Tieto’s Interim Report 3/2018 Strong growth – solid profitability
- Growth in local currencies 7%, organically 5%
- Strong performance continues in Technology Services and Modernization and Product Development Services
- Efficiency improvements compensate negative currency impact
The full interim report with tables is available at the end of this release.
Key figures for the third quarter
Figures for 2017 in this interim report have been restated due to the adoption of IFRS 15.
IT services
- Sales growth totalled 2.7%, sales in local currencies up by 6.3%
- Adjusted operating profit amounted to EUR 41.2 (42.4) million, 12.3% (13.0) of sales
The Group
- Sales growth totalled 3.4%, sales in local currencies up by 7.3%
- Adjusted operating profit amounted to EUR 41.6 (41.1) million, 11.3% (11.6) of sales
- In local currencies, the order backlog for 2018 provides support for Tieto’s growth ambitions for the year
| 7–9/ 2018 |
7–9/ 2017 |
1–9/ 2018 |
1–9/ 2017 |
|
| Net sales, EUR million | 367.1 | 355.0 | 1 177.6 | 1 133.8 |
| Change, % | 3.4 | 4.3 | 3.9 | 4.1 |
| Change in local currencies, % | 7.3 | 4.5 | 7.1 | 4.7 |
| Operating profit (EBITA), EUR million | 43.8 | 45.0 | 121.5 | 102.7 |
| Operating margin (EBITA), % | 11.9 | 12.7 | 10.3 | 9.1 |
| Operating profit (EBIT), EUR million [1] | 40.4 | 41.1 | 109.0 | 91.2 |
| Operating margin (EBIT), % [1] | 11.0 | 11.6 | 9.3 | 8.0 |
| Adjusted [1] [2] operating profit (EBIT), EUR million | 41.6 | 41.1 | 113.0 | 112.2 |
| Adjusted [1] [2] operating margin (EBIT), % | 11.3 | 11.6 | 9.6 | 9.9 |
| Profit after taxes, EUR million | 33.0 | 34.2 | 87.6 | 71.0 |
| EPS, EUR | 0.45 | 0.46 | 1.19 | 0.96 |
| Net cash flow from operations, EUR million | 18.7 | 10.8 | 92.5 | 84.4 |
| Return on equity, 12-month rolling, % | 27.8 | 23.5 | 27.8 | 23.5 |
| Return on capital employed, 12-month rolling, % | 23.5 | 21.0 | 23.5 | 21.0 |
| Capital expenditure, EUR million | 8.7 | 9.1 | 28.2 | 39.4 |
| Acquisitions, EUR million | - | - | 12.2 | - |
| Interest-bearing net debt, EUR million | 199.7 | 161.4 | 199.7 | 161.4 |
| Net debt/EBITDA | 1.0 | 0.8 | 1.0 | 0.8 |
| Order backlog | 1 564 | 1 689 | 1 564 | 1 689 |
| Personnel on 30 September | 15 109 | 13 85 | 15 109 | 13 851 |
[1] the third 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 affecting comparability
Full-year outlook for 2018 unchanged
Tieto expects its adjusted[1] 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 affecting comparability
CEO’s comment
Comment regarding the interim report by Kimmo Alkio, President and CEO:
“We are happy to continue on our path of strong growth. We see good opportunities across our service portfolio – from design lead consulting, data analytics and cloud computing to modernization of high availability infrastructures and applications. The breadth of our services and software, coupled with our targeted investments, have established a solid foundation for growth – this is especially evident in the Technology Services and Modernization and Product Development Services businesses.
We are also satisfied with the development of our operational profitability, which was in line with our expectations for the quarter. With efficiency improvement and service delivery automation we have continued to compensate for the negative currency impact which we have experienced throughout this year.
It is very encouraging to see the continued development in our company-wide customer experience results, measured by Net Promoter Score (NPS). With four successive years of improvement, we have set a new record – and our ambition is to excel in our industry globally. All our employees around the world have contributed to this positive progress, supported by continued attention to our Open Source culture. We have also been recognized as an attractive and innovative employer. Most recently, we were globally nominated among the top 25 companies in Equileap's 2018 Gender Equality Ranking. Of technology companies, Tieto was ranked number one in the world. These latest developments provide a good foundation for accelerating renewal and innovation.”
Financial performance by service line
| EUR million | Customer sales 7–9/2018 |
Customer sales 7–9/2017 |
Change, % | Operating profit 7–9/2018 |
Operating profit 7–9/2017 |
| Technology Services and Modernization | 173.4 | 171.8 | 1 | 23.5 | 23.0 |
| Business Consulting and Implementation | 51.5 | 42.3 | 22 | 1.6 | 3.6 |
| Industry Solutions | 110.1 | 112.1 | -2 | 15.7 | 15.8 |
| Product Development Services | 31.9 | 28.8 | 11 | 3.1 | 2.1 |
| Support Functions and Global Management | - | - | - | -3.5 | -3.5 |
| Total | 367.1 | 355.0 | 3 | 40.4 | 41.1 |
Operating margin by service line
| % | Operating margin 7–9/2018 |
Operating margin 7–9/2017 |
Adjusted[1] operating margin 7–9/2018 |
Adjusted[1] operating margin 7–9/2017 |
| Technology Services and Modernization | 13.6 | 13.4 | 13.8 | 13.5 |
| Business Consulting and Implementation | 3.1 | 8.4 | 2.8 | 8.2 |
| Industry Solutions | 14.2 | 14.1 | 14.3 | 14.1 |
| Product Development Services | 9.7 | 7.3 | 9.9 | 7.2 |
| Total | 11.0 | 11.6 | 11.3 | 11.6 |
[1] adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability
Customer sales by industry group
| EUR million | Customer sales 7–9/2018 |
Customer sales 7–9/2017 |
Change, % |
| Financial Services | 88.2 | 92.2 | -4 |
| Public, Healthcare and Welfare | 120.8 | 112.3 | 8 |
| Industrial and Consumer Services | 126.2 | 121.7 | 4 |
| IT services | 335.1 | 326.2 | 3 |
| Product Development Services | 31.9 | 28.8 | 11 |
| Total | 367.1 | 355.0 | 3 |
M&A impact by service line
| Growth, % (in local currencies) 7–9/2018 |
Organic growth, % (in local currencies) 7–9/2018 |
|
| Technology Services and Modernization | 4 | 4 |
| Business Consulting and Implementation | 26 | 5 |
| Industry Solutions | 2 | 4 |
| IT services | 6 | 4 |
| Product Development Services | 18 | 18 |
| Total | 7 | 5 |
M&A impact by industry group
| Growth, % (in local currencies) 7–9/2018 |
Organic growth, % (in local currencies) 7–9/2018 |
|
| Financial Services | -1 | -2 |
| Public, Healthcare and Welfare | 12 | 11 |
| Industrial and Consumer Services | 7 | 2 |
| IT services | 6 | 4 |
| Product Development Services | 18 | 18 |
| Total | 7 | 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 Wednesday 24 October 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 Stockholm, address: Fjärde Bassängvägen 15.
Kimmo Alkio, President and CEO, and Janne Salminen, Acting 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: +1 929 477 0324
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 around 15 000 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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