Tieto’s Interim Report 2/2018   Strong growth – profit at the previous year’s level

  • Growth in local currencies 8%, organically 5%
  • Profitability development good in Technology Services and Modernization, Business Consulting and Product Development Services
  • Higher investments in technology renewals in Industry Solutions impact second-quarter profit
  • Currency impact remains negative

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

Key figures for the second quarter

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

IT services

  • Sales growth totalled 4.6%, sales in local currencies up by 7.4%
  • Adjusted operating profit amounted to EUR 31.9 (33.0) million, 8.6% (9.3) of sales

The Group

  • Sales growth totalled 4.8%, sales in local currencies up by 7.9%
  • Adjusted operating profit amounted to EUR 34.8 (35.5) million, 8.6% (9.2) of sales
  • In local currencies, the order backlog for 2018 provides support for Tieto’s growth ambitions for the year
4–6/2018 4–6/2017 1–6/2018 1–6/2017
Net sales, EUR million 404.1   385.6   810.5   778.8
   Change, % 4.8    1.2   4.1   4.0  
   Change in local currencies, % 7.9    2.8   7.1   4.8  
Operating profit (EBITA), EUR million 36.4   32.0   77.7   57.7  
Operating margin (EBITA), % 9.0   8.3   9.6   7.4  
Operating profit (EBIT), EUR million 1) 31.3    28.1 68.6   50.2
Operating margin (EBIT), % 1) 7.7    7.3   8.5   6.4  
Adjusted 1) 2) operating profit (EBIT), EUR million 34.8    35.5   71.4   71.1  
Adjusted 1) 2) operating margin (EBIT), % 8.6    9.2   8.8   9.1  
Profit after taxes, EUR million 24.7    20.9 54.6   36.7
EPS, EUR 0.33   0.28   0.74   0.50  
Net cash flow from operations, EUR million 12.3    -6.1   73.8   73.7
Return on equity, 12-month rolling, % 30.5   23.6   30.5   23.6  
Return on capital employed, 12-month rolling, % 24.1   21.0   24.1   21.0  
Capital expenditure, EUR million 11.4    21.0   19.5   30.3  
Acquisitions, EUR million 2.3 - 12.2 -
Interest-bearing net debt, EUR million 209.2   164.6  209.2   164.6
Net debt/EBITDA 1.0    0.9   1.0   0.9
Order backlog 1 731 1 817 1 731 1 817
Personnel on 30 June     14 956   13 754 14 956   13 754

1) the second quarter includes EUR 1.4 (1.0) 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 million in 2017).

1)adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items

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

“We are happy to deliver strong growth during the second quarter. The organic growth of all our service lines also outpaced the market – with a broader portfolio that is starting to deliver sustainable growth. Operating profit remained at the previous year’s level, while the development was twofold. Most of our businesses had strong overall performance, while our investments in Industry Solutions are impacting short-term profits. Our investments play an important part in our growth agenda and in ensuring our position as customers’ first choice for business renewal.

In our Industry Solutions’ software business we are currently carrying out a technology and business model renewal in several industries simultaneously. We intend to take advantage of the growth opportunities by introducing the latest cloud-based technologies, open ecosystems and APIs, and new business models. I remain confident that our investments in the Financial Services, Healthcare and Utility sectors will provide strong future value – this has also been proven by our recent success with customers, such as a major Nordic bank within the Payments segment.

In addition to driving our continuous business acceleration, we are pleased to participate in the broader society-wide dialogue on the future of work – and the future of technology. Our commitment to promoting equal opportunity and continuous learning provides significant additional meaning to our employees worldwide. This combination of technology-based innovation, social contribution and co-innovation with our customers will drive greater value for society and our customers.”

Financial performance by service line

EUR million Customer
sales

4–6/2018
Customer
sales
4–6/2017
Change, % Operating
profit
4–6/2018
Operating
profit
4–6/2017
Technology Services and Modernization 186.8 185.6 1 20.7 19.1
Business Consulting and Implementation 64.3 48.9 31 7.1 4.8
Industry Solutions 119.4 119.8 0 5.0 9.6
Product Development Services 33.7 31.3 8 2.9 2.3
Support Functions and Global Management - - -4.4 -7.6
Total 404.1  385.6  5  31.3 28.1

Operating margin by service line

% Operating
margin
4–6/2018
Operating
margin
4–6/2017
Adjusted1)
operating
margin
4–6/2018
Adjusted1)
operating
margin
4–6/2017
Technology Services and Modernization     11.1  10.3 12.3 11.7
Business Consulting and Implementation 11.0 9.9 9.8 7.7
Industry Solutions 4.2 8.0 4.9 9.4
Product Development Services 8.7 7.3 8.7 8.0
Total 7.7 7.3 8.6 9.2
1) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items

Customer sales by industry group

EUR million Customer sales
4–6/2018
Customer sales
4–6/2017
Change, %
Financial Services 95.3 96.4 -1
Public, Healthcare and Welfare 133.2 126.5 5
Industrial and Consumer Services 141.9 131.5 8
IT services  370.5  354.3 5
Product Development Services 33.7  31.3 8
Total 404.1 385.6 5

M&A impact by service line

Growth, %
(in local currencies)
4–6/2018 
Organic growth, %
(in local currencies)
4–6/2018 
Technology Services and Modernization 3 3
Business Consulting and Implementation  36  10 
Industry Solutions 
IT services  7  4 
Product Development Services  13  13 
Total  8  5 

M&A impact by industry group

Growth, %
(in local currencies)
4–6/2018 
Organic growth, %
(in local currencies)
4–6/2018 
Financial Services 
Public, Healthcare and Welfare 
Industrial and Consumer Services  11 
IT services  7  4 
Product Development Services  13  13 
Total  8  5 

For further information, please contact:

Janne Salminen, Acting CFO, tel.+358 2072 70707, +358 50 359 8521, 
janne.salminen (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 Friday 20 July 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 Espoo, address: Keilalahdentie 2-4.

Kimmo Alkio, President and CEO, 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

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

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