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TietoEnator’s Q2 weaker due to seasonality and one-time items


21 July 2006

Highlights of the second quarter
- Net sales growth 4% to EUR 443.1 million
- Operating profit excluding capital gains EUR 24.8 (41.7) million
- Operating margin 5.6% (9.7)
- Profit before taxes EUR 24.4 (57.7) million
- EPS at EUR 0.23 (0.57)
- Full-year guidance unchanged

TietoEnator’s President and CEO Pentti Heikkinen comments on second quarter performance:

“Compared with last year our performance in the second quarter looks weak, but a lot of it is explained by exceptional seasonality and one-time items both this year and last year. The measures we have taken to improve our organic growth and profitability have already started to kick in. We still need to work hard to achieve clearly better performance in the latter part of the year but based on the evidence I have seen this far, I am confident that we will be able to do that.”

TietoEnator’s second-quarter net sales grew 4% to EUR 443.1 (427.7) million. Organic growth was -1%. Second-quarter operating profit excluding capital gains was lower than in 2005 at EUR 24.8 (41.7) million, representing a margin of 5.6% (9.7). Both growth and profit were reduced by exceptional seasonality as Easter fell in the second quarter this year, which reduced the number of working days compared to 2005. It is estimated that the negative impact on growth was two percentage points and on operating profit around EUR 5 million. Another factor distorting comparability is the substantially lower amount of performance-based rewards from partnership contracts in the Telecom & Media business area. These totalled EUR 0.5 million in the second quarter of 2006 compared to EUR 6 million in net sales and EUR 5 million in operating profit in 2005. Additionally, the second quarter included restructuring expenses of EUR 4.6 (2) million. The slight decline in underlying profitability is a result of lower prices and a few project overruns.

Capital gains were lower than the year before at EUR 3.5 (14.7) million, and operating profit including capital gains totalled EUR 28.3 (56.3) million. Profit before taxes totalled EUR 24.4 (57.7) million) and earnings per share were EUR 0.23 (0.57).

TietoEnator’s full-year guidance remains unchanged. The net sales growth is expected to be 5-9% and the operating margin to range between 8% and 10%. The performance improvement in the second half is based on signed contracts bringing higher organic growth, lower restructuring expenses, higher utilization of staff and fewer project overruns.

TietoEnator expects its cash flow to continue strong and will start a new share repurchase programme of EUR 40 million to develop the company’s long-term capital structure.

TietoEnator’s full Q2 and full-year 2005 report (in English) can be found as an attachment.

TietoEnator is among the leading architects in building a more efficient information society and one of the largest IT services providers in Europe. TietoEnator specializes in consulting, developing and hosting its customers’ business operations in the digital economy. The Group’s services are based on a combination of deep industry-specific expertise and the latest information technology. TietoEnator has over 15 000 experts in more than 25 countries.

This is a release without tables. You can download the complete report using this link:


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