Joni has written a new company report as Tietoevry sells Bekk.
Tieto is selling its Norwegian consulting business, Bekk, at a fairly good price. The sale did not come as a direct surprise, but we had expected divestments from another business area. The company will use the proceeds from the transaction for debt reduction and distribution of funds to shareholders. We lowered our forecasts in line with the transaction, but next year would have been a transitional year for revenue growth anyway. However, substantial cost savings will support the result next year. We reiterate our target price of EUR 18.0 and Reduce recommendation for the share. In our view, the valuation picture for the share remains neutral.
I read Inderes’ new Tietoevry company report, which states the following, among other things:
At the beginning of December, Tieto announced that it had agreed on the sale of the Norwegian Bekk Consulting AS to the private equity firm Axcel for a debt-free cash purchase price of ~EUR 140 million. Customary adjustments will be made to the purchase price at the time of closing, and according to the company’s estimate, the transaction will be completed in Q1’26. The company will use the proceeds from the sale to reduce debt and for distribution of funds to shareholders. We estimate a relatively good capital gain will be recorded from the sale, which is, however, naturally one-off. In our estimation, the sale will not affect the dividend paid for the current year, but it will reduce leverage and improve the possibilities for paying extra dividends in the coming years. […]
We lowered our forecasts driven by the Bekk sale. We removed the business from our forecasts starting from February. Bekk’s revenue for the previous 12 months was NOK 1,056 million and EBIT was NOK 150 million (approx. EUR 90 million and EUR 13 million), representing about 5% of the group’s revenue and a slightly larger share of the profit.
I was left wondering how the Bekk sale has been handled in Inderes’ forecasts. In the income statement forecasts, Bekk’s contribution to revenue and EBIT has indeed been removed starting from 3/2026e, but the purchase price from Bekk, the estimated capital gain, and consequential effects on, for example, the amount of interest-bearing debt or gross investments have not, in my view, been taken into account in the forecasts at all—not in the income statement, not in the balance sheet, nor in the gross investments of the DCF calculation.
Could @Joni_Gronqvist explain in more detail what (numerical) changes have been made to Inderes’ forecasts regarding the Bekk deal? At the same time, I hope for an answer to my old post-CMD dividend question (see my message from 25 days ago).
Apologies for the delay in responding! I take my summer holidays during the winter (though I’ve done some short bursts of work in between)…
Tieto estimates that the 2025 dividend proposal will be 80% of adjusted net profit, adjusted for non-cash impairments and the cost burden related to the IFRS 5 standard. That non-cash impairment was EUR 80 million or ~EUR 0.63 per share, which accounts for nearly half of our adjustments. The impact related to the IFRS 5 standard is then significantly smaller. Thus, the adjusted EPS guided by Tieto will be approximately EUR 0.90 per share in our forecasts. Then 80% of this brings the dividend to the EUR 0.70 level.
Regarding Tieto’s Bekk sale, there will likely be no dramatic changes to leverage, as the business being sold was small and highly profitable (the company monitors the net debt/EBITDA ratio, which is also an important metric regarding potential extra dividend distributions). There will likely be a capital gain, but the scale depends on the allocated goodwill etc., and it is a one-off item that won’t significantly affect the aforementioned leverage. There won’t be much change to investments either, as the consulting business being sold is very capital-light and requires very little investment, whereas the software business (or especially Tech Services previously) does. We will refine our forecasts in connection with the Q4 report, when additional details of the transaction (balance sheet impact) are likely to be released.
So, our comment from the Capital Markets Day remains relevant: According to the new dividend policy, the company aims for a dividend payout of 60–80% of net profit, adjusted for non-cash items. The company wants to be close to its 2x net debt/EBITDA target, and excess capital will be used for share buybacks or extra dividends, which are not currently in our forecasts. The company will likely reach its leverage target at the end of 2026, and thus extra dividends/buybacks are possible in 2027 at the earliest. The company estimates that the 2025 dividend proposal will be 80% of adjusted net profit, adjusted for non-cash impairments and the cost burden related to the IFRS 5 standard. The new policy from the Capital Markets Day provides flexibility between growth investments and shareholder returns.
Tieto aims to achieve a leading position in the European software and technology consulting markets in selected industries. The company sees Spain as a promising market area, particularly for the modern software and data solutions of its Tieto Banktech and Tieto Caretech businesses.
To advance this goal, Tieto has signed a binding agreement with AFI Family Espana to acquire the companies OpenSpring and GrupoOnetec. The acquired companies focus on technology consulting and services supporting financial crime prevention. The companies’ long and strong customer relationships provide a solid foundation for Tieto to offer its Banktech and Caretech software and solutions to customers in the Iberian region. Additionally, new opportunities will open up for the Tieto Tech Consulting business.
OpenSpring and GrupoOnetec serve customers in several industries, the largest of which is the banking and insurance sector. The companies have a total of nearly 200 employees in Spain and Portugal, and their combined revenue is approximately 10 million euros; furthermore, they are seen to have significant growth potential.
The acquisition, which consists of the purchase of the entire share capital of Openspring IT Iberia, S.L. and Grupo Onetec, S.L., is based on an enterprise value of 8 million euros. The transaction is expected to be completed in the first quarter of 2026, after which the acquired businesses will be reported as part of Tieto.
Norgestion acted as the financial advisor for the preparation and execution of the transaction, and EY acted as the due diligence and legal advisor.
Had to look for the purchase price a couple of times as my eyes misread the part about it being based on 8m in “goodwill” I guess I’m starting to be ready for the weekend already.
Tieto is building something truly interesting in Spain, considering the company’s previous moves in the Catalonia region. European patient data systems are very fragmented entities. At the same time, in the background, the EU is starting to establish a framework for defining structured patient data comparable to Finland’s Kanta system, and… if Tieto Caretech manages to scale its own systems in this regard, they will be a European pioneer. Furthermore, their American counterparts are technically lagging behind; they aren’t even real competitors. Apotti was put out to tender ten years too early.
That deal looks like a sensible move. Out of those 200 employees, it’s hardly worth keeping even half on the payroll going forward; instead, the sharpest ones should be harnessed for the expansion into Spain. Just roll out the LifeCare patient information system for everyone there, and why not some banking solutions as well.
Here are Frans’s comments on Tieto’s small acquisitions in Spain.
Tietoevry is acquiring the Spanish companies OpenSpring and GrupoOnetec. The acquisitions are small in scale, but they support the company’s strategic goal to expand its Banktech and Caretech businesses in Europe. The transaction has no material impact on our forecasts or outlook.
I guess I’m starting to be ready for the weekend already.