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Tecnotree Corporation Interim Report 1 January – 30 September 2012 (unaudited)

Tecnotree Corporation
Interim Report
October 31^st, 2012 at 8.30 am

Tecnotree is a global supplier of telecom IT solutions, providing products and services for charging, billing, customer care, and messaging and content services.  The company’s product portfolio comprises virtually the full range of business management systems for telecom operators, with standard solutions for fixed networks, mobile services and broad band and for managing subscriptions, services and cash flows for prepaid and post-paid customers. Tecnotree has a strong footing especially in developing markets.

Growth in net sales, weaker result in third quarter
 

• Net sales for the nine month review period were EUR 51.0 million (EUR 46.2 million for the same period in the previous year) and the adjusted operating result was EUR -4.6 (0.3) million. The operating result was EUR -8.7 (-7.6) million and the result for the period EUR -10.7 (-8.1) million.
• Third quarter net sales were EUR 19.7 (17.2) million. The adjusted operating result for the quarter was -0.8 (1.9) million and the result was EUR -3.0 (0.9) million. 
• The decline in the adjusted operating result was due to higher project costs and investments in growth. 
• The order book at the end of the period stood at EUR 59.2 (30 September 2011: 21.0) million. At the end of the previous quarter the order book stood at EUR 58.8 million.
• Cash flow after investments was EUR -6.3 (-14.6) million.
• The third quarter cash flow after investments was EUR 7.4 million negative because of the exceptionally low level of customer payments. The company’s financial position is tight.
• On 29 October 2012, Tecnotree changed its prospects for 2012 as follows: Tecnotree estimates that net sales in 2012 will be higher than in 2011. The adjusted operating result is estimated to be negative due to increased costs and foreign exchange losses during the third quarter. The cash flow after investments is expected to improve compared to 2011. Variations in the quarterly figures will be considerable. The adjusted operating result is the operating result before R&D capitalisation, amortisation of this and one-time costs.

* Adjusted operating result = operating result before R & D capitalisation, amortisation of this and one-time costs. Details of these are given in the section “Result analysis”.
** The key figure is adjusted for all periods presented to reflect the share issue.

President and CEO Kaj Hagros:
”Net sales in the first nine months of 2012 totalled EUR 51.0 million, which is 10 % more than in the same period in the previous year (EUR 46.2 million). Thanks to the strong demand and record high order book we estimate that net sales will continue to grow. The outlook for our key customer accounts is promising. However, due to the start-up costs for larger projects, long-term R&D investments and exchange rate losses, the adjusted operating result in the third quarter was a loss. Because of this we have to revise our financial guidelines for the whole year. The process of switching from project to solution based business operations in line with the change in strategy is still incomplete, and the aimed for improvement in productivity is still not evident in the latest quarter. The cash flow from operations was weak in the review period, and to improve this we are focusing more strongly on obtaining receivables from customers and on optimising working capital.”

Events after the end of period

At the beginning of October Tecnotree sold a vacant plot of land close to its head office to the City of Espoo. The selling price was EUR 980,000. The sale also released the company from its obligation to build on the land. In connection with this, at the end of September the company had a short-term loan of EUR 450,000 which was paid off with the funds received from the sale of the plot of land.

Prospects in 2012

In Tecnotree’s previous interim report, the prospects for 2012 were stated as follows:

Tecnotree estimates that net sales and the operating result in 2012 will be better than in 2011. The adjusted operating result is estimated to be positive. Variations in the quarterly figures will be considerable. The cash flow after investments is also expected to improve compared to 2011. The adjusted operating result is the operating result before R&D capitalisation, amortisation of this and one-time costs.

In accordance with the press release published on 29 October 2012, the prospects for 2012 are now as follows:

Tecnotree estimates that net sales in 2012 will be higher than in 2011. The adjusted operating result is estimated to be negative due to increased costs and foreign exchange losses during the third quarter. The cash flow after investments is expected to improve compared to 2011.

Variations in the quarterly figures will be considerable. The adjusted operating result is the operating result before R&D capitalisation, amortisation of this and one-time costs.

Financial information

Tecnotree is holding a conference for analysts and the media to announce its nine month results at 10.00 am on 31^st  October 2012 in the Bulsa conference room at the Scandic Hotel Simonkenttä, Simonkatu 9, Helsinki. The interim review will be presented by CEO Kaj Hagros and the conference will be held in Finnish. The material to be presented at the press conference will be available at www.tecnotree.com.

TECNOTREE CORPORATION

Board of Directors

FURTHER INFORMATION
Kaj Hagros, President and CEO, tel. +358 40 849 1749
Tuomas Wegelius, CFO, tel. +358 400 433 228

DISTRIBUTION
NASDAQ OMX Helsinki Ltd.
Main media
www.tecnotree.com

About Tecnotree
Tecnotree is a global provider of a broad range of telecom IT solutions focused on charging, billing, customer care, messaging and content services. Tecnotree empowers communication service providers to create and monetize a broad marketplace of digital services, and augment value across the customer lifecycle. Acknowledged for agility and commitment, Tecnotree has more than 1000 employees serving over 100 operators globally. Tecnotree is listed on the main list of NASDAQ OMX Helsinki Ltd. with the trading code TEM1V. For more information on Tecnotree visit www.tecnotree.com