Tieto’s Interim Report 3/2016 – Solid profitability – well positioned for future growth and competitiveness
- Modest growth – good order intake with significant contracts won towards the end of the quarter
- Operating structure aligned with the new strategy – temporary transition impact addressed
- Investments in automation and future high-growth businesses continued
The full interim report with tables is available at the end of this release
Key figures for the third quarter
IT services
- Sales growth totalled 2.6%, sales in local currencies up by 3.1%
- Adjusted operating profit amounted to EUR 33.7 (36.8) million, 10.7% (12.0) of sales
The Group
- Sales growth totalled 1.6%, sales in local currencies up by 2.2%
- Adjusted operating profit amounted to EUR 35.4 (38.6) million, 10.4% (11.5) of sales
- Order intake (Total Contract Value) at EUR 406 (490) million, order backlog at EUR 1 722 (1 864) million – book-to-bill 1.2
| 7–9/2016 | 7–9/2015 | 1–9/2016 | 1–9/2015 | |
| Net sales, EUR million | 340.5 | 335.1 | 1 089.0 | 1 064.5 |
| Change, % | 1.6 | -3.2 | 2.3 | -4.9 |
| Change in local currencies, % | 2.2 | -0.6 | 3.1 | -2.4 |
| Operating profit (EBITA), EUR million 1) | 38.6 | 44.5 | 105.9 | 87.9 |
| Operating margin (EBITA), % | 11.3 | 13.3 | 9.7 | 8.3 |
| Operating profit (EBIT), EUR million | 35.1 | 41.4 | 95.7 | 78.4 |
| Operating margin (EBIT), % | 10.3 | 12.4 | 8.8 | 7.4 |
| Adjusted2) operating profit (EBIT), EUR million | 35.4 | 38.6 | 102.7 | 99.4 |
| Adjusted2) operating margin (EBIT), % | 10.4 | 11.5 | 9.4 | 9.3 |
| Profit after taxes, EUR million | 27.3 | 29.6 | 73.0 | 56.1 |
| EPS, EUR | 0.37 | 0.40 | 0.99 | 0.76 |
| Net cash flow from operations, EUR million | 13.8 | 16.4 | 47.0 | 65.5 |
| Return on equity, 12-month rolling, % | 24.4 | 13.8 | 24.4 | 13.8 |
| Return on capital employed, 12-month rolling, % | 22.6 | 14.8 | 22.6 | 14.8 |
| Capital expenditure and acquisitions, EUR million | 53.3 | 81.8 | 74.5 | 104.0 |
| Interest-bearing net debt, EUR million | 136.4 | 57.7 | 136.4 | 57.7 |
| Net debt/EBITDA | 0.7 | 0.4 | 0.7 | 0.4 |
| Book-to-bill | 1.2 | 1.5 | 1.0 | 1.2 |
| Order backlog | 1 722 | 1 864 | 1 722 | 1 864 |
| Personnel on 30 September | 13 758 | 13 179 | 13 758 | 13 179 |
1) amortization of all intangible items; previously, only acquisition-related intangible items
2) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items (see page 15)
Full-year outlook for 2016 unchanged
Tieto expects its adjusted1) full-year operating profit (EBIT) to increase from the previous year’s level (EUR 150.8 million in 2015).
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 ended the third quarter with good order intake and solid profitability while growth was modest. The significant agreements won during the quarter well demonstrate our competitiveness and support our growth ambition.
Our aim is to help customers renew their business: to provide truly innovative services and to constantly increase operational efficiency. As part of our renewed strategy, we adopted a new operating structure in July. While we transitioned to a new operating model and experienced temporarily lower efficiency, I am pleased how swiftly this was addressed. We believe that the new strategy combined with targeted investments will accelerate our performance and help us achieve our long-term financial objectives. To further strengthen our position in the attractive financial services market, we are pleased to have completed the acquisition of Emric, the Nordic market leader in software and services for credit processing. We are happy to welcome our new colleagues to join Tieto to accelerate our customers’ business renewal.
I believe that our existing investments, close co-innovation with our customers and continuous productivity improvements will provide us with a good basis for competitiveness and value creation in the future as well.”
Financial performance by service line
| EUR million | Customer sales 7–9/2016 | Customer sales 7–9/2015 | Change, % | Operating profit 7–9/2016 | Operating profit 7–9/2015 |
| Technology Services and Modernization | 179 | 177 | 1 | 24.2 | 22.9 |
| Business Consulting and Implementation | 30 | 28 | 5 | -0.2 | -0.5 |
| Industry Solutions | 106 | 101 | 4 | 13.0 | 22.7 |
| Product Development Services | 26 | 29 | -9 | 1.7 | 0.6 |
| Support Functions and Global Management | -3.5 | -4.3 | |||
| Total | 341 | 335 | 2 | 35.1 | 41.4 |
Operating margin by service line
| % | Operating margin 7–9/2016 | Operating margin 7–9/2015 | Adjusted1) operating margin 7–9/2016 | Adjusted1) operating margin 7–9/2015 |
| Technology Services and Modernization | 13.5 | 12.9 | 13.4 | 13.2 |
| Business Consulting and Implementation | -0.6 | -1.6 | -4.9 | -0.1 |
| Industry Solutions | 12.3 | 22.3 | 12.5 | 16.4 |
| Product Development Services | 6.4 | 2.1 | 6.5 | 6.2 |
| Total | 10.3 | 12.4 | 10.4 | 11.5 |
1) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items
Customer sales by industry group
| EUR million | Customer sales 7–9/2016 | Customer sales 7–9/2015 | Change, % |
| Financial Services | 88 | 83 | 6 |
| Public, Healthcare and Welfare | 106 | 98 | 8 |
| Industrial and Consumer Services | 121 | 126 | -4 |
| IT services | 315 | 306 | 3 |
| Product Development Services | 26 | 29 | -9 |
| Total | 341 | 335 | 2 |
M&A impact by service line
| Growth, % (in local currencies) 7–9/2016 | Organic growth, % (in local currencies) 7–9/2016 | |
| Technology Services and Modernization | 1.3 | 1.3 |
| Business Consulting and Implementation | 5.4 | -6.2 |
| Industry Solutions | 5.0 | -1.0 |
| IT services | 3.1 | 0.1 |
| Product Development Services | -7.9 | -7.9 |
| Total | 2.2 | -0.6 |
M&A impact by industry group
| Growth, % (in local currencies) 7–9/2016 | Organic growth, % (in local currencies) 7–9/2016 | |
| Financial Services | 6.8 | 4.7 |
| Public, Healthcare and Welfare | 8.1 | 3.5 |
| Industrial and Consumer Services | -3.5 | -6.0 |
| IT services | 3.1 | 0.1 |
| Product Development Services | -7.9 | -7.9 |
| Total | 2.2 | -0.6 |
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 at Tieto’s premises in Stockholm, address: Fjärde Bassänvägen 15, on 25 October 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 7479 0361
Sweden: +46 (0)8 5033 6574
UK: +44 (0)203 043 2002
US: +1 719 325 2131
Conference code: 6304748
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 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 13 000 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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