directors,
President and CEO, the Corporate Management Team and the Group's
associated companies.
The base salaries and bonus levels of the President and CEO and
Corporate Management Team members were reviewed with effect from the
beginning of 2007. The President and CEO's bonus is a maximum of 80%
of his annual base salary and is based on the Group's net sales and
operating profit. The reward factors for the Corporate Management
Team members are based on the financial performance of the Group and
their own units.
In December 2006 TietoEnator's Board of Directors allocated 2006 B
options. The President and CEO was allocated 10 000 options and the
Corporate Management Team members in total 71 600 options. In the
share-based incentive plan the CEO and President is entitled to a
maximum of 6 000 shares and other Corporate Management Team members
in total to 24 600 shares if the set performance criteria are met.
Transactions with the associated companies are not considered to be
material.
Dividend
The Annual General Meeting approved a dividend of EUR 1.20 (0.85) per
share. The total dividend payment of EUR 88.3 million took place in
mid-April.
Shares and options
The outstanding number of shares excluding the shares in the
company's possession was 73 596 462 at the end of March. At the end
of the quarter TietoEnator held a total of 500 000 of its own shares
representing 0.7% of all the shares and voting power. The shares were
repurchased in April 2006 for the three-year share-based incentive
plan.
The Annual General Meeting authorized the Board to repurchase the
company's own shares to the extent that this does not exceed 10% of
the company's share capital in order to develop the company's capital
structure. The authorization is in force until the close of the next
Annual General Meeting.
TietoEnator's Annual General Meeting also approved authorizations to
issue share and option rights or raise convertible bond loans. The
Board has not exercised these authorizations.
'Profit 2007' programme
TietoEnator launched a programme called 'Profit 2007' at the
beginning of February to improve its business performance. The
programme includes plans to cut costs and divest or restructure
loss-making businesses. In the first quarter detailed planning of the
programme continued and the implementation started. Most of the
benefits from the programme will take place during the remaining
quarters of this year.
Initiatives to save on travelling, meeting and personal equipment
costs were launched. At the end of the quarter these initiatives
already started to show some impact. Low-performing units are under
close scrutiny and their plans to improve net sales and profitability
are supported by the programme.
So far this year TietoEnator has divested its minority holding in
S.E.S.A. Spa in Italy, its majority holding in TietoEnator Libraries
Oy in Finland and parts of the German Banking & Insurance business.
Events after the period
TietoEnator announced several new contracts in April.
TietoEnator and Blyk, the free, pan-European mobile operator for
young people, entered into a partnership in which TietoEnator
provides Blyk with an end-to-end BSS (Business Support Systems)
solution related to web portals and infrastructure services.
TietoEnator signed an agreement with Siemens IT Solutions and
Services in Italy regarding the streamlining of business-critical and
customer-related processes and services for mobile telephony. The
value of the contract is expected to be EUR 40 million and the
contract period is three years.
TietoEnator announced that it will be the main partner in Vaisala's
corporate wide enterprise resource planning system implementation.
Vaisala is a Finnish electronic measurement product, solutions and
services company. TietoEnator signed an agreement with the
Finnish-based metal products and services company Rautaruukki to
extend the current relationship to providing full services for the
information systems of Ruukki Production division. The total service
comprises application development and integration, server management,
IT operations management and data security, and customer support.
TietoEnator signed Memorandums of Understanding to divest Banking &
Insurance's SAP businesses in Germany in two transactions to Resco
GmbH and the management of TietoEnator's SAP Human Capital Management
consulting team. The transactions are expected to be completed at the
beginning of June 2007. In 2006 the total net sales of these
businesses were about EUR 5.8 million and operating loss about EUR
1.2 million. In the first quarter of 2007 the businesses reached net
sales of EUR 1.4 million and operating loss of EUR 0.3 million.
Currently the businesses employ close to 40 people.
On 11 April TietoEnator announced that its President and CEO Pentti
Heikkinen will be on sick leave due to the diagnosis of aortic valve
insufficiency in his heart. According to the current plan he will
return to work at the beginning of May. During this time his duties
have been assumed by TietoEnator's Deputy CEO Åke Plyhm. Pentti
Heikkinen's aortic valve will be treated with surgery during this
year. Recovery from this surgery typically takes 1-3 months.
Some items affecting 2007
The net of acquisitions and divestments finalized to date is expected
to have about a -1% impact on net sales for the full year 2007.
The restructuring and related costs are currently expected to exceed
the level of 2006 (EUR 12.4 million). EUR 5-10 million of this is
expected to take place in the second quarter.
Additionally the divestment of some of Banking & Insurance's
businesses in Germany resulted in about EUR 4 million capital loss to
be recorded in the second quarter.
TietoEnator expects amortization of intangible assets to total about
EUR 10 (8.8) million and stock option expenses around EUR 2 (4.0)
million. Costs related to the share-based incentive programme depend
on the company's performance in 2007 and are currently expected to
amount to a maximum of about EUR 5 (0) million.
Risks and uncertainties
The risks TietoEnator is facing and actively managing are mainly: the
market becoming more commoditized, price pressure, new low-cost
competition, customers demanding tighter contract terms, the
availability and cost of resources, and the ability to control
challenging deliveries.
Prospects for 2007
TietoEnator expects the general IT market to be active in 2007. On
average prices are expected to stay roughly in line with 2006 levels.
TietoEnator will continue to invest in its low-cost sites and
international expansion. The turnaround of underperforming units will
take time and there are some deliveries with low margins. In some
areas cost pressures cannot be met by price increases.
TietoEnator expects its full-year organic growth in 2007 to be higher
than the 2006 level of 2%. Several outsourcing contracts will cease
to have an impact on growth during 2007.
The operating profit of the underlying business is expected to exceed
the level of 2006 (EUR 124 million). The 'Profit 2007' Programme is
important for TietoEnator to reach its expected profitability in
2007. The operating profit of the underlying business does not
include potential capital gains and restructuring expenses.
Financial calendar in 2007
Interim Report January - June 2007 on 20 July
Capital Markets Day on 12 September in Stockholm
Interim Report January - September 2007 on 26 October
The figures in this report are for continuing operations. The
Personec Group business divested in December 2006 is treated as a
discontinued operation for whole of 2006.
The accounting policies adopted are consistent with those of the
annual financial statements for the year ended 31 December 2006 and
as described in the annual financial statements. In addition IFRS 7"Financial Instruments: Disclosures" has been applied from the
beginning of 2007 but will not have any major impact on the Group.
The required information will be disclosed in the annual financial
statements for the year ending 31 December 2007.
The figures in this report are unaudited.
Key figures 2007 2006 2006
1-3 1-3 1-12
Earnings per share, EUR
- basic 0.33 0.29 3.25
- diluted 0.33 0.28 3.25
- basic from continuing operations 0.33 0.27 1.15
- basic from discontinued operations - 0.02 2.10
Earnings per share from continuing operations, EUR
a) 0.34 0.24 1.18
Equity per share, EUR 7.70 5.97 8.51
Return on equity rolling 12 month, % 17.5 27.6 15.5
Return on capital employed rolling 12 month, % 21.8 28.8 18.7
Equity ratio % 44.5 34.7 48.4
Net interest-bearing liabilities, EUR million 72.6 198.6 93.4
Gearing, % 12.9 43.9 14.9
Investments in continuing operations, EUR million 27.3 24.5 77.9
a) Excluding goodwill impairments, amortization on allocated
intangible assets from acquisitions, stock option expenses and
one-time capital gains.
Income statement, EUR million 2007 2006 change 2006
1-3 1-3 % 1-12
Continuing operations
Net sales 442.2 409.8 8 1 646.5
Other operating income 4.6 7.3 -37 25.1
Employee benefit expenses 253.3 241.6 5 938.5
Depreciation and amortization 16.0 14.3 12 59.4
Impairment of goodwill - - - -
Other operating expenses 143.0 131.6 9 546.2
Share of associated companies' result 0.0 0.2 -100 0.2
Operating profit (EBIT) 34.5 29.8 16 127.7
Net interest expenses -1.5 0.1 -1 600 -2.1
Net exchange losses/gains -0.5 -0.2 150 -0.6
Other financial income and expenses -0.1 -0.1 0 -0.5
Profit before taxes 32.4 29.6 9 124.5
Income taxes -8.3 -8.8 -6 -37.2
Net profit for the period from continuing
operations 24.1 20.8 16 87.3
Discontinued operations
Net profit for the period from
discontinued operations - 1.8 159.7
Net profit for the period 24.1 22.6 7 247.0
Net profit for the period attributable to
Shareholders of the parent company 24.0 21.7 11 243.9
Minority interest in continuing
operations 0.1 0.5 -80 1.0
Minority interest in discontinued
operations - 0.4 2.1
24.1 22.6 7 247.0
Earnings attributable to the shareholders
of the parent company per share, EUR
Basic 0.33 0.29 14 3.25
Diluted 0.33 0.29 14 3.25
Basic from continuing operations 0.33 0.27 22 1.15
Basic from discontinued operations - 0.02 2.10
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 4.5
million (3.3 previous year) and the stock option expenses (share
based payments) were EUR 0.5 million (0.8).
Number of shares 2007 2006 2006
1-3 1-3 10-12
Outstanding shares, end of period
Basic 73 596 462 75 840 212 73 596 462
Diluted 73 654 512 76 228 104 73 657 628
Outstanding shares, average
Basic 73 596 462 75 840 120 73 596 462
Diluted 73 654 512 76 147 920 73 596 462
Company's possession of its own
shares,
End of period 500 000 2 903 860 2 245 000
Average 965 333 2 903 860 2 245 000
Balance sheet, EUR million 2007 2006 change 2006
31 March 31 March % 31 Dec
Goodwill 451.8 466.1 -3 448.4
Other intangible assets 82.2 79.8 3 82.6
Property, plant and equipment 86.8 96.9 -10 87.9
Deferred tax assets 71.9 94.2 -24 75.2
Investments in associated
companies 2.2 4.5 -51 2.3
Other non-current assets 1.4 2.0 -30 1.4
Total non-current assets 696.3 743.5 -6 697.8
Trade and other receivables 536.3 504.4 6 503.0
Current income tax receivables 23.3 17.1 36 22.3
Interest-bearing current assets 9.8 9.8 0 12.7
Cash and cash equivalents 89.6 97.1 -8 138.9
Total current assets 659.0 628.4 5 676.9
Total assets 1 355.3 1371.9 -1 1 374.7
Share capital, share issue
premiums and other reserves 142.6 141.4 1 144.6
Retained earnings 417.5 297.3 40 477.8
Parent shareholders equity 560.1 438.7 28 622.4
Minority interest 3.9 13.7 -72 4.0
Total Equity 564.0 452.4 25 626.4
Finance lease liability 10.5 19.6 -46 13.5
Shareholders' loan - 37.0 0.8
Other interest-bearing loans 150.6 127.2 18 153.6
Deferred tax liabilities 20.1 22.8 -12 20.0
Pension obligations 43.5 41.1 6 46.4
Provisions 2.1 11.7 -82 3.4
Other non-current liabilities 3.1 1.1 182 3.2
Total non-current liabilities 229.9 260.5 -12 240.9
Trade and other payables 528.4 525.8 0 410.6
Current income tax liabilities 22.0 11.4 93 19.7
Interest-bearing loans 11.0 121.8 -91 77.1
Total current liabilities 561.4 659.0 -15 507.4
Total equity and liabilities 1 355.3 1371.9 -1 1 374.7
Deferred tax assets end of March 2007 include the remaining EUR 31
million, which rose from the loss incurred in the parent company
related to the intra-group transaction carried out in April 2004.
Trade and other payables end of March 2007 include EUR 88.3 million
unpaid dividend.
Net working capital in the balance
sheet, EUR million 2007 2006 change 2006
31 March 31 March % 31 Dec
Accounts receivable 324.1 314.8 3 321.3
Other working capital receivables 212.2 188.8 12 181.7
Working capital receivables included
in assets 536.3 503.6 6 503.0
Operative accruals 230.9 255.8 -10 215.6
Other working capital liabilities 200.4 192.4 4 192.2
Pension obligations and provisions 45.7 52.8 -13 49.7
Working capital liabilities included
in current liabilities 477.0 501.0 -5 457.5
Net working capital in the balance
sheet 59.3 2.6 45.5
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, EUR million 2007 2006 2006
1-3 1-3 1-12
Cash flow from operations
Operating profit 34.5 29.8 127.7
Adjustments to operating profit
Depreciation and amortization 16.0 14.3 59.4
Profit/loss on sale of fixed assets and shares -1.7 -4.7 -15.7
Share of associated companies' result 0.0 -0.2 -0.2
Other adjustments 0.3 0.8 3.5
Change in net working capital -6.8 3.2 -37.8
Cash generated from continuing operations 42.3 43.2 136.9
Net financial items -1.7 -0.9 -2.8
Income taxes paid -1.8 -12.0 -24.8
Net cash flow from continuing operations 38.8 30.3 109.3
Net cash flow from discontinued operations - 7.2 3.7
Total net cash flow from operations 38.8 37.5 113.0
Cash flow from investing activities
Acquisition of Group companies and business
operations, net of cash acquired -9.3 -0.6 -24.6
Capital expenditures -12.1 -15.6 -50.6
Disposal of business operations
and associated company 1.9 5.2 30.4
Other investing activities 0.4 0.8 1.6
Net cash used in investing activities from
- continuing operations -19.1 -10.2 -43.2
- discontinued operations - -24.6 -4.2
Total net cash used in investing activities -19.1 -34.8 -47.4
Cash flow from financing activites
Dividends -0.2 -1.2 -65.8
Repurchase of own shares 0.0 0.0 -52.3
Proceeds from finance lease liabilities 0.0 0.0 0.6
Payment of finance lease liabilities -2.2 -2.7 -9.3
Change in interest-bearing liabilities -69.2 -27.8 41.6
Net cash used in other financing activities 2.9 1.7 -4.3
Net cash used in financing activities from
- continuing operations -68.7 -30.0 -89.5
- discontinued operations - 24.9 63.0
Total net cash used in financing activities -68.7 -5.1 -26.5
Change in cash and cash equivalents -49.0 -2.4 39.1
Cash and cash equivalents at beginning of period -138.9 -99.8 -99.8
Foreign exchange differences 0.3 0.3 0.0
Cash and cash equivalents at end of period 89.6 97.1 138.9
-49.0 -2.4 39.1
Statement of changes in Shareholders equity
Minority Total
Parent shareholders equity interest equity
Share issue Trans- Retai-
premiums lation ned
Share and other Own diffe- ear-
EUR million capital reserves shares rences nings
Balance at 31 500.9
Dec 2005 78.7 62.7 -80.0 -8.2 435.5 12.2
Translation -3.2
difference -1.8 -1.4
Minority 0.6
interest 0.6
Share based
payments
recognised 0.8
against equity 0.8
Dividend -64.5 -64.5
Other changes -4.8 -4.8
Net profit for 22.6
the period 21.7 0.9
At 31 March 2006 78.7 62.7 -80.0 -10.0 387.3 13.7 452.4
Balance at 31 626.4
Dec 2006 75.8 68.8 -52.3 -6.6 536.7 4.0
Translation 1.6
difference -2.0 -4.7 8.3
Minority -0.2
interest -0.2
Cancellation of 0.0
own shares 39.9 -39.9
Share based
payments
recognised 0.4
against equity 0.4
Dividend -88.3 -88.3
Net profit for 24.1
the period 24.0 0.1
At 31 March 2007 75.8 66.8 -12.4 -11.3 441.2 3.9 564.0
SEGMENT INFORMATION
Net sales by business area, EUR million (primary segment)
2007 2006 Change 2006
Continuing operations 1-3 1-3 % 1-12
Banking & Insurance 78 72 9 284
Telecom & Media 161 135 19 542
Government, Manufacturing & Retail 50 66 -24 236
Healthcare & Welfare 35 34 2 144
Forest & Energy 45 39 15 161
Processing & Network 98 91 8 374
Group elimination incl other -24 -27 -11 -95
Group total 442 410 8 1646
Country Sales, EUR million (secondary segment)
2007 Change Share 2006 Share 2006 Change
Continuing operations 1-3 % % 1-3 % 1-12 %
Finland 197 0 45 197 48 751 3
Sweden 121 6 27 115 28 454 -3
Germany 39 61 9 24 6 124 21
Denmark 19 37 4 14 3 51 -1
Norway 17 -22 4 22 5 81 4
Great Britain 14 30 3 11 3 48 48
Netherlands 6 1 1 6 1 25 61
France 6 28 1 4 1 18 -14
Italy 5 26 1 4 1 17 -
Other 18 32 4 14 3 77 11
Group total 442 8 100 410 100 1646 5
Net sales by industry segment, EUR million
2007 Change Share 2006 Share 2006 Change
Continuing operations 1-3 % % 1-3 % 1-12 %
Banking and insurance 103 16 23 88 22 374 23
Public 65 -12 15 74 18 292 4
Telecom and media 155 24 35 126 31 515 -6
Forest 21 3 5 21 5 88 -1
Energy 23 23 5 19 5 79 6
Manufacturing 24 1 5 23 6 89 11
Retail & Logistics 21 -8 5 23 6 88 -9
Other 30 -16 7 36 9 122 21
Group total 442 8 100 410 100 1646 5
Operating profit (EBIT), EUR million
2007 2006 Change 2006
Continuing operations 1-3 1-3 % 1-12
Banking & Insurance 5.6 4.5 23.9 20.1
Telecom & Media 14.8 9.2 61.0 37.5
Government, Manufacturing & Retail 4.9 9.7 -48.9 31.2
Healthcare & Welfare 1.2 1.4 -19.2 12.5
Forest & Energy 3.6 2.6 39.6 7.8
Processing & Network 8.4 8.9 -5.4 39.7
Business areas 38.5 36.3 6.1 148.9
Group operations incl other -3.9 -6.4 38.7 - 24.7
Associated companies outside BA 0.0 0.0 - 0.0
Group capital gain 0.0 0.0 - 3.5
Operating profit (EBIT) 34.5 29.8 15.7 127.7
Operating profit, EUR million excl capital gains and impairment
losses
2007 2006 Change 2006
Continuing operations 1-3 1-3 % 1-12
Banking & Insurance 5.6 4.5 23.9 20.1
Telecom & Media 14.8 9.2 61.4 38.7
Government, Manufacturing & Retail 4.9 4.9 0.3 18.0
Healthcare & Welfare -0.6 1.4 -139.6 12.5
Forest & Energy 3.6 2.6 39.6 7.8
Processing & Network 8.4 8.9 -5.4 39.5
Business areas 36.8 31.5 16.7 136.6
Group operations incl other -3.9 -6.4 38.4 - 24.6
Associated companies outside BA 0.0 0.0 - 0.0
Operating profit (EBIT excl cap gain) 32.8 25.1 30.8 112.0
Operating margin (EBIT), %
2007 2006 Change 2006
Continuing operations 1-3 1-3 1-12
Banking & Insurance 7.1 6.3 0.9 7.1
Telecom & Media 9.2 6.8 2.4 6.9
Government, Manufacturing & Retail 9.9 14.8 -4.8 13.2
Healthcare & Welfare 3.3 4.2 -0.9 8.7
Forest & Energy 8.1 6.7 1.4 4.9
Processing & Network 8.6 9.8 -1.2 10.6
Business areas 8.7 8.9 -0.2 9.0
Operating margin (EBIT) 7.8 7.3 0.5 7.8
Operating margin (EBIT) excl capital gains and impairment losses, %
2007 2006 Change 2006
Continuing operations 1-3 1-3 1-12
Banking & Insurance 7.1 6.3 0.9 7.1
Telecom & Media 9.2 6.8 2.4 7.2
Government, Manufacturing & Retail 9.9 7.5 2.4 7.6
Healthcare & Welfare -1.6 4.2 -5.9 8.7
Forest & Energy 8.1 6.7 1.4 4.9
Processing & Network 8.6 9.8 -1.2 10.5
Business areas 8.3 7.7 0.6 8.3
Operating margin (EBIT), excl capital gains and
impairment losses 7.4 6.1 1.3 6.8
Personnel
End of period Average
Continuing operations 2007 Change Share 2006 2006 2007 2006
By business area
(primary segment) 1-3 % % 1-3 1-12 1-3 1-3
Banking & Insurance 2 244 4 15 2 166 2 193 2 233 2 179
Telecom & Media 5 351 13 35 4 751 5 107 5 268 4 703
Government,
Manufacturing &
Retail 1 567 - 21 10 1 982 1 532 1 560 1 989
Healthcare & Welfare 1 067 6 7 1 005 1 079 1 069 996
Forest & Energy 1 288 4 8 1 237 1 286 1 291 1 249
Processing & Network 2 059 5 14 1 961 1 966 2 032 1 977
Software Centres 1 051 88 7 559 925 1 015 537
Other Group
Operations 554 12 4 496 507 557 486
Group total 15 182 7 100 14 157 14 597 15 026 14 115
From Jan 2007, 216 persons in India were moved from BA Healthcare &
Welfare to Software Centre in Group Operations. Figures for 2006 have
been restated. The change had a positive effect of 0.3 MEUR on EBIT
2006 in Group Operations and a corresponding negative effect in
Healthcare & Welfare.
End of period Average
Continuing operations 2007 Change Share 2006 2006 2007 2006
By country (secondary
segment) 1-3 % % 1-3 1-12 1-3 1-3
Finland 6 185 - 2 41 6 333 6 163 6 183 6 344
Sweden 3 347 - 4 22 3 480 3 239 3 332 3 487
Germany 1 370 50 9 912 1 342 1 360 901
Czech 853 74 6 491 769 823 477
Norway 741 - 15 5 868 742 751 851
Latvia 549 30 4 424 521 546 413
Great Britain 315 - 3 2 324 314 312 342
Denmark 314 - 15 2 367 221 280 355
Poland 284 - 2 0 153 245 0
India 265 66 2 160 231 263 156
Italy 224 31 1 171 176 204 168
France 120 11 1 108 114 117 109
Estonia 103 25 1 82 116 107 82
Lithuania 93 11 1 84 102 89 82
Other 419 19 3 354 395 413 348
Group total 15 182 7 100 14 157 14 597 15 026 14 115
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 15 580 (14 548) at the end of the period.
Total assets by business area, EUR million (primary segment)
2007 2006 Change 2006
Continuing operations 31-Mar 31-Mar % 31 Dec
Banking & Insurance 267.2 229.2 17 256.0
Telecom & Media 427.5 395.6 8 414.7
Government, Manufacturing & Retail 65.1 63.1 3 64.1
Healthcare & Welfare 88.6 90.2 -2 93.5
Forest & Energy 119.0 117.5 1 112.1
Processing& Network 178.8 175.2 2 187.3
Group elimination -24.6 -28.7 -14 -34.0
Business areas 1 121.6 1 042.1 8 1 093.9
Group Operation 233.7 317.7 -26 280.9
Group total 1355.3 1359.8 0 1374.7
Discontinuing operations, net impact - 12.1 - -
Total assets 1355.3 1371.9 -1 1374.7
Total liabilities by business area, EUR million (primary segment)
2007 2006 Change 2006
Continuing operations 31 Mar 31 Mar % 31 Dec
Banking & Insurance 103.4 90.2 15 93.2
Telecom & Media 173.8 143.5 21 166.6
Government, Manufacturing & Retail 42.2 59.9 -30 39.2
Healthcare & Welfare 34.5 32.1 7 32.0
Forest & Energy 65.4 62.9 4 52.3
Processing & Network 68.8 79.2 -13 76.3
Group elimination - 18.0 -44.6 -60 -31.0
Business areas 470.1 423.2 11 428.6
Group Operation 321.2 334.1 -4 319.7
Group total 791.3 757.3 4 748.3
Discontinuing operations, net impact - 162.2 - -
Total liabilities 791.3 919.5 -14 748.3
Segment assets by country, EUR million (secondary segment)
2007 2006 Change 2006
Continuing operations 31 Mar 31 Mar % 31 Dec
Finland 320.4 338.0 -5 329.0
Sweden 337.2 311.1 8 317.4
Norway 100.7 80.2 26 97.5
Germany 178.3 124.3 43 174.6
Great Britain 90.5 86.8 4 99.1
Other 94.6 101.7 -7 76.2
Business areas 1 121.6 1 042.1 8 1 093.9
Depreciation, EUR million
2007 2006 Changes 2006
Continuing operations 1-3 1-3 % 1-12
Processing & Network 8.9 7.5 18 31.5
whereof Finland 7.4 6.7 10 27.0
Sweden 1.2 0.6 102 3.8
Other countries 0.2 0.1 50 0.7
Other 4.7 4.8 -1 19.2
Group total 13.6 12.3 11 50.7
Amortisation on allocated intangible assets from acquisitions, EUR
million
2007 2006 Change 2006
Continuing operations 1-3 1-3 % 1-12
Telecom & Media 1.2 1.2 8 4.9
Other 1.2 0.8 49 3.8
Group total 2.5 2.0 25 8.7
No impairment losses have been recognised during 2007 and 2006.
Capital expenditure by business area, EUR million
2007 2006 Change 2006
Continuing operations 1-3 1-3 % 1-12
Processing & Network 7.4 12.9 -43 35.3
whereof Finland 5.6 8.1 -31 22.1
Sweden 1.7 4.8 -64 13.2
Other countries 0.0 0.0 - 0.0
Other 4.7 2.9 62 15.6
Group total 12.1 15.8 -24 50.9
Commitments and contingencies, EUR million
2007 2006
31 Mar 31 Dec change %
For TietoEnator obligations
Pledges - -
On behalf of associated companies
Guarantees 1.4 1.4 0
Other TietoEnator obligations
Rent commitments due in one year 57.0 62.4 -9
Rent commitments due in 1-5 years 160.1 174.3 -8
Rent commitments due after 5 years 2.9 5.7 -49
Operating lease commitments due in one year 7.5 7.2 4
Operating lease commitments due in 1-5 years 10.5 7.0 50
Operating lease commitments due after 5
years - -
Other commitments *) 24.7 25.8 -4
Operating lease commitments are principally three-year lease
agreements that do not include buyout clauses.
*) Including EUR 12.3 million commitment mainly for purchase of
hardware.
Notional amounts of derivative financial instruments, EUR million
2007 2006
31 March 31 Dec
Foreign exchange forward contracts 405.1 423.2
Interest rate swaps 102.0 2.0
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 2007 2006
balance sheet date were: 31 March 31 Dec
Forward foreign exchange contracts 4.4 -0.9
Interest rate swaps -0.2 -0.2
Derivatives are used for hedging purposes only.
Major shareholders 31 March 2007
Shares %
1 Didner & Gerge Aktiefond 2 059 000 2.8%
2 Roburs fonder 1 503 810 2.0%
3 Svenska Litteratursällskapet i Finland 1 314 000 1.8%
4 Skandinaviska Enskilda Banken 1 125 000 1.5%
5 Tapiola 1 052 280 1.4%
6 AMF Pensionsförsäkrings 860 000 1.2%
7 The State Pension Funds 811 500 1.1%
8 Länsförsäkringar 753 843 1.0%
9 Suomi Insurance 724 300 1.0%
10 Mutual Pension Insurance Company Ilmarinen 666 340 0.9%
Remaining Nominee registered 46 933 929 63.3%
Others 16 292 460 22.0%
Total 74 096 462 100.0%
Based on ownership records of the Finnish and Swedish central
security depositories.
On 31 March 2007 TietoEnator posses 500 000 own shares.
TIETOENATOR CORPORATION
For further information:
Åke Plyhm, Deputy CEO, TietoEnator, tel. +46 705 658 631, +46 705 65
86 31, ake.plyhm@tietoenator.com,
Timo Salmela, CFO, TietoEnator, tel. +358 9 8626 2213, +358 400 434
974, timo.salmela@tietoenator.com,
Päivi Lindqvist, EVP, Communications and Investor Relations,
TietoEnator, tel. +358 9 8626 3276, +358 40 708 5351,
paivi.lindqvist@tietoenator.com or
Paula Liimatta, IR Manager, TietoEnator, tel. +358 9 8626 3113, +358
40 580 3521, paula.liimatta@tietoenator.com
Press conference for analysts and media will be held in Stockholm,
Scandic Anglais Hotel, cabinet Birk, Humlegårdsgatan 23, at 9.00 am
CET, (10.00 am EET, 8.00 am UK time).
The conference will be hosted in English by Deputy CEO Åke Plyhm, CFO
Timo Salmela, EVP Communications and Investor Relations Päivi
Lindqvist and Investor Relations Manager Paula Liimatta.
The conference will be webcast and published live on the Internet at
TietoEnator's website www.tietoenator.com/presentations and there
will be a possibility to present questions on-line. An on-demand
video will be available after the conference.
Conference call starting at 3.00 pm CET, (4.00 pm EET, 2.00 pm UK
time) will also be available as live audio webcast on
www.tietoenator.com/presentations. The call will be hosted by Timo
Salmela and Päivi Lindqvist. Callers may access the conference
directly at the following telephone numbers: US callers: +1 617 213
8051, non-US callers: +44 20 7365 8426, code 'TietoEnator'. Lines to
be reserved ten minutes before start of conference call.
A replay will be available until 4 May 2007 in the following numbers:
US callers: +1 617 801 6888, non-US callers: +44 20 7365 8427, access
code 9950 3933. An on-demand audiocast of the conference will also be
published at TietoEnator's website later during the same day.
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 among the leading architects in building a more
efficient information society and one of the largest IT services
providers in Europe. TietoEnator specializes in consulting,
developing and hosting its customers' business operations in the
digital economy. The Group's services are based on a combination of
deep industry-specific expertise and the latest information
technology. TietoEnator has about 16 000 experts in close to 30
countries.
www.tietoenator.com
DISTRIBUTION
Helsinki Stock Exchange
Stockholmsbörsen
Principal Media
TietoEnator Corporation
Business ID: 0101138-5
Kutojantie 10 PO Box 33
FI-02631 ESPOO, FINLAND
Tel +358 9 862 6000
Fax +358 9 862 63091
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
