April 28, 2020 / 5:27 AM / a month ago

Nordic IT services firm TietoEVRY first-quarter profits rise, shares jump

HELSINKI (Reuters) - Nordic IT services provider TietoEVRY (TIETO.HE) on Tuesday posted a stronger first-quarter profit, underpinned by solid performances in its cloud and infrastructure businesses, and said it sees higher-than-expected cost savings this year.

Shares in TietoEVRY jumped 14% in early trading to 23.68 euros.

The company, which finalised the takeover of Norwegian EVRY’s businesses last December, said its adjusted operating profit during January-March came in at 78.2 million euros ($84.6 million) from pro forma 74.7 million euros last year.

“Profitability improvement was supported by continued attention on the company’s cost structure and strong volume development in the cloud and infrastructure business,” Chief Executive Kimmo Alkio said in a statement.

TietoEVRY’s infrastructure unit Hybrid Infra reported organic revenue growth of 6%, with adjusted operating profit up 80% from a year ago to 16.0 million euros.

The Finland-headquartered company said the merger would help it achieve annualised synergies, or cost savings, of 45 million-55 million euros by the end of 2020, compared with earlier estimates of 30 million-40 million.

“Synergies from the merger will come in earlier than expected and the impact from the coronavirus was smaller than we expected,” Inderes analysts said in a note.

TietoEVRY withdrew its 2020 outlook last month and also scrapped an April dividend payment in response to the coronavirus pandemic.

“Current market indicators imply a negative 2-5% full-year revenue impact due to the Covid-19 pandemic...depending on the IT market development,” the company said, adding that sensitivity to economic conditions varied by business unit, with many of its businesses in infrastructure and application services based on multi-year agreements.

“The digital consulting business has shorter contractual periods and is likely to be more affected during times of economic uncertainty,” it said.

Tieto said its revenue would be hit by 50 million euros in the second quarter and by more than 150 million in the full year if currency exchange rates, especially Norwegian and Swedish currencies, stay at March’s levels.

Reporting by Tarmo Virki and Anne Kauranen; Editing by Clarence Fernandez and Sherry Jacob-Phillips and Kirsten Donovan

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