TietoEnator Q4 and full year 2007 6 February 2008, Helsinki Strategy and actions for 2008 Interim CEO Åke Plyhm Performance and outlook CFO Timo Salmela
Strategy and actions for 2008 Performance and outlook
Summary of full year 2007 Positive development in IT market High level of organic growth (9%) Revised strategy Performance Improvement Programme started Number of people in offshore countries up 60% Appointment of new President and CEO Profitability impacted by one-off items related to Performance Improvement Programme Page 3
Financial highlights full year 2007 Net sales growth 8% to EUR 1 772.4 million Operating profit (EBIT) EUR 1.3 (127.7) million including one-off items of EUR 104.7 million Proposed dividend EUR 0.50 (1.20) per share Comparable EPS excludes goodwill impairments, amortization of allocated intangible assets from acquisitions, stock option expenses and one-time capital gains Page 4
Business area operating margin FY 2007 10% 6% 2% -2% -6% Banking & Insurance Telecom & Media Government, Manufacturing & Retail Healthcare & Welfare Forest & Energy Processing & Network EBIT% Impact of one-off items % EBIT% excluding capital gains and losses and impairment losses Digital Innovations allocated to business areas Page 5
Background for the revised strategy and performance improvement programme Decline in profitability Low-cost competition and price pressure Salary increases in high-cost countries Stagnant prices Customers demand cost-efficiencies and low-cost production Operational efficiency improvements Focus on improving quality and productivity Reducing overhead activities and corporate-level administrative costs New strategy to restore profitability and strengthen competitive positioning for future growth Page 6
Improved profitability through focused strategy Focused approach Sharper regional and global strategies Fewer international spearheads Re-evaluating solutions portfolio Efficiency Quality and productivity Speed-up offshore production Page 7
Performance Improvement Programme Target of over EUR 100 million annual cost savings by the end of 2009 Covers all business areas, horizontal units and group operations The programme consists of three components Increase the quality of services Improve utilization of staff and facilities, reduce administrative costs and increase offshoring Restructure, discontinue or divest low-performing businesses Negotiations concerning personnel adjustments started in January 2008 Page 8
Global service production Number of people in offshore countries up 60% Combining onshore and offshore capabilities efficiently is the key to success 3500 3000 2500 2000 1500 1000 500 0 Offshoring target 40% in 3-5 years 2004 2005 2006 2007 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% India, China, Malaysia and Indonesia Baltics and Russia Czech and Poland Off-shore of total, % Page 9
Going forward
Strategy and actions for 2008 Performance and outlook
Financial highlights in Q4 2007 Net sales growth 8% to EUR 491.3 million Operating profit (EBIT) EUR -63.8 (43.9) million including EUR 104.5 million of one-off items Capital gains EUR 1.5 (7.3) million EPS EUR -1.00 (0.39) Full-year EPS EUR -0.44 (1.15) Comparable EPS excludes goodwill impairments, amortization of allocated intangible assets from acquisitions, stock option expenses and one-time capital gains Page 12
Net sales by industry segment FY 2007 +6% -23% 4% +4% +27% -4% 6% 5% 11% 22% Banking and insurance Telecom and media Government Healthcare and Welfare Forest -2% 8% 8% 37% +26% Energy Nordic regional verticals*) Non-allocated -16% * Incl Retail, Logistics and Manufacturing Share of net sales Change Page 13
Net sales and margin by country FY 2007 EBIT% 2007 2006 Finland 12 15 Sweden 1 2 Other countries neg neg EBIT including one-off items +8% +23% 9% 0% 5% 13% 45% +7% Finland Sweden Germany Norway Other 28% +9% Share of net sales Change, local currency Page 14
Top 10 customers FY 2007 Top 10 customers account for around 37% of net sales Danske-Sampo banking and insurance Ericsson telecom If insurance banking and insurance Nokia telecom Nordea banking and insurance Nokia Siemens Network telecom SAAB Technology manufacturing Stora Enso forest The National Board of Taxes (FI) government TeliaSonera telecom Page 15
Financial impact of the Performance Improvement Programme during Q4 2007 and 2008 2009 Total impact on operating profit (EBIT) EUR 160 million Impact in Q4 2007 EUR 105 million Restructuring EUR 22 million Impairment of assets EUR 60 million of which EUR 40 million goodwill related Provisions for project risks EUR 23 million Impact during 2008 2009 EUR 60 million Page 16
Banking & Insurance Positive organic growth after decline in previous quarters One-off items EUR 50 million (incl. impairment loss of EUR 40 million) in Q4 Q4 2007 Q4 2006 Net sales, MEUR 82 78 Growth, % 5% 17% EBIT, MEUR -6.6 6.1 * 7.8% 7.1% EBIT, % -8.0% 7.7% Employees 2 180 2 193 78 78 70 62 82 * Excl. EUR 40 million impairment loss -5.4% -5.2% -8.0% Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Net sales EBIT % EBIT excluding capital gains and impairment losses Page 17
Telecom & Media High level of organic growth continued One-off items EUR 6 million in Q4 8.8% 9.2% 7.7% 8.2% Q4 2007 Q4 2006 Net sales, MEUR 188 152 Growth, % 24% 1% EBIT, MEUR 13.3 13.4 EBIT, % 7.1% 8.8% Employees 5 990 5 107 152 161 162 153 188 7.1% Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Net sales EBIT % EBIT excluding capital gains Page 18
Government, Manufacturing & Retail Profitability impacted by one-off items One-off items EUR 17 million in Q4 9.9% 9.9% 5.6% 1.6% Q4 2007 Q4 2006 Net sales, MEUR 46 58 Growth, % -20% -11% EBIT, MEUR -13.7 5.8 EBIT, % -29.7% 9.9% Employees 1 530 1 532 58 50 47 40 46-29.7% Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Net sales EBIT % EBIT excluding capital gains Page 19
Healthcare & Welfare Q4 seasonality effect not visible due to one-off items One-off items EUR 10 million in Q4 17.8% Q4 2007 Q4 2006 Net sales, MEUR 41 44 Growth, % -7% 6% EBIT, MEUR -5.4 7.9 EBIT, % -13.0% 17.8% Employees 1 114 1 079 44 35 34 31 41-1.6% -0.8% -1.8% Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Net sales EBIT % -13.0% EBIT excluding capital gains Page 20
Forest & Energy Growth slowed down from previous quarters One-off items EUR 5 million in Q4 8.1% 7.3% 8.1% Q4 2007 Q4 2006 Net sales, MEUR 46 45 4.9% Growth, % 2% 6% EBIT, MEUR -1.6 2.2 EBIT, % -3.6% 4.9% Employees 1 286 1 286 45 45 45 42 46-3.6% Q4 2006 Q12007 Q2 2007 Q3 2007 Q4 2007 Net sales EBIT % EBIT excluding capital gains Page 21
Processing & Network Good growth despite continuous price pressure One-off items EUR 6 million in Q4 12.5% Q4 2007 Q4 2006 Net sales, MEUR 115 101 9.2% 8.6% Growth, % 14% 12% 6.2% EBIT, MEUR 5.9 9.3 EBIT, % 5.2% 9.2% Employees 2 124 1 966 101 98 97 100 115 5.2% Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Net sales EBIT % EBIT excluding capital gains Page 22
Employees FY 2007 FY 2006 Employees at the end of period 16 324 14 597 Gross recruitment 3 066 2 090 Leaves 1 800 1 354 Layoffs 210 279 Acquisitions and outsourcing 834 974 Divestment 186 556 Employee turnover (12-month rolling) 11.2% 9.0% Page 23
Balance sheet 2007 2006 Change MEUR 31 Dec 31 Dec % Non-current assets 628 698-10 Loan receivables 11 13-11 Current assets 570 525 9 Cash 73 139-48 Total assets 1 283 1 375-7 Equity 478 626-24 Interest-bearing debt 249 245 2 Other non-current liabilities 83 73 14 Other current liabilities 473 430 10 Total shareholders equity and liabilities 1 283 1 375-7 Net interest-bearing liabilities 165 93 Gearing % 34 15 Equity ratio % 40 48 Return on equity % (rolling 12 months) -6 16 Return on capital employed % (rolling 12 months) 8 19 Page 24
Cash flow MEUR Q4 2007 Q4 2006 FY 2007 FY 2006 Cash generated from continuing operations 59 71 130 137 Net financial items -1 1-5 -3 Income taxes paid 4-4 -10-25 Net cash flow from discontinued operations - 2-4 Total Net Cash flow from operations 61 70 116 113 Net cash used in investing activities from - continuing operations -4-2 -64-43 - discontinued operations - 21 - -4 Dividends and donations 0 0-89 -66 Repurchase of own shares -2 0-32 -52 Net cash used in other financing activities -39-74 4 29 Net cash used in financing activities from discontinued operations - 38-63 Total Net Cash used in investing/financing activities -45-16 -181-74 Change in cash 16 54-65 39 Liquid assets at end of period 73 139 73 139 Page 25
Dividend proposal EUR 0.50 per share EUR 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2001 2002 2003 2004 2005 2006 2007 EPS non-recurring EPS recurring Dividend non-recurring Dividend recurring Page 26
Outlook for 2008 IT market is expected to remain active Prices are expected to stay roughly on the same level or be higher than in 2007 Full-year revenue growth will follow the overall development in the relevant market Actions related to Performance Improvement Programme will impact on profitability in 2008 Full-year operating profit is expected to improve from 2007 Page 27
Questions and answers»
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