Tieto Q2 net sales slide

Source: Tieto

Second-quarter net sales declined by 3% and amounted to EUR 431.5 (444.8) million.

In most industries, outsourcing of IT operations was brisk. However, the highly competitive operating environment as well as business transfers to offshore countries strained net sales. Tieto saw strong order intake in the second quarter amounting to EUR 590 (483) million.

Second-quarter operating profit (EBIT) amounted to EUR 19.5 (10.4) million, representing a margin of 4.5% (2.3). The improvement in operating profit is attributable to lower restructuring costs than in 2009. Operating profit excluding one-off items decreased to EUR 21.3 (24.6) million, or 4.9% (5.6) of net sales. Profit before taxes totalled EUR 18.4 (8.8) million and earnings per share amounted to EUR 0.17 (0.14) in the second quarter.

Tieto continued to invest in global delivery capacity, growth initiatives in Russia and its offerings, such as cloud services. The costs derived from the development programmes related to the global delivery model and offerings increased by around EUR 4 million compared to the second quarter of 2009. Additionally, Tieto booked development costs of around to EUR 3 million related to building of the Russian operations.

Activity in the market has picked up, and companies' efforts to achieve cost savings and improve productivity continue to be the key drivers for investments. The Nordic IT services market is expected to start growing in the second half of 2010. Growth estimates for the full year provided by market analysts vary from 0% to 2%. The company's outlook remains unchanged. In 2010, the company expects its net sales to develop in line with the IT services market relevant to Tieto and its operating profit to be higher than in 2009.

President and CEO Hannu Syrjälä: "The Nordic IT services market has stabilized and started to recover. During the second quarter, we signed many significant longer term contracts such as the ones with the City of Stockholm, Skåne Regional Council and If P&C Insurance.

We have continued to invest in our global delivery model with excellent results - today 34% of our people are working in offshore countries, an increase of more than 1 300 employees from the second quarter of 2009. Lower sales together with spending for development programmes and growth strained our profitability in the second quarter.

Cloud services are expected to stand for a significant part of new growth in IT spending in the coming years. We continue to invest in this area to become one of the leading cloud integrator by 2013 in our main markets. Our new energy-efficient data centres in Finland, Sweden and Russia provide an excellent platform for secure, full-scale production of environmentally friendly IT services.

The pick-up of demand in the IT market and our strengthened sales activities are expected to benefit our topline in the coming quarters. The demand for IT outsourcing continues on a good level especially in Sweden and Finland. Our operations outside Finland and Sweden have also improved, but slower than planned. We have strengthened the management and re-focused investments in order to accelerate performance improvement. Profitable growth is on top of our agenda for the rest of the year for the whole company."

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