TeleComputing announces cost efficiency program in Swedish IT Operations business
Q1 2009 financial results will include restructuring charges of approximately MNOK 9 associated with workforce reductions. Q4 2008 and 2008 financial results will be restated to include a non-cash Goodwill Impairment expense related to the writedown of prior acquisitions in the Sweden IT Operations business. The Goodwill Impairment will reduce pre-tax profit by MNOK 21.
TeleComputing announced today that it has implemented a program to reduce costs in its Sweden IT Operations business. Throughout the first quarter 2009, TeleComputing has undertaken processes to reduce staffing in its Sweden IT Operations business segment by 44 positions, or over 15% of its total workforce. This staff reduction represents over 5% of the total workforce of the TeleComputing group. In addition to this workforce reduction, TeleComputing will minimize new hiring across its businesses through the end of the year.
The workforce reduction will reduce operating expenses in the Sweden IT Operations business by over MNOK 20 annually. Included in the workforce reduction is a closure of the Sweden IT Operations office in Gothenburg. The Gothenburg office had 2008 revenues of approximately MNOK 9. The closure will not affect the operations of the Kentor IT Solutions business segment in Gothenburg.
In total, the TeleComputing group will report a one-time restructuring charge of approximately MNOK 9 during Q1 2009. This includes severance costs, write-down of related overhead contracts and legal fees related to the cost efficiency program in TC Sweden. In addition, the charge covers severance costs for the former Chief Executive of TeleComputing and related legal fees.
Sven Tore Kaasa, TeleComputing's Chief Executive Officer, commented on the announcement by stating, "The cost efficiency program is necessary to position TeleComputing for the current economic environment and for the future. These steps will reduce our operating expenses and align our workforce to serve customers in the most effective manner. While we regret that this has required employees to leave the company, we are confident that the steps we are taking are the right ones for the long-term strategy of TeleComputing."
Over the course of implementing the cost efficiency program, TeleComputing has conducted an assessment of balances related to the acquired intangible assets in the Sweden IT Operations business. The Sweden IT Operations business has previously reported Goodwill balances of MNOK 118 from its acquisitions of Proserva AB, Kebne AB, and the IT operations business of Kentor AB in its unaudited Q4 2008 accounts. The recently closed Gothenburg office was acquired with the IT operations business of Kentor AB.
TeleComputing has determined that it will restate its unaudited Q4 2008 financial results to include a Goodwill impairment charge in the Sweden IT Operations business of MNOK 21, which will directly reduce profit before tax during the period. The Goodwill impairment is a non-cash charge and will not affect the Company's liquidity position, cash flows, compliance with its debt covenants, nor is the charge expected to have an impact on future operations.
Following the restatement, TeleComputing expects to report 2008 Pretax profit of MNOK 25,5, and 2008 Net income after tax of MNOK 16,0. 2008 Revenue and EBITA will be unchanged following the restatement. The restatement will include offsetting incremental operating expenses and savings, resulting in no net effect on EBITA.
The audited 2008 financial statements will be approved by the Board later in April 2009.