Teleca is expecting weaker first quarter numbers than previously anticipated
Over recent few weeks, Teleca has experienced delays or cancellations of previously agreed and expected contracts from key clients. This has led to a decline in the utilization rate in the first quarter of 2008 and is expected to also have a negative effect on the second quarter of 2008.
The company is actively working on re-assigning resources to alternative projects and customers, but due to the limited short term visibility, Teleca has decided to take a cautious view on 2008. As a consequence, the company will review its expense planning for the remainder of 2008 to maintain its goal of improved profitability.
Teleca delivers engineering services to the world’s leading mobile phone companies and their key suppliers. Teleca views the decline in demand as a consequence of the mobile industry being cautious with regard to the adverse sentiment driven by the US market situation. While Teleca expects the situation to be of short term nature, the company will take all relevant measures to protect profitability until better visibility of demand returns. In a medium- to long-term perspective, Teleca is very confident that the demand for mobile device software as well as the demand for outsourced software services will increase.
Teleca is committed to its growth strategy of expanding with its wireless know-how into new industry segments, such as the Internet industry as well as expanding beyond the current embedded software expertise categories. The company expects the outsourcing industry to consolidate around a few global suppliers. With its solid customer base and know-how, Teleca is very well positioned for gaining market share through consolidation.
Current outlook:
Revenues and margins are expected to show increasing growth in 2008.
Teleca expects slight to moderate growth in services revenue whilst a decline in product revenue is expected. The company targets EBIT margins at 10% for the year 2008. Margins are expected to be higher in second half of the year than in the first half.
New outlook:
While Teleca expects flat organic growth in 2008 compared to 2007, the Company intends to seek growth through industry consolidation.
The operating earnings (EBIT) in the first quarter is expected to show a small surplus (excluding earlier announced restructuring costs of around SEK 14 million,). The EBIT margin for the second quarter is expected to be between 4% and 8%. Given the limited visibility, Teleca has taken a cautious view with regard to the second half of 2008. However, the Company remains committed to its ambition to deliver a double-digit EBIT margin for the second half of 2008.