Tieto’s Interim Report 1/2019: Good start for the year
- Adjusted operating margin of 10% supported by healthy performance in Industry Solutions
- Strong growth and profitability in Product Development Services
- Growth in local currencies 2% – strong order intake
- Strategy implementation progressing as planned, including efficiency measures
The full interim report with tables is available at the end of this release.
Key figures for the first quarter
- Sales growth totalled 0.5%, sales in local currencies up by 2.4%
- Adjusted operating profit amounted to EUR 40.9 (37.9) million, 10.0% (9.3) of sales
- In local currencies, the order backlog for 2019 provides support for Tieto’s growth ambitions for the year
| 1–3/2019 | 1–3/2018 | ||
| Net sales, EUR million | 408.4 | 406.3 | |
| Change, % | 0.5 | 3.4 | |
| Change in local currencies, % | 2.4 | 6.2 | |
| Operating profit (EBIT), EUR million | 36.8 | 37.3 | |
| Operating margin (EBIT), % | 9.0 | 9.2 | |
| Adjusted [1] operating profit (EBIT), EUR million | 40.9 | 37.9 | |
| Adjusted [1] operating margin (EBIT), % | 10.0 | 9.3 | |
| Profit after taxes, EUR million | 27.1 | 29.9 | |
| EPS, EUR | 0.37 | 0.41 | |
| Net cash flow from operations, EUR million | 43.3 | 61.5 | |
| Return on equity, 12-month rolling, % | 30.4 | 30.7 | |
| Return on capital employed, 12-month rolling, % | 22.3 | 29.2 | |
| Capital expenditure, EUR million | 9.4 | 8.2 | |
| Acquisitions, EUR million | 0.7 | 6.2 | |
| Interest-bearing net debt, EUR million | 273.2 | 100.7 | |
| Net debt/EBITDA [2] | 1.1 | 0.5 | |
| Order backlog | 1 717 | 1 787 | |
| Personnel on 31 March | 15 275 | 14 581 | |
[1]adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability
[2] EBITDA is 12-month average and is modified to reflect the impact of IFRS 16 on depreciations
Full-year outlook for 2019 unchanged
Tieto expects its full-year adjusted[1] operating profit (EBIT) to increase from the previous year’s level (EUR 168.0 million in 2018) added by the impact of IFRS 16[2] to maintain the comparability after the adoption of the new standard.
[1]adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability
[2]The company estimates that the adoption of IFRS 16 will have a positive impact on operating profit in 2019. In the first quarter, the impact was EUR 0.9 million. Comparative periods are not restated. More information on the adoption of the standard can be found in the Accounting Policies in the tables section.
CEO’s comment
Comment regarding the interim report by Kimmo Alkio, President and CEO:
“We are pleased to start the year with a strong quarter, experiencing positive development in most of the businesses with all service lines posting an adjusted operating margin of over 10%. While overall growth was curbed by somewhat slow development in infrastructure services, we achieved strong order intake. Product Development Services performed well with 12% growth and profitability. Several investment areas accelerated performance with Customer Experience Management growing by over 30% and the Data-Driven Businesses unit more than doubling its revenues.
The market continues to be dynamic as our customers continue to prioritize investments in improving the attractiveness and competitiveness of their own products and services. The need to support clients’ digital transformation drives growth opportunities for all our businesses. For our product development services in the telecom and automotive sectors, the market to make customers’ products connected and data-rich continues to gain good momentum.
Based on our new strategy and agile operations, we focus on helping our customers in their digital transformation. While the transition towards new structure is under way, we maintain attention on serving our customers. As estimated in connection with the strategy launch, related efficiency improvement will start to materialize during the second half of this year. Our Open Source Culture is a good foundation to continue on our path of innovation and renewal – and helps us support our employees during the change. Lifelong learning continues to be crucial both for employees’ personal growth and overall success.”
Financial performance by service line
| EUR million | Customer sales 1–3/2019 |
Customer sales 1–3/2018 |
Change, % |
Operating profit 1–3/2019 |
Operating profit 1–3/2018 |
|
| Technology Services and Modernization | 187.3 | 189.5 | -1 | 18.6 | 20.7 | |
| Business Consulting and Implementation | 65.0 | 62.1 | 5 | 5.6 | 5.3 | |
| Industry Solutions | 119.4 | 120.7 | -1 | 13.1 | 10.9 | |
| Product Development Services | 36.8 | 34.0 | 8 | 4.5 | 4.3 | |
| Support Functions and Global Management | - | - | - | -5.0 | -3.8 | |
| Total | 408.4 | 406.3 | 1 | 36.8 | 37.3 | |
Operating margin by service line
| % | Operating margin 1–3/2019 |
Operating margin 1–3/2018 |
Adjusted[1] operating margin 1–3/2019 |
Adjusted[1] operating margin 1–3/2018 |
| Technology Services and Modernization | 9.9 | 10.9 | 10.4 | 11.0 |
| Business Consulting and Implementation | 8.7 | 8.5 | 10.4 | 9.4 |
| Industry Solutions | 10.9 | 9.0 | 11.1 | 8.2 |
| Product Development Services | 12.3 | 12.7 | 12.3 | 12.7 |
| Total | 9.0 | 9.2 | 10.0 | 9.3 |
| [1] adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability |
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Customer sales by industry group
| EUR million | Customer sales 1–3/2019 |
Customer sales 1–3/2018 |
Change, % |
| Financial Services | 91.4 | 96.4 | -5 |
| Public, Healthcare and Welfare | 139.2 | 132.9 | 5 |
| Industrial and Consumer Services | 141.2 | 143.0 | -1 |
| Product Development Services | 36.8 | 34.0 | 8 |
| Total | 408.4 | 406.3 | 1 |
M&A impact by service line
| Growth,% (in local currencies) 1–3/2019 |
Organic growth, % (in local currencies) 1–3/2019 |
|
| Technology Services and Modernization | 0 | 0 |
| Business Consulting and Implementation | 7 | 4 |
| Industry Solutions | 1 | 2 |
| Product Development Services | 12 | 12 |
| Total | 2 | 2 |
M&A impact by industry group
| Growth, % (in local currencies) 1–3/2019 |
Organic growth, % (in local currencies) 1–3/2019 |
|
| Financial Services | -3 | -4 |
| Public, Healthcare and Welfare | 7 | 6 |
| Industrial and Consumer Services | 0 | 0 |
| Product Development Services | 12 | 12 |
| Total | 2 | 2 |
For further information, please contact:
Tomi Hyryläinen, Chief Financial Officer, tel. +358 50 555 0363, tomi.hyrylainen (at) tieto.com
Tanja Lounevirta, Head of Investor Relations, tel. +358 50 321 7510,
tanja.lounevirta (at) tieto.com
A teleconference for analysts and media will be held on Thursday 25 April 2019 at 10.00 am EET (9.00 am CET, 8.00 am UK time). Kimmo Alkio, President and CEO, and Tomi Hyryläinen, 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 9125
US: +1 323 794 2093
Conference code: 8080410
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 around 15 000 experts in close to 20 countries. Tieto’s turnover is approximately EUR 1.6 billion and shares listed on NASDAQ in Helsinki and Stockholm. www.tieto.com
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