Tieto’s Interim Report 2/2018 Strong growth – profit at the previous year’s level
- Growth in local currencies 8%, organically 5%
- Profitability development good in Technology Services and Modernization, Business Consulting and Product Development Services
- Higher investments in technology renewals in Industry Solutions impact second-quarter profit
- Currency impact remains negative
The full interim report with tables is available at the end of this release.
Key figures for the second quarter
Figures for 2017 in this interim report have been restated due to the adoption of IFRS 15.
IT services
- Sales growth totalled 4.6%, sales in local currencies up by 7.4%
- Adjusted operating profit amounted to EUR 31.9 (33.0) million, 8.6% (9.3) of sales
The Group
- Sales growth totalled 4.8%, sales in local currencies up by 7.9%
- Adjusted operating profit amounted to EUR 34.8 (35.5) million, 8.6% (9.2) of sales
- In local currencies, the order backlog for 2018 provides support for Tieto’s growth ambitions for the year
| 4–6/2018 | 4–6/2017 | 1–6/2018 | 1–6/2017 | |
| Net sales, EUR million | 404.1 | 385.6 | 810.5 | 778.8 |
| Change, % | 4.8 | 1.2 | 4.1 | 4.0 |
| Change in local currencies, % | 7.9 | 2.8 | 7.1 | 4.8 |
| Operating profit (EBITA), EUR million | 36.4 | 32.0 | 77.7 | 57.7 |
| Operating margin (EBITA), % | 9.0 | 8.3 | 9.6 | 7.4 |
| Operating profit (EBIT), EUR million 1) | 31.3 | 28.1 | 68.6 | 50.2 |
| Operating margin (EBIT), % 1) | 7.7 | 7.3 | 8.5 | 6.4 |
| Adjusted 1) 2) operating profit (EBIT), EUR million | 34.8 | 35.5 | 71.4 | 71.1 |
| Adjusted 1) 2) operating margin (EBIT), % | 8.6 | 9.2 | 8.8 | 9.1 |
| Profit after taxes, EUR million | 24.7 | 20.9 | 54.6 | 36.7 |
| EPS, EUR | 0.33 | 0.28 | 0.74 | 0.50 |
| Net cash flow from operations, EUR million | 12.3 | -6.1 | 73.8 | 73.7 |
| Return on equity, 12-month rolling, % | 30.5 | 23.6 | 30.5 | 23.6 |
| Return on capital employed, 12-month rolling, % | 24.1 | 21.0 | 24.1 | 21.0 |
| Capital expenditure, EUR million | 11.4 | 21.0 | 19.5 | 30.3 |
| Acquisitions, EUR million | 2.3 | - | 12.2 | - |
| Interest-bearing net debt, EUR million | 209.2 | 164.6 | 209.2 | 164.6 |
| Net debt/EBITDA | 1.0 | 0.9 | 1.0 | 0.9 |
| Order backlog | 1 731 | 1 817 | 1 731 | 1 817 |
| Personnel on 30 June | 14 956 | 13 754 | 14 956 | 13 754 |
1) the second quarter includes EUR 1.4 (1.0) 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 million in 2017).
1)adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items
CEO’s comment
Comment regarding the interim report by Kimmo Alkio, President and CEO:
“We are happy to deliver strong growth during the second quarter. The organic growth of all our service lines also outpaced the market – with a broader portfolio that is starting to deliver sustainable growth. Operating profit remained at the previous year’s level, while the development was twofold. Most of our businesses had strong overall performance, while our investments in Industry Solutions are impacting short-term profits. Our investments play an important part in our growth agenda and in ensuring our position as customers’ first choice for business renewal.
In our Industry Solutions’ software business we are currently carrying out a technology and business model renewal in several industries simultaneously. We intend to take advantage of the growth opportunities by introducing the latest cloud-based technologies, open ecosystems and APIs, and new business models. I remain confident that our investments in the Financial Services, Healthcare and Utility sectors will provide strong future value – this has also been proven by our recent success with customers, such as a major Nordic bank within the Payments segment.
In addition to driving our continuous business acceleration, we are pleased to participate in the broader society-wide dialogue on the future of work – and the future of technology. Our commitment to promoting equal opportunity and continuous learning provides significant additional meaning to our employees worldwide. This combination of technology-based innovation, social contribution and co-innovation with our customers will drive greater value for society and our customers.”
Financial performance by service line
| EUR million | Customer sales 4–6/2018 |
Customer sales 4–6/2017 |
Change, % | Operating profit 4–6/2018 |
Operating profit 4–6/2017 |
| Technology Services and Modernization | 186.8 | 185.6 | 1 | 20.7 | 19.1 |
| Business Consulting and Implementation | 64.3 | 48.9 | 31 | 7.1 | 4.8 |
| Industry Solutions | 119.4 | 119.8 | 0 | 5.0 | 9.6 |
| Product Development Services | 33.7 | 31.3 | 8 | 2.9 | 2.3 |
| Support Functions and Global Management | - | - | -4.4 | -7.6 | |
| Total | 404.1 | 385.6 | 5 | 31.3 | 28.1 |
Operating margin by service line
| % | Operating margin 4–6/2018 |
Operating margin 4–6/2017 |
Adjusted1) operating margin 4–6/2018 |
Adjusted1) operating margin 4–6/2017 |
| Technology Services and Modernization | 11.1 | 10.3 | 12.3 | 11.7 |
| Business Consulting and Implementation | 11.0 | 9.9 | 9.8 | 7.7 |
| Industry Solutions | 4.2 | 8.0 | 4.9 | 9.4 |
| Product Development Services | 8.7 | 7.3 | 8.7 | 8.0 |
| Total | 7.7 | 7.3 | 8.6 | 9.2 |
| 1) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items | ||||
Customer sales by industry group
| EUR million | Customer sales 4–6/2018 |
Customer sales 4–6/2017 |
Change, % |
| Financial Services | 95.3 | 96.4 | -1 |
| Public, Healthcare and Welfare | 133.2 | 126.5 | 5 |
| Industrial and Consumer Services | 141.9 | 131.5 | 8 |
| IT services | 370.5 | 354.3 | 5 |
| Product Development Services | 33.7 | 31.3 | 8 |
| Total | 404.1 | 385.6 | 5 |
M&A impact by service line
| Growth, % (in local currencies) 4–6/2018 |
Organic growth, % (in local currencies) 4–6/2018 |
|
| Technology Services and Modernization | 3 | 3 |
| Business Consulting and Implementation | 36 | 10 |
| Industry Solutions | 3 | 4 |
| IT services | 7 | 4 |
| Product Development Services | 13 | 13 |
| Total | 8 | 5 |
M&A impact by industry group
| Growth, % (in local currencies) 4–6/2018 |
Organic growth, % (in local currencies) 4–6/2018 |
|
| Financial Services | 2 | 0 |
| Public, Healthcare and Welfare | 9 | 7 |
| Industrial and Consumer Services | 11 | 5 |
| IT services | 7 | 4 |
| Product Development Services | 13 | 13 |
| Total | 8 | 5 |
For further information, please contact:
Janne Salminen, Acting CFO, tel.+358 2072 70707, +358 50 359 8521,
janne.salminen (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 Friday 20 July 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, 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