ESPOO, Finland, Feb. 14, 2002 (PRIMEZONE) -- TietoEnator:
-- Full year operating profit, before non-comparable items (EBIT) up
46% to EUR 120.5 million (82.4), corresponding to a margin of
10.6% (7.4). Net sales for full year up 13%. New international
customers for spearhead solutions, continued growth in
outsourcing.
-- Q4 operating profit, before non-comparable items, (EBIT) up 26%
to EUR 32,6 (25,9) million, corresponding to a margin of 10.4%
(8.3). Net sales for fourth quarter up 12%.
-- Dividend proposal to the AGM: EUR 1.00 (0.49) per share.
Full Year 2001
Markets: increased demand for high-value-added services After a comparatively strong start to the year the general economic slowdown increasingly affected overall IT expenditure in Europe and the USA. During the final two quarters the growth rate declined to single- digit figures following the drastic fall in the telecom market and the uncertainty following the September 11 attacks.
The market for low-value-added services gradually became tougher, with continued low demand for hardware products and body-shopping activities. Simultaneously, interest in the more complex, high-value partnership and solution businesses where TietoEnator has its stronghold showed constant growth, also during the latter part of the year. Customers continued to seek out strong IT partners with the capacity to provide services and solutions that could increase profitability and internal efficiency, generate cost-cutting opportunities, and provide the means to adapt rapidly to new market environments. This resulted in a number of large partnership contracts. In several cases the sales cycles for large partnerships were clearly shortened.
TietoEnator also continued to target its spearhead solutions to different areas such as banking and finance and the energy sector.
Despite the continued overall downturn of the IT industry during the year, the main demand driver, the ongoing digitisation of production and distribution of services, is clearly still in place and working.
Changes in corporate structure and larger new outsourcing agreements TietoEnator carried out a number of acquisitions and divestments during the year as well as concluded major outsourcing agreements that affected its corporate structure. The new outsourcing and partnership agreements are defined as organic growth even though in some cases they involved the purchase of share capital or business operations.
TietoEnator took over the Information Systems unit of Rautaruukki Corporation. An outsourcing agreement was signed with Kesko Oyj. Nokia Networks signed a collaboration agreement and transferred part of its product development activities, including some 300 employees, to TietoEnator. The remaining 43 % stake in AerotechTelub AB was sold to the company's principal owner Saab, and the holding in Atkos was sold to Finland Post Ltd. Net sales: strongest growth in banking and finance and forest segments The aggregate net sales of the six Business Areas rose by 13% to EUR 1,132.8 (1,005.6) million. In local currencies the growth was 16%. Organic growth was 11% and in local currencies 13%. Among TietoEnator's customer segments the strongest growth took place within banking and finance and the forest segment, both growing by 15%. Public sector sales grew by 8% and for telecom the growth figure was 6%.
The consolidated net sales of the Group increased by 1% to EUR 1,135.2 (1,119.9) million, when taking into account the divestment of the network infrastructure activities.
Geographically net sales growth in Finland amounted to 26%, in Sweden - 10% (in local currency -1%) and in Norway 28% (in local currency 27%).
The order backlog, comprising only services ordered with binding contracts, amounted to EUR 887.7 million at 31 December 2001, which was EUR 335.6 million higher than in 2000. TietoEnator estimates that 60% of this backlog will be invoiced during 2002.
Profitability: EBITA 11.9%, EBIT 10.6%
Operating profit before amortisation of goodwill (EBITA) and non- comparable items amounted to EUR 135.6 (95.1) million, representing a margin of 11.9% (8.5%). Operating profit after goodwill amortisation (EBIT) and before non-comparable items increased to EUR 120.5 (82.4) million, or 10.6% (7.4%). Operating profit (EBIT) after non-comparable items was EUR 251.8 (103.5) million. Under non-comparable items, income included capital gains of EUR 132.6 million on the sale of shares, and expenses included EUR 0.2 million in social costs related to the personnel warrants. Taxes on the non-comparable items were EUR 20.2 million.
All business areas except Telecom & Media reported improved profits. The improvement was due to increased sales and margins.
Earnings per share were EUR 2.40 (0.88) and, excluding goodwill amortisation, EUR 2.58 (1.04). Earnings per share excluding non- comparable items were EUR 1.05 (0.69).
Return on capital employed (ROCE) was 59.9% (27.7%) and the return on equity was 47.1% (19.6%).
Financing and Investments
Cash flow from operations totalled EUR 151.5 (73.5) million. EUR 71.2 (42.0) million was spent on investments in fixed assets and EUR 39.0 (9.8) million on acquisitions. Disposals of Group companies and sales of shares affected the cash flow positively by EUR 169.6 (4.3) million. EUR 40.4 (38.5) million was used to pay dividends. The company repurchased its own shares for EUR 25.7 million corresponding to 1,085,342 shares (1.3 % of the total share capital).
The balance sheet totalled EUR 801.2 (632.0) million. The equity ratio was 61.9% (57.5%) and gearing was -36.6% (-9.4%). Cash and cash equivalents amounted to EUR 214.8 (68.8) million. The company had unused credit lines totalling EUR 22 million and unused commercial paper programmes amounting to EUR 250 million.
Personnel
Net recruitment was strong during the first part of the year but slowed down substantially during the second half. The Business Areas took on a total of 1,507 (1,436) new employees. Together with acquisitions, divestments and leaves, the net increase amounted to 1,417 (369) persons for the full year. The average number of employees rose by 10%.
The average number of employees for the total Group amounted to 10,058 (9,934) and was 10,589 (10,032) on 31 December 2001.
The employee turnover rate decreased substantially during the year and for the full year was 9% (13%).
Share buy-backs: Improvement of Capital Structure
The Annual General Meeting authorised the Board to purchase the company's own shares in order to develop the capital structure of the company. The Board decided to exercise the authorisation on 19 September 2001, purchasing 871,060 shares for EUR 19.1 million. These shares represent 1% of the total share capital and shares. The purchase of own shares does not significantly change the ownership and voting structure of the company.
In January TietoEnator purchased 214,282 of the company's own shares for altogether EUR 6.6 million under the authorisation granted by the Annual General Meeting in 2000. The Annual General Meeting in 2001 decided to nullify these shares.
Short-term prospects: Outsourcing Will Increase
The transfer of digitisable products and services to electronic information networks will continue and sustain growth in demand for IT services. The current economic recession will dampen overall investment growth at least during the first half of 2002 and shift investment priorities to essential items and investments with short payback periods. Demand for high-added-value services will continue to grow at a faster pace than demand for low-value-added services.
Investments in information technology will remain positive in most of TietoEnator's business sectors. An exception is telecommunications, where overall investment activity is declining. Demand for software products for financial and human resources management is expected to slow down at the beginning of the year mainly as a result of the extensive replacement projects that were implemented last year. Outsourcing will increase in all sectors despite the trend among information management units to reduce their use of external services.
TietoEnators net sales growth in 2002 is expected to exceed the previous year growth of 13 %.
The first quarter of the year will be burdened by start up costs for new partnership agreements. The increase in net sales and moderate cost increases however create conditions for an improved result (EBITA) for the full year.
Dividend Proposal
The Board of Directors is proposing a dividend of EUR 1.00 (0.49) per share in respect of year 2001. EUR 0.50 of the dividend is based on the recurring profit and EUR 0.50 on the non-recurring capital gains.
TietoEnator Q4/2001
Markets and Results
IT expenditure continued to grow during the last quarter of 2001 but at a slower pace compared to the first half of the year. Demand for outsourcing, partnerships, services and solutions, continued to grow steadily; these rapidly increase customers' internal efficiency and profitability. Resource consulting ("body-shopping"), on the other hand, continued to suffer from weak demand. For TietoEnator, which focuses on high-value-added services, development was stable and positive especially in banking and finance, the public sector and the energy sector, whereas the telecom sector continued its negative trend.
Net sales growth for the six business areas during the fourth quarter was 12%, in local currencies 15%. The banking and finance segment accounted for 23% of total sales, telecom for 11%, public sales for 25% and the forest segment for 6% of the total.
Organic growth was 10% for the fourth quarter and in local currencies 13%. Geographically, growth was 30% in Finland, while Sweden decreased by 10% (in local currency growth in Sweden was -2%). Growth in Norway amounted to 1% (4% in local currency), in Denmark to 17% and in Germany to -19%.
Isolated for the fourth quarter, the operating profit before goodwill amortisation (EBITA), excluding non-comparable items, was EUR 36.8 (30.6) million, corresponding to a margin of 11.7% (9.8%). Operating profit after goodwill amortisation (EBIT), excluding non-comparable items, was EUR 32.6 (25.9) million, corresponding to a margin of 10.4% (8.3%). EBIT, including non-comparable items, amounted to EUR 143.0 (21.5) million.
Personnel
Net recruitment continued to slow down. A total of 223 (345) new persons were employed during the last quarter within the business areas. Together with acquisitions, divestments and leaves, the net increase was 369 (31).
Q4 development by business area: Banking & Finance (formerly Finance Sector) Economic uncertainty encouraged customers to place higher priority on investments aimed at short-term cost savings, while demand for consulting assignments and larger-scale development projects was weaker.
The Nordic partnership business, the foundation of this business area, showed continued strong growth in sales and profits, mainly due to the successful acquisitions earlier in the year. The announced partnership with Sampo and If was officially signed at the end of the year. The solutions business grew moderately during the last quarter, but it continued to strengthen its position as a leading supplier of fund management systems and payment systems. An agreement was signed with Europolitan/Vodafone for a mobile payment system and with Deutsche Bank for a fund management system.
Net sales for the fourth quarter totalled EUR 50.2 million (45.0), an increase of 12% compared to last year. Operating profit before goodwill amortisation (EBITA) was EUR 6.8 (6.1) million.
Telecom & Media
The weak economy and the cash flow problems of telecom operators continued to have a heavy impact on the overall telecom market also during the fourth quarter of the year. TietoEnator, however, owing to its size and competence, is playing a major role in ongoing discussions regarding outsourcing and partnerships where demand still is high.
The schedules for building and commissioning 3G networks were delayed and the saturation of the 2G market in Europe continued to slow down the manufacturing market. Several key customers made stringent efforts to cut costs by continued layoffs of personnel, freezing investments, cutting the number of external consultants and shelving projects that did not already in short-term improve performance or market position. The aggregate result of this development was slow market growth and a further increase in pressure on prices.
Integration of the product development department outsourced from Nokia during the autumn proceeded according to plan. TietoEnator advanced to a majority shareholder position in the Czech telecom-related IT company ISS.
Net sales for the fourth quarter totalled EUR 46.2 (45.4) million, an increase of 2% compared to last year. Operating profit before goodwill amortisation (EBITA) was EUR 3.1 (6.4) million.
Public Sector
The public market continued to develop steadily despite the economic slowdown. Trade conditions within the public sector normally change late in the economic cycle and with less amplitude compared to other markets. The market for IT solutions and services within the healthcare sector (for example hospitals, primary healthcare and dental care) continued to develop very positively, especially towards the end of the year. This is an area where the company is expanding its operations and services through acquisitions on a pan-Nordic and Scandinavian basis.
The professional service units reported a good result and the focus on cost issues that was clearly stated during the autumn also positively affected the result.
Agreements were signed with, among others, The Swedish Agency for Public Management and the county council of Ostergotland in Sweden.
Net sales for the fourth quarter totalled EUR 48.9 (39.9) million, an increase of 22% compared to last year. Operating profit before goodwill amortisation (EBITA) was EUR 7.8 (4.4) million.
Production & Logistics
The addressable Nordic market continued to slow down, most noticeably in Norway and Sweden. The aftermath effects of the attacks on September 11th reduced the IT spending within the travel industry. However, the ongoing structural changes in the Nordic countries continued, creating potential for new large outsourcing agreements.
There are several large companies that have run into problems when trying to implement large systems for the operative part of their business. This is partly why customers are now seeking the competence to implement industry-compliant solutions, to integrate surrounding systems and finally to manage the applications during the full lifecycle of the system. Another growing area is solutions that support collaborative value chains.
During the fourth quarter a global master licence agreement was signed with BP Amoco for the Energy Components concept, and an agreement for applications development and maintenance with Statoil of Norway. Within the forest sector deals were made with Myllykoski and M-Real.
Net sales for the fourth quarter totalled EUR 56.4 (51.1) million, an increase of 11% compared to last year. Operating profit before goodwill amortisation (EBITA) was EUR 5.5 (3.9) million.
Processing & Network
Demand for outsourcing and partnership services was strong during the period, in Sweden and especially in Finland. TietoEnator has a strong position in this market. Long-term credibility and reliability are considered increasingly important when choosing the right supplier and partner.
Among the larger deals made during the last quarter were increased co- operation with Sampo, the acquisition of Parcomp and a cross-border agreement with Kalmar Industries. Deals were also signed with the City of Helsinki and the Finnish National Board of Patents and Registration.
Net sales for the fourth quarter totalled EUR 87.2 (73.1) million, an increase of 19% compared to last year. Operating profit before goodwill amortisation (EBITA) was EUR 8.9 (8.0) million.
Resource Management
Demand was stable in all the Nordic countries. The Resource Management market is still hesitant about developments in the global and European economies. The Finnish euro-conversion projects were successfully concluded during the last months of 2001, and by mid-January 2002 all customers had converted to the new currency.
Demand for traditional payroll and accounting solutions was weak, whereas demand increased for process consulting, mainly related to human resources and finance, which created more outsourcing opportunities. Demand for value-added solutions is also increasing. These include invoice centres, as well as travel, reporting, archiving and content management on Intranets and the Internet.
Several large agreements were signed with existing and new customers in Sweden and Finland and Norway.
Net sales for the fourth quarter totalled EUR 47.4 (46.5) million, an increase of 2% compared to last year. Operating profit before goodwill amortisation (EBITA) was EUR 6.7 (7.7) million.
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www.waymaker.net/bitonline/2002/02/14/20020214BIT00090/bit0002.doc The Full Year-End Report www.waymaker.net/bitonline/2002/02/14/20020214BIT00090/bit0002.pdf The Full Year-End Report