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2015-10-28

Enfo: Enfo Oyj's interim report 3/2015 (1 January - 30 September 2015)

Key points of the interim report
* Turnover fell by 3.4% in July-September to EUR 31.3 (32.4) million. In
January-September, turnover decreased by 3.6% and stood at EUR 101.5
(105.3) million. The divestments carried out during the year in Financial
Process Services and the intense competition in invoice operator services
contributed to the decrease in turnover.
* Operating profit (EBIT) increased by 66.5% in July-September to EUR 3.1
(1.8) million. The operating profit of the reference period includes
non-recurring costs from a loss-producing customer project totalling EUR
2.4 million. In January-September, operating profit decreased by 16.2% and
stood at EUR 6.4 (7.6) million.
* Profit before taxes in July-September stood at EUR 2.6 (1.8) million. In
January-September, profit before taxes was EUR 5.7 (6.6) million.
* Earnings per share in July-September were EUR 3.08 (1.87). In
January-September, earnings per share were EUR 6.19 (6.73).
* The twelve-month return on investment was 10.0% (11.8%).
* In January-September, Enfo Group employed an average of 805 people (765).
At the end of September, the Group had a total of 801 employees (807).
* In January-September, cash flow from operating activities totalled EUR 9.1
(8.1) million.
* The company estimates that consolidated turnover will decrease in 2015 from
the previous year. Operating profit is expected to decrease slightly in
2015 from the year before.
* Short-term risks are associated with maintaining competitive prices in the
highly competitive IT services market.
Arto Herranen, CEO:
Enfo's third quarter progressed in line with expectations. Turnover decreased
slightly compared with the same period last year. Without the effect of
divested businesses, the turnover would have remained at the previous year's
level. Operating profit without non-recurring items increased, but the
reference period includes non-recurring costs totalling EUR 2.4 million. The
comparable operating profit decreased clearly. Intense price competition and
investments in new businesses, including the outsourcing services of
financial processes, significantly weakened the Group's profitability.

The weak economic situation and predictions of continued uncertainty were
evidenced by the generally weak development of IT and invoice operator
services and by the intensifying price competition in Finland. On the other
hand, Enfo has engaged in several active negotiations on outsourcing of
financial processes, and important new agreements will be signed during the
last quarter. In Sweden, the economic indicators were markedly better and the
outlook positive. This strengthened the demand for consultancy services.

A wind of change is clearly blowing in the Finnish IT services market. The
customers' IT solutions are becoming more diverse, and building efficient
packages requires diverse expertise. Enfo both aims to be a competent advisor
for its customers and to be able to provide the required solutions as a
service. In order to achieve this, extensive modification work was completed
in the operating methods and the organisation.

Investing in the outsourcing services of financial processes has proven to be
the correct decision. The interest in these services among the potential
customer base is growing well, and the benefits and experience gained from
outsourcing by existing customers support our view of increasing demand.

During the third quarter, the consultancy services developed very favourably
in Sweden. There was a marked increase in demand, and the situation also
allowed the price level to be slightly revised, which was reflected by the
improved profitability.

The good demand for consultancy services in Sweden makes it possible to also
expand this service offering to Finland. Growth will also be supported by
developing solutions-based business in all service sectors.

Business development
Enfo Oyj is the parent company of Enfo Group. Enfo's business operations are
divided into two separately reported segments - IT Services, and Financial
Process Services.

IT Services
The turnover of IT Services increased by 1.3% during the third quarter. In
Finland, the sales of services remained at the previous level; therefore, the
growth was particularly brought about by the positive development of
consultancy business in Sweden. Profitability also developed moderately, and
profit was clearly better than during the weak comparison period in the
previous year. We succeeded in slightly revising our prices for consultancy
services, but in cloud services, for example, the intense price competition
continued.

In the IT Services and Outsourcing Business Area included in IT Services, the
extensive modification work regarding the organisation and methods of
operation was completed. The planning for that work started already in
spring. The changed model of operations did not affect the number of
employees, only the job descriptions and organisational structure. Work in
the new organisation started from the beginning of October. The aim of the
change was to provide better support for sales and the development of demand
and to create a more uniform way of working with customers. This will also
ensure efficient production and the high quality of services.

While the customers' decision-making regarding IT-related procurement is
increasingly being left to persons responsible for businesses, the IT
environment is also becoming more complex. The customers want to utilise
different solutions, such as proprietary and bought-in systems, as well as
public cloud services. Combining these into efficient entities requires
increasingly diverse expertise. Enfo is developing its competencies and
methods of operation in order to be able to act as an advisor and to provide
the information technology its customers need as a continuous service.

During the quarter, several new accounts were acquired, among them the
agreement signed in late September regarding the IT infrastructure services
and working hours for the Helsinki Region Environmental Services HSY. The
services cover the server and management services for HSY and the associated
support and maintenance services, troubleshooting and diagnostic services, as
well as fault repair and other services required.

With the new organisation, growth is expected through more active sales and
better management of customer accounts. The application outsourcing markets
and consultancy services both offer a clear potential for growth.

Financial Process Services
The turnover of Financial Process Services decreased by 16,7% from the
reference period. The interest in outsourcing services continued to increase
clearly, but the intense competitive situation in invoice operations weakened
the overall development. As expected, the profitability of Financial Process
Services dipped from the previous year's level due to price competition and
the development costs of new services. In invoice operations, the development
investments were targeted at the digitalisation of the service platform and,
in financial process outsourcing services, at a cloud-based MS AX service
platform.

The development of financial process outsourcing services and the recruitment
of new experts during the previous quarter have proven to be the right
solutions. The strengthening demand for outsourcing services that continued
during the autumn gives positive indications of expanding the business to new
customer accounts.

The continued increase of interest in outsourcing services was also evidenced
by new customer agreements. Savon Voima, one of the largest providers of
energy services in Finland, agreed in August that it would procure its
financial management application services from Enfo. According to the
agreement that will enter into force in the beginning of 2016, Savon Voima
will start using Enfo's standardised financial management applications as a
cloud service. The aim of the productised service solution is better cost
efficiency, better management of procurement and improved competitiveness. In
addition, three Letters of Intent were signed during the period. They will be
published at a later stage.

Turnover
Enfo Group's turnover fell by 3.4% in July-September to EUR 31.3 (32.4)
million. In January-September, consolidated turnover fell by 3.6% and stood
at EUR 101.5 (105.3) million.

Development of turnover by reporting segment

---------------------------------------------------------------------------------
| EUR million 7-9/2015 7-9/2014 1-9/2015 1-9/2014 1-12/2014 |
| IT Services 24.4 24.1 78.2 79.1 109.3 |
| Financial Process Services 7.5 9.0 24.8 27.7 37.6 |
---------------------------------------------------------------------------------
The turnover of IT Services increased by 1.3% in July-September to EUR 24.4
(24.1) million. The turnover accumulated from the beginning of the year was
EUR 78.2 (79.1) million, a decrease of 1.1% from the reference period.

The turnover of Financial Process Services fell by 16.7% in July-September to
EUR 7.5 (9.0) million. In January-September, turnover decreased by 10.3% and
stood at EUR 24.8 (27.7) million.

Profitability
Enfo Group's operating profit increased by 66.5% in July-September and stood
at EUR 3.1 million, representing 9.9% of turnover (EUR 1.8 million and 5.7%,
respectively). The reference period included non-recurring costs of EUR 2.4
million. In January-September, the Group's operating profit decreased by
16.2% to EUR 6.4 million, representing 6.3% of turnover (EUR 7.6 million and
7.2%, respectively).

Development of operating profit by reporting segment

---------------------------------------------------------------------------------
| EUR million 7-9/2015 7-9/2014 1-9/2015 1-9/2014 1-12/2014 |
| IT Services 2.6 0.5 4.5 4.2 5.6 |
| Financial Process Services 0.5 1.4 1.9 3.4 4.1 |
---------------------------------------------------------------------------------
The decrease in the operating profit of IT Services was affected by
increasingly fierce price competition.

The turnover of Financial Process Services fell from the previous year's level
as expected. This was partly caused by the decrease in turnover and
non-recurring reorganisation expenses, but also by investments made in the
development of new services.

Financing and investments
Enfo's net investments stood at EUR 1.0 (3.8) million in July-September and
EUR 2.5 (7.7) million in January-September. The investments mainly consisted
of data centre hardware acquired through financial leasing agreements and of
investments in the provision of financial process services.

At the end of September, the company's equity...

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