- Tightened profitability criteria put pressure on order entry
- Deconsolitations in Italy and France affect revenue and margin
- Group IT cost decrease as planned
A focus on profitability is the heart of the transformation program T-Systems 2015+. The financial figures for the first quarter of 2014 show the initial effects of this strategic realignment. In the first three months of this year, order entry in the Market Unit, which mainly comprises T-Systems' external business, declined by 28.4 percent year-on-year to EUR 1.4 billion. This reflects compliance with stricter profitability criteria for new business introduced as part of the restructuring.
It is therefore all the more pleasing that T-Systems has won one of the biggest systems integration orders in the history of the company. The contract with Daimler AG has an order volume in the three-digit million range. In the long term, T-Systems will assume sole responsibility for maintaining, developing, and integrating numerous software applications across all of the automaker's important business areas. In addition to cooperating in conventional systems integration business, the two companies will advance promising future topics such as connected cars and the cloud-based workplace together.
The abstention from less profitable activities is also having an impact on the Market Unit's revenue. Discontinued business activities, such as hardware reselling, as well as the still difficult industry climate resulted in a revenue decline of 6.7 percent to EUR 1.7 billion. Adjusted for the sales of T-Systems Italia and the Systems Integration business unit in France, as well as exchange rate effects, revenue decreased 4.1 percent in the first quarter.
This revenue decline also impacts on earnings. The adjusted EBIT margin fell to minus 0.4 percent in the first quarter, compared with plus 0.2 percent one year ago. The reduction of the Group's IT costs is progressing according to plan. They declined by another 4.3 percent in the first quarter of 2014 compared with the prior year.
Segment Systems Solutions:
Comments on the table: ICSS/GNF business at the local business units (LBUs), which had previously been organizationally assigned to the Systems Solutions operating segment, was brought together as of January 1, 2014, and is now reported under the Europe operating segment. In addition, as of January 1, 2014, the local business customer units of T-Systems Czech Republic, which had previously been managed under the Systems Solutions operating segment, were merged with T-Mobile Czech Republic; they are reported in the Europe operating segment. Comparative prior-year figures have been adjusted retrospectively.