Tieto’s Interim Report 3/2017 – Good third-quarter performance – strong improvement in customer experience results
- Revenue growth over 4% – continued solid market demand
- Operating margin close to 12% – improvement in all businesses with Industry Solutions’ margin rising to over 14%
- All-time high Net Promoter Score as customer experience initiatives paying off
- Public offer to acquire Avega announced in October – to accelerate growth in Sweden
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 3.8%, sales in local currencies up by 4.0%
- Adjusted operating profit amounted to EUR 39.0 (33.7) million, 12.0% (10.7) of sales
The Group
- Sales growth totalled 4.2%, sales in local currencies up by 4.5%
- Adjusted operating profit amounted to EUR 41.2 (35.4) million, 11.6% (10.4) of sales
- Order intake (Total Contract Value) at EUR 271 (406) million – book-to-bill 0.8 (1.2)
| 7–9/ 2017 |
7–9/ 2016 |
1–9/ 2017 |
1–9/ 2016 |
|
| Net sales, EUR million | 354.9 | 340.5 |
1 133.6 |
1 089.0 |
| Change, % | 4.2 |
1.6 |
4.1 |
2.3 |
| Change in local currencies, % | 4.5 |
2.2 |
4.7 |
3.1 |
| Operating profit (EBITA), EUR million | 45.0 |
38.6 |
102.6 |
105.9 |
| Operating margin (EBITA), % | 12.7 |
11.3 |
9.1 |
9.7 |
| Operating profit (EBIT), EUR million 1) | 41.1 |
35.1 |
91.2 |
95.7 |
| Operating margin (EBIT), % 1) | 11.6 |
10.3 |
8.0 |
8.8 |
| Adjusted 1) 2) operating profit (EBIT), EUR million | 41.2 |
35.4 |
112.2 |
102.7 |
| Adjusted 1) 2) operating margin (EBIT), % | 11.6 |
10.4 |
9.9 |
9.4 |
| Profit after taxes, EUR million | 34.3 |
27.3 |
71.0 |
73.0 |
| EPS, EUR | 0.46 |
0.37 |
0.96 |
0.99 |
| Net cash flow from operations, EUR million | 10.8 |
13.8 |
84.4 |
47.0 |
| Return on equity, 12-month rolling, % | 23.6 |
24.4 |
23.6 |
24.4 |
| Return on capital employed, 12-month rolling, % | 21.0 |
22.6 |
21.0 |
22.6 |
| Capital expenditure, EUR million | 9.1 |
16.0 |
39.4 |
37.2 |
| Interest-bearing net debt, EUR million | 161.4 |
136.4 |
161.4 |
136.4 |
| Net debt/EBITDA | 0.8 |
0.7 | 0.8 |
0.7 |
| Book-to-bill | 0.8 |
1.2 |
0.9 |
1.0 |
| Order backlog | 1 689 | 1 722 | 1 689 | 1 722 |
| Personnel on 30 September | 13 851 |
13 758 | 13 851 |
13 758 |
1)the third quarter includes EUR 1.0 (0.8) million and the nine-month period EUR 3.1 (2.2) 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 2017 unchanged
Tieto expects its adjusted1) full-year operating profit (EBIT) to increase from the previous year’s level (EUR 152.2 million in 2016).
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 really pleased with the strong third-quarter performance – especially as all businesses developed favourably. We had solid growth of over 4% and healthy profitability with an operating margin close to 12%. Our recent performance confirms that our focus on selective solutions and strategy implementation is creating greater value to our customers and a more competitive company overall.
During the past quarter, as expected, our industry solutions businesses delivered good performance with 8% growth and solid profitability of over 14%. These solutions are a clear market differentiator for Tieto and we continue to invest in attractive software-centric growth opportunities. Of our high-growth businesses, we are especially pleased with the development in Customer Experience Management related solutions, which saw growth of over 30%.
As announced on 23 October, we have made a public offer to acquire Avega, a Swedish consulting company with around 350 employees, which would strengthen our advisory capabilities in the Swedish consulting-led market. This is a logical step in our strategy of aiming to accelerate our role as the preferred partner for business renewal for our customers. This announced transaction is expected to close during the latter part of the fourth quarter.
We saw strong improvement in our recent annual customer experience results with our Net Promoter Score reaching an all-time high. It is positive to see that our multi-year attention to quality and customer experience is starting to pay off. This lays a good foundation for continuing our efforts to improve our customer satisfaction and competitiveness as well as drive longer-term market share gains.”
Financial performance by service line
| EUR million | Customer sales 7–9/2017 |
Customer sales 7–9/2016 |
Change, % | Operating profit 7–9/2017 |
Operating profit 7–9/2016 |
| Technology Services and Modernization | 180 | 179 | 1 | 25.0 | 24.2 |
| Business Consulting and Implementation | 32 | 30 | 7 | 0.7 | -0.2 |
| Industry Solutions | 114 | 106 | 8 | 16.6 | 13.0 |
| Product Development Services | 29 | 26 | 10 | 2.2 | 1.7 |
| Support Functions and Global Management | -3.4 | -3.5 | |||
| Total | 355 | 341 | 4 | 41.1 | 35.1 |
Operating margin by service line
| % | Operating margin 7–9/2017 |
Operating margin 7–9/2016 |
Adjusted1) operating margin 7–9/2017 |
Adjusted1) operating margin 7–9/2016 |
| Technology Services and Modernization | 13.9 | 13.5 | 13.8 | 13.4 |
| Business Consulting and Implementation | 2.3 | -0.6 | 2.8 | -4.9 |
| Industry Solutions | 14.5 | 12.3 | 14.4 | 12.5 |
| Product Development Services | 7.6 | 6.4 | 7.5 | 6.5 |
| Total | 11.6 | 10.3 | 11.6 | 10.4 |
| 1) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items | ||||
Customer sales by industry group
| EUR million | Customer sales 7–9/2017 |
Customer sales 7–9/2016 |
Change,% |
| Financial Services | 92 | 88 | 5 |
| Public, Healthcare and Welfare | 112 | 106 | 6 |
| Industrial and Consumer Services | 122 | 121 | 0 |
| IT services | 326 | 315 | 4 |
| Product Development Services | 29 | 26 | 9 |
| Total | 355 | 341 | 4 |
M&A impact by service line
| Growth, % (in local currencies) 7–9/2017 | Organic growth, % (in local currencies) 7–9/2017 | |
| Technology Services and Modernization | 0.8 | 0.8 |
| Business Consulting and Implementation | 7.3 | 7.3 |
| Industry Solutions | 8.6 | 6.0 |
| IT services | 4.0 | 3.1 |
| Product Development Services | 10.5 | 10.5 |
| Total | 4.5 | 3.7 |
M&A impact by industry group
| Growth, % (in local currencies) 7–9/2017 |
Organic growth, % (in local currencies) 7–9/2017 |
|
| Financial Services | 5.2 | 2.2 |
| Public, Healthcare and Welfare | 6.5 | 6.4 |
| Industrial and Consumer Services | 0.7 | 0.6 |
| IT services | 4.0 | 3.1 |
| Product Development Services | 10.5 | 10.5 |
| Total | 4.5 | 3.7 |
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
A teleconference for analysts and media will be held on Tuesday 24 October 2017 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 Stockholm, address: Fjärde Bassänvägen 15.
Kimmo Alkio, President and CEO, and Lasse Heinonen, 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 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 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
Tags: