Financial Review 2020

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About TietoEVRY

TietoEVRY is a leading Nordic digital services and software company. Headquartered in Finland, TietoEVRY employs around 24 000 experts globally. The company serves thousands of enterprise and public sector customers in more than 90 countries. TietoEVRY shares are listed on the NASDAQ in Helsinki and Stockholm and the Oslo Børs.

The merger of Tieto and EVRY was concluded on 5 December 2019 and the companies have been consolidated from that date onwards. Operations are described in the Strategy section.

Highlights of 2020

•The operating model consisting of Country Teams, Service Lines and Support Functions became operational on 1 January 2020. TietoEVRY Group comprises six operating segments: Digital Consulting, Cloud & Infra, Industry Software, Financial Services Solutions, International Operations and Product Development Services.

•While growth is getting higher on the agenda, the focus in 2020 was on merger integration, related efficiencies and competitiveness. The company achieved merger synergies of EUR 30 million during 2020 and a run-rate of EUR 80 million by the year-end. The total cost synergy target of EUR 100 million is anticipated to materialize by 2022.

•TietoEVRY took measures to allow the integrated company to move forward with less uncertainty and greater potential to improve profitability. In June, the company redefined the scope and operating model of its partnership with IBM and took full responsibility for the service processes and quality. Furthermore, the company’s decision to end the SmartUtilities platform concluded a multi-year investment and eliminates further potential negative profit impact.

•Adjusted items were high in 2020 and are anticipated to be significantly lower in 2021. In addition to integration costs, these items include costs related to a redefined agreement with IBM and ending of the common SmartUtilities platform.

•Revenue was up by 60.7%, mainly due to the merger of Tieto and EVRY on 5 December 2019.

•Adjusted operating profit (EBIT) was up to EUR 355.0 (199.4) million, supported by the merger of Tieto and EVRY. Adjusted operating margin was strong at 12.7% (11.5) due to cost synergies related to the merger as well as active measures to offset negative impacts of Covid-19.

•Operating profit (EBIT) was up to EUR 146.7 (126.8) million.

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Five-year key figures

1) Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability 

2) Restated due to finalized accounting of the EVRY merger. More information in note 26.

See calculation of key figures on page Alternative performance measures.

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IT market development

•Creating superior experiences enabled by data continues to be a strong driver for investments across industries

•Covid-19's implications are anticipated to accelerate customers' digital ambitions

•Cloud services, data and analytics as well as utilization of DevOps are anticipated to see double-digit growth over the next few years

•The IT market is anticipated to decline during the early part of 2021 and rebound to growth in the second half, subject to Covid-19

While the implications of Covid-19 have accelerated digital ambitions by several years, industry analysts currently anticipate the IT market to decline in the first half of 2021. Large and long-term contracts with substantial core technology content are less affected than shorter and smaller assignments.

Enterprises across industries as well as the public sector are undergoing a fundamental change in creating value. The shift towards more digital interaction and experiences enabled by data continues to be a strong trend. Change in orientation from products to services is creating new growth opportunities and revenue streams across industries and businesses.

The digital world is enabled by a number of technology-led advancements and new applications, including ones that utilize artificial intelligence and machine learning. Technological drivers include cloud, data and analytics as well as overall software development, accelerated by open APIs. This creates the opportunity for businesses and societies to move to the data-oriented intelligent world at a fast pace.

Agile enterprises and cost-efficient IT are becoming a new norm and customers are shifting from traditional large-scale projects to adaptive and rapid development cycles, utilizing concepts such as DevOps. There is growing demand for smaller or mid-sized cloud projects as an alternative to large outsourcing agreements.

Cloud adoption, multi-cloud management as well as scalable IT environments and automation continue to enable cost optimization. Cloud services, data and analytics as well as utilization of DevOps and software-driven digitalization are anticipated to see double-digit growth over the next few years. Spending on traditional infrastructure services continues to decline.

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Strategy cornerstones to position for growth

TietoEVRY has an active role in the creation of customers’ digital products and services, providing superior, personalized  experiences based on data. The company's capabilities and technologies it provides help customers ensure their competitiveness through agile operations and societies to provide advanced digital citizen services.

Services to accelerate customers' digital agenda   

TietoEVRY has chosen to focus on services accelerating customers’ digital agenda and providing them with the strongest growth potential. Capabilities such as digital consulting, advanced analytics, data platforms and cloud-native application development coupled with world-leading partnerships in the public cloud domain as well as own industry software assets support the aim of being a leading partner in realizing customers’ digital ambition. Strategic choices include:  

•Focus on Nordic companies and public sector, building on deep customer knowledge

•Services and global capabilities to accelerate customers’ digital agendas – Digital Consulting, Cloud & Infra, Industry Software, Financial Services Solutions and Product Development Services 

•Accelerated growth through cloud, data & analytics and software – representing over 70% of the company’s investments

◦Growth ambition of over 20%: public cloud services, Data & Analytics solutions as well as DevOps and automation

◦Growth ambition of over 10%: software businesses, including payments software and card services, Nordic healthcare and citizen services as well as product development services business.

The company anticipates that investments in offering development, including software development, will amount to 4–5% of revenue annually. Investments in fixed assets, mainly related to data centres, are estimated to amount to 1.5–2% of revenue. 

Long-term financial targets

The company announced its financial targets in December

•    Growth accelerating to 5% by 2023

•    Adjusted EBITA 15% by 2023

•    Net debt/EBITDA below 2 by the end of 2022

•    One-time items around 1% of revenue post 2021

•    Dividends increased annually1)

1) Baseline EUR 1.27 per share, which was the initial dividend proposal to the Annual General Meeting 2020

Operating model to drive customer value

The company's operating model is designed to drive customer value and speed across markets. TietoEVRY comprises six operating segments:

•Digital Consulting

•Cloud & Infra

•Industry Software

•Financial Services Solutions

•Product Development Services and

•International Operations.

In addition, the company has established Country Teams in Norway, Sweden and Finland to integrate the capabilities of the company for Nordic customers. Product Development Services operates as a separate unit, serving their customers globally. Competitive and scalable services are made available through local teams and global delivery centres in countries such as the Czech Republic, China, India and Poland. 

International businesses include selected industry software and financial services solutions as well as the International Operations segment, which includes businesses in Austria, the Baltic countries and Russia. Furthermore, International Operations serve non-Nordic customers from India and Ukraine.

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Measures to ensure future profit contribution  

During the year, TietoEVRY took measures intended to allow the integrated company to move forward with less uncertainty and greater potential to improve profitability. The company redefined the scope and operating model of its partnership with IBM and took full responsibility for the service processes and quality. Furthermore, the company’s decision to end the SmartUtilities platform concluded a multi-year investment and eliminates further potential negative profit impact. Consequently, adjusted items were unusually high in 2020 and are anticipated to be significantly lower in 2021.

Realizing the merger synergies

Based on advanced digital consulting practices at scale and strong multi-cloud capabilities coupled with a competitive software portfolio, TietoEVRY is well positioned to drive digitalization of Nordic enterprises and public sector. In 2020, the company built an integrated company, made good progress in synergy realization and laid the foundation for future performance. Achievements include:

•New structure with common operations and processes in place

•Strengthened FinTech value proposition based on the capabilities from both companies laying a foundation for market share expansion

•Identification of growth potential from complementary customer base, digital consulting scale in the Nordics and accelerated cloud adoption

•Significant merger-related cost synergies achieved during 2020. 

The company achieved merger synergies of EUR 30 million during 2020 and a run-rate of EUR 80 million by the year-end. The employee consultation processes initiated in 2020 resulted in around 950 redundancies, mainly in the Nordic countries. Integration costs amounted to EUR 84 million in 2020.

The total cost synergy target was increased to EUR 100 million during the year. Non-recurring implementation costs are anticipated to materialize during 2020-2022 and total EUR 110-120 million.

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Impact of Covid-19 in 2021 

The company anticipates performance to be affected by the Covid-19 pandemic in the early part of 2021 and revenue to turn to growth in the second half of the year.

Financial impact of the Covid-19 pandemic  

Measures to secure the health and safety of employees and ensure continuity of critical services to customers, as well as measures to minimize the financial impact of the pandemic have been successful. Covid-19's impact on TietoEVRY's first-quarter revenue in 2021 is anticipated to remain similar to the fourth quarter of 2020, at around 4%. The company has, however, demonstrated a good ability to offset the negative margin impact.

Resilience is anticipated to vary by business due to different contractual structures:

•Digital consulting: primarily short-term contracts while relationships with customers are long – application services with long-term agreements represent approximately 20% of consulting revenue

•Product development services: short contracts within long-term commitments contributing to customers' core development roadmaps – stability due to TietoEVRY's role in customers' key development areas

•Infrastructure services: primarily long-term commitments of 3-5 years – fluctuations in demand in some services in the short-term, e.g. increase in network capacity while some onsite installations are postponed

•Industry software and Financial Services Solutions: primarily long-term contractual periods of up to 5-7 years, with customer relationships lasting much longer.

Covid-19-related cost savings comprise both non-personnel-related activities such as reduced travelling and training as well as temporary layoffs in the areas where TietoEVRY has experienced a temporary decline in demand. The need for temporary leaves is assessed on a regular basis, subject to the magnitude and duration of weak market conditions.

More information on Covid-19's impact on the company is available at www.tietoevry.com/Investors.

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Financial performance

Full-year revenue increased by 60.7% to EUR 2 786.4 (1 734.0) million. The merger was the major contributor to revenue development. Covid-19 had a negative impact of around 3% on revenue. Full-year operating profit (EBIT) amounted to EUR 146.7 (126.8) million, representing a margin of 5.3% (7.3). The merger had a positive contribution to operating profit while the profit level was impacted by integration costs and amortization of acquisition-related intangible assets. Furthermore, the ending of the common SmartUtilities platform resulted in additional costs of EUR 40.5 million, affecting operating profit of Industry Software, and redefined IBM partnership resulted in costs of EUR 35.6 million, affecting profitability of Cloud & Infra. Currency changes had a negative impact of around EUR 13 million on operating profit.

Depreciation and amortization amounted to EUR 175.8 (106.6) million, including EUR 72.7 (49.9) million in depreciation of right of use assets (IFRS 16 impact) and EUR 45.5 (8.0) million in amortization of acquisition-related intangible assets. Net financial expenses stood at EUR 24.4 (26.1) million. Net interest expenses were EUR 22.3 (8.8) million and net gains from foreign exchange transactions EUR 0.8 (losses 13.0) million. Other financial income and expenses amounted to EUR -2.9 (-4.3) million. Earnings per share (EPS) totalled EUR 0.80 (1.02).

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Financial performance by segment

Operating margin by segment

1) Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability.

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Cash flow and financing

Full-year cash flow from operations amounted to EUR 354.7 (278.4) million, including a decrease of EUR 67.2 (66.7) million in net working capital. Payments for restructuring amounted to EUR 29.6 (17.0) million.

Full-year  tax payments were EUR 28.9 (31.4) million.   

The equity ratio was 45.9% (44.5). Gearing decreased to 54.3% (63.4). Interest-bearing net debt totalled EUR 883.3 (1 070.0) million, including EUR 925.5 (964.1) million in interest-bearing debt, EUR 243.1 (298.3) million in lease liabilities, EUR 5.2 (5.6) million in finance lease receivables, EUR 27.9 (10.3) million in other interest-bearing receivables and EUR 252.3 (164.6) million in cash and cash equivalents.

Interest-bearing long-term loans amounted to EUR 1 056.9 (814.5) million at the end of

December. The company issued a new EUR 300 million bond in June 2020 to refinance a bridge loan related to the merger. The bond has a coupon of 2% and it will mature in June 2025. In addition to the EUR 300 million bond, interest-bearing long-term loans consist primarily of a EUR 100 million bond expiring in September 2024, a EUR 85 million loan from the European Investment Bank, a EUR 400 million long-term loan from financial institutions and EUR 171.0 million in lease liabilities.

Interest-bearing short-term loans amounted to EUR 111.7 (448.0) million, mainly related to leasing liabilities. The committed revolving credit facility of EUR 250 million expiring in September 2024 was not in use at the end of December.

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Investments and development

TietoEVRY is seeking to achieve a growth rate of 5% by 2023. A significant part of the company’s investments will be made in areas such as its own industry-specific software, data & analytics and cloud services. 

TietoEVRY’s offering development costs amounted to around EUR 135 (2019: 80 and 2018: 80) million, representing 4.8% (2019: 4.6% and 2018: 5.0%) of the Group's revenue. Of these costs, EUR 51.0 (17.0) million were capitalized. In 2020, the focus was on Industry Software, especially solutions for Health & Care and Financial Services.

Capital expenditure totalled EUR 83.5 (51.4) million, including the capitalized costs for the development of industry software. Capital expenditure represented 3.0% (3.0) of net sales.

Order backlog 

The significance of traditional measures for the order backlog is impacted by the shift from traditional large outsourcing agreements towards agile methods and consumption-based business models. Additionally, traditional development programmes are cut into smaller projects. While this change in customer behaviour affects the order backlog levels, it is not expected to have any significant impact on TietoEVRY’s market opportunity and business outlook.

TietoEVRY's order backlog amounted to EUR 3 350 (3 640) million at the end of December. Of the backlog, 49% is expected to be invoiced during 2021. The order backlog includes all signed customer orders that have not been recognized as revenue, including estimates of the value of consumption-based contracts.

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Major agreements

TietoEVRY has signed a number of new agreements during the period with customers across all the businesses. However, according to the terms and conditions of these agreements, TietoEVRY is not able to disclose most of the contracts.

In January, EasyUse signed an agreement with TietoEVRY within the Cards business area. This is a five-year agreement for the delivery of a Prepaid closed loop service within the ferry and cruise shipping segment. The cards will be used onboard ships and at partner merchants like hotels and shops.

In February, Telenor extended its agreement with TietoEVRY on IT infrastructure and cloud services for four more years. The renewed partnership will ensure that Telenor will be able to accelerate its digital transformation, and simultaneously provides a high level of focus on security, agility and stability. The areas covered by the agreement include dynamic infrastructure (IaaS), application and database operations, storage services, end-user and data centre services. TietoEVRY will also participate in Telenor’s cloud journey as well as the modernization and automation of business support tools.

In February, Ahlstrom-Munksjö, a global leader in fibre-based materials, extended its collaboration with TietoEVRY. The company’s renewal, based on the Tieto Integrated Paper Solution (TIPS), continues to drive business modernization at over 40 plants and will convert units globally. The new system automates Ahlstrom-Munksjö’s key business processes and improves internal agility. Digitalization also enhances customer experience and enables new business models and digital business.

In February, Fjellinjen, a company responsible for the collection of road tolls on the Oslo toll ring and the most important financial contributor to road construction in the region, entered into an agreement with TietoEVRY on the delivery of multichannel invoice distribution and master data services. The solution will ensure more efficient invoicing and mailing processes, better control and optimized distribution processes as well as reduced print, material and postage costs by increasing the volume of digital distribution in a simple, secure and cost-effective way.

In February, Geldmaat extended its collaboration with TietoEVRY on the delivery of the Sealbag service, which allows customers to make self-serviced deposits and drops of notes. The notes are packed in self-locking bags and dropped in safes operated via a sealbag processing mechanism. TietoEVRY delivers the central platform with additional managed services according to the master service agreement with the customer. The related machines and services will be provided all across the Netherlands. This service was an option to the master service agreement, signed with the customer back in 2018.

In February, Asfinag, an Austrian publicly owned corporation that plans, finances, builds and maintains Austrian autobahns and handles their toll collection, extended its agreement with TietoEVRY on IT service delivery, containing, for example, services for SAP and software development. As the main full-service IT partner for Asfinag, Tieto will contribute to sustainable improvement and increase efficiency in the customer’s processes. The extension has an estimated value of over EUR 5 million.

In March, Mayr-Melnhof extended its development partnership for the new Manufacturing Execution System for 37 plants in the Packaging division. The agreement is an extension for the delivery of the Rough and Fine Planning system agreed in 2019. 

In March, Malaysian Newsprint Industries Sdn Bhd (MNI), one of the leading manufacturers and suppliers of paper across South East Asia, selected TietoEVRY as their business transformation partner. The modernization of MNI’s key business processes will improve quality of paper and On Time In Full Delivery Service (OTIF). It will also enable visibility of real-time data and Key Performance Indicators (KPI). The renewal covers various key processes, for example, order to cash, advanced planning and trimming, reporting and analytics, warehouse management and logistics, invoicing and integration into the existing ERP system. The renewal is based on the Tieto Integrated Paper Solution (TIPS) for the pulp, paper, board, packaging, tissue and non-woven industries.

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In March, Skatteetaten and TietoEVRY extended their collaboration related to Workspace services. Skatteetaten is planning to carry out a personnel transfer and take on 1 250 new employees, formerly employed as local tax collectors in Norwegian municipalities. TietoEVRY will supply the new employees with equipment, including laptops, PC screens and mobile phones.

In March, TietoEVRY and Statens Service Center agreed on a new service to deliver Primula, a comprehensive HR and payroll service, to 35 governmental authorities. At the moment, its set up in a common cloud environment in TietoEVRY’s data centre in Kista is ongoing. The related cloud service will support all processes within the area of HR and payroll. In addition, the contract includes a major investment by the customer in the development of the product that will meet the future needs of users. Total value of the seven-year agreement is SEK 27 million.

In March, TietoEVRY signed an agreement with Deutsche Bank for Virtual Account Management (VAM) software. Deutsche Bank will leverage TietoEVRY's VAM platform as a complementary technology solution that can seamlessly integrate with its award-winning Cash, Trade and FX platform, thus further enhancing its cash management offering to the benefit of its corporate clients.

In March, Posten Norge AS chose TietoEVRY to deliver a payroll solution based on the Unit4 ERP system. Posten Norge decided to insource their payroll service and purchase a payroll system to run the payroll process internally. TietoEVRY was chosen by the customer in heavy competition with leading suppliers in the market. A solid and efficient solution as well as trustworthy project setup and a reliable implementation process became important winning criteria. The solution is scheduled to go into production in January 2021 and is estimated to provide salary payments to 13 000 employees.

In April, TietoEVRY signed an agreement with SEB for Virtual Account Management software. The solution will allow SEB to offer its corporate customers virtual cash management services. The new service will support SEB’s multinational corporate customers that need a fast and reliable way to centralize collection of payments and rationalize bank account structure. The launch of the new service forms part of SEB’s wider plans to invest in cash management services. Virtual cash management is an important part of this journey to improve customer experience and offer new and innovative value propositions.

In April, AB Storstockholms Lokaltrafik, the public transport administration of Stockholm County, decided to continue its digital journey with TietoEVRY by extending the current outsourcing agreement – the next step in a long and successful relationship. The objective of the extended collaboration is to boost the customer's efficiency, provide workplace flexibility via digital online solutions and contribute to stable and secure operation of Stockholm's public transportation.

In April, TietoEVRY and Aimo Park, the leading parking company in the Nordics, entered into a strategic partnership to accelerate Aimo Park’s digital transformation. The new collaboration will fuel development of innovative parking and mobility solutions by increasing automation and utilizing a variety of cloud services. TietoEVRY is leading the integration process. The new landscape consists of several cloud solutions from a variety of providers that cover systems such as Enterprise Resource Planning (ERP), Customer Relation Management (CRM) and Content Management (CMS). These solutions will enable faster time to market, more agile development of services and an improved end-user experience. Aimo Park will also be able to achieve better cost predictability and management with one single service provider to orchestrate its IT landscape.

In May, TietoEVRY and Finland’s Legal Register Centre signed a new contract for the further development of digital citizens’ services. Expanding their long-term relationship, this project covers application management and service production of legal aid, and financial and debt counselling systems. The project is a part of the Legal Register Centre’s overall operations standardization and development drive, which will usher in improved digital services for Finnish citizens.

In May, Helsinki and Uusimaa Hospital District (HUS) chose TietoEVRY to deliver architecture and application development as well as maintenance services to the Health Village project, an internationally unique concept. Health Village is a digital service platform offering information and support to citizens, care for patients and tools for healthcare professionals. It enables creation of symptom navigators and digital care paths as well as monitoring of health data and remote appointments. Furthermore, it provides secured communication channels across patients and care personnel. TietoEVRY has been the development partner of Heath Village since 2018.

In May, the Norwegian Digitalisation Agency prolonged its agreement with TietoEVRY for operating ID-Porten/MinID and the digital contact register in Norway. The ID-Porten is a login solution that provides citizens access to online services across government agencies and

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municipalities. The solution is used by more than 800 public entities for more than 4 000 internet-based public services. The total value of the agreement is NOK 46 million.

In May, Volvofinans Bank AB, one of the largest card issuers in Sweden with around one million customers, entered into a new agreement with TietoEVRY. The customer will be provided with expert support as well as solutions in the domains of service desk, financial services, infrastructure and security. The agreement entails access to TietoEVRY's PCI DSS certified platform for payments and Security Operations Center (SOC), which enables real-time surveillance. Collaboration with Volvofinans started in 2014, and the new agreement is yet another milestone in a successful partnership with the customer. The contract is valid for five years and the total contract value is SEK 85 million.

In June, Metsä Group renewed its agreement with TietoEVRY on cloud and infrastructure services. The new solution continues the modernization of Metsä Group’s global ICT capacity services with maximized business continuity and helps Metsä Group focus on their core business activities.

In June, TietoEVRY entered into a long-term agreement with Nordea, expanding the company’s strong international customer base in its Cards business. TietoEVRY will provide the client with a modern platform for card services (SaaS). The scope of the engagement covers card issuing and processing as well as dispute process management for Norway and Sweden. Based on the agreement, the customer will be able to consolidate their card-issuing capabilities onto a single platform, achieving a lower total cost of ownership as well as streamlining their services across countries, while customers will benefit from simpler and quicker access to new, future-oriented payment solutions.

In June 2020, TietoEVRY signed an agreement with International Card Services (ICS), part of ABN AMRO, the largest credit card issuing business in the Netherlands, to modernize the customer’s Cards solution and to deliver end-to-end services based on a Software as a Service agreement, valid for over seven years. 

In July, TietoEVRY extended its collaboration with Hyland Healthcare, a leading global provider of connected healthcare solutions, to deliver a best-in-class solution for digital pathology. A consortium of five companies, including TietoEVRY and Hyland Healthcare, is partnering to deliver PATOS to Region Västra Götaland (VGR). PATOS is a digital pathology solution that enables improved cancer diagnostics and patient treatment. The agreement is currently in year

five of an initially 10-year contract and includes an option for VGR to extend the relationship for another ten years.

In July, Cambio Healthcare Systems chose TietoEVRY as its IT operations partner for future healthcare information support for nine Swedish regions. The Swedish SUSSA regions of Blekinge, Sörmland, Västerbotten, Västernorrland and Örebro counties decided to jointly procure a new healthcare information support platform and signed an agreement with Cambio in June 2019. Cambio has chosen TietoEVRY as its IT operations partner to ensure safe and secure IT operation of the healthcare information support platform.

In September, the City of Västerås chose TietoEVRY as its IT partner in four defined areas: infrastructure services, service desk and on-site support, security services and workplace services. The four-year agreement with an option to extend the delivery by another two years has a contract value of SEK 300 million. The procurement placed high demands on user experience, efficiency, quality as well as enhanced safety and accessibility, to support 11 000 employees in areas such as healthcare, welfare, education and administration.

In September, Systembolaget Aktiebolag chose TietoEVRY to deliver managed collaborative smart screens as a service to all of its stores. The agreement covers hardware, configuration, on-site installation, support and operations.

In September, Servicegrossistene AS, a growing national full-service wholesaler supplying food and drink to the food service market, chose TietoEVRY to deliver a service-based solution based on cloud technology from Microsoft Dynamics 365. The transition to Dynamics 365, in combination with tools for areas such as reporting, analysis and logistics process optimization, will lay the foundation for the company’s growth also in the future. The company also aims to make the day-to-day activities of its wholesalers and customers more flexible and efficient. The six-year agreement represents a total contract value of around NOK 45 million.

In October, Kesko and TietoEVRY announced an agreement on expanded collaboration. TietoEVRY will support the implementation of Kesko's strategy to boost productivity and cost-efficiency through automation and new technologies. The co-operation also enables more efficient utilization of data. Under the new co-operation agreement, TietoEVRY and Kesko will continue to collaborate on continuous operational IT services with a development focus. The partnership aims to ensure that the services are business-oriented and maintain a high standard. The co-operation agreement covers a wide range of services, including management

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of Kesko’s business-critical applications, integration services and cloud services, end-user services as well as information security and capacity services.

In November, Region Stockholm signed an agreement with TietoEVRY for IT support to facilitate more accessible healthcare. The agreement supports, for example, the care and nursing plan created prior to discharge from hospital – which facilitates measures by municipal health and/or social care services. The value of the initial order is approximately SEK 56 million but can be extended to SEK 104 million with additional options and extensions. The agreement is initially valid for four years with the possibility of extending for up to another four years.

In November, Maldives Monetary Authority (MMA) signed an agreement with TietoEVRY to implement an Instant Payments System in the Maldives. The Instant Payments System will form the most essential component of the Maldives Payment System Development Project. The implementation will enable users to make and receive payments in real-time. The Instant Payments System in the Maldives will be based on TietoEVRY’s solution and will include ISO20022 message processing, liquidity management, fee management, fraud management and proxy (smart) addressing services.

In November, TietoEVRY signed a strategically important agreement with Innovasjon Norge to deliver the company’s suite of case management services. The agreement will contribute to professional and more agile response from Innovasjon Norge towards its key stakeholders. The value of this four-year agreement is approximately NOK 15 million. 

In November, SOS Alarm AB in Sweden chose TietoEVRY to implement the new IP-based 112 solution planned to replace the existing PSTN (Public Switched Telephone Network) solution. TietoEVRY’s assignment is to implement the communication solution and, in cooperation with SOS Alarm AB, connect the Communication Service Providers with SOS Alarms Call Center. The contract also includes six years of operating the 112 communications solution. As 112 is a highly critical service for Swedish society, extremely high requirements have been set for reliability and security.

In December, TietoEVRY signed a three-year agreement with OKQ8. OKQ8 with its 753 service stations is one of the largest fuel distribution companies in Sweden, investing in renewable energy solutions areas such as solar panels and infrastructure for chargeable electrical vehicles. As an IT partner, TietoEVRY will provide services and support in areas such as internet

banking, payments and credit solutions. Furthermore, the agreement covers services within information logistics, e.g. e-ID, printing, mailing and archiving services.

In December, the City of Vellinge prolonged the current outsourcing contract for infrastructure services until 2023. TietoEVRY will continue to have the complete responsibility for server and application operations, workplace management, network services, Service Desk and on-site support. TietoEVRY will also work in the areas of digitalization of new services and automation of processes. TietoEVRY will secure user-focused, efficient and high-quality services for key areas such as social care, welfare and education.

In December, Eika Alliance, one of Norway's largest banks and insurance companies, and TietoEVRY entered into a strategic agreement. The agreement covers a delivery of the next generation of core banking and payment solutions, including card services and digital channels. Eika is anticipated to gain high-quality digital solutions for compliance and security – as well as innovative and future-oriented banking solutions. The agreement runs for five years after all the Eika banks have been migrated to TietoEVRY. The agreement also includes the option to extend for a further four years.

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Changes in Group structure

The divestment of Karbon Invest AS, providing case management and archiving systems for the public sector in Norway, was completed in February 2020.

The merger of Tieto Latvia SIA and Evry Latvia SIA was registered on 11 November 2020.

Branches

TietoEVRY Group has branches in Australia, France, Latvia, Malesia, Norway, Ukraine and United Arab Emirates.

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Personnel

The number of full-time employees amounted to 23 632 (24 322) at the end of December. The number of full-time employees in the global delivery centres totalled 11 225 (11 383), or 47.5% (46.8) of all personnel.

The number of full-time employees was down from the year-end 2019 level of 24 322. The decline includes redundancies of around 950 and net recruitments of over 400. The company also took over close to 200 employees from IBM as part of the redefined partnership. The 12-month rolling employee turnover stood at 9.7% (12.6) at the end of December. Group-level salary inflation is expected to remain below 2% on average in 2021. Furthermore, salary inflation is partly offset by price increases in some service areas, offshoring and management of the competence pyramid. 

Group personnel and remuneration

In 2020, the focus was on creating the foundation for future success of the integrated company. The integration programme node called Leadership and Engagement was responsible for developing and driving HR integration-related projects and workstreams. Measures to secure the health and safety of employees as well as to facilitate remote work were also high on the agenda during the year.

TietoEVRY’s Human Resources (HR) function is responsible for developing people practices and employee experience in the company. The function is led by the Chief HR Officer while country HR teams are responsible for country-specific HR operations. The company supports freedom of association and collective bargaining as defined in the International Labour Organization’s Declaration on Fundamental Principles and Rights at Work and stated in TietoEVRY’s Code of Conduct. In addition, the company supports and respects the principles

set out in the United Nations’ Universal Declaration of Human Rights and the ILO Declaration on Fundamental Principles and Rights at Work.

TietoEVRY invests in the competence development of its employees. Curiosity and lifelong learning are crucial aspects of the company’s culture and success. The Keep Learning culture and the learning platform Cornerstone offer various learning modules. By the end of 2020, 93% of employees and 94% of managers had used the learning platform.

The Culture Code, OurVoice survey and Leadership Aspirations form the cornerstones of employee engagement.

A critical element for successful integration is understanding, building and aligning cultural factors. In addition to the Nordic values of openness, trust and diversity, all employees were engaged in creating TietoEVRY’s Culture Code. This code defines the behaviour valued in the company based on insights from both of the former companies and the long-term strategic priorities.

Employee engagement activities are followed up through OurVoice, an employee engagement survey where employees give feedback in key areas. The survey results are reviewed and discussed in the Group Leadership Team as well as within the business networks and teams on all levels across the organization. The result of the TietoEVRY Engagement Index, the key parameter, was 76/100. In addition, almost 5 000 individual written comments were received and TietoEVRY created a toolbox for managers on how to interpret the results, run workshops, create engagement initiatives, and engage with their teams remotely.

TietoEVRY has defined principles that set expectations for what good leadership means. The three Leadership Aspirations set the focus on building the future, leading performance and being the role model for values. The leadership aspirations are further translated into leadership skills and behaviours and used for purposes such as leadership selection.

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Diversity and inclusion is a key area in TietoEVRY’s new long-term sustainability plan. During the year, activities from the former companies were consolidated under one umbrella and a diversity and inclusion charter complements the company’s Code of Conduct. As one encouragement for this work, TietoEVRY was in 2020 ranked third among companies in Sweden in the SHE Index, which promotes diversity and inclusion in leadership and workforce as well as equal compensation and work-life balance. Furthermore, TietoEVRY Sweden continues to hold the EDGE Assessment Certificate, the leading global assessment and business certification for gender equality.

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Non-financial information

This section describes TietoEVRY’s sustainability activities as required in Chapter 3a of the Finnish Accounting Act on non-financial information (NFI). The linkages between NFI areas and TietoEVRY's sustainability focus areas are identified in the chart describing policies and processes. More information is available in the Sustainability Report, assured by an external partner.

Description of TietoEVRY's business model

TietoEVRY is one of the largest digital services and software companies in the Nordics. The company’s value-adding services comprise new data-driven services, business critical software solutions, managed services, product development services and related capabilities to support customers’ business renewal, innovation and efficient operations.

TietoEVRY’s role varies from consulting and advisory, designing and building solutions to running IT operations. Our ambition is to co-create new solutions and innovate new data-driven business models with our customers and partners. Value creation and competitiveness are based on solutions combining best-of-breed technologies with integration capabilities, industrialized service delivery and strong global delivery capability.

Description of management of NFI topics

In 2020, TietoEVRY focused on developing a systematic approach to managing sustainability, including appropriate policies, processes, governance and organization. TietoEVRY’s sustainability work is facilitated by the company’s Sustainability Team and supported by the Sustainability Steering Group, chaired by the Vice President, Communication and Sustainability. The steering group advises the Group Leadership Team and Board of Directors and approves the sustainability section of the integrated annual report. The Sustainability Steering Group represents different functions and units of TietoEVRY and many of its members are part of the Group Leadership Team. TietoEVRY’s ambition is to maintain gender balance in the steering group, as well as ensure that both younger and more experienced executives are represented.

TietoEVRY’s Group Leadership Team and the Board of Directors reviewed sustainability matters on two occasions during 2020. The topics included reviews of the annual integrated report and

NFI information, including relevant sustainability-related risks and TietoEVRY’s societal engagements in 2020, among other things. 

TietoEVRY’s new Sustainability Game Plan 2023 consists of three broad themes – climate action, ethical conduct and exciting place to work – with Responsible Areas under each. An additional area in the game plan is sustainable business opportunities, comprising a range of solutions and services that can accelerate and improve a customer’s sustainability performance. Materiality analysis has been used to prioritize the most important topics based on the strategy, market trends, results from stakeholder dialogues, and the UN’s Sustainable Development Goals. The analysis forms the basis of our sustainability game plan and our sustainability reporting in accordance with GRI Standards, option Core.   

Each Responsible Area has publicly stated goals, and the action plans, implementation and reporting are run by nominated Responsible Area owners and data partners. Responsible Area goals and results for 2020 are presented in the table in this section. The Sustainability Game Plan 2023 is managed according to TietoEVRY’s Sustainability Management Process, which follows the United Nations Global Compact Management Model and GRI Standards. Linkages to the United Nations Sustainable Development Goals, which are considered a strategic tool enabling corporations to contribute to a more sustainable society, are established by applying principled prioritization. The management of the Responsible Areas – including policies, processes, due diligence and escalation channels – is illustrated in the chart in this section. 

TietoEVRY’s ethical guidelines are summarized in the Code of Conduct Policy, which applies to all TietoEVRY employees, and a separate Supplier Code of Conduct Rule applies to any third party contributing to the company’s services, products and other business activities. Both documents are based on the United Nations Global Compact, OECD Guidelines for Multinational Enterprises, ILO Declaration on Fundamental Principles and Rights at Work, the International Bill of Human Rights, UN Rio Declaration on Environment and Development, the UN Convention against Corruption, UK Bribery Act, and US Foreign Corrupt Practices. The policies cover all Responsible Areas, which are also linked to other, topic-specific policies and more detailed rules. The policies cover the relevant legal, certification and other best practice requirements and are reviewed annually.

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TietoEVRY has a group-wide Whistleblowing Channel that can also be accessed on the company’s external webpages. Whistleblowing notifications concerning Code of Conduct violations, for instance, are investigated confidentially by the Compliance Officer through a predefined process. Cases of a severe or sensitive nature can also be referred to an Escalation Committee for a decision. If a whistleblower notification relates to managers on L1, including the CEO, the Chair of the Audit and Risk Committee shall be informed. If a whistleblower notification involves managers on L2, the CEO shall be informed.

In the case of serious or highly sensitive whistleblowing cases, the Compliance Officer shall prepare a report for submission to the Audit and Risk Committee. In each such case, the Escalation Committee shall consider whether the CEO or Board of Directors should also be informed. Six-monthly reports shall be prepared for the Audit and Risk Committee covering aggregated information about notifications received through the Whistleblowing Channel, cases under investigation and measures taken. In addition, the Responsible Areas have separate channels for incident reporting and continuous improvement.

Main risks in non-financial area

During this extraordinary year of the Covid-19 pandemic, our priorities have been crystallized to ensuring employee safety, the continuity of our customers’ operations and the company’s stability.

The aim of TietoEVRY’s internal control framework is to assure that operations are effective and well aligned with the strategic goals. The internal control framework is intended to ensure correct, reliable, complete and timely financial reporting and management information. The framework endorses ethical values, good corporate governance and risk management practices. Risk management and major risks are described in detail in section Major risks.

TietoEVRY uses systematic risk management to develop the efficiency and control of business operations as well as their profitability and continuity.

The risk management framework consists of the risk management organization, related policies, processes, tools and common ways of working. The risk management organization develops and maintains the company’s risk management framework, including risk reporting, risk management governance and follow-up of risk exposures consisting of strategic, financial, operational and compliance risks.

The risk management organization consists of the Corporate Risk Management unit, nominated Risk Managers in the units and other stakeholders. A group-wide Risk Manager Forum has been established for sharing information, setting the direction of risk management, collaboration between units and reviewing steering documents. In addition, the forum aligns group-wide Risk Management activities and ensures the company-wide deployment of the Risk Management framework.

TietoEVRY’s risks include a reputational factor, which in addition to negative publicity could lead to loss of customers’ trust, and a negative impact on stakeholder relations including financial consequences. 

Fraudulent, unethical, or even illegal actions by individuals in areas such as corruption or conflict of interest can occur if the company controls are not of an adequate standard or anticorruption awareness and team culture are not at a sufficiently high level. Such situations can have negative consequences ranging from disqualification from public tenders to sanctions. Compliance training, improvements of controls, audits and follow-up are used to mitigate the risk.

Stress-related health issues as well as discrimination and harassment are human and labour rights related risks. From an operational perspective, deliveries could be compromised if key resources go on long sick leaves. Both health issues and discrimination and harassment can lead to environments where employees may not reach their full potential. Discrimination could also hinder the company’s ability to develop solutions to societal problems.

TietoEVRY believes that diversity in personnel, whether in terms of gender, age or cultural background, is needed to stay competitive in the fast-paced technology industry. Diversity and inclusion are an integral part of the company’s culture and Human Resources activities. Being able to unwind and maintain wellbeing is equally crucial. 

TietoEVRY’s supplier base consists of direct and indirect suppliers. Supply chains may include compliance risks related to the environment, human and labour rights or even corruption. Severe breaches against international conventions in the supply chain could lead to customers deciding to terminate contracts or sanctions from authorities. TietoEVRY mitigates these risks through its supplier sustainability programme and on-boarding practices, consisting of both compliance and audit activities.

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Environmental risks have mainly been identified and handled within TietoEVRY’s environmental management system and include, for example, risks related to aspects such as offices, equipment, waste and business travel. Proper handling of these topics is a prerequisite for TietoEVRY’s ISO certificate (ISO14001) and our attractiveness as an existing or potential partner and employer. 

Group Sustainability manages the climate risks related to emerging regulations including higher pricing of greenhouse gas emissions that can lead to increased costs. Climate risks and their management will be further reviewed and assessed, as well as incorporated within the company’s risk management framework during 2021.

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POLICIES AND PROCESSES ON NFI MATTERS

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Goals and results for each sustainability area

1) United Nations Sustainable Development Goals: https://sustainabledevelopment.un.org/

2) Measured on an annual basis

3) Scope: Agreements made through the company's procurement function. Note that scope also includes supplier's version approved by Head of Sustainability

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1) United Nations Sustainable Development Goals: https://sustainabledevelopment.un.org/

2) Baseline FY20

3) Scope consists of hardware for own use as well as hardware as a service to customers. Devices in the scope include lap-tops, mobile devices, monitors, and IT peripherals. 

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Shareholders’ meetings

TietoEVRY Corporation's Annual General Meeting held on 29 April approved the financial statements 2019 and discharged the company's officers from liability for the financial year 2019. The meeting also approved the Remuneration Policy for the company’s governing bodies and decided to amend the Articles of Association.

The Annual General Meeting decided to not distribute dividends. Thus the Annual General Meeting authorized the Board of Directors to decide at a later stage at its discretion on the distribution of dividend in one or several instalments up to the aggregate maximum amount of EUR 1.27 per share from the distributable funds of the company for the financial year that

ended on 31 December 2019. On 23 July, the Board of Directors decided that a dividend of EUR 0.635 per share in total be paid for the financial year ended on 31 December 2019 from the distributable funds of the company in two instalments.

The Annual General Meeting decided that the Board of Directors shall consist of ten members and re-elected the Board's current members Tomas Franzén, Salim Nathoo, Harri-Pekka  Kaukonen, Timo Ahopelto, Rohan Haldea, Liselotte Hägertz Engstam, Niko Pakalén, Endre Rangnes and Leif Teksum. Katharina Mosheim was elected as a new member. Tomas Franzén was elected as the Chairperson of the Board of Directors.

Shareholders’ Nomination Board

The composition of the Shareholders’ Nomination Board for TietoEVRY Corporation was determined based on holdings on 31 August 2020 in the Finnish, Norwegian and Swedish shareholders’ registers and received evidence thereof.

TietoEVRY’s Shareholders' Nomination Board comprises four members nominated by the largest shareholders and the Chairperson of the Board of Directors of the company. The shareholders who wished to participate in the work of the Shareholders’ Nomination Board nominated the following members:

•Petter Söderström, Investment Director, Solidium Oy

•Gabriele Cipparrone, Partner, Apax Partners LLP

•Gustav Moss, Vice President, Cevian Capital AB

•Mikko Mursula, Chief Investment Officer, Ilmarinen Mutual Pension Insurance Company; and

•Tomas Franzén, Chairperson of the Board of Directors, TietoEVRY Corporation.

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The Board of Directors 

Board of Directors as at 31 December 2020  

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The President and CEO and operative management

Members of the Leadership Team as at 31 December 2020

Kimmo Alkio

President and CEO   

Born: 1963   

Nationality: Finnish   

Education: BBA and Executive MBA   

Joined TietoEVRY in 2011

Malin Fors-Skjæveland   

Integration Officer

Born: 1970   

Nationality: Swedish   

Education: MSc. (Tech.)   

Joined TietoEVRY in 2018   

Kishore Ghadiyaram 

Head of Strategy 

Born: 1972 

Nationality: Indian 

Education: BSc. (Tech.) 

Joined TietoEVRY in 2008 

Tomi Hyryläinen  

Chief Financial Officer 

Born: 1970 

Nationality: Finnish 

Education: MSc. (Econ.)

Joined TietoEVRY in 2018

Ari Järvelä  

Head of Operations   

Born: 1969   

Nationality: Finnish   

Education: MSc. (Eng.)   

Joined TietoEVRY in 2001

Satu Kiiskinen  

Managing Partner, Finland   

Born: 1965   

Nationality: Finnish   

Education: MSc. (Econ.)   

Joined TietoEVRY in 2013

Thomas Nordås 

Head of Digital Consulting 

Born: 1971 

Nationality: Norwegian 

Education: MSc. (Math.) 

Joined TietoEVRY in 2019 

Christian Pedersen  

Managing Partner, Norway 

Born: 1974 

Nationality: Norwegian 

Education: MSc. (Tech.) 

Joined TietoEVRY in 2014 

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Harri Salomaa  

Head of Product Development Services   

Born: 1961   

Nationality: Finnish   

Education: BSc. (Eng.)   

Joined TietoEVRY in 2020 

Karin Schreil 

Managing Partner, Sweden 

Born: 1971 

Nationality: Swedish 

Education: MSc. (Eng.) 

Joined TietoEVRY in 2019

Christian Segersven  

Head of Industry Software 

Born: 1975   

Nationality: Finnish   

Education: MSc. (Tech.)  

Joined TietoEVRY in 2013   

Johan Torstensson  

Head of Cloud & Infra 

Born: 1969 

Nationality: Swedish 

Education: MBA in Finance and Management 

Joined TietoEVRY in 2019  

Trond Vinje  

Head of HR   

Born: 1968   

Nationality: Norwegian   

Education: MSc. (Pol. Sci.)   

Joined TietoEVRY in 2015

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Major risks

TietoEVRY has four risk categories: strategic, operational, financial and compliance risks.

Strategic risks are related to market volatility, IT market transformation to new technologies (including the rapid digitalization and automatization of society), change management, reskilling ability and speed, ability to respond to competition and new entrants in the market, dependencies on few big customers in some business areas and ensuring delivery quality in the dynamic business environment.

Operational risks refer e.g to changing the business model in business units, risk and continuity management, customer bidding and requirement analysis, and maintaining a high professional standard in delivery management and quality assurance.

Financial risks mainly consist of credit risks, currency risks, interest rate risks, and funding and liquidity risks.

Compliance risks are connected to the organization failing to recognize or meet the requirements in the areas of legislation or other mandatory regulation (e.g. General Data Protection Regulation (GDPR), Schrems II, anti-corruption, anti-bribery, insider matters, sanctions and trade compliance), internal policies and rules or ethics and integrity.

Risks are aggregated by utilizing the corporate GRC platform, resulting in risk maps that are reviewed by leadership teams in the units and the ARC. TietoEVRY’s major risks and the measures for their mitigation are described below.

Market volatility

Changes in the Nordic core markets have a direct effect on market conditions and result in volatility that might have a negative impact on Nordic market growth. Changes in the economic environment and customer demand can affect both business volumes and price levels, which might result in lower revenue or slower revenue growth than expected.

These potential risks are mitigated through multi-year contracts for continuous services. TietoEVRY also aims to maintain long-term business relations and to be a preferred supplier to

its customers. The company executes tight cost and investment control with continuous investment performance monitoring, accompanied with a clear structure for decision rights, which are defined in the Decision Making Authority (DMA) Policy.

Global service capabilities, cross-selling and tough price competition are the main drivers in the IT sector for the development of the global delivery model. TietoEVRY’s position as a leading IT service provider in the Nordics is supported by existing and enhanced competencies, and by the choice of right partners.

Change and transformation

In large-scale adaptation to the market by organizational transformation and right-sizing, resistance to change can prolong the transition, which may affect operational efficiency.

The change management capacity is concentrated in a common Integration Management Office (IMO), which provides standard tools and systems for the change, including communication, target setting and training for the integration period.

The Group Project Excellence unit sets common standards for project management to ensure  proper project risk management and compliance in project financials management and follow-up.

Sudden changes in the market environment, customer demand and customer strategies or the competitive landscape in these areas might harm TietoEVRY’s operations and profitability.

To diversify the business, TietoEVRY provides services to several different industries and markets. The company develops its business mix to provide new industry software solutions, digital consulting, new hybrid cloud solutions and broader R&D capabilities to strengthen its position amongst both current and new customers. An industrialized and standardized way of providing services and solutions, employing automated processes, improves competitiveness and reduces risk.

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Service continuity and cyber security

Close to 100% availability of the services is the basis of trust among customers, stakeholders and society.

A service continuity disruption can be caused, for instance, by hardware or software failures, power outages, natural disasters and different types of intentional or unintentional actions by people, such as human error, cybersecurity breaches, and other criminal activities.

Risks related to malfunctions or cybersecurity breaches of systems could seriously affect TietoEVRY’s ability to provide its services and have an adverse impact on the company’s financials and reputation.Thus, business continuity planning is a high priority in TietoEVRY’s operational management in order to ensure that redundancy and fault tolerance are at the appropriate level.

To reduce the service continuity risk and to better understand the interdependencies in solutions and data centres, TietoEVRY constantly reviews, maintains and improves its IT asset management, configuration management and monitoring systems. In addition to a balanced global portfolio, TietoEVRY has recovery procedures and backup systems in place to handle potential service interruptions. Root cause analysis, best practices and experiences from previous incidents help in preparing for and in mitigating the service continuity risk.

Also, a comprehensive and robust Major Incident & Escalation process, crisis management process and efficient cybersecurity defence with high-class detection and response capabilities reduce service interruptions.

Quality costs related to customer bidding and delivery management

Inability to appropriately understand and analyze customers’ changing needs, their business processes and the exact requirements can lead to misjudgements in setting the scope of projects or services and, consequently, difficulties in meeting the specifications of customer agreements.

TietoEVRY’s is committed to actively verify that business processes from sales to delivery are designed, implemented and embedded to deliver customer value and actively mitigate end-to-end risk exposure along full contract life cycles. Internal and external quality assessments and audits are used to verify the effectiveness and efficiency of ways of working as well as to control

the quality of outcomes through measurable and actionable KPIs and key controls. At the same time, customer feedback management is an integral part of how we drive performance and safeguard quality assurance at both the operational and strategic level. As part of this, we actively ask customers for feedback to understand how well we perform individual deliveries.  In addition, we engage with customers to understand how well we support them in meeting their changing business objectives through our portfolio of deliveries. Insights and actions resulting from customer feedback are prioritized and followed up regularly all at levels of the organization and integrated into change management efforts.

Retention of employees

The competition in the market and demand for new services require ability and speed to reskill, attract new and retain existing competences and business knowledge for new services, new service models and offerings. TietoEVRY’s success builds on attracting talent, skills renewal, business knowledge and the maturity of the organization.

Inability to retain key employees and to recruit new talent with the required competence might have a negative impact on the company’s performance. High employee turnover might also cause delays in customer projects, leading to penalties or loss of customers.

To reduce these risks, TietoEVRY implements unified delivery models across sites and offers its employees challenging jobs, diverse development possibilities, social recognition and training opportunities as well as interesting career paths through job rotation. Furthermore, the company has competitive compensation packages, including a company-wide incentive system. Attractive recruitment tools, strategies, talent management and competence development have a high strategic priority at TietoEVRY. The company also focuses on Employer Branding to build and strengthen TietoEVRY’s image as an attractive employer both internally and externally.

Credit risks

Changes in the general market environment and global economy can result in additional financial risks. Credit risks might arise if customers or financial counterparties become unable to fulfil their commitments towards TietoEVRY.

TietoEVRY's Credit Policy defines the principles for customer credit risk management to be applied in all lines of business and controlled by a centralized credit management team. The risk assessment utilizes external risk databases and past experience as a reference. Credit risk

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regarding financial counterparties is managed through counterparty limits, as set out in the TietoEVRY Treasury Policy.

Currency risks

TietoEVRY’s currency transaction exposure arises from foreign trade, cash management and internal funding in foreign currencies. Translating the balance sheets and income statements of Group companies into euros creates a translation exposure.

TietoEVRY’s Treasury Policy defines the principles for managing currency risks within the Group.

Interest rate risks

TietoEVRY's interest rate risk consists mainly of short- and long-term loans, cash positions and derivative contracts. Fluctuations in interest rates can impact TietoEVRY's financial result or economic situation.

TietoEVRY Treasury Policy defines the principles for managing interest rate risks within the Group.

Funding and liquidity risks

Exceptional market conditions in the financial market might impose temporary limitations on raising new funding and/or lead to an increase in funding costs.

Group Treasury monitors and manages TietoEVRY’s funding structure and liquidity by maintaining a sufficient loan portfolio and liquidity position. Analyses of alternative financing sources and pricing for the company are continuously updated. TietoEVRY’s financial risks are described in full in the notes to the consolidated financial statements.

Legal, regulatory and compliance risks

TietoEVRY operates in multiple jurisdictions and is required to comply with a wide range of laws and regulations enacted both at the European and national level, e.g. data protection and privacy laws public procurement, anti-corruption, anti-bribery, regulations restricting competitive trading conditions, health and safety regulations, environmental regulations, labour regulations, competition regulations as well as securities markets, corporate and tax laws. Failing to comply

with the regulations may subject the company to regulatory interventions or penalties, or a slowing or even halting of the development of its activities.

TietoEVRY functions as a data processor for customers and as a data controller for its internal personal data. Failing to comply with the EU General Data Protection Regulation (GDPR) or to so called "Schrems II" decision, might result in negative reputation, significant fines or other expenses if a solution or service needs to be redesigned or redeveloped.

The risk is mitigated by company-wide privacy work. TietoEVRY has a privacy governance model, which ensures that a privacy organization and resources, continuous follow up and reporting, proactive privacy development and active employee communication and training are in place. Privacy governance also ensures that the GDPR requirements are appropriately embedded as practical rules and instructions into corporate core business processes such as offering and software development, sales and marketing, program and project delivery, continuous service delivery and TietoEVRY’s internal service.

Supply chain risk

TietoEVRY's ability to perform its obligations to customers can be affected by a failure by any significant supplier or partner to fulfil its obligations. Such failure may expose TietoEVRY to liabilities and impact the profitability of the company. The company has, for example, outsourced certain infrastructure operations, and a potential failure in deliveries by a supplier could cause disturbances to customers. These risks are managed by partner contract management, contract renewal negotiations and continuous evaluation of the partner delivery quality.

Global pandemic: Covid-19

Due to the ongoing Covid-19 pandemic, the current market outlook in TietoEVRY’s main markets involves significant uncertainties. The company’s portfolio comprises services based on multi-year agreements in infrastructure and application services as well as in industry-specific software businesses. The digital consulting business has shorter contractual periods and is likely to be more affected during times of economic uncertainty. TietoEVRY operates in multiple countries, balancing workforce availability. The company has already taken strict measures, including savings actions and temporary layoffs, to mitigate the potential financial impact of the pandemic and to secure the health and safety of employees and ensure critical services to customers.

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Auditors

The ARC prepares a proposal on the appointment of TietoEVRY’s auditors, which is then presented to the Board of Directors and finally to the AGM for its decision. The compensation paid to the auditors is decided by the AGM and assessed annually by the ARC.

The Board of Directors proposes to the AGM, in accordance with the recommendation of the ARC, that the auditor to be elected at the AGM 2021 be reimbursed according to the auditor's invoice and in compliance with the purchase principles approved by the Committee.

The Board of Directors proposes to the AGM, in accordance with the recommendation of the ARC, that the firm of authorized public accountants Deloitte Oy  be elected as the company's auditor for the financial year 2021. The firm of authorized public accountants Deloitte Oy has notified that APA Jukka Vattulainen will act as the auditor with principal responsibility.

Auditing 

The AGM 2020 elected the firm of authorized public accountants Deloitte Oy as the company’s auditor for the financial year 2020. Deloitte Oy notified the company that Authorized Public Accountant Jukka Vattulainen acts as principal auditor.

In 2020, TietoEVRY Group paid the auditors a total of EUR 1.3 (0.9) million in audit fees, and a total of EUR 0.7 (0.9) million for other services.

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Shares and shareholders

TietoEVRY Corporation’s issued and registered share capital on 31 December 2020 amounted to EUR 76 555 412.00 and the number of shares totalled 118 425 771. TietoEVRY’s shares have no par value and their book counter value is one euro. The company's shares are listed on NASDAQ in Helsinki and Stockholm and the Oslo Stock Exchange. The company has one class

of shares, with each share conferring equal dividend rights and one vote. The company’s Articles of Association include a restriction on voting at the Annual General Meeting, where no-one is allowed to vote with more than one-fifth of the votes represented at the meeting. The Articles of Association are available at www.tietoevry.com/investors.

The company had 44 011 registered shareholders at the end of 2020 based on the ownership records of the Finnish, Swedish and Norwegian central securities depositories. On 31 December, TietoEVRY had two long-term shareholders holding 10% or more of the shares: Apax Guernsey (Holdco) PCC Limited, formerly the largest shareholder of EVRY, and Solidium Oy. TietoEVRY received one announcement regarding a change in its shareholding during 2020: the holding of Silchester International Investors LLP fell below the 5% threshold.

The members of the Board of Directors, the President and CEO and their close associates together held 0.1% of the shares and votes registered in the book-entry system on 31 December 2020. The President and CEO is also participating in the company’s long-term share-based incentive plans. Potential rewards will be paid partly in TietoEVRY shares. As the number of additional shares related to these incentives is dependent on the company’s performance, these are not included in this aggregate number.

In connection with the merger, Apax Partners LLP, acting through the company Lyngen Holdco S.A.R.L., Cevian Capital Partners Limited and Solidium Oy, entered into a binding governance agreement concerning the nomination of members of the company's Board of Directors. More details are available at www.tietoevry.com/ investors.

At the end of 2020, the number of shares in the company’s or its subsidiaries’ possession totalled 10 978, representing 0.01% of the total number of shares and voting rights. Related to the company’s share-based reward plans, a total of 201 998 shares held by TietoEVRY were transferred to the participants of the plan during the year. In March, TietoEVRY purchased 35 000 own shares. In December, TietoEVRY Corporation received a return of 5 731 shares free of consideration according to the terms and conditions of EVRY Interim Long-Term Incentive Plan 2017. The number of outstanding shares, excluding the treasury shares, was 118 414 793 at the end of the year.

Share-based incentive plans

TietoEVRY has the following active share-based incentive plans: a Performance Share Plan 2018, 2019 and 2020 and a Restricted Share Plan 2018, 2019 and 2020. Additionally, EVRY’s share-based incentive plans have been transitioned into Restricted Share Plans (RSP) at TietoEVRY. The plans continue and have been transformed in a value neutral way into restricted stock units in the combined company.

The potential rewards will be paid partly in the company’s shares and partly in cash in 2021, 2022 and 2023, respectively. The share rewards to be delivered to the participants will consist of shares to be acquired from the market and treasury shares. Thus, no new shares will be issued in connection with the plans. The rewards to be paid on the basis of the plans correspond to the value of an approximate maximum total of 2 223 000 TietoEVRY shares (including the proportion to be paid in cash). On 31 Dec, the value of granted and unvested share plans corresponded to 1 774 899. The company has not issued any bonds with warrants and does not have any stock option programmes.

Board authorizations

The 2020 Annual General Meeting authorized the Board of Directors to decide on the repurchase of the company's own shares. The amount of own shares to be repurchased shall not exceed 11 800 000 shares, which currently corresponds to approximately 10% of all the shares in the company. The authorization is intended to be used to develop the company’s capital structure. The Board of Directors was also authorized to decide on the issuance of shares as well as on the issuance of option rights and other special rights. The amount of shares to be issued based on the authorization (including shares to be issued based on the special rights) shall not exceed 11 800 000 shares, which currently corresponds to approximately 10% of all the shares in the company.

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Share information

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Major shareholders on 31 December 2020 

Based on the ownership records of Euroclear Finland Oy, Euroclear Sweden AB and Norwegian Central Securities Depository (VPS).

1) On 20 December 2019, Apax Guernsey (Holco) PCC Ltd announced that its holding in TietoEVRY Corporation was 19 872 767 shares, which represents 16.8% of the shares and voting rights.

2) Based on the ownership records of Euroclear Finland Oy, Cevian Capital Partners Ltd's holding on 30 September 2020 was 9 381 731 shares, representing 7.9% of the shares and voting rights.

Number of shares

Based on the ownership records of Euroclear Finland Oy.

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Dividend

The distributable funds of the parent company amount to EUR 1 786.2 million, of which net profit for 2020 amounts to EUR 55.4 million. The Board of Directors proposes to the Annual General Meeting that for the financial year ended on 31 December 2020, a dividend of EUR 1.32 per share be paid from the distributable profits of the company. The Board of Directors proposes that the dividend shall be paid in two instalments:

•The first dividend instalment of EUR 0.66 per share shall be paid to shareholders who on the record date for the dividend payment on 29 March 2021 are recorded in the shareholders’ register held by Euroclear Finland Oy or the registers of Euroclear Sweden AB or Verdipapirsentralen ASA (VPS).

•The second dividend instalment of EUR 0.66 per share shall be paid to shareholders who on the record date for the dividend payment on 27 September 2021 are recorded in the shareholders’ registers.

The proposed dividend payout does not endanger the solvency of the company.

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Events after the period

On 15 February, TietoEVRY announced that it has reached an agreement with Aucerna, a Quorum Software affiliate, to sell its Oil & Gas software business. The divestment is part of the company’s strategy to seek focus and scale. Through this transaction, the Oil & Gas software business will have greater global market reach and growth opportunities. TietoEVRY’s Oil & Gas software business comprises hydrocarbon management, personnel and material logistics software and related services with installations in more than 50 countries. Revenue of the businesses to be divested amounted to around EUR 50 million in 2020 and the number of employees is around 430. 

The agreement was reached at an enterprise value of EUR 155 million, implying an EV/Revenue multiple of approximately 3.2. The Oil & Gas software business is reported as part of the Industry Software segment in the financial statement. The company anticipates that the transaction, subject to the approval of the competition authorities, will be concluded before summer 2021.

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Full-year outlook for 2021

TietoEVRY expects its organic1) growth to be -1% to +2%2) (revenue in 2020: EUR 2 786.4 million). The company estimates its full-year adjusted operating margin (adjusted EBITA)3) to increase to 13–14% (12.7% in 2020).

1) Adjusted for currency effects, acquisitions and divestments

2) High dependency on the Covid-19 pandemic development. Assuming normal business environment from the third quarter of 2021.

3) Adjusted EBITA is fully comparable with the previous definition of adjusted EBIT. According to both definitions, amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, impairment charges and other items affecting comparability are excluded – whereas amortization of other intangible assets is included.

Financial reporting in 2021

TietoEVRY will publish three interim reports in 2021:

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Alternative performance measures

Calculation of alternative performance measures

TietoEVRY presents certain financial measures, which, in accordance with the “Alternative Performance Measures” guidance issued by the European Securities and Markets Authority, are not accounting measures defined or specified in IFRS and are, therefore, considered alternative performance measures. TietoEVRY believes that alternative performance measures provide meaningful supplemental information to the financial measures presented in the consolidated financial statements prepared in accordance with IFRS and increase the understanding of the profitability of TietoEVRY’s operations. In addition, they are seen as useful indicators of

the Group's financial position and ability to obtain funding. Alternative performance measures are not accounting measures defined or specified in IFRS and, therefore, they are considered non-IFRS measures, which should not be viewed in isolation or as a substitute to the IFRS financial measures.

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Adjusted operating profit (EBIT) by segment

Adjusted operating margin (EBIT) by segment

Reconciliation of adjusted operating profit (EBIT)

1) 2019 comparative figures have been restated to reflect changes in amortizations due to updated valuations of the identified intangible assets in the EVRY merger, impact in operating profit of EUR -0.5 million. More information in Note 26. In addition, the Group has reclassified EUR 3.1 million foreign currency exchange gains and losses related to EVRY from financial items to materials and services.

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CONSOLIDATED FINANCIAL STATEMENTS (IFRS)

Income Statement

Statement of other comprehensive income

1) 2019 comparative figures have been restated to reflect changes in amortizations due to updated valuations of the identified intangible assets in the EVRY merger, impact in operating profit of EUR -0.5 million. More information in note 26. In addition, the Group has reclassified EUR 3.1 million foreign currency exchange gains and losses related to EVRY from financial items to materials and services.

Notes are an integral part of these consolidated financial statements.

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Statement of financial position

Assets