IT market continues to be weak, Tieto’s profitability improves slightly from the first quarter
Second-quarter net sales declined by 7% and amounted to EUR 444.8 (480.1) million. In local currencies, net sales declined by 3%. Net sales dropped in most customer industries, reflecting customers’ cautiousness in starting new projects. The telecom market continued to be challenging and Tieto’s net sales in the sector declined by 13%, having a substantial negative impact on the Group’s net sales.
Second-quarter operating profit amounted to EUR 10.4 (29.6) million. Operating profit, excluding one-off items amounted to EUR 24.6 (33.2) million, representing a margin of 5.5% (6.9). The number of employees was somewhat down during the quarter, resulting in a decrease in personnel costs and an improvement in the utilization rate. However, net sales declined at a faster rate than costs. Profit before taxes totalled EUR 8.8 (23.8) million and earnings per share amounted to EUR 0.14 (0.26).
To further adjust its operations to the current market situation and the declining trend in demand, Tieto started new streamlining actions during the first quarter of 2009. The streamlining measures include personnel adjustments, decreased use of subcontractors, accelerated utilization of offshore resources, consolidation of offices and cutting business expenses throughout the Group. The costs related to these measures amounted to EUR 24.9 million in the second quarter.
Tieto’s outlook for 2009 remains unchanged. The company 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.
President and CEO Hannu Syrjälä:
"The IT market continues to be weak and the telecom sector has remained the most challenging area for us. Although several large agreements were made in the second quarter, Tieto’s net sales were down 7%. Due to the declining sales and one-time costs, our profitability was clearly down from last year, but improved slightly from the first quarter.
Outsourcing continues to offer the strongest growth potential for Tieto in all our main markets, and this is the area where we are directing more and more of our sales efforts currently. In a recent study by EquaTerra, Tieto was ranked as the best provider of application management services in the Nordic countries. The positive feedback we have received from our customers is a clear indication that our efforts in quality and innovation are now starting to pay off"
Tieto is an IT service company providing IT, R&D and consulting services. With approximately 16 000 experts, we are among the leading IT service companies in Northern Europe and the global leader in selected segments. We specialize in areas where we have the deepest understanding of our customers’ businesses and needs. Our superior customer centricity and Nordic expertise set us apart from our competitors.
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