EDB reports revenue of NOK 1,716 million in the third quarter of 2009.
This is 7% lower than in the same period of 2008 as a result of lower demand for IT services. EDB's operating profit (EBITA) for the quarter was NOK 150 million as compared to NOK 168 million for the same quarter in 2008. EDB recognized sizeable non-recurring items related to the company's ongoing restructuring program in the third quarter, and the net effect of these items was NOK 16 million. The third quarter produced pre-tax profit of NOK 95 million as compared to NOK 72 million for the same quarter in 2008.
"We worked on implementing the restructuring program in the third quarter, and the program is now well on the way to completion. Costs have been reduced in order to adapt the company to a lower level of demand and ensure a more competitive cost structure. We are satisfied to report that we signed new contracts totalling NOK 500 million in the third quarter, bringing the total for the first nine months to NOK 7.2 billion", comments Endre Rangnes, CEO of EDB.
Key figures and main features of the third quarter of 2009
- Operating revenues of NOK 1,716 million (NOK 1,854 million).
- Operating profit before intangible asset amortisation (EBITA) of NOK 150 million (NOK 168 million)
- EBITA margin of 8.8% as compared to 9.0% in the same quarter of 2008. Two of EDB's three business areas reported an improvement in margin.
- Pre-tax profit of NOK 95 million (NOK 72 million).
The solutions area of bank and finance continued to win market share with 6% growth in the quarter. This strengthens EDB's position as a market leader for the Nordic banking and finance sector.
EDB signed new contracts with total contract value of NOK 500 million in the third quarter, and has an order backlog of NOK 13.2 billion.
Pension changes implemented and restructuring program carried out
During the course of the third quarter of 2009, EDB realised most of the main features s of the improvement program announced in the first quarter 2009. The net effect of non-recurring items in the third quarter was NOK 16 million, made up of a number of accounting items:
- The defined benefit pension schemes operated for part of the Norwegian activities were closed with effect from 1 September 2009, resulting in a positive non-recurring effect of NOK 568 million due to the consequent reduction in the group's capitalised pension liabilities.
- Provisions totalling NOK 152 million were recognized in the third quarter in respect of restructuring, including the closure of six locations and headcount reductions of almost 100 employees, as well as provisions in respect of losses on receivables and contract losses in the IT Operations business area.
- In accordance with the current accounting standards, EDB routinely evaluates the book value of intangible assets. As part of this exercise, the Board of Directors has decided to write down goodwill related to the Application Services business area by NOK 218 million. In addition, the capitalised book value of software developed in-house has been written down by NOK 120 million. This write-down relates to EDB's in-house development of SAP-based solutions for the Norwegian public sector.
- In the third quarter of 2009, EDB sold two smaller subsidiaries that were part of the Swedish activities of Application Services but lay outside the group's core business. In addition, some parts of the group's printing activities were sold in the quarter. These disposals caused an accounting loss of NOK 62 million in total, which relates principally to goodwill.
Results from the business areas for the third quarter of 2009
IT Operations: The business area reports revenue of NOK 1,054 million for the third quarter of 2009 (NOK 1,103 million). EBITA margin for the quarter was 9.7%, as compared to pro forma 9.6% in the third quarter of 2008.
Application Services: The business area reports revenue of NOK 410 million for the third quarter of 2009 (NOK 480 million). EBITA margin for the quarter was 6.6%. This represents an improvement from the pro forma margin of 6.1% reported for the third quarter of 2008.
Solutions: The business area reports revenue of NOK 343 million for the third quarter of 2009 (NOK 325 million). EBITA margin for the quarter was 13.0%, as compared to 15.6% in the third quarter of 2008.
Conditions in the Nordic IT services market successively weakened over the course of the first nine months of 2009, particularly in the consulting area. This has resulted in lower capacity utilisation and downward pressure on prices for services in certain areas. In view of its current cost efficiency program, EDB expects that the company will maintain its competitive strength.