Tieto’s Interim Report 4/2017 – Solid performance continues in the fourth quarter – strong full year 2017

  • Strong cash flow and good profitability
  • Order backlog provides healthy foundation for 2018
  • Accelerated growth in Sweden – Avega acquisition completed
  • Dividend proposal of EUR 1.40  

The full interim report with tables is available at the end of this release.
 
 
Key figures for the fourth quarter

IT services

  • Sales growth totalled 0.8%, sales in local currencies up by 1.7%
  • Adjusted operating profit amounted to EUR 45.7 (45.9) million, 12.2% (12.3) of sales

The Group

  • Sales growth totalled 1.5%, sales in local currencies up by 2.4%
  • Adjusted operating profit amounted to EUR 49.3 (49.5) million, 12.0% (12.3) of sales
  • Order intake (Total Contract Value) at EUR 543 (613) million – book-to-bill 1.3 (1.5)

Key figures for the full year

IT services

  • Sales growth totalled 3.0%, sales in local currencies up by 3.6%
  • Adjusted operating profit amounted to EUR 148.9 (141.1) million, 10.5% (10.3) of sales

The Group

  • Sales growth totalled 3.4%, sales in local currencies up by 4.1%
  • Adjusted operating profit amounted to EUR 161.5 (152.2) million, 10.5% (10.2) of sales
  • Proposed dividend EUR 1.40 per share, including base dividend of EUR 1.20 (1.15) and an additional dividend of EUR 0.20 (0.22), representing dividend yield of 5.4%
10–12/
2017
10–12/
2016
1–12/
2017
1–12/
2016
Net sales, EUR million 409.6 403.6 1 543.2 1 492.6
   Change, % 1.5 2.0 3.4 2.2
   Change in local currencies, % 2.4 3.5 4.1 3.2
Operating profit (EBITA), EUR million 51.7 49.0 154.3 154.9
Operating margin (EBITA), % 12.6 12.1 10.0 10.4
Operating profit (EBIT), EUR million [1] 48.0 45.1 139.2 140.8
Operating margin (EBIT), % [1] 11.7 11.2 9.0 9.4
Adjusted [1] [2] operating profit (EBIT), EUR million           49.3 49.5 161.5 152.2
Adjusted [1] [2] operating margin (EBIT), % 12.0 12.3 10.5 10.2
Profit after taxes, EUR million 36.8 34.2 107.8 107.2
EPS, EUR 0.50 0.46 1.46 1.46
Net cash flow from operations, EUR million 66.6 50.2 151.0 97.2
Return on equity, 12-month rolling, % 22.4 22.1 22.4 22.1
Return on capital employed, 12-month rolling, % 20.5 21.6 20.5 21.6
Capital expenditure, EUR million 11.4 24.4 50.8 61.6
Acquisitions, EUR million       49.3        0.3        49.3        37.6
Interest-bearing net debt, EUR million 155.7 109.7 155.7 109.7
Net debt/EBITDA 0.8 0.6 0.8 0.6
Book-to-bill 1.3 1.5 1.0 1.1
Order backlog 1 860 1 847      1 860 1 847
Personnel on 31 December     14 329 13 876 14 329 13 876

[1] the fourth quarter includes EUR 1.2 (1.1) million and the full year EUR 4.3 (3.3) 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

Tieto expects its adjusted [1] full-year operating profit (EBIT) to increase from the previous year’s level (EUR 161.5 million [2] in 2017).

[1] adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items
[2] subject to revision according to IFRS 15 restatement

CEO’s comment

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

“We are pleased to have ended a strong year with a solid last quarter. Performance highlights are in the Public, Healthcare & Welfare and Product Development businesses which achieved the strongest growth. Our business accelerated in Sweden with 8% growth and in December, we had the pleasure of welcoming 350 new colleagues from Avega, enabling us to further take advantage of the consulting-led Swedish market.

2017 as a whole was a good year for Tieto, as we were able to provide strong value to all our key stakeholders. We achieved major improvement and record results in customer experience and continued to enhance employee engagement and motivation. I am also pleased that we delivered revenue growth that outperformed the market, strong cash flow progress and good profitability – total performance supporting the Board’s proposal to increase the dividend payout. Our long-term initiatives to drive innovation, performance and social responsibility have been recognized by Tieto’s nomination to Thomson Reuters Top 100 Global Tech Leaders. This prominent list includes a total of 14 European and three Nordic companies.

We continue to be inspired by the dynamic market, driven by data-driven opportunities and customers’ healthy investment appetite. Tieto actively drives innovation, especially around data-intensive services and technologies, such as artificial intelligence, to accelerate growth across markets and customer segments. Amongst our global Tieto community of 14 000 employees we will actively promote our Open Source culture with focus particularly on equality, diversity and inclusion. We expect that 2018 will be another year of driving competitiveness and attractive value creation for all our stakeholders.”

Financial performance by service line

EUR million  Customer
sales
10–12/
2017
 Customer
sales
10–12/
2016
Change, % Operating
profit
10–12/
2017
Operating
profit
10–12/
2016
Technology Services and Modernization 199 197 1 24.7 26.2
Business Consulting and Implementation 42 38  10 2.4 2.0
Industry Solutions 135 138  -2 23.2 19.7
Product Development Services 34 31  10 3.5 3.3
Support Functions and Global Management -5.9 -6.2
Total 410 404 1 48.0 45.1

Operating margin by service line

% Operating
margin
10–12/2017
Operating
margin
10–12/2016
Adjusted 1)
operating
margin
10–12/2017
Adjusted 1)
operating
margin
10–12/2016
Technology Services and Modernization 12.4 13.3 13.2 14.1
Business Consulting and Implementation       5.7 5.3 4.8 1.8
Industry Solutions 17.2 14.3 15.8 15.5
Product Development Services 10.3 10.6 10.3 11.3
Total 11.7 11.2 12.0 12.3

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

Customer sales by industry group

EUR million Customer
 sales
10–12/2017
Customer
sales
10–12/2016
Change, %
Financial Services 100 101 -1
Public, Healthcare and Welfare 135 135 1
Industrial and Consumer Services    140 137 3
IT services  376 373 1
Product Development Services 34 31 10
Total 410 404 1

M&A impact by service line

Growth, %
(in local
currencies)
10–12/2017 
Organic growth, %
(in local
currencies)
10–12/2017 
Technology Services and Modernization 1.4 1.4
Business Consulting and Implementation       11.0 1.0
Industry Solutions  -0.6 -0.6
IT services  1.7 0.6
Product Development Services  10.7 10.7
Total  2.4 1.4

M&A impact by industry group

Growth, %
(in local
currencies)
10–12/2017 
Organic growth, %
(in local
currencies)
10–12/2017 
Financial Services  -0.7 -1.2
Public, Healthcare and Welfare  1.4 1.0
Industrial and Consumer Services          3.7 1.7
IT services  1.7 0.6
Product Development Services  10.7 10.7
Total  2.4 1.4

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 6 February 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, 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