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 sales1–3/2018 |
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
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