Tieto's Interim Report 3/2015 – Solid performance and accelerated growth in IT services
Tieto Corporation INTERIM REPORT 22 October 2015, 8.00 am EET
- Organic growth in IT services 5% - Industry Products and add-on sales as key drivers
- Solid profitability in IT services while investing in new services and competences
- Product Development Services business successfully stabilized
The full interim report with tables is available at the end of this release
Key figures for the third quarter
IT services
- Organic growth in local currencies was 5.1%
- Operating profit excl. one-off items amounted to EUR 36.8 (36.8) million, 12.0% (12.5) of sales
The Group
- Organic growth in local currencies was -0.6% – affected by lower business volumes in Product Development Services as announced in 2014
- Third-quarter operating profit excl. one-off items amounted to EUR 38.6 (41.3) million, 11.5% (11.9) of sales
- Order intake (Total Contract Value) amounted to EUR 490 (395) million and order backlog was EUR 1 864 (1 558) million
| 7–9/2015 | 7–9/2014 | 1–9/2015 | 1–9/2014 | |
| Net sales, EUR million | 335.1 | 346.2 | 1 064.5 | 1 119.6 |
| Change, % | -3.2 | -4.1 | -4.9 | -6.8 |
| Organic change in local currencies, % | -0.6 | -2.6 | -2.4 | -1.7 |
| Operating profit (EBITA), EUR million | 41.7 | -3.7 | 79.0 | 52.4 |
| Operating margin (EBITA), % | 12.4 | -1.1 | 7.4 | 4.7 |
| Operating profit (EBIT), EUR million | 41.4 | -3.9 | 78.4 | 51.6 |
| Operating margin (EBIT), % | 12.4 | -1.1 | 7.4 | 4.6 |
| Operating profit (EBIT) excl. one-off items1), EUR million | 38.6 | 41.3 | 99.4 | 105.8 |
| Operating margin (EBIT) excl. one-off items1), % | 11.5 | 11.9 | 9.3 | 9.5 |
| Profit after taxes, EUR million | 29.6 | -12.8 | 56.1 | 28.3 |
| EPS, EUR | 0.40 | -0.17 | 0.76 | 0.39 |
| Net cash flow from operations, EUR million | 16.4 | 11.1 | 65.5 | 77.7 |
| Return on equity, 12-month rolling, % | 13.8 | 8.7 | 13.8 | 8.7 |
| Return on capital employed, 12-month rolling, % | 14.8 | 10.4 | 14.8 | 10.4 |
| Investments, EUR million | 81.8 | 10.1 | 104.0 | 30.6 |
| Interest-bearing net debt, EUR million | 57.7 | 25.7 | 57.7 | 25.7 |
| Net debt/EBITDA | 0.4 | 0.2 | 0.4 | 0.2 |
| Book-to-bill | 1.5 | 1.1 | 1.2 | 1.1 |
| Order backlog | 1 864 | 1 558 | 1 864 | 1 558 |
| Personnel on 30 September | 13 179 | 13 878 | 13 179 | 13 878 |
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:
“We have good reasons to be satisfied with our third-quarter performance. This was the highest growth quarter in many years in our main business of IT services. The combination of 5% growth and strong order intake demonstrates our current competitiveness all across the Nordics. In the recent quarter, especially our software product businesses and Consulting & System Integration services grew faster than the market. Furthermore, our Product Development Services business has stabilized and we have won new business in the semiconductor area and identified several interesting new opportunities.
We are also pleased to continue pursuing new service areas and thereby capture the opportunities provided by digitalization. We have maintained our investments into our start-up operations and related recruitments at a somewhat higher level to accelerate growth of new services and innovations. Our Managed Services automation programme, initiated earlier in the year, is also well on track and has already contributed to our intended efficiency improvement. Our financial performance continues to develop favourably even with higher, fully expensed investments in service development and currency headwinds – these combined totalled over EUR 20 million during the first nine months of the current year.
In the past quarter, we concluded both our annual customer satisfaction and employee engagement surveys, whose results confirmed the positive renewal of Tieto. I’m particularly pleased with the significant improvement in employee engagement, which gives us a strong foundation to provide exciting professional opportunities and drive innovation with our customers.”
Financial performance by service line
| EUR million | Customer sales 7-9/2015 |
Customer sales 7-9/2014 |
Change, % | Operating profit 7-9/2015 |
Operating profit 7-9/2014 |
| Managed Services | 122 | 121 | 1 | 16.7 | 11.0 |
| Consulting and System Integration | 88 | 84 | 5 | 4.4 | 7.2 |
| Industry Products | 96 | 91 | 6 | 24.0 | 20.3 |
| Product Development Services | 29 | 51 | -43 | 0.6 | -37.4 |
| Support Functions and Global Management | -4.2 | -5.0 | |||
| Total | 335 | 346 | -3 | 41.4 | -3.9 |
Operating margin by service line
| % | Operating margin 7-9/2015 |
Operating margin 7-9/2014 |
Operating margin excl. one-off items1) 7-9/2015 |
Operating margin excl. one-off items1) 7-9/2014 |
| Managed Services | 13.7 | 9.0 | 13.8 | 9.1 |
| Consulting and System Integration | 5.0 | 8.6 | 5.9 | 11.6 |
| Industry Products | 24.9 | 22.4 | 18.7 | 22.3 |
| Product Development Services | 2.1 | -73.0 | 6.2 | 8.9 |
| Total | 12.4 | -1.1 | 11.5 | 11.9 |
1)Excl. capital gains, impairments and restructuring costs
Organic change in local currency by service line
| Customer sales adj. for acquisitions and currency 7-9/2015 |
Customer sales adj. for divestments 7-9/2014 |
Change, % | |
| Managed Services | 124 | 121 | 2 |
| Consulting and System Integration | 90 | 84 | 7 |
| Industry Products | 97 | 91 | 8 |
| IT services | 310 | 295 | 5 |
| Product Development Services | 29 | 47 | -37 |
| Total | 339 | 342 | -1 |
Customer sales by industry group
| EUR million | Customer sales 7-9/2015 |
Customer sales 7-9/2014 |
Change, % |
| Financial Services | 83 | 77 | 7 |
| Manufacturing, Retail and Logistics | 73 | 73 | 0 |
| Public, Healthcare and Welfare | 98 | 91 | 8 |
| Telecom, Media and Energy | 53 | 54 | -2 |
| IT services | 306 | 295 | 4 |
| Product Development Services | 29 | 51 | -43 |
| Total | 335 | 346 | -3 |
Organic change in local currency by industry group
| EUR million | Customer sales adj. for acquisitions and currency 7-9/2015 |
Customer sales adj. for divestments 7-9/2014 |
Change, % |
| Financial Services | 85 | 78 | 10 |
| Manufacturing, Retail and Logistics | 74 | 73 | 1 |
| Public, Healthcare and Welfare | 97 | 91 | 6 |
| Telecom, Media and Energy | 55 | 54 | 2 |
| IT services | 310 | 295 | 5 |
| Product Development Services | 29 | 47 | -37 |
| Total | 339 | 342 | -1 |
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 October 2015 at Tieto’s premises in Stockholm, address: Fjärde Bassängvägen 15, 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