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* The Performance Improvement Programme has progressed well. The actions taken by the end of June amount to annualized savings of EUR 71 million.
* Net sales grew by 11% to EUR 480.1 (434.2) million. Organic growth totalled 11%.
* Operating profit, excluding one-off items mainly related to the Performance Improvement Programme, amounted to EUR 33.2 (14.8) million, representing an operating margin of 6.9% (3.4).
* Operating profit, including one-off items of EUR 3.7 million, amounted to EUR 29.6 (9.9) million.
* Profit after taxes was EUR 18.7 (5.0) million.
* EPS amounted to EUR 0.26 (0.07).
* Net cash flow from operations amounted to EUR 53.9 (-4.0) million.
* Cidron Services Oy's public tender offer lapsed in May. In June, TietoEnator announced that discussions with potential offerors have ended.
Highlights - January-June
* Net sales totalled EUR 948.4 (876.4) million, up 8%.
* Operating profit, excluding one-off items mainly related to the Performance Improvement Programme, totalled EUR 70.9 (47.6) million, representing an operating margin of 7.5% (5.4).
* Operating profit including one-off items amounted to EUR 54.2 (44.4) million.
* Profit after taxes was EUR 35.0 (29.1) million.
* EPS amounted to EUR 0.48 (0.39).
* Net cash flow from operations amounted to EUR 118.5 (34.8) million.
Market development and TietoEnator's business transactions The general market situation remained positive and in most sectors growth prospects have remained unchanged. It is estimated that the market relevant to TietoEnator will see growth of 5-7% this year. In some areas, such as banking and telecom, there are signs of cautiousness regarding the economic slowdown and its impact on IT investments. Price levels were either stable or slightly higher than in the previous year. The labour market remains challenging and the attrition rate is on the rise, resulting in a higher salary level. Growing personnel costs and increased use of subcontractors put pressure on margins.
Banking and insurance Overall demand in the financial services sector is healthy. Due to the credit crisis, customers, especially in the UK, have adopted a cautious attitude towards IT investments. The market is very competitive in certain areas and price pressure persists, partly due to offshore competition from territories such as India and Eastern Europe. Regulatory changes in the European Union are creating new demand in the payments and capital markets areas.
Following the consolidation of Sampo Bank and Danske Bank, TietoEnator's business volumes to these customers have decreased and therefore, 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%), Sampo Plc (20%) and Sampo Bank/Danske Bank (20%). In connection with the agreement, parts of Primasoft's application management business were sold to If P&C Insurance Company and Sampo Life.
These transactions will have a negative impact on the net sales of both Banking & Insurance and Processing & Network in full year 2008. In the second quarter, however, the impact on TietoEnator's net sales was positive.
Telecom and media The overall IT demand in the telecom and media sectors is fairly good. The challenging market conditions in the telecom sector, however, might lead to a slowdown in demand towards the year-end. Due to customers' cost saving initiatives, demand for network R&D services will level off in Europe. However, consolidating R&D service purchases to few key contractors may favour TietoEnator. In the operator market, the situation has eased and today, operators are focusing on building new services and improving customer care.
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 mainly for mobile devices, networks and operators.
Government, manufacturing and retail Overall demand is solid in all of these areas as customers are seeking to improve performance and productivity. Government customers plan to start several large development projects in the coming years. However, the new framework arrangement for the sourcing of technical IT consulting established by Hansel Ltd, the central procurement unit of the State of Finland, has led to more demanding terms in contracts. The positive trend in the manufacturing industry is expected to continue. Although uncertainty in global markets has increased, manufacturing companies continue to invest in IT. Retail customers are in the market for IT systems to help them provide new ways to manage customer demand more accurately.
Healthcare and welfare Demand in the Finnish healthcare market has been steady as self-services are gaining more momentum. 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.
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 with an option to extend for a further two years. The total value of the agreement is at least EUR 12 million.
Forest and energy In the forest sector, Nordic customers are restructuring their operations and closing down excess capacity, but they are expanding business in Russia and Asia, especially China. Customers are seeking to keep costs in check and are suffering from high energy and raw material prices.
In the energy sector, the market situation is very good for the oil and gas segment as well as for the utility segment. Larger investments in finding new oil reservoirs and utilizing old ones, growing demand for energy and the good economic situation of energy companies ensure IT investments in the coming years. However, customers' price awareness is growing.
Infrastructure outsourcing The market for infrastructure outsourcing in the Nordic countries is active and growing steadily. Customers are looking for more flexible solutions and request broader service agreements that provide end-to-end business process coverage. Price pressure persists, especially in new outsourcing contracts and contract renewals.
In March, TietoEnator agreed a contract with the Swedish Tax Agency to supply highly secure server centre services. Furthermore, the contract includes options for other services. The contract will run for five years with an option for two extension periods of two years each. TietoEnator estimates the total value of the order to be around EUR 7 million during the first five years.
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. The new agreement includes the outsourcing of IT and application operations for TeliaSonera's internal business-critical systems on the IBM mainframe, Unisys and VMS platforms in the entire Nordic region.
Net sales
Net sales in the second quarter Second-quarter net sales grew by 11% to EUR 480.2 (434.2) million or by 12% in local currencies. Organic growth totalled 11%. The timing of Easter had a positive impact on growth, as it resulted in approximately 6% more working days in the quarter than in the second quarter of 2007. The number of working days affects the business areas' performance differently. It has the greatest impact on Telecom & Media.
Growth was solid in all business areas, except in Forest & Energy which was affected by weak performance in the utilities sector. In certain areas, the higher attrition rate has limited growth.
In Banking & Insurance, net sales grew by 9% despite of the closure of the German operations. TietoEnator increased its holding in Primasoft in April. This transaction had a positive impact of around 2 %-points on the second-quarter net sales. The Services business developed well in Finland and Sweden during the review quarter, as did the Partnership business.
Telecom & Media has held on to its market position. Eliminating the impact of more working days in the quarter, net sales grew in line with the relevant market. Sales to current large customers have continued to grow.
Processing & Network's net sales saw organic growth of 16%, clearly outpacing the relevant market. The business area concluded several major agreements in 2007 and the first half of 2008. The most significant were the agreements made with Apoteket and TeliaSonera as well as Op-Pohjola Group and Ilmarinen.
In Government, Manufacturing & Retail, TietoEnator has experienced steady demand in all sectors. In Healthcare & Welfare, growth was very strong in all market areas and units, except the healthcare business in Finland, where the comparison figures are high due to exceptionally high license revenue in 2007. The business area concluded several mid-sized and large new agreements in 2007 and the first half of 2008. Thanks to the deal with Apoteket in June 2007, 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 market remained active, but a shortage of resources hampered growth in some areas.
Net sales in January-June TietoEnator's six-month net sales grew by 8% to EUR 948.4 (876.4) million or 9% in local currencies. Organic growth totalled 8%.
The most solid performance has been seen in Processing & Network. In Telecom & Media, net sales growth was not as high as in the previous year, reflecting the cautious stance on investments in the telecom sector. The net sales growth of Healthcare & Welfare was on an upward trend due to several new deals.
Net sales grew by 10% in Finland and by 8% in Sweden. In Norway, net sales grew by 20% thanks to Telecom & Media's and Banking & Insurance's strong performance. In Germany, net sales declined by 5%, mainly due to the closure of Banking & Insurance's operations in 2007.
Telecom and media increased its share of consolidated net sales to 36% (35). The banking and insurance sector generated 22% (22) of net sales, whereas the public sector's contribution was 15% (15). The forest sector's contribution was 5% (5) and the energy sector's 5% (5).
The order backlog, which only comprises services ordered with binding contracts, amounted to EUR 1 177.9 (1 314.3) million at the end of the period. Processing & Network's share of the order backlog is 41%. In total, 40% (39) 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 June amount to annualized savings of EUR 71 million, which will gradually impact on the cost base starting from the latter part of 2008 and fully 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 purchasing 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. TietoEnator booked EUR 18.0 million in one-off items related to the programme in the first half of 2008, and the rest will be booked during 2008 and 2009.
Profitability
Profitability in the second quarter Operating profit, excluding one-off items mainly related to the Performance Improvement Programme, improved substantially in the second quarter and amounted to EUR 33.2 (14.8) million, representing a margin of 6.9% (3.4).
In the second quarter of 2008, TietoEnator booked EUR 5.0 million in one-off costs related to the programme. Out of these items, costs from personnel restructuring totalled close to EUR 3 million. Additionally, the company booked an income of EUR 1.3 million from badwill recognition. There were no capital gains (capital losses of EUR 4.9 million in 2007) in the quarter. Second-quarter operating profit, including one-off items, amounted to EUR 29.6 (9.9) million.
Due to the vacation period, the second and third quarters are usually weaker than the other two quarters. Compared to the corresponding quarter of 2007, the operating margin of the underlying business has risen substantially. However, greater use of subcontractors and disturbance from the tender offer process ongoing during the quarter curbed improvement to some extent. Second-quarter profit is impacted negatively by the costs of the public tender offer, approximately EUR 3 million. Part of this cost is related to a retention compensation for a number of key managers and the President and CEO.
Operating Operating profit Operating Operating margin of of the margin of profit the underlying the of the underlying business (1) underlying underlying business (1) in business (1) business (1) in H1/2008, Q2/2008, in Q2/2008, in H1/2008, % EUR million % EUR million Banking & 7.6 10.0 14.6 9.6 Insurance Telecom & Media 14.6 8.2 28.1 8.0 Government, 5.2 10.3 9.9 9.8 Manufacturing & Retail Healthcare & 1.4 3.3 2.3 2.9 Welfare Forest & Energy 1.9 4.1 5.7 6.3 Processing & 11.9 10.6 25.7 11.3 Network Business areas 42.6 8.9 86.3 9.1
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 10.0% (-5.4). In the second quarter of 2007, the business area suffered from a few loss-making projects. The margin improvement is partly attributable to decreased use of subcontractors in the second quarter of 2008. Additionally, the business area's operating margin saw one-time effect of more than 4 %-points.
In Telecom & Media, the operating margin improved somewhat to 8.2% (7.7). However, greater use of subcontractors in the second quarter curbed improvement.
Processing & Network's operating profit, excluding one-off items related to the programme, rose to EUR 11.9 million (6.0). Thanks to a higher utilization rate, the operating margin of the underlying business rose to 10.6% (6.2).
A higher utilization rate was positively reflected in Government, Manufacturing & Retail's profitability. In the business area Healthcare & Welfare, the positive trend continued, driven primarily by a higher utilization rate and better management of deliveries in the solution-based business. However, the healthcare business in Scandinavia and especially in Central Europe continues to struggle with unsatisfactory profitability.
Profitability declined in the business area Forest & Energy due to weakness in the utilities sector, where a decline in sales to a major customer strained the margin.
Net financial expenses stood at EUR 5.8 (1.0) million in the second quarter. Net interest expenses were EUR 2.2 (1.9) million and one-time net losses from foreign exchange transactions EUR 0.9 (positive 1.0) million. Other financial income and expenses amounted to EUR -2.7 (-0.1) million.
Second-quarter earnings per share (EPS) totalled EUR 0.26 (0.07).
Operating profit (EBIT) includes EUR 2.4 (2.4) million from amortization on allocated intangible assets. The costs arising from share-based payments of EUR 1.4 (1.5) million are included in employee benefit expenses.
Profitability in January-June First-half operating profit, excluding one-off items mainly related to the Performance Improvement Programme, amounted to EUR 70.9 (47.6) million, representing a margin of 7.5% (5.4). Greater use of subcontractors curbed improvement to some extent. Banking & Insurance's and Processing & Network's strong performance was the main contributor to the better profitability of the underlying business.
In the six-month period, TietoEnator booked EUR 18.0 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. Six-month operating profit, including one-off items, amounted to EUR 54.2 (44.4) million. The costs of the public tender offer, approximately EUR 7 million, had a negative impact on profit. Part of this cost is related to a retention compensation for a number of key managers and the President and CEO.
Six-month net financial expenses stood at EUR 8.7 (3.1) million. Net interest expenses were EUR 4.5 (3.4) million and one-time net losses from foreign exchange transactions EUR 2.3 (positive 0.5) million. Other financial income and expenses amounted to EUR -1.9 (-0.2) million.
Six-month earnings per share totalled EUR 0.48 (0.39).
Operating profit (EBIT) for the six-month period includes EUR 4.9 (4.9) million from amortization on allocated intangible assets. The costs arising from share-based payments of EUR 2.7 (2.0) million are included in employee benefit expenses.
The 12-month rolling return on capital employed (ROCE) was 8.8% and the return on shareholders' equity (ROE) -4.9%.
Financing and investments Net cash flow from operations amounted to EUR 118.5 (34.8) million in the six-month period. Operating profit contributed EUR 87.6 (81.1) million and the decrease in working capital EUR 41.2 (increase 36.7) million. Tax payments amounted to EUR 9.5 (8.8) million.
Dividends of EUR 35.8 were paid in April.
Payments for acquisitions totalled EUR 11.6 million in the six-month period.
The equity ratio was 38.8% (44.4). Gearing decreased to 29.3% (31.2). Net debt totalled EUR 138.1 (177.7) million, including EUR 226.6 million in interest-bearing debt, EUR 15.3 million in finance lease liabilities, EUR 10.3 million in finance lease receivables and EUR 93.4 million in cash and cash equivalents.
The interest-bearing debt consists of one seven-year bond at EUR 100 million and one seven-year private placement at EUR 50 million and usage of EUR 75 million from the short-term EUR 250 million commercial paper programme. At the end of the quarter, unused credit facilities totalled about EUR 425 million.
Accrual-based investments totalled EUR 59.4 (40.2) million for the period. Capital expenditure, including financial leasing, accounted for EUR 47.2 (24.7) million and investments in subsidiary and associated company shares for EUR 12.2 (15.5) million.
Personnel The number of full-time employees totalled 16 301 (15 408) at the end of June. Acquisitions and new outsourcing contracts added 55 employees in the six months.
Employee turnover has increased. The 12-month rolling figure stood at 12.8% (9.8) at the end of June. The average number of full-time employees was 16 361 (15 178) in the first half.
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 June, the number of people in global centres of excellence totalled about 3 700 (2 500), or 21% (15) of the total headcount.
Board of Directors and management On 8 May, Matti Lehti, the Chairman of TietoEnator's Board of Directors, resigned from the Board due to health reasons. Anders Ullberg, previously the Board's Deputy Chairman was appointed as the new Chairman and Board member Olli Riikkala as Deputy Chairman as of 8 May.
In May, Arto Ryymin was appointed as Executive Vice President of TietoEnator's Healthcare & Welfare business area and as a member of the company's Corporate Management Team (CMT) as of 1 June.
In June, Johanna Pyykönen-Walker was appointed as Executive Vice President, Human Resources and as a member of TietoEnator's Corporate Management Team as of 1 August.
In July, Eva Gidlöf was appointed as Executive Vice President of TietoEnator's Banking & Insurance business area and as a member of the company's Corporate Management Team. Gidlöf will start in her new position during September. 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, a number of key managers of the company and the president and CEO have a retention compensation connected to the public tender offer that was on-going during the quarter.
In February, TietoEnator's Board of Directors decided on an allocation of 35 000 stock options 2006 B and approximately 390 000 stock options 2006 C to key employees of TietoEnator based on performance. In March, the Board decided on an allocation of 363 450 stock options 2006C. The President and CEO was allocated a total of 115 000 options and the Corporate Management Team members a total of 135 000 options.
In February, the Board approved the performance criteria and allocation principles of the share-based incentive plan for 2008. The President and CEO is entitled to a maximum of 6 000 shares and other Corporate Management Team members to a total of 20 900 shares if the set performance criteria are met.
Transactions with associated companies are not considered to be material.
Shares and options At the end of June, 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 361 650. The outstanding number of shares, excluding the shares in the company's possession, was 71 661 523 at the end of June.
In the second quarter, Goldman Sachs Group, Inc announced that its holding in TietoEnator had decreased below the 10% threshold to 8.98%. UBS AG flagged its ownership twice. According to the latest information, it held 3.11% of the company shares in April.
On 11 July, OP-Pohjola Group Central Cooperative (OPK) announced that its group holding in TietoEnator Corporation increased to 5.05%.
Public tender offer and discussions with potential offerors ended Cidron Services Oy (Nordic Capital) made an offer for all the outstanding shares and stock options in TietoEnator on 20 March. On 26 May, Cidron Services announced that its public tender offer lapses as the conditions to the completion of the offer were not fulfilled during the offer period.
During and after the offer period, TietoEnator's Board of Directors has had discussions with a number of strategic and financial parties that have indicated their potential interest in making an offer for the company. As none of these discussions resulted in any firm and actionable offers for the shares, TietoEnator announced on 19 June that discussions with potential offerors have ended.
Events after the reporting period TietoEnator's Board of Directors has approved the new company strategy for 2009-2011. The strategy is announced in a separate release published on 18 July 2008.
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.
Risks and uncertainties 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.
The ability to control ever more complex multinational deliveries also poses a continuous risk. Due to a more commoditized market and offshore 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 expects the demand in the IT market to remain at a good level. Turbulence in the financial markets has led to some uncertainty concerning development in 2008. Price pressures exist, 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 remain challenging in 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 will start to materialize during the second half of 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 divestments or closures.
TietoEnator is pursuing the full turnaround of the company by the end of 2009. The revised strategy, the Performance Improvement Programme and the actions taken so far will have a positive impact on the company's profitability in the future.
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 2008 Interim report for January-September 2008 on 28 October
Return on equity rolling 12 month, % -4.9 14.8 -7.7 -4.9 14.8 -5.7 Return on capital employed rolling 12 month, % 8.8 18.7 7.2 8.8 18.7 7.8 Equity ratio % 38.8 44.4 38.0 38.8 44.4 40.2 Net interest-bearing liabilities, EUR million 138.1 177.7 139.7 138.1 177.7 164.5 Gearing, % 29.3 31.2 31.0 29.3 31.2 34.4 Investments, EUR million 23.2 12.9 36.2 59.4 40.2 87.7
*) Excluding one-off items related to the Performance Improvement Programme, goodwill impairments, badwill and capital gains and losses.
Income statement, EUR million 2008 2007 2008 2007 change 2007 4-6 4-6 1-6 1-6 % 1-12 Net sales 480.1 434.2 948.4 876.4 8 1 772.4 Other operating income 1.7 2.8 6.2 7.4 -16 13.3 Employee benefit expenses 273.1 257.9 550.1 511.2 8 1 021.3 Depreciation and amortization 16.3 16.2 32.6 32.2 1 77.0 Impairment of goodwill - - - - 40.0 Other operating expenses 162.8 153.0 317.7 296.0 7 646.2 Share of associated companies' result 0.0 0.0 0.0 0.0 0.1 Operating profit (EBIT) *) 29.6 9.9 54.2 44.4 22 1.3 Net interest expenses -2.2 -1.9 -4.5 -3.4 32 -7.1 Net exchange losses/gains -0.9 1.0 -2.3 0.5 -560 -0.7 Other financial income and expenses -2.7 -0.1 -1.9 -0.2 850 -2.1 Profit before taxes 23.8 8.9 45.5 41.3 10 -8.6 Income taxes -5.1 -3.9 -10.5 -12.2 -14 -22.6 Net profit for the period 18.7 5.0 35.0 29.1 20 -31.2
Net profit for the period attributable to Shareholders of the parent company 18.9 4.8 34.6 28.8 20 -32.3 Minority interest 0.3 0.2 0.4 0.3 33 1.1 19.2 5.0 35.0 29.1 20 -31.2
*) Operating profit 2008 includes one-off items of EUR 18 million related to the Performance Improvement Programme in the first half and EUR 5 million in the second-quarter. In addition the first half profit is impacted negatively by the cost of EUR 7 million related to the occurred public tender offer and EUR 3 million in the second-quarter.
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 16.2 million (10.6 previous year) and stock option expenses (share based payments) were EUR 2.7 million (2.0).
Number of shares 2008 2008 2008 2007 4-6 1-3 1-6 4-6
Finance lease liability 15.3 7.9 94 1.4 Other interest-bearing loans 150.1 150.6 0 150.5 Deferred tax liabilities 29.6 23.9 24 23.4 Pension obligations 21.8 41.8 -48 22.0 Provisions 35.9 1.5 2 293 35.9 Other non-current liabilities 1.7 3.2 -47 1.7 Total non-current liabilities 254.4 228.9 11 234.9 Trade and other payables 502.6 455.4 10 461.7 Current income tax liabilities 12.5 18.8 -34 11.6 Interest-bearing loans 76.5 98.7 -22 96.9 Total current liabilities 591.6 572.9 3 570.2 Total equity and liabilities 1 317.3 1 371.9 -4 1 282.7
Net working capital in the balance sheet, EUR million 2008 2007 change 2007 30 June 30 June % 31 Dec
Accounts receivable 339.6 339.8 0 391.2 Other working capital receivables 217.8 237.2 -8 168.4 Working capital receivables included in assets 557.4 577.0 -3 559.6
Operative accruals 258.4 225.9 14 225.4 Other working capital liabilities 234.7 223.4 5 228.6 Pension obligations and provisions 57.7 43.3 33 57.9 Working capital liabilities included in current liabilities 550.8 492.6 12 511.9
Net working capital in the balance sheet 6.6 84.4 -92 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 18.7 5.0 16.3 35.0 29.1 -31.2 Adjustments Depreciation, amortization and impairment 16.3 16.2 16.3 32.6 32.2 117.0 Share of associated companies' result 0.0 0.0 0.0 0.0 0.0 -0.1 Share-based payments 1.1 0.9 0.8 1.9 1.4 2.3 Profit/loss on sale of fixed assets and shares 0.2 4.8 0.0 0.2 3.1 0.0 Other adjustments -1.3 0.1 0.0 -1.3 - 1.3 Net financial expenses 5.8 1.0 2.9 8.7 3.2 9.9 Income taxes 5.1 3.9 5.4 10.5 12.2 22.6 Change in net working capital 19.5 -29.9 21.7 41.2 -36.7 8.4 Cash generated from operations 65.4 2.0 63.4 128.8 44.4 130.2 Net financial expenses paid -0.6 1.0 -0.2 -0.8 -0.7 -4.6 Income taxes paid -10.9 -7.0 1.4 -9.5 -8.8 -9.9 Net cash flow from operations 53.9 -4.0 64.6 118.5 34.8 115.7
Cash flow from investing activities Acquisition of Group companies and business 5.2 -3.2 -8.0 -2.8 -12.5 -28.3 operations, net of cash acquired Capital expenditures -17.0 -12.6 -14.5 -31.5 -24.7 -48.6 Disposal of business operations and associated company 0.0 -1.7 0.0 0.0 0.2 4.6 Other investing activities 1.2 4.0 0.1 1.3 4.4 8.0 Net cash used in investing activities from operations -10.6 -13.5 -22.4 -33.0 -32.6 -64.3
Cash flow from financing activites Dividends -36.0 -88.3 0.0 -36.0 -88.5 -88.5 Repurchase of own shares - - - - - -32.1 Payment of finance lease liabilities -0.8 -3.3 -0.9 -1.7 -5.5 -12.1 Change in interest-bearing liabilities 2.5 88.6 -27.5 -25.0 19.4 17.1 Change in loan receivables -2.2 4.3 0.0 -2.2 4.1 -1.2 Net cash used in other financing activities 1.4 -2.7 -1.4 0.0 0.5 0.5 Net cash used in financing activities from operations -35.1 -1.4 -29.8 -64.9 -70.1 -116.3
Change in cash and cash equivalents 8.2 -18.9 12.4 20.6 -67.9 -64.9
Cash and cash equivalents at beginning of period -85.0 -89.6 -72.9 -72.9 -138.9 -138.9 Foreign exchange differences -0.2 -0.2 0.3 0.1 0.1 1.1 Cash and cash equivalents at end of period 93.4 70.9 85.0 93.4 70.9 72.9 8.2 -18.9 12.4 20.6 -67.9 -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 -1.4 -1.4 5.5 2.7 Minority interest -1.2 -1.2 Cancellation of own shares 39.9 -39.9 0.0 Share based payments recognized against equity 1.4 1.4 Dividend -88.3 -88.3 Net profit for the period 28.8 0.3 29.1 At 30 June 2007 75.8 67.4 -12.4 -8.0 444.2 3.1 570.1
Balance at 31 Dec 2007 75.8 39.6 -41.1 -12.5 411.8 4.0 477.6 Translation difference -0.2 -8.8 3.0 -6.0 Minority interest -0.9 -0.9 Cancellation of own shares 32.1 -32.1 0.0 Transfer between restricted and non-restricted equity -2.0 2.0 0.0 Share based payments recognized against equity 1.9 1.9 Dividend -35.8 -35.8 Net profit for the period 34.5 34.5 At 30 June 2008 75.8 37.4 -9.0 -21.3 385.3 3.1 471.3
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 16 571 (15 806) at the end of the period.
Total assets by business area, EUR million (primary segment) 2008 2007 Change 2007 30 Jun 30 Jun % 31 Dec Banking & Insurance 223.0 263.4 -15 215.8 Telecom & Media 453.7 452.0 0 474.9 Government, Manufacturing & Retail 55.9 63.3 -12 51.2 Healthcare & Welfare 85.5 88.2 -3 96.0 Forest & Energy 108.7 120.0 -9 116.8 Processing & Network 197.6 176.9 12 178.1 Group elimination -19.3 -25.2 -24 -21.9 Business areas 1 105.2 1 138.5 -3 1 110.9 Group Operations 212.1 233.4 -9 171.8 Total assets 1 317.3 1 371.9 -4 1 282.7
Total liabilities by business area, EUR million (primary segment) 2008 2007 Change 2007 30 Jun 30 Jun % 31 Dec Banking & Insurance 151.6 115.3 31 127.6 Telecom & Media 183.5 191.9 -4 187.5 Government, Manufacturing & Retail 42.7 40.8 5 49.4 Healthcare & Welfare 41.0 34.4 19 44.3 Forest & Energy 77.1 70.6 9 72.1 Processing & Network 88.9 69.3 28 64.4 Group elimination - 22.8 -22.9 0 -17.3 Business areas 562.1 499.4 13 528.1 Group Operations 283.9 302.3 -6 277.0 Total liabilities 846.0 801.8 6 805.1
Segment assets by country, EUR million (secondary segment) 2008 2007 Change 2007 30 Jun 30 Jun % 31 Dec Finland 374.1 326.6 15 348.4 Sweden 316.6 344.7 -8 333.8 Norway 83.0 98.9 -16 94.7 Germany 156.1 174.3 -10 160.9 Great Britain 42.8 89.3 -52 45.7 Other 132.6 104.7 27 127.5 Business areas 1 105.2 1 138.5 -3 1 110.9
Depreciation, EUR million 2008 2007 Changes 2008 2007 Changes 2007 4-6 4-6 % 1-6 1-6 % 1-12 Processing & Network 10.4 9.1 14 20.3 18.0 13 40.0 whereof Finland 8.5 7.6 12 16.7 15.1 11 34,1 Sweden 1.7 1.3 30 3.2 2.5 29 4,9 Other countries 0.2 0.2 4 0.4 0.4 -1 0,9 Other 3.4 4.5 -25 7.3 9.3 -21 27,2 Group total 13.8 13.7 1 27.7 27.3 1 67.2
Amortization on allocated intangible assets from acquisitions, EUR million 2008 2007 Changes 2008 2007 Changes 2007 4-6 4-6 % 1-6 1-6 % 1-12 Telecom & Media 1.5 1.3 15 3.0 2.5 17 5.3 Other 1.0 1.1 -16 2.0 2.4 -18 4,5 Group total 2.4 2.4 0 4.9 4.9 0 9.8
Capital expenditure by business area, EUR million 2008 2007 Change 2008 2007 Change 2007 4-6 4-6 % 1-6 1-6 % 1-12 Processing & Network 12.2 9.3 31 37.1 16.7 122 36.1 whereof Finland 8.0 8.5 -6 30.4 14.2 114 29,7 Sweden 4.2 0.8 425 6.7 2.6 158 6,4 Other countries 0.0 0.0 - 0.0 0.0 - 0,0 Other 4.9 3.2 51 10.1 7.9 27 16,8 Group total 17.1 12.6 36 47.2 24.7 91 52.9
2008 2007 Commitments and contingencies, EUR million 30 June 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 55.5 56.0 -1 Rent commitments due in 1-5 years 113.0 129.4 -13 Rent commitments due after 5 years 22.2 25.6 -13 Operating lease commitments due in one year 16.1 9.3 73 Operating lease commitments due in 1-5 years 14.1 15.0 -6 Operating lease commitments due after 5 years 0.0 0.0 Other commitments *) 15.9 53.7 -70
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 June 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 June 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.
Major shareholders 30 June 2008 Shares % 1 Pohjola Asset Management Ltd. 2 990 315 4.2% 2 Didner & Gerge Aktiefond 2 195 200 3.0% 3 OP-Keskus Osk 2 160 000 3.0% 4 Swedbank Robur fonder 1 902 996 2.6% 5 Svenska Litteratursällskapet i Finland 1 404 000 1.9% 6 Varma Mutual Pension Insurance Co. 1 349 749 1.9% 7 The State Pension fund 1 300 000 1.8% 8 OP funds 1 174 318 1.6% 9 Ilmarinen Mutual Pension Insurance Co. 905 751 1.3% 10 Credit Agricole Cheuvreux International 704 504 1.0% Nominee registered 50 093 883 69.6% Others 5 842 457 8.1% Total 72 023 173 100.0%
Based on ownership records of the Finnish and Swedish central security depositories.
In April, Goldman Sachs Group, Inc. announced that its holding in TietoEnator Corporation was 6 465 590 shares, which represents 8.98% of the shares and voting rights.
Press conference for analysts and media will be held in Helsinki, Radisson SAS Royal Hotel, Runeberginkatu 2, cabinet Finland, at 10.00 am EET (9.00 am CET, 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 2.00 pm EET, (1.00 pm CET, 12.00 am 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 25 July 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 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
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
