Tecnotree Oyj — Earnings Release 2018

Feb 27, 2019

TECNOTREE CORPORATION FINANCIAL REPORT 1 JAN –31 DEC 2018 (UNAUDITED)

TECNOTREE CORPORATION FINANCIAL REPORT 1 JAN –31 DEC 2018 (UNAUDITED)

Tecnotree Corporation
Financial Report
February 27, 2019 at 10:00 (EET)
IMPROVED PROFITABILITY RESULTS THROUGH STRONG COST MANAGEMENT

Fourth quarter 2018

· Fourth quarter net sales were EUR 12.1 (15.6) million.
· The adjusted operating result for the quarter was EUR 4.5 (4.4) million
and the operating result 4.0 (-12.2) million.
· The adjusted result for the quarter was EUR 1.7 (2.6) million and result
EUR 1.1 (-14.1) million
· The order book at the end of the period stood at EUR 21.1 (26.2) million.
· Fourth quarter cash flow after investments was EUR 0.9 (0.0) million.
· Earnings per share were EUR 0.01 (-0.11)
· One-time cost EUR 0.6 million related to redundancies.

Jan-Dec 2018

· Net sales for the financial period were EUR 41.9 (55.1) million.
· The adjusted operating result was EUR 5.9 (9.8) and the operating result
5.3 (-8.0) million.
· The adjusted result for the period was EUR 0.1 (2.3) million and the
result EUR -0.5 (-15.5) million.
· Cash flow after investments for the financial period was EUR 1.3 million
(4.8) and the company’s cash and cash equivalents were EUR 4.2 (2.3) million.
· Earnings per share were EUR -0.00 (-0.13)
· One-time write of EUR 0,6 million related to redundancies (EUR 17,8
million including one-time goodwill write off EUR 16.7 million and EUR 1.1
million related to redundancies)

KEY FIGURES 10-12/ 10-12/ 1-12/ 1-12/
  2018   2017   2018   2017
Net sales, MEUR 12,1 15,6 41,9 55,1
Adjusted operating result, MEUR 1 4,5 4,4 5,9 9,8
Operating result, MEUR 4,0 -12,2 5,3 -8,0
Result before taxes, MEUR 3,3 -12,6 4,4 -10,5
Adjusted result for the   period, MEUR 2 1,7 2,6 0,1 2,3
Result for the   period, MEUR 1,1 -14,1 -0,5 -15,5

Earnings per   share, basic, EUR 0,01 -0,11 0,00 -0,13

Order book, MEUR 21,1 26,2

Cash flow after   investments, MEUR 0,9 -0,0 1,3 4,8
Change in cash   and cash equivalents, MEUR 1,1 0,1 1,9 -0,9
Cash and cash   equivalents, MEUR 4,2 2,3

Equity ratio % -22,8 -19,1
Net gearing % - -

Personnel at end   of period 543 666

1 Adjusted operating result = operating result before one-time items.

2 Adjusted result for the period = result before one-time items.

Unless otherwise stated, all figures presented below are for the financial
period 1-12/2018 and the figures for comparison are for the corresponding period
in 2017.

CEO PADMA RAVICHANDER:

2018 – Prudent cost management yields strong profitability improvement

For Tecnotree, 2018 was a year, where we clearly demonstrated our resilience and
ability to make massive turn-around of our results, especially in the second
half of the year. While we showed stable performance on the revenue growth in Q4
we also improved our operating result significantly in the fourth quarter. This
certainly confirms that we are on the right path to recovery and growth.

The company’s long term viability, was further endorsed by the capital infusion
that we received from Fitzroy Investments Limited during H2. This further
strengthened our overall financial situation and the new investors believe in
the company’s overall turn-around and growth strategy.

The investment by Fitzroy also enhanced the confidence of our major customers
and that has reflected in order volumes in Q3 and Q4 of 2018.

New Orders

Tecnotree was able to garner new orders and some of the major ones were

·  Order for Wholesale Billing from Nepal Telecom for the International
Roaming as a turnkey project
·  Renewal of Maintenance contracts of EUR 1.9 million from a major operator
in Middle East
·  Delivery of a VAS platform for a new customer in Europe
·  Renewal of Maintenance contract with Net One
·  Implementation of Tecnotree My life Dashboard Self-care product in
Mauritius Telecom

By focusing on our key customers in terms of high quality delivery and SLA
compliance during 2018, we also won many accolades from our customers and they
clearly stand as a testimony to our product features as well as to our stability
and delivery competence.

We are now confident that our customers are convinced about the stability and
our ability to deliver state-of-the-art products and excellent services, which
will result in good new business opportunities.

Costs

Tecnotree has been increasing the efficiency of operations over the last few
years, at the same time reducing the costs prudently. In 2018, the company
continued to optimize costs. During the Q4-2018, Tecnotree completed the
negotiations in Finland, which will result in further reduction of costs by EUR
2 million, the full impact of which will be realized in 2019.

Costs were optimized in other areas also, resulting in overall reduction in opex
by 21% over the previous year.

Given that the company operates in emerging markets with multiple tax regimes,
the withholding taxes continue to be a major concern. The company is trying to
optimize the tax burdens and to ensure lesser tax impacts in the coming years.

To ensure the stable cash position the company continues to enforce restraint in
all areas of expenditure and is focused on the aggressive and timely collection
of the outstanding receivables.

2019 – The road ahead

In 2019, Tecnotree will strive to recover in terms of order intake and focus on
profitable business growth by efficient cost management.

While expanding its market reach to new geographies, the company also will focus
on delivering cutting-edge technology based Digital BSS 5.0 stack to new and
existing customers and providing state-of-the-art digital transformation
capabilities. Tecnotree’s products will help the customers to grow revenue while
reducing operational costs and will deliver superior speed of service.

RISKS AND SHORT-TERM UNCERTAINTY FACTORS

Tecnotree’s risks and uncertainties in the near future relate to development of
net sales, projects, to their timing, to trade receivables and to changes in
foreign exchange rates. Risks related to having sufficient cash funds and
financing have reduced after new capital investments done to the company.
Fitzroy subscribed for 52,555,040 new shares in the company with the total
subscription price of 2.09 million euros at a price per share of about 0.04
euros. In addition, Fitzroy has subscribed for 72,444,960 freely transferable
warrants entitling, but not obligating, their holder to subscribe for 72,444,960
new shares in the company with the total subscription price of 2.91 million
euros.

According to company’s cash flow forecast its cash flow will be positive during
the next 12 months period. This along with ensuring the going concern principle
assumes net sales of the company to remain at the same level as in 2018 and cost
management according to the plan.

EVENTS AFTER THE END OF THE PERIOD

Tecnotree announced on 25 January 2019 that Fitzroy Investments Limited had
transferred a number of 50.000.000 million warrants to Luminos Sun Holding
Limited. According to the information provided to Tecnotree by Luminos, Luminos
is a company incorporated under the laws of the British Virgin Islands and its
ultimate beneficial owner is Mr. Prakash K Aildasani. Luminos has further
informed Tecnotree that it will exercise the warrrants transferred to it within
15 days.

OUTLOOK FOR 2019

The company strengthened and stabilised its operations in 2018 and in 2019 the
company continues with the efforts to improve its net sales while focusing on
profitable growth.

PROPOSAL CONCERNING THE RESULT
Considering the parent company’s accumulated losses of EUR 6,839,442.02 in
retained earnings, the Board of Directors proposes to the annual to the Annual
General Meeting that no dividends will be paid for the financial period ended 31
December 2018.

TECNOTREE CORPORATION

Board of Directors

FURTHER INFORMATION

Padma Ravichander, CEO, tel. +97 15 641 414 20
Kirsti Parvi, CFO, tel. +358 (0)505 174 569

www.tecnotree.com
About Tecnotree

Tecnotree Corporation (NASDAQ HELSINKI: TEM1V) is a global provider of telecom
IT solutions for the management of products, customers and revenue. Tecnotree
helps customers to monetise and transform their business towards a marketplace
of digital services. Together with its customers, Tecnotree empowers people to
self-serve, engage and take control of their own digital life.

http://www.tecnotree.com

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