Tieto's Interim Report 1/2015 – Accelerated investments to drive growth and renewal
Tieto Corporation INTERIM REPORT 28 April 2015, 8.00 am EET
- Modest growth in IT services – continued strong order intake
- In IT services, investments in offering development and the Managed Services automation programme affect first-half profitability
- Efficiency measures improve profitability in Product Development Services
- Full-year outlook remains unchanged
The full interim report with tables is available at the end of this release
Key figures for the first quarter
- Organic growth in local currencies was -3.2%
- In IT services, organic growth in local currencies was 0.5%
- Order intake (Total Contract Value) amounted to EUR 430 (402) million and order backlog was EUR 1 819 (1 582) million
- First-quarter operating profit excl. one-off items amounted to EUR 30.7 (34.5) million, 8.4% (8.9) of sales
- Operating profit includes a negative currency effect of around EUR 4 million
| 1–3/2015 | 1–3/2014 | |
| Net sales, EUR million | 365.6 | 387.0 |
| Change, % | -5.5 | -8.7 |
| Organic change in local currencies, % | -3.2 | -1.4 |
| Operating profit (EBITA), EUR million | 14.0 | 34.4 |
| Operating margin (EBITA), % | 3.8 | 8.9 |
| Operating profit (EBIT), EUR million | 13.9 | 34.0 |
| Operating margin (EBIT), % | 3.8 | 8.8 |
| Operating profit (EBIT) excl. one-off items1), EUR million | 30.7 | 34.5 |
| Operating margin (EBIT) excl. one-off items1), % | 8.4 | 8.9 |
| Profit after taxes, EUR million | 9.1 | 24.6 |
| EPS, EUR | 0.12 | 0.34 |
| Net cash flow from operations, EUR million | 36.7 | 50.0 |
| Return on equity, 12-month rolling, % | 4.5 | 13.5 |
| Return on capital employed, 12-month rolling, % | 7.7 | 15.3 |
| Investments, EUR million | 11.6 | 13.4 |
| Interest-bearing net debt, EUR million | -85.9 | -20.5 |
| Net debt/EBITDA | -0.6 | -0.1 |
| Book-to-bill | 1.2 | 1.0 |
| Order backlog | 1 819 | 1 582 |
| Personnel on 31 March | 13 456 | 14 102 |
1) Excl. capital gains, goodwill impairment charges and restructuring costs
Full-year outlook for 2015 unchanged
Tieto expects its full-year operating profit (EBIT) excluding one-off items to increase from the previous year’s level (EUR 150.2 million in 2014).
CEO’s comment
Comment regarding the interim report by Kimmo Alkio, President and CEO:
“The current era of digitalization, which impacts all industries and societies worldwide, continues to provide attractive business opportunities for Tieto. With the aim of becoming the thought leader and advisor for enterprise customers in the Nordic countries, we have accelerated our investments in areas with promising future business opportunities.
Currently, we have increased our focus on digitalizing our own services. As an example, additional investments have been made in the Managed Services automation programme. This is expected to deliver a superior service experience to our customers and improved profitability levels towards the year end. In addition, we are continuing to actively invest in growth businesses such as Industrial Internet, Customer Experience Management, Healthcare and Cloud Computing. I’m pleased to see that our cloud business continued to grow in the first quarter at a year-on-year rate of over 100%.
While investments for future growth and competitiveness will somewhat strain our first-half profitability, the underlying business continues to develop favourably.”
Financial performance by service line
| EUR million | Customer sales 1–3/2015 |
Customer sales 1–3/2014 |
Change, % | Operating profit 1–3/2015 |
Operating profit 1–3/2014 |
| Managed Services | 126 | 127 | -1 | -8.3 | 10.9 |
| Consulting and System Integration | 99 | 100 | -1 | 8.2 | 11.1 |
| Industry Products | 94 | 100 | -6 | 12.6 | 15.5 |
| Product Development Services | 47 | 60 | -22 | 6.5 | 1.1 |
| Support Functions and Global Management | -5.0 | -4.6 | |||
| Total | 366 | 387 | -6 | 13.9 | 34.0 |
Operating margin by service line
| % | Operating margin 1–3/2015 |
Operating margin 1–3/2014 |
Operating margin excl. one-off items1) 1–3/2015 |
Operating margin excl. one-off items1) 1–3/2014 |
| Managed Services | -6.6 | 8.5 | 3.6 | 8.4 |
| Consulting and System Integration | 8.3 | 11.1 | 10.8 | 11.2 |
| Industry Products | 13.3 | 15.4 | 13.4 | 15.4 |
| Product Development Services | 14.0 | 1.9 | 14.0 | 2.6 |
| Total | 3.8 | 8.8 | 8.4 | 8.9 |
1) Excl. capital gains, impairments and restructuring costs
Organic change in local currency by service line
| EUR million | Customer sales adj. for acquisitions and currency 1–3/2015 |
Customer sales adj. for divestments 1–3/2014 |
Change, % |
| Managed Services | 130 | 127 | 2 |
| Consulting and System Integration | 101 | 100 | 1 |
| Industry Products | 99 | 100 | -1 |
| IT services | 329 | 327 | 1 |
| Product Development Services | 46 | 60 | -24 |
| Total | 375 | 387 | -3 |
Customer sales by industry group
| EUR million | Customer sales 1–3/2015 |
Customer sales 1–3/2014 |
Change, % |
| Financial Services | 84 | 83 | 0 |
| Manufacturing, Retail and Logistics | 78 | 79 | -2 |
| Public, Healthcare and Welfare | 101 | 100 | 1 |
| Telecom, Media and Energy | 57 | 65 | -12 |
| IT services | 319 | 327 | -2 |
| Product Development Services | 47 | 60 | -22 |
| Total | 366 | 387 | -6 |
Organic change in local currency by industry group
| EUR million | Customer sales adj. for acquisitions and currency 1-3/2015 |
Customer sales adj. for divestments 1-3/2014 |
Change, % |
| Financial Services | 87 | 83 | 5 |
| Manufacturing, Retail and Logistics | 79 | 79 | 0 |
| Public, Healthcare and Welfare | 104 | 100 | 4 |
| Telecom, Media and Energy | 59 | 65 | -9 |
| IT services | 329 | 327 | 1 |
| Product Development Services | 46 | 60 | -24 |
| Total | 375 | 387 | -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
Press conference for analysts and media will be held at Tieto’s premises in Stockholm, address: Fjärde Bassängvägen 15, on Tuesday 28 April 2015 at 11.00 am EET (10.00 am CET, 9.00 am UK time). The results will be presented in English by Kimmo Alkio, President and CEO, and Lasse Heinonen, CFO.
The conference will be webcasted and can be viewed live on Tieto's website. To join the conference, attendees need Adobe Flash plugin version 10.1.0 or newer. The meeting participants can also join a telephone conference that will be held at the same time. The telephone conference details can be found below.
Telephone conference numbers
Finland: +358 (0)9 6937 9590
Sweden: +46 (0)8 5065 3937
UK: +44 (0)20 3427 1909
US: +1212 444 0896
Conference code: 8765732
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. An on-demand video will be available after the conference.
Tieto publishes financial information in English and Finnish.
TIETO CORPORATION
DISTRIBUTION
NASDAQ Helsinki
NASDAQ Stockholm
Principal Media
Tieto is the largest IT services company in the Nordics providing full lifecycle IT services. We also provide global product development services for companies in the communications and embedded technologies arena. Through industry insight, technology vision, and innovative thinking, Tieto proactively strives to inspire and engage our customers in finding new ways of accelerating their business.
Building on a strong Nordic heritage, Tieto combines global capabilities with local presence. Headquartered in Helsinki, Finland, Tieto has over 13 000 experts in more than 20 countries. Turnover is approximately EUR 1.5 billion. Tieto’s shares are listed on NASDAQ in Helsinki and Stockholm. www.tieto.com