TietoEnator 1999: net sales meur 1,229, operating profit meur 108

TIETOENATOR CORPORATION STOCK EXCHANGE BULLETIN 18 February 2000 9.00 AM 1 (8) TIETOENATOR 1999: NET SALES MEUR 1,229, OPERATING PROFIT MEUR 108 Group net sales grew by 13.9 % to EUR 1,229.1 million (1998: 1,079.2). Operating profit (EBIT) was EUR 107.7 million (105.0), corresponding to an 8.8 % profit margin. The average number of personnel increased 9.6 % and was 11,058 (10,089). Earnings per share were EUR 0.90 (0.96). Dividend proposal to the AGM (on 29 March 2000) is EUR 0.49 (EUR 0.49) per share and the dividend payment date 14 April 2000. Group's investments in growth will rise in 2000 and the long- term growth target is raised to 20 %. Demand for information technology services continued strong. The completion of Y2K projects affected the demand during the whole year. Towards the end of the year customers started up new investments in network technology. Several customer sectors of TietoEnator began development and integration of e-business systems and new network-based operating concepts. TietoEnator concentrates on e-business applications and services in all its business sectors. Some 25 %, over 2,500 persons, of TietoEnator's employees now work with digital economy applications and services. TietoEnator has pioneered the development of Internet and WAP applications for mobile phones in a number of customer sectors. For instance, the Group has been the partner to its customers in developing the first banking services in the world for use with WAP mobile phones and is deeply involved in the development of third generation mobile handset software. Demand for IT services will remain strong and will focus on electronic services. Tieto's and Enator's pooling of resources, which has proceeded as planned, now enables the group to take the next steps forward: further consolidating the presence in Europe and pushing the strongest solutions to the global market. TietoEnator´s international spearhead solutions are mobile and Internet banking, mobile telecommunications and media, digital government and the digital forest chain. Investments in growth will rise and acquisitions will have a greater impact on the Group's growth than in the previous year. The Group is expected to report a stronger result in 2000 than one year earlier. Fourth quarter Net sales during the fourth quarter were EUR 344.1 million, giving growth of 16.8 %. This was the strongest quarter during 1999 for net sales. Operating profit (EBIT) was EUR 33.6 million, which is 9.8 % of net sales. The profit includes non-recurring income of EUR 15.0 million due to divestments. Reorganisation weakened the performance in Defence and Network Infrastructure. In Services Sweden the provisions for higher costs in new technology projects were recorded. Y2K constrained demand in several of the business areas. The change of millennium in itself proceeded without any major problems. Result per quarters, EUR million 1999 1999 1999 1999 1999 1-3 4-6 7-9 10-12 1-12 Net sales 291.6 315.1 278.3 344.1 1,229.1 Operating 32,4 18,4 23,3 33,6 107,7 profit Net financial 0.3 0.6 0.3 0.4 1.6 items Profit before 32.7 19.0 23.6 34.0 109.3 taxes Key figures 1999, 1998 1999 1998 Change % Net sales, MEUR 1,229.1 1,079.2 +13.9 Operating profit, MEUR 107.7 105.0 +2.6 Operating margin, % 8.8 9.7 Pre tax profit, MEUR 109.3 107.0 +2.2 Earnings per share, EUR 0.90 0.96 -6.3 Earnings excl. amortization of goodwill per share, EUR 1.04 1.08 -3.7 Earnings per share (incl. dilutions by warrants), 0,88 EUR Shareholders equity per share 4.59 4.09 +12.2 Dividend per share 0.49 0.49 Investments, MEUR 102.8 71.0 +44.8 Return on equity, % 21.2 25.2 Return on capital employed, % 29.5 33.6 Gearing, % -13.2 -15.9 Equity ratio, % 52.8 56.8 Personnel on average 11,058 10,089 +9.6 Personnel on 31 December 11,098 10,335 +7.4 Financial development The combination of Enator and Tieto took place on 7 July 1999 but TietoEnator´s accounts have been consolidated according to the pooling method from the beginning of the year. Group net sales grew by 13.9 % to EUR 1229.1 million (1079.2). Excluding exchange rate effects, growth was 13.4 %. Organic growth in local currency for comparable units was 7.3 %. Growth was strongest in the Finance sector owing to Entra, which has been consolidated from the beginning of February 1999. Defence Sweden continued to show weak growth due to poor demand. Geographically, growth was 14 % in Finland, 9 % in Sweden and 40 % outside these countries. Operating profit (EBIT) was EUR 107.7 million (105.0), which corresponded to an 8.8 % profit margin. The figure includes non-recurring income of EUR 20.0 million from profits on property sales and divestments. Costs related to the combination are evaluated to be EUR 16 million. This includes external combination costs and internal effects of restructuring. Operating profit also includes a provision of EUR 14.7 million (14.7) for annual bonuses and the personnel´s development and training fund. All the business areas except Services increased their operating profits. Services has changed its strategy against verticalization (telecom, energy, retail).This in connection with higher costs in new technology projects has had a negative impact on the result. The impact of new technology projects has been about EUR 8 million. Slacker demand of low value added services also affected the profitability of Services in Sweden and in Norway. The decrease in the Finance sector's margin is due to Entra. Operating profits decreased in the units under reorganization. After the divestment decisions the main emphasis in these businesses has been on rationalization and on preparing for divestment, which weakened profitability. Earnings per share were EUR 0.90 (0.96), and EUR 1.04 (1.08) excluding amortization of goodwill. Return on capital employed was 29.5 % (33.6) and return on equity 21.2 % (25.2 %). The order backlog, which comprises only those services ordered with binding contracts, totalled EUR 478.8 million on 31 December 1999. From the figure has been excluded the order backlog for Network infrastructure and Defence Sweden which totalled EUR 93.6 million. Repayment from SPP According to information from the Swedish Staff Pension Society (SPP), a sum of EUR 31 million deriving from SPP´s consolidation surplus has been allocated to companies within the TietoEnator Group. To date, SPP has not stated how or when these funds will be made available. This is why it is not reflected in the financial statements. Investments Direct investments in fixed assets and other long-term assets totalled EUR 102.8 million. EUR 38.4 million was spent on machinery and equipment, and EUR 40.7 million on subsidiary shares. EUR 10.9 million. was spent on property investments related to the Group's main business premises in Espoo. Financing Cash flow from operations totalled EUR 117.2 million. Capital expenditure was EUR 56.9 million and EUR 22.5 million was spent on acquisitions. Divestment of Group companies and sale of fixed assets increased the Group's cash reserves by EUR 34.8 million. Dividend payments were EUR 33.5 million. Some EUR 16.0 million was spent on repurchase of the Enator minority holdings. The balance sheet totalled EUR 702.6 million (561.0). The equity ratio was 52.8 % (56.8 %) and gearing was -13.2 % (-15.9 %). The company had cash and bank reserves of EUR 113.8 million (84.6) and uncommitted credit limits of EUR 20 million. Changes to group structure Following its strategy of concentration on its core businesses, TietoEnator decided to withdraw from the Defence and Network infrastructure hardware businesses. TietoEnator's services for the Swedish defence industry were merged with Celsius Aerotech AB on 1 January 2000 to form a new group called Aerotech Telub which is 57 % owned by Celsius and 43 % by TietoEnator. TietoEnator also decided to reduce its holding to below 50 % in the Swedish company Dotcom and Danish NetDesign A/S both of which specialize in network infrastructure hardware. Personnel The averaged number of employees increased with 9,6 % to 11,058 (10,089) during the year. During the year 1,584 new employees were employed. Together with leaves of 1,079 and structural changes the full time employees totalled 11,098 (10,335) at the year-end. Employee turnover decreased from 11,3 % to 9,8 % during 1999. Development The thrust of the Group's development focused on network-based business concepts and applications. Work started on development of the new eBiz concept for e-business. eBiz aims to offer customers the best package of products and expertise for their specific needs, regardless of how these products and areas of expertise are organized within TietoEnator. Short-term prospects Demand for IT services will remain strong and will focus on electronic services. Following the change of millennium, digitization of production and distribution is now the main demand driver. Information networks are emerging as the most important service channel in our society, encompassing the production, distribution and consumption of all products and services that can be digitized. This trend is especially pronounced in the Nordic countries, which have become the forerunners in wireless communications and Internet banking. TietoEnator's focus on strong North European vertical markets and high- value-added services throughout the 1990s favours the company's development in the new Information Society. Tieto's and Enator's pooling of resources, which has proceeded as planned, now enables us to take the next steps forward: further consolidating our presence in Europe and pushing the strongest solutions to the global market. TietoEnator´s international spearhead solutions are mobile and Internet banking, mobile telecommunications and media, digital government and the digital forest chain. Investments in growth will rise and acquisitions will have a greater impact on the Group's growth than in the previous year. TietoEnator´s long term growth target is raised to 20 %. In 2000 the growth excluding divestments is expected to be higher than in 1999. Yet the first half is expected to be below and second half over the year average. Growth in the first months is being slowed by the TietoEnator´s internal restructuring measures carried out in 1999 and by the gradual increase in investment activity by customers following the critical millenium shift. Non-recurring items arising as planned from last year's combination will continue to have some impact on the Group's result in 2000. Structural changes, notably in Sweden, will generate both costs and income, which are expected to result in a net positive impact in 2000. Personnel costs, a crucial factor in our performance, are expected to develop as in the previous year. The increase in investments in research and development, intellectual capital and acquisitions will strengthen our long-term profit growth at the expense of short term profitability. The Group is expected to report a stronger result in 2000 than one year earlier. Annual General Meeting and dividend proposal Annual General Meeting of TietoEnator will be held on 29 March 2000. The Board of Directors will propose to the Meeting that a dividend of EUR 0.49 (0.49) per share be paid on the financial year 1999. The record date for dividend payment is 3 April 2000 and the dividend payment date is 14 April 2000. ------------------------------------------------------------ Please visit http://www.bit.se for further information The following files are available for download: http://www.bit.se/bitonline/2000/02/18/20000218BIT00020/bit0001.doc The full report http://www.bit.se/bitonline/2000/02/18/20000218BIT00020/bit0002.pdf The full report

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