ESPOO, Finland, April 25, 2002 (PRIMEZONE) -- TietoEnator Interim Report 1/2002:
- Stable development for TietoEnator during first quarter 2002
- Top line grew over 10% to EUR 310 million
- Operating profit (EBITA) EUR 34.4 million (37.8), operating margin
(EBITA) 11.1% (13.4)
- Profit impacted by weaker telecom market, start of new partnerships
and the divestment of defence operations in 2001
- High acquisition activity to be continued
MARKET OVERVIEW
IT expenditure increased at a slow pace during the period. Demand for outsourcing, partnerships, services and solutions that increase customers' internal efficiency and profitability continued to grow.
The resource consulting oriented segments of the market suffered fromweak demand and strong price pressure. For TietoEnator, which focuses on high-value-added services, development during the first quarter of 2002 was stable and no major changes, positive or negative, were observed in the market environment. The majority of TietoEnator's businesses recorded positive development even though the Telecom market showed no signs of improvement during the period.
NET SALES
First-quarter net sales increased by 10% to EUR 310.1 million (281.2).In local currencies the growth was the same. Organic growth was 7%.Geographically growth expressed in local currencies was 21% in Finland,-6% in Sweden, 2% in Norway, 26% in Denmark and 5% in Germany.
The banking and finance industry segment accounted for 26% (23) of total sales, telecom for 13% (14), public segment sales for 24% (25), the forest segment for 6% (6), and energy for 5% (4) of the total.
The order backlog, comprising only services ordered with binding contracts, amounted to EUR 1,014.9 million at 31 March 2002 compared to EUR 759.8 million at 31 March 2001. The estimate is that 50% of the backlog will be invoiced during 2002.
PROFITABILITY
The operating profit before amortisation of goodwill (EBITA) and non-recurring items was EUR 34.4 million (37.8), corresponding to a marginof 11.1% (13.4%). Operating profit after goodwill amortisation (EBIT)and before non-recurring items amounted to EUR 29.4 million (34.7),corresponding to 9.5% (12.3%). Due to the divestment of Aerotech Telubin 2001 the contributions from associated companies decreased by EUR 2.2 million. The declining trend in telecom and the costs of new partnership starts affected the margin somewhat negatively, compared to the very strong first quarter of 2001.
Operating profit (EBIT) after non-recurring items was EUR 29.4 million(55.3).
Cash flow from operations amounted to EUR 39.4 million (68.3) and cash used for investment activities totalled EUR 76.4 million (3.2).
Earnings per share, excluding goodwill amortisation, was EUR 0.31 (0.48) and after goodwill amortisation EUR 0.25 (0.44).
The rolling 12-month return on capital employed (ROCE) was 52.5% and one quity 41.2%.
PERSONNEL
Net recruitment during the first quarter decreased compared to the corresponding period last year. A total of 211 (507) new persons were employed. Together with acquisitions, divestments and leaves, the net increase amounted to altogether 495 (-340).
The group had an average of 11,147 (9,488) employees during the period and 11,130 (9,602) by 31 March.
The employee turnover rate was 7% on a rolling 12-month basis. Hence the clearly decreasing personnel turnover rate visible during 2001 continued through the first quarter of 2002.
DEVELOPMENT BY BUSINESS AREA
Banking & Finance
The prevailing economic uncertainty continued to decrease customers' willingness to invest. Companies were looking for ways to reduce existing costs and at the same time aiming to find measures to rapidly increase internal efficiency and profitability. Structural changes among customers also slowed down the overall market development.
The Nordic partnership business continued to develop positively, while the solutions-oriented part of the business area experienced a weaker market. The business area acquired Ementor Financial Systems, Norway'sleading provider of solutions for the bank and finance sector in February. The company, which has 300 employees, has been consolidated in the balance sheet as of 31 March, but has not affected the profit and loss statement.
Net sales amounted to EUR 43.1 million (38.6), an increase of 12% compared to last year. Operating profit before goodwill decreased by 7% to EUR 6.1 million (6.5).
Telecom & Media
The telecom market continued to be weak during the first quarter. Operators minimised their investments, which was reflected throughou tthe value chain. The low level of capital expenditure in the market resulted in lower demand for the manufacturers. The expected consolidation in the operator market started with Telia and Sonera, and is also expected in the manufacturing and infrastructure sector.
The trend in customer behaviour, from buying resource consulting to procurement of larger assignments, continued. Smaller projects were received from all key customers, while the market still lacked larger deals owing to the low level of investment activity.
Net sales amounted to EUR 45.9 million (46.9), a decrease of 2% compared to last year. Operating profit before goodwill decreased by 46% to EUR 4.0 million (7.3).
Public & Healthcare
Competition clearly increased in the public market during the quarter, especially within the resource consulting oriented market segments. The market for IT solutions and services within the healthcare sector (hospitals, primary healthcare and dental care) continued to develop positively. The business area was renamed from Public Sector to Public & Healthcare to better reflect the scope of its activities.
Net sales amounted to EUR 45.3 million (42.2), an increase of 7% compared to last year. Operating profit before goodwill increased by 11% to EUR 5.2 million (4.7).
Production & Logistics
Structural consolidation continued in all sectors where the business area has activities, thus creating new potential for outsourcing activities. The Nordic market was slow. Customers, for cost reasons, carefully planned and evaluated all IT investments, resulting in longer sales cycles. Consequently very few large-scale IT projects will starton the market before summer. The forest industry was still experiencing a fairly weak demand, while the oil and gas sector is an exception as increasing oil prices improve the results of the oil companies. Key customers have significant needs for process and application harmonisation, but are refraining from action due to the economic climate.
Net sales amounted to EUR 57.5 million (53.7), an increase of 7% compared to last year. Operating profit before goodwill increased by 10% to EUR 8.2 million (7.5).
Processing & Network
TietoEnators strategy to combine traditional outsourcing services with the expertise built up in the focused verticals has overall been attractive to both new and old customers, thus paving the way for new partnership businesses.
The demand for outsourcing services grew on all main markets of TietoEnator. At the same time price competition was intensive. TietoEnator identifies growth opportunities in both Nordic and Baltic countries.
Net sales amounted to EUR 92.0 million (75.8), an increase of 21% compared to last year. Operating profit before goodwill increased by 23% to EUR 9.0 million (7.4).
Resource Management
During the quarter an overall slowdown in investments was noticed within Resource Management, particularly in license sales, whicha ffected all markets. Nonetheless the business area was able to prolong customer contracts in several areas and there were also examples of customers returning from other suppliers. Demand for traditional payroll solutions was low, while both the public and private sector markets showed an increasing interest in a more complete support in the human resources field, moving from payroll services to employee self services (ESS), web services and time/manning solutions. Demand was also high for the value- adding electronic invoicing systems.
Net sales amounted to EUR 44.3 million (43.7), an increase of 1% compared to last year. Operating profit before goodwill decreased by 14% to EUR 5.1 million (5.9).
Short-term prospects
The ongoing migration into the digital economy will continue to sustain growth in demand for IT services. The economic downturn, however, will dampen overall investment growth in 2002. Demand for high-value-added services will continue to grow faster than demand for other services.
Investments in information technology will grow in most of TietoEnator's business sectors. In telecommunications overall investment activity will continue to decline in the short term. Outsourcing will increase in all areas.
TietoEnator's net sales growth in 2002 is expected to exceed the previous year's growth of 13%. The increase in net sales and moderate cost increases create conditions for an improved EBITA for the full year.
Dividend
TietoEnator Corporation's Annual General Meeting on 21 March 2002 approved a dividend of EUR 1.00 per share. EUR 0.50 of the dividend is based on the recurring profit and EUR 0.50 on the non-recurring capital gains. The dividend payment date was 9 April 2002.
Shares
The AGM decided to reduce the share capital by EUR 871,060 by nullifying the company's own shares. The number of shares on 31 March was 82,886,444.
Board authorisations
The AGM authorised the Board of Directors to purchase the company's ownshares. This authorisation is in force from the decision of the AGM until 21 March 2003. The company's owns shares will be purchased if necessary in order to develop the company's capital structure.
The Board of Directors was authorised to raise the share capital by at most 16,751,469 shares through a rights issue, by issuing option rights and by raising convertible bond loans for one year from the close of the AGM.
Stock option program
The AGM approved the proposal to offer stock options for subscription by personnel and managers based on performance and for subscription by a wholly owned subsidiary. The warrants entitle personnel to subscribe for at most 1,800,000 shares. The stock options are intended to form apart of the Group's management and employee incentive program. The subscription price will be based on the market price of the share and is the trading volume weighted average share price between 1 February 2002 and 28 February 2002 inclusive (EUR 27.73).
Interim report 2 / 2002
The interim report for January - June will be published on 25 July 2002.
For further information, please contact: Matti Lehti, President and CEO, tel. +358 9 8626 2200, +358 400 816 405 Ake Plyhm, Deputy CEO, tel. +46 8 632 14 10 Tuija Soanjarvi, CFO, tel. +358 9 8626 2213, +35840 5455476 Eric Osterberg, Senior Vice President, Communications, tel. +46 8 632 1426, +46 70 590 0599
With almost 12,000 employees and annual net sales of EUR 1.1 billion, TietoEnator is a leading supplier of high value-added IT services in Europe. TietoEnator specialises in consulting, building 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 latest information technology. www.tietoenator.com
TIETOENATOR CORPORATION DISTRIBUTION Helsinki Exchanges Stockholm StockExchange Principal Media
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