Tieto's Interim Report 2/2015 – Healthy growth in IT services – competitiveness strengthens further
Tieto Corporation INTERIM REPORT 22 July 2015, 8.00 am EET
- IT services growth close to 3% – profit as expected
- Managed Services automation programme on track
- Acquisition of Software Innovation strengthens Tieto’s competitiveness
- Solid performance in Product Development Services
The full interim report with tables is available at the end of this release
Key figures for the second quarter
- Organic growth in local currencies was -3.3% due to lower business volumes in Product Development Services
- In IT services, organic growth in local currencies was 2.7%
- Order intake (Total Contract Value) amounted to EUR 340 (398) million and order backlog was EUR 1 737 (1 550) million
- Second-quarter operating profit excl. one-off items amounted to EUR 30.1 (30.0) million, 8.3% (7.8) of sales
| 4–6/2015 | 4–6/2014 | 1–6/2015 | 1–6/2014 | |
| Net sales, EUR million | 363.8 | 386.4 | 729.4 | 773.4 |
| Change, % | -5.8 | -7.3 | -5.7 | -8.0 |
| Organic change in local currencies, % | -3.3 | -1.3 | -3.3 | -1.3 |
| Operating profit (EBITA), EUR million | 23.2 | 21.7 | 37.2 | 56.1 |
| Operating margin (EBITA), % | 6.4 | 5.6 | 5.1 | 7.3 |
| Operating profit (EBIT), EUR million | 23.1 | 21.5 | 37.0 | 55.5 |
| Operating margin (EBIT), % | 6.3 | 5.6 | 5.1 | 7.2 |
| Operating profit (EBIT) excl. one-off items1), EUR million | 30.1 | 30.0 | 60.8 | 64.5 |
| Operating margin (EBIT) excl. one-off items1), % | 8.3 | 7.8 | 8.3 | 8.3 |
| Profit after taxes, EUR million | 17.4 | 16.5 | 26.5 | 41.1 |
| EPS, EUR | 0.24 | 0.23 | 0.36 | 0.56 |
| Net cash flow from operations, EUR million | 12.4 | 16.6 | 49.1 | 66.6 |
| Return on equity, 12-month rolling, % | 4.5 | 15.3 | 4.5 | 15.3 |
| Return on capital employed, 12-month rolling, % | 7.5 | 14.8 | 7.5 | 14.8 |
| Investments, EUR million | 10.6 | 7.1 | 22.2 | 20.5 |
| Interest-bearing net debt, EUR million | 5.3 | 30.3 | 5.3 | 30.3 |
| Net debt/EBITDA | 0.0 | 0.2 | 0.0 | 0.2 |
| Book-to-bill | 0.9 | 1.0 | 1.1 | 1.1 |
| Order backlog | 1 737 | 1 550 | 1 737 | 1 550 |
| Personnel on 30 June | 12 949 | 14 126 | 12 949 | 14 126 |
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:
“I am pleased that we were able to deliver healthy growth in our IT services business in the second quarter. The profitability of the underlying business developed as expected and the margin somewhat improved, despite our continued investments to support long-term growth. We see this development as evidence of further improvement in competitiveness, as the macro environment remains relatively challenging.
We are continuing to make good progress in digitalizing our own services. The current major automation programme in Managed Services is progressing on schedule and we expect the customer benefits of this programme to materialize during the second half of this year. In addition, this software-driven automation programme drives further efficiency improvement.
I am also pleased with the performance of Product Development Services. Our current business, excluding the R&D activities earlier insourced by one customer, has been developing well and efficiency measures have resulted in a healthy cost structure.
Our customers are continuing to reshape their businesses by applying new technologies to their core processes. With the acquisition of Software Innovation, announced in June, we are further strengthening our position as the leading digitalization partner in the Nordic countries and accelerating our growth, especially in Norway. Software Innovation is recognized for its strong Nordic presence in digitalizing customers’ document and workflow management, which further enables us to provide a broader set of services to a larger customer base.
After the second quarter of 2015, we are on track in terms of both speed and magnitude with re-shaping Tieto’s competitiveness through active investments in both automation and new services.”
Financial performance by service line
| EUR million | Customer sales 4–6/2015 |
Customer sales 4–6/2014 |
Change, % | Operating profit 4–6/2015 |
Operating profit 4–6/2014 |
| Managed Services | 131 | 132 | -1 | 3.1 | 7.6 |
| Consulting and System Integration | 101 | 97 | 5 | 8.5 | 6.1 |
| Industry Products | 98 | 97 | 1 | 10.8 | 15.0 |
| Product Development Services | 33 | 60 | -45 | 5.7 | -2.3 |
| Support Functions and Global Management | -5.0 | -4.8 | |||
| Total | 364 | 386 | -6 | 23.1 | 21.5 |
Operating margin by service line
| % | Operating margin 4–6/2015 |
Operating margin 4–6/2014 |
Operating margin excl. one-off items1) 4–6/2015 |
Operating margin excl. one-off items1) 4–6/2014 |
| Managed Services | 2.4 | 5.8 | 7.6 | 5.8 |
| Consulting and System Integration | 8.4 | 6.3 | 8.6 | 7.4 |
| Industry Products | 11.0 | 15.3 | 12.2 | 15.6 |
| Product Development Services | 17.1 | -3.8 | 9.6 | 6.1 |
| Total | 6.3 | 5.6 | 8.3 | 7.8 |
| 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 4–6/2015 |
Customer sales adj. for divestments 4–6/2014 |
Change, % |
| Managed Services | 132 | 132 | 1 |
| Consulting and System Integration | 102 | 97 | 6 |
| Industry Products | 100 | 97 | 3 |
| IT services | 335 | 326 | 3 |
| Product Development Services | 34 | 55 | -39 |
| Total | 369 | 386 | -3 |
Customer sales by industry group
| EUR million | Customer sales 4–6/2015 |
Customer sales 4–6/2014 |
Change, % |
| Financial Services | 88 | 84 | 4 |
| Manufacturing, Retail and Logistics | 77 | 78 | 0 |
| Public, Healthcare and Welfare | 107 | 104 | 2 |
| Telecom, Media and Energy | 58 | 60 | -3 |
| IT services | 330 | 326 | 1 |
| Product Development Services | 33 | 60 | -45 |
| Total | 364 | 386 | -6 |
Organic change in local currency by industry group
| EUR million | Customer sales adj. for acquisitions and currency 4-6/2015 |
Customer sales adj. for divestments 4-6/2014 |
Change, % |
| Financial Services | 89 | 84 | 6 |
| Manufacturing, Retail and Logistics | 78 | 78 | 0 |
| Public, Healthcare and Welfare | 108 | 104 | 4 |
| Telecom, Media and Energy | 60 | 60 | -1 |
| IT services | 335 | 326 | 3 |
| Product Development Services | 34 | 55 | -39 |
| Total | 369 | 386 | -3 |
Leadership team
Antti Vasara, Executive Vice President, Head of Product Development Services, has decided to pursue opportunities outside Tieto. Tom Leskinen, currently heading a business unit in PDS, has been nominated as Head of Product Development Services and he will report to Kimmo Alkio, President and CEO. The changes will take effect as of 1 August 2015.
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 on 22 July 2015 at Tieto’s premises in Helsinki, address: Aku Korhosen tie 2–6, 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 around 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