Business News
Net sales and profits decline, outsourcing activity picking up
Friday 24. April 2009 - First-quarter net sales declined by 6% and amounted to EUR 438.0 (468.3) million. As 38% of Tieto's net sales are generated in non-euro countries, the weakened currencies, especially the Swedish krona, had a negative impact on net sales in euros. In local currencies, net sales declined by 2%. Weak performance in the finance and telecom sectors had a negative impact on the Group's net sales.
Operating profit, excluding one-off costs related to the Performance Improvement Programme, amounted to EUR 21.3 (37.7) million, representing a margin of 4.9% (8.1). Weaker profitability is mainly attributable to the decline in net sales.
First-quarter operating profit, including one-off costs of EUR 16.4 million amounted to EUR 4.9 (24.6) million. First-quarter profit before taxes totalled EUR 2.1 (21.7) million and earnings per share amounted to EUR 0.01 (0.23).
The targets set for Tieto’s Performance Improvement Programme have been reached and the programme has been completed. To adjust its operations to the current market situation and to address the declining trend in demand, Tieto started new streamlining actions during the first quarter. The company’s target is to achieve additional annualized cost-savings amounting to EUR 100 million, of which approximately EUR 70 million is expected to materialize in 2009.
Uncertainty prevails over the future development of the IT market. Polarization of the IT services market has increased during the quarter. On the one hand, the market for new, large-scale IT projects has declined in most sectors. On the other, outsourcing activity has picked up.
Tieto expects the IT services market to decline in 2009 and tough market conditions to continue. Therefore Tieto expects its full-year net sales and operating profit to decline from last year. In the Nordic countries, the best prospects for growth in 2009 are seen in the outsourcing of application and ICT infrastructure management. More than half of Tieto’s business is related to these services.
Tieto’s President and CEO Hannu Syrjälä:
“The recovery of the overall economy and the IT market is not yet in sight. Tieto has started a number of streamlining actions to adjust our cost base to the current market situation. At the same time we are putting a lot of effort into our sales activities, as we believe that IT can solve many of our customers’ challenges and make a major contribution to their business success, especially during a downturn.
Despite the tight budgets, savings and personnel adjustments, Tieto’s transformation continues. Our new operating model and business structure make us more efficient, enabling us to better harness competence and resources throughout the company. Combining our industry knowledge with a firm grip of our business countries has already led to good development in many of our local businesses. Without the transformation that we started last year, Tieto would be facing even tougher times than the ones we are experiencing at the moment.”