Tieto’s Interim Report 3/2017 – Good third-quarter performance – strong improvement in customer experience results

  • Revenue growth over 4% – continued solid market demand
  • Operating margin close to 12% – improvement in all businesses with Industry Solutions’ margin rising to over 14%
  • All-time high Net Promoter Score as customer experience initiatives paying off  
  • Public offer to acquire Avega announced in October – to accelerate growth in Sweden

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

Key figures for the third quarter

IT services

  • Sales growth totalled 3.8%, sales in local currencies up by 4.0%
  • Adjusted operating profit amounted to EUR 39.0 (33.7) million, 12.0% (10.7) of sales

The Group

  • Sales growth totalled 4.2%, sales in local currencies up by 4.5%
  • Adjusted operating profit amounted to EUR 41.2 (35.4) million, 11.6% (10.4) of sales
  • Order intake (Total Contract Value) at EUR 271 (406) million – book-to-bill 0.8 (1.2)
7–9/
2017
7–9/
2016
1–9/
2017
1–9/
2016
Net sales, EUR million 354.9 340.5
1 133.6
1 089.0
Change, % 4.2
1.6
4.1
2.3
Change in local currencies, % 4.5
2.2
4.7
3.1
Operating profit (EBITA), EUR million 45.0
38.6
102.6
105.9
Operating margin (EBITA), % 12.7
11.3
9.1
9.7
Operating profit (EBIT), EUR million 1) 41.1
35.1
91.2
95.7
Operating margin (EBIT), % 1) 11.6
10.3
8.0
8.8
Adjusted 1) 2) operating profit (EBIT), EUR million 41.2
35.4
112.2
102.7
Adjusted 1) 2) operating margin (EBIT), % 11.6
10.4
9.9
9.4
Profit after taxes, EUR million 34.3
27.3
71.0
73.0
EPS, EUR 0.46
0.37
0.96
0.99
Net cash flow from operations, EUR million 10.8
13.8
84.4
47.0
Return on equity, 12-month rolling, % 23.6
24.4
23.6
24.4
Return on capital employed, 12-month rolling, % 21.0
22.6
21.0
22.6
Capital expenditure, EUR million 9.1
16.0
39.4
37.2
Interest-bearing net debt, EUR million 161.4
136.4
161.4
136.4
Net debt/EBITDA 0.8
0.7 0.8
0.7
Book-to-bill 0.8
1.2
0.9
1.0
Order backlog 1 689 1 722 1 689 1 722
Personnel on 30 September     13 851
13 758 13 851
13 758

1)the third quarter includes EUR 1.0 (0.8) million and the nine-month period EUR 3.1 (2.2) 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 2017 unchanged

Tieto expects its adjusted1) full-year operating profit (EBIT) to increase from the previous year’s level (EUR 152.2 million in 2016).

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 really pleased with the strong third-quarter performance – especially as all businesses developed favourably. We had solid growth of over 4% and healthy profitability with an operating margin close to 12%. Our recent performance confirms that our focus on selective solutions and strategy implementation is creating greater value to our customers and a more competitive company overall.

During the past quarter, as expected, our industry solutions businesses delivered good performance with 8% growth and solid profitability of over 14%. These solutions are a clear market differentiator for Tieto and we continue to invest in attractive software-centric growth opportunities. Of our high-growth businesses, we are especially pleased with the development in Customer Experience Management related solutions, which saw growth of over 30%.

As announced on 23 October, we have made a public offer to acquire Avega, a Swedish consulting company with around 350 employees, which would strengthen our advisory capabilities in the Swedish consulting-led market. This is a logical step in our strategy of aiming to accelerate our role as the preferred partner for business renewal for our customers. This announced transaction is expected to close during the latter part of the fourth quarter.

We saw strong improvement in our recent annual customer experience results with our Net Promoter Score reaching an all-time high. It is positive to see that our multi-year attention to quality and customer experience is starting to pay off. This lays a good foundation for continuing our efforts to improve our customer satisfaction and competitiveness as well as drive longer-term market share gains.”

Financial performance by service line

EUR million Customer
sales

7–9/2017
Customer
sales
7–9/2016
Change, % Operating
profit
7–9/2017
Operating
profit
7–9/2016
Technology Services and Modernization 180 179 1 25.0 24.2
Business Consulting and Implementation 32 30 7 0.7 -0.2
Industry Solutions 114 106 8 16.6 13.0
Product Development Services 29 26 10 2.2 1.7
Support Functions and Global Management -3.4 -3.5
Total 355 341 4 41.1 35.1

Operating margin by service line

% Operating
margin
7–9/2017
Operating
margin
7–9/2016
Adjusted1) operating
margin
7–9/2017
Adjusted1) operating
margin
7–9/2016
Technology Services and Modernization 13.9  13.5 13.8 13.4
Business Consulting and Implementation 2.3 -0.6 2.8 -4.9
Industry Solutions 14.5 12.3 14.4 12.5
Product Development Services 7.6 6.4 7.5 6.5
Total 11.6 10.3 11.6 10.4
1) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items

Customer sales by industry group

EUR million Customer
sales
7–9/2017
Customer
sales
7–9/2016
Change,%
Financial Services 92 88 5
Public, Healthcare and Welfare 112 106 6
Industrial and Consumer Services 122 121 0
IT services  326 315 4
Product Development Services 29 26 9
Total 355 341 4

M&A impact by service line

Growth, % (in local currencies) 7–9/2017 Organic growth, % (in local currencies) 7–9/2017
Technology Services and Modernization 0.8 0.8
Business Consulting and Implementation 7.3 7.3
Industry Solutions 8.6 6.0
IT services 4.0 3.1
Product Development Services 10.5 10.5
Total 4.5 3.7

M&A impact by industry group

Growth, %
(in local currencies)
7–9/2017
Organic growth, %
(in local currencies)
7–9/2017
Financial Services 5.2 2.2
Public, Healthcare and Welfare 6.5 6.4
Industrial and Consumer Services 0.7 0.6
IT services 4.0 3.1
Product Development Services 10.5 10.5
Total 4.5 3.7


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 Tuesday 24 October 2017 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.

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 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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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