Business News
Profitability on track, growth hampered by weak Swedish krona and soft demand in banking and telecom sectors
Tuesday 10. February 2009 - Tieto's fourth-quarter net sales remained at the same level as in the fourth quarter of 2007 and amounted to EUR 492.0 (491.3) million.
As 27% of Tieto’s net sales are generated in Sweden, the weakened Swedish currency (SEK) had a negative impact on net sales in euros. In local currencies, net sales grew by 4%. Operating profit, excluding one-off items related to the Performance Improvement Programme, amounted to EUR 42.4 (39.1) million, representing a margin of 8.6% (8.0).
In the fourth quarter, demand for IT services slackened due to the rapid weakening of the world economy. The effects of the economic slowdown on IT investments varied by customer segment. Demand for IT services was at a good level especially in the public sector, i.e. government, healthcare and welfare, whereas the finance sector was hit hard.
The Performance Improvement Programme has progressed ahead of schedule. The actions taken by the end of December amount to annualized savings of EUR 120 million. The savings reached to date will come into full effect as from the end of 2009. Thanks to the programme, improvement in profitability continued in all business areas in the fourth quarter. Fourth-quarter profit before taxes totalled EUR 6.6 (-67.7) million and earnings per share amounted to EUR 0.02 (-1.00). Tieto’s Board of Directors proposes a dividend of EUR 0.50 (0.50) per share for 2008.
Tieto anticipates the overall growth of IT services market to remain flat in 2009 due to the economic slowdown. Visibility to the market is poor, as uncertainty prevails over the future development of the IT market. Tieto expects its service volumes to grow, supported by new outsourcing cases, but the lower price level and weak Swedish currency (SEK) are anticipated to have a negative impact on net sales.
Tieto’s President and CEO Hannu Syrjälä:
“Tieto’s Turnaround programme progressed well in 2008. Our sales grew in line with our expectations and our profitability improved substantially from the previous year thanks to the Performance Improvement Programme, which has advanced ahead of schedule. We achieved all this in rather turbulent circumstances starting from the public tender offer during late spring followed by major changes in the financial markets and the overall global economy later in the year.
During 2009, Tieto will continue to focus on implementing our new business structure and operating model, supporting our customers through this economic downturn with high value-adding services, and maintaining our profitability. Actions to keep our costs in control will be taken as needed. At the same time, we will continue to invest in our competence development and the implementation of the global delivery model to ensure our future competitiveness.”