Tieto - Targeting profitable growth

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Tietoevry Care delivered a new system to social and primary healthcare, as well as to Vaasa Central Hospital and other specialized healthcare units, phased in starting from October 2024. The Lifecare system replaced six different client and patient information systems in the wellbeing services county. The harmonization of the system enables the provision of equal services to approximately 176,000 residents of the wellbeing services county.

The Lifecare Client and Patient Information System is in use in 16 wellbeing services counties, covering over 3 million Finns.

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Tietoevry has recalculated for 2024, taking into account the sale of Tech Services.

They state that 1.6 percentage points of costs remained ‘under control’ after the transaction, which had supported Tech Services but could not be divested.

1.6% x 1880 = 30 MEUR

So, this amount of scale benefits seems to have been lost, unless they can be offset. Some of these costs may be offset in the longer term (such as headquarters size, etc.), some perhaps never (costs of being listed on the stock exchange, etc.).

Tietoevry Oyj STOCK EXCHANGE RELEASE 15 April 2025 at 9:00 a.m.

Tietoevry announced on March 23 that it had agreed to sell its Tietoevry Tech Services business to funds managed by Agilitas Private Equity LLP (“Agilitas”). The company estimates the transaction to close in the third quarter of 2025, subject to the fulfillment of certain conditions. Upon completion of the transaction, Tietoevry’s reportable segments will consist of the software businesses Tietoevry Banking, Care and Industry, and the international consulting business Tietoevry Create.

Starting from the first quarter of 2025, Tietoevry will classify the Tietoevry Tech Services business as held for sale and present it as a discontinued operation in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations. In the Group’s income statement, the results of discontinued operations will be reported separately from the results of continuing operations. In its segment reporting, the company will only report continuing operations.

The company publishes adjusted financial information for 2024 as an attachment to this release, which will form the comparative information for the current year. The company will not adjust its balance sheet or cash flow statement. Additional material is available on the company’s website.

The revenue and expenses directly related to the Tietoevry Tech Services business have been included in discontinued operations, while certain group operating expenses related to supporting the Tietoevry Tech Services business have not been included in discontinued operations. Consequently, the financial information presented for continuing operations and for the Tietoevry Tech Services business as discontinued operations does not reflect the profitability of either business as separate independent operations.

Tietoevry’s revenue in 2024, adjusted for changes in internal eliminations, decreases from EUR 2,802.6 million to EUR 1,879.5 million. The results of continuing operations are burdened by costs from activities that support the Tietoevry Tech Services business but cannot be allocated to discontinued operations. The company estimates that the impact of these costs on the 7.6% operating profit (EBIT) and 12.0% adjusted operating profit (EBITA) was approximately 1.6 percentage points in 2024.

Tietoevry’s adjusted financial information for 2024 Tietoevryn oikaistut taloudelliset tiedot vuodelle 2024 | Kauppalehti

Adjusted information

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Joni has prepared a preliminary company report as Tietoevry publishes its results on Tuesday. :slight_smile:

In March, we updated our forecasts following the sale of the Tech Services business, and have now refined them further with adjustments, as Tech Services is already excluded from Q1 figures. We expect Tietoevry’s revenue under the new structure to have decreased in Q1. Additionally, we expect the result to have been at the comparison period’s level due to several efficiency measures. The company will provide new guidance in connection with Q1, reflecting the new structure. For 2025, we forecast revenue to decrease slightly and profitability to increase, supported by efficiency measures. We lower the target price to EUR 20.0 (previously 21.0), reflecting the forecast changes. At the same time, we reiterate our ‘add’ recommendation for the stock.

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Quite busy today: Tietoevryn osavuosikatsaus 1/2025: Tulos ennakoidulla tasolla - merkittävä askel strategisessa uudistumisessa | Kauppalehti

  • Organic growth -4% in a weak demand environment
  • Adjusted operating profit 10.6% - Temporary cost burden related to IFRS 5 standard reduces profitability by 1.8 percentage points
  • Strong cash flow and strengthened order book - Important customer agreements in Banking and Care areas
  • Sale of Tech Services business - a significant step in Tietoevry’s positioning as a leading provider of software and digital development and consulting services
  • Full-year outlook updated to cover continuing operations

Tietoevry announced on March 23, 2025, that it had agreed to sell its Tietoevry Tech Services business. Starting from the first quarter of 2025, Tietoevry presents the Tech Services segment as a discontinued operation. The financial information presented in this report pertains to continuing operations unless otherwise stated. Comparative information has been adjusted accordingly. Tietoevry published adjusted financial information for 2024 on April 15, 2025.

Continuing operations 1-3/2025 1-3/2024
Net sales, EUR million 470.8 492.4
Organic growth1), % -4 0
Impact of acquisitions, % 0 3
Exchange rate impact, % 0 -2
Total growth, % -4 2
Organic growth adjusted for working days4), % -3 1
Operating profit (EBIT), EUR million 26.0 42.1
Operating profit (EBIT), % of net sales 5.5 8.6
Adjusted2) operating profit (EBITA3)), EUR million 49.8 60.0
Adjusted2) operating profit (EBITA3)), % of net sales 10.6 12.2
Total continuing and discontinued operations 1-3/2025 1-3/2024
Cash flow from operations, EUR million 97.3 71.8
Interest-bearing net debt, EUR million 806.7 879.8
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This was probably what many owners wished for - CEO change:

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Poor results, but now that the CEO has finally been fired, the stock price should start to climb from here. Implement a new strategy and significant layoffs within six months, and the results will also improve in the coming years.

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This depends entirely on the new CEO. I wonder if Lundmark would be interested in the company? Tieto is, of course, only a fraction of Nokia’s market value, but he could come again to “save” a Finnish company.

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It now looks like the new CEO will be from outside Finland, and that’s a good thing.

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Lundmark will no longer become CEO, but it would be excellent news if he were to join Tietoevry’s board instead!

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I once watched an interview with Alkio; he seemed competent. More recently, I watched a recording of the general meeting’s webcast, where Alkio was constantly buttoning and fiddling with his blazer, even though there was no button on the jacket. He didn’t impress me at all then.

I also don’t consider the company’s politically charged statements regarding the situation in Ukraine appropriate. Such things are out of place. Neither are NATO deals.
Hopefully, they won’t start skipping dividends in the future…

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Yep, he has reportedly also made a promise to his family that he will never again take a CEO position. But he will probably still pursue board positions, if I have interpreted his speeches correctly - but very carefully chosen ones.

I personally suspect that he will still end up as Nokia’s chairman of the board - would there be room for others alongside that?

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Joni has prepared a new company report on Tietoevry. :slight_smile:

We reiterate our Add recommendation for Tietoevry and lower the target price to EUR 19.0 (previously 20.0), reflecting forecast changes. Tietoevry’s Q1 was slightly softer than our expectations, and the recovery was slower than anticipated. Thus, we slightly lowered our forecasts and expect the new structure’s revenue to decrease slightly and profitability to improve driven by efficiency measures in 2025. Our forecasts are at the lower end of the new guidance. The share’s valuation picture remains attractive from several perspectives (DCF €19 and dividend yield 9%).

Quoted from the report:

Long-term CEO Kimmo Alkio leaves the company

Alkio served as the Group CEO for the past 14 years. Alkio led several major transformations within the company during his tenure. During his era, the total return on the share has been reasonable due to dividend payments and approximately at the level of the general Helsinki stock exchange development. Endre Rangnes has been appointed interim CEO starting May 5, 2025. Rangnes currently serves as the Head of Tietoevry Banking business. Tietoevry’s Board of Directors will initiate an international recruitment process for the company’s permanent CEO position.

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Everyone can have many opinions on this.
In my opinion, Lundmark has implemented many good things and has also achieved many good things at Nokia. It’s not easy to shake a company the size of Nokia from the bottom up to where it is now. Of course, there have been misses, of which Uniper is most likely on everyone’s mind, but in hindsight, it’s easy for everyone to state what was a bad decision.
I myself am of the opinion that Uniper, in the light of that world, was certainly an interesting investment target, where only synergies were completely lacking due to Uniper’s reluctance, and the political risk was certainly great, but no one believed Russia would change its course, even though there were signs of it.

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What is the qualification behind the statement?

When one has led one of Finland’s largest companies for over 10 years, they probably don’t necessarily need to covet those board positions anymore, but can, if they wish, just enjoy their retirement :slight_smile:

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You can listen to Lundmark’s thoughts on the future from there, for example.

It can be found from the last minute mark. I have listened very carefully to his comments from the time he has served as Nokia’s CEO.

“It is very possible that I will take some board or advisory positions.. but it is certain that I will not become a CEO.”

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An article behind a paywall in Kauppalehti about Tietoevry and its departing CEO.
There’s quite little content in the article.

Tietoevry does pay dividends, but I don’t think many owners are satisfied with the returns from Alkio’s 14-year CEO tenure:

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“The beginning of a new era created an opportunity for the company to renew the CEO’s role. According to Alkio, he and the company mutually agreed on his departure. Tietoevry appointed Endre Rangnes as interim CEO.”
Someone more cynical might say Alkio was politely fired, meaning he was given to understand that it would be better if Alkio sought his challenges elsewhere in the future…

Evry’s merger and the final explanations:
“After that, we grew quite honorably for five quarters. After that, we have also been affected by the weakening macroeconomic effects.”
For these reasons, according to Alkio, the return on value for shareholders has been very challenging over the last two years or so."
In two years, the stock price has almost halved, but fortunately, the CEO doesn’t have to look in the mirror.

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Metsä Group and Tietoevry Tech Services have signed a new three-year agreement, strengthening the companies’ 15-year ongoing partnership. The agreement covers Metsä Group’s IT infrastructure services in their entirety, including factory and SAP environments. This collaboration ensures the reliable and secure operation of Metsä Group’s critical infrastructure.

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TietoEvry won’t get a single euro from this agreement, due to the fact that these businesses were just sold. It’s a bit strange that this is still being reported under TietoEvry.

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Tech Service is still part of Tietoevry until approximately Q3. These announcements are also relevant because the conditional additional purchase price in the coming years is dependent on Tech Service’s performance.

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Juha Varis had spotted that between the press release on March 23 and the Q1 report on April 29, the estimated additional purchase price had decreased to a level of 30 million euros, according to management’s estimate

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https://x.com/JuhaVaris/status/1917221921097228299

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