Tieto’s Interim Report 1/2018 – Strong start for 2018

  • Growth in local currencies 6%, organically 3%
  • Strong profitability in Technology Services and Modernization and Product Development Services
  • Industry Solutions renewal progressing – investments continue
  • Order backlog supports the growth ambitions for 2018

The full interim report with tables is available at the end of this release.

Key figures for the first quarter

Figures for 2017 in this interim report have been restated due to the adoption of IFRS 15.

IT services

  • Sales growth totalled 3.0%, sales in local currencies up by 5.8%
  • Adjusted operating profit amounted to EUR 35.2 (34.4) million, 9.5% (9.5) of sales

The Group

  • Sales growth totalled 3.4%, sales in local currencies up by 6.2%
  • Adjusted operating profit amounted to EUR 36.6 (35.6) million, 9.0% (9.0) of sales
  • In local currencies, the order backlog for 2018 provides support for Tieto’s growth ambitions for the year
1–3/2018 1–3/2017
Net sales, EUR million 406.3
393.1
Change, % 3.4
7.0
Change in local currencies, % 6.2
6.9
Operating profit (EBITA), EUR million 41.3
25.7
Operating margin (EBITA), % 10.2
6.5
Operating profit (EBIT), EUR million 1) 37.3
22.0
Operating margin (EBIT), % 1) 9.2
5.6
Adjusted 1) 2) operating profit (EBIT), EUR million 36.6
35.6
Adjusted 1) 2) operating margin (EBIT), % 9.0
9.0
Profit after taxes, EUR million 29.9
15.9
EPS, EUR 0.41
0.22
Net cash flow from operations, EUR million 61.5
79.7
Return on equity, 12-month rolling, % 30.7
25.3
Return on capital employed, 12-month rolling, % 29.2
25.8
Capital expenditure, EUR million 8.2
9.3
Acquisitions, EUR million 9.9
-
Interest-bearing net debt, EUR million 100.7
38.0
Net debt/EBITDA 0.5
0.2
Order backlog 1 787 1 864
Personnel on 31 March     14 581
13 822

1) the first quarter includes EUR 1.3 (1.1) million in amortization of acquisition-related intangible assets
2) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items

Full-year outlook for 2018 unchanged

Tieto expects its adjusted1) full-year operating profit (EBIT) to increase from the previous year’s level (EUR 161.4 million2) in 2017).

1) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items
2) restated due to the adoption of IFRS 15

CEO’s comment

Comment regarding the interim report by Kimmo Alkio, President and CEO:

“We had a strong start to 2018 with revenue growth exceeding the market and further improvement in operating profit. Our application services and product development services performed particularly well, while exchange rates and the shorter quarter had a negative impact on both the Group’s net sales and profitability. We are rapidly moving forward into the digital world for the benefit of our customers. Our recent contract with Kraft Bank in Norway is a good example of a win that enables us to help adopt new technologies – including Artificial Intelligence with built-in machine learning.

Renewal of our key industry solutions is progressing and we will see a number of new-generation software to be released in solutions such as Lifecare, Transaction Banking and SmartUtilities. We expect that the ongoing technology investments will contribute to enhanced future performance in Industry Solutions.

Given the good market demand for digitalization consulting and the design of data-centric services, we aim to accelerate growth in our Business Consulting and Implementation business. Through the acquisition of Avega and the recent integration of business consulting and implementation capabilities, we are well positioned to capture consulting-driven market opportunities.

We aim to be our customers’ first choice for business renewal. Our recent acquisitions we have carried out – including Petrostreamz in Norway, which focuses on the oil and gas segment, and the Swedish company NSEC in the security segment – strengthen our capabilities and competitiveness. We will continue to seek opportunities to turn data and new technologies into value for our customers.”

Financial performance by service line

EUR million Customer
sales
1–3/2018
Customer
sales
1–3/2017
Change, % Operating
profit
1–3/2018
Operating
profit
1–3/2017
Technology Services and Modernization 198.8 197.7 1 22.9 14.6
Business Consulting and Implementation 50.2 39.3 28 2.7 2.2
Industry Solutions 123.2 124.5 -1 11.2 6.3
Product Development Services 34.1 31.9 7 4.3 4.2
Support Functions and Global Management - - -3.8 -5.3
Total 406.3 393.1 3 37.3 22.0

Operating margin by service line

% Operating
margin
1–3/2018
Operating
margin
1–3/2017
Adjusted1) operating
margin
1–3/2018
Adjusted1) operating
margin
1–3/2017
Technology Services and Modernization 11.5  7.4 11.6 10.9
Business Consulting and Implementation 5.3 5.7 5.5 7.1
Industry Solutions 9.1 5.0 7.6 8.0
Product Development Services 12.6 13.1 12.7 13.6
Total 9.2 5.6 9.0 9.0
1) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items


Customer sales by industry group

EUR million Customer sales
1–3/2018
Customer sales
1–3/2017
Change, %
Financial Services 96.4 96.0 0
Public, Healthcare and Welfare 132.8 127.6 4
Industrial and Consumer Services 142.9 138.0 4
IT services 372.1 361.6 3
Product Development Services 34.1 32.0 7
Total 406.3 393.1 3

M&A impact by service line

Growth, % (in local currencies)
1–3/2018 
Organic growth,% (in local currencies)
1–3/2018 
Technology Services and Modernization 3 3
Business Consulting and Implementation  31 -3
Industry Solutions  3 4
IT services  6 2
Product Development Services  11 11
Total  6 3

M&A impact by industry group

Growth, % (in local currencies)
1–3/2018 
Organic growth,% (in local currencies)
1–3/2018 
Financial Services  3 1
Public, Healthcare and Welfare  7 5
Industrial and Consumer Services  6 0
IT services  6 2
Product Development Services  11 11
Total  6 3

For further information, please contact:

Lasse Heinonen, CFO, tel.+358 2072 66329, +358 50 393 4950, lasse.heinonen (at) tieto.com

Tanja Lounevirta, Head of Investor Relations,  tel.+358 2072 71725, +358 50 321 7510, tanja.lounevirta (at) tieto.com

A teleconference for analysts and media will be held on Thursday 26 April 2018 at 10.00 am EET (9.00 am CET, 8.00 am UK time). Analysts and media are also welcome to participate in the conference at Tieto’s office in Stockholm, address: Fjärde Bassänvägen 15.4.

Kimmo Alkio, President and CEO, and Lasse Heinonen, CFO, will present the results online in English. The presentation can be followed on Tieto's website, for which attendees need Adobe Flash plugin version 10.1.0 or newer. The teleconference details can be found below.

Teleconference numbers
Finland: +358 (0)9 7479 0361
Sweden: +46 (0)8 5033 6574
UK: +44 (0)330 336 9105
US: +1 719 457 1036
Conference code: 4404154

To ensure that you are connected to the conference call, please dial in a few minutes before the start of the press and analyst conference. The teleconference is recorded and it will be available on demand later during the day.

Tieto publishes its financial information in English and Finnish.

TIETO CORPORATION

DISTRIBUTION
NASDAQ Helsinki
Principal Media

Tieto aims to capture the significant opportunities of the data-driven world and turn them into lifelong value for people, business and society. We aim to be customers’ first choice for business renewal by combining our software and services capabilities with a strong drive for co-innovation and ecosystems.

Headquartered in Finland, Tieto has over 14 000 experts in close to 20 countries. Tieto’s turnover is approximately EUR 1.5 billion and shares listed on NASDAQ in Helsinki and Stockholm. www.tieto.com

Tags:

About Us

Tieto aims to capture the significant opportunities of the data-driven world and turn them into lifelong value for people, business and society. We aim to be customers’ first choice for business renewal by combining our software and services capabilities with a strong drive for co-innovation and ecosystems. Headquartered in Finland, Tieto has over 13 000 experts in close to 20 countries. Tieto’s turnover is approximately EUR 1.5 billion and shares listed on NASDAQ in Helsinki and Stockholm. www.tieto.com