TietoEnator's profitability decline in Q2 further deepened by capital
TietoEnator Corporation Press Release 20 July 2007 at 08.00 am EET
This is a press release without tables. You can download the complete version using this link (pdf): http://hugin.info/3114/R/1140616/215564.pdf
Despite very good growth in net sales, TietoEnator's profitability declined in the second quarter of 2007. Net sales increased by 5% to EUR 434 million. Operating profit totalled EUR 9.9 (26.3) million. TietoEnator recorded capital losses of EUR 4.9 million in the second quarter compared to capital gains of EUR 3.5 million in 2006. The other main reasons of the profitability decline were higher personnel and subcontracting costs, loss-making delivery projects and high product development costs.
TietoEnator's net sales grew 5% to EUR 434.2 (411.8) million. Organic growth of 8% was higher than total growth as divestments reduced net sales more than acquisitions added. The market for IT services and solutions is active. In most areas prices are either stable or slightly higher than the year before. For TietoEnator prices remained unchanged on average.
The second-quarter operating profit totalled EUR 9.9 (26.3) million. TietoEnator recorded EUR 4.9 million of capital losses mainly from the divestment of parts of the German Banking & Insurance business. In the second quarter of 2006 TietoEnator recorded capital gains from divestments amounting to EUR 3.5 million. Excluding capital gains and losses operating margin was 3.4% (5.5). Restructuring expenses were lower than expected at EUR 3.3 (4.2) million.
Underlying operating profit (excluding capital gains and losses and restructuring expenses) declined to EUR 18.1 million from EUR 26.9 million the year before. Higher personnel expenses and subcontracting costs together with unchanged average prices had negative impact on profitability. Banking & Insurance business area recorded operating loss for the quarter due to poor profitability in Germany, challenging delivery projects in the core banking area and higher product development costs. The weak performance of the healthcare business in Sweden, Norway and Germany continued.
Lower operating profit was reflected in profit before taxes, which totalled EUR 8.9 (25.3) million and earnings per share amounting to EUR 0.07 (0.23).
TietoEnator's Deputy CEO Åke Plyhm comments on the second quarter performance: "We cannot be satisfied with our latest quarterly results. There are several things that are pressuring our profitability at the moment, the weakness of Banking & Insurance's solutions business being new for this quarter. The profitability issues will be tackled and solved one by one. Growth continued to be strong and we will have to work on using that to turn profitability to positive direction in the future."
TietoEnator expects its full-year organic growth in 2007 to be higher than the 2006 level of 2%. TietoEnator considers reaching the earlier communicated underlying operating profit guidance of over EUR 124 million difficult for 2007.
TietoEnator's Q2 2007 report can be found as an attachment.
For further information, please contact; Åke Plyhm, vice koncernchef, TietoEnator, tel. +46 705 65 8631, firstname.lastname@example.org
Timo Salmela, CFO, TietoEnator, tel. +358 9 8626 2213, +358 400 434 974, email@example.com
Päivi Lindqvist, EVP, Communications and Investor Relations, TietoEnator, tel. +358 9 8626 3276, +358 40 708 5351, firstname.lastname@example.org
Paula Liimatta, IR-chef, TietoEnator, tel. +358 9 8626 3113, +358 40 580 3521, email@example.com
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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 about 16 000 experts in close to 30 countries. www.tietoenator.com