TietoEVRY's fourth-quarter results: Strong profitability and cash flow
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Fourth-quarter adjusted operating margin 15% driven by Industry Software and Digital Consulting
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Fourth-quarter revenue down by 6% organically – affected by Covid-19 and anticipated short-term decline in Cloud & Infra
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Run-rate of EUR 80 million achieved in merger synergies – integration fully on schedule
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Strong operative cash flow of EUR 355 million in the full year – good cash conversion
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Dividend of EUR 1.32 per share proposed
The full interim report with tables is available at the end of this release.
About financial reporting
Tieto’s and EVRY’s merger was concluded on 5 December 2019. This report is based on the official financial figures of TietoEVRY, with EVRY being consolidated as from 5 December 2019.
COMPARABLE FINANCIAL INFORMATION for illustrative purposes
The new operating model became effective on 1 January 2020 and financial reporting has been prepared in accordance with the new structure as from the second-quarter interim report. As additional information, the report includes comparable financial information for TietoEVRY with figures for 2019 restated to account for the current segments.
| 10–12/2020 | 10–12/2019 | 1–12/2020 | 1–12/2019 | |||||
| Revenue, EUR million | 712.0 | 778.1 | 2 786.4 | 2 950.9 | ||||
| Change, % | -8.5 | - | -5.6 | - | ||||
| Organic growth1), % | -6.3 | - | -2.2 | - | ||||
| Operating profit (EBIT), EUR million | 77.8 | 56.7 | 146.7 | 230.5 | ||||
| Operating margin (EBIT), % | 10.9 | 7.3 | 5.3 | 7.8 | ||||
| Adjusted2) operating profit (EBIT), EUR million | 106.4 | 105.2 | 355.0 | 341.7 | ||||
| Adjusted2) operating margin (EBIT), % | 14.9 | 13.5 | 12.7 | 11.6 | ||||
| One-time items, EUR million | 28.5 | 48.5 | 208.3 | 111.2 | ||||
| Order backlog, EUR million | 3 350 | 3 640 | 3 350 | 3 640.0 | ||||
| Net debt/EBITDA3) | 2.5 | - | 2.5 | - | ||||
1) Adjusted for currency effects and impact from acquisitions and divestments
2) Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability
Full-year outlook for 2021
TietoEVRY expects its organic1) growth to be -1% to +2%2) (revenue in 2020: EUR 2 786.4 million). The company estimates its full-year adjusted operating margin (adjusted EBITA)3) to increase to 13–14% (12.7% in 2020).
1) Adjusted for currency effects, acquisitions and divestments
2) High dependency on the Covid-19 pandemic development. Assuming normal business environment from the third quarter of 2021.
3) Adjusted EBITA is fully comparable with the previous definition of adjusted EBIT. According to both definitions, amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, impairment charges and other items affecting comparability are excluded – whereas amortization of other intangible assets is included.
CEO’s comment
Comment regarding the fourth-quarter report by Kimmo Alkio, President and CEO:
“We are pleased with the continued strong progress of TietoEVRY's integration and good business momentum in the fourth quarter. We are seeing positive development in terms of both customer and employee experience, while the impact of the pandemic has created challenges during the year. Thanks to the commitment of our 24 000 digital professionals, we were able to shift 96% of our employees to remote work, drive large-scale integration and ensure business continuity to our customers throughout 2020.
Our fourth quarter is characterized by strong profitability and several large customer wins. During the quarter, we delivered adjusted operating profit of 15% and strong operative cash flow of EUR 125 million. Profitability improvement was driven by continued synergy realization and healthy profitability in Industry Software as well as in Digital Consulting. Our Industry Software business reached an adjusted operating margin of 26% and Digital Consulting 17%. For the Group, fourth-quarter revenue was down by 6%, significantly impacted by Covid-19.
We begin our 2021 company agenda with energy and a focus on growth in our core businesses – with opportunities in areas such as cloud, data and analytics, next generation automation, Financial Services software and Healthcare solutions. Currently we estimate the overall business to return to growth during the second half of 2021.
Our financial guidance has been updated both for 2021 and the longer-term view up to 2023. Guidance for 2021 consists of revenue growth of -1% to +2% and an increase in the adjusted profit margin (adjusted EBITA) to between 13% and 14%. As announced at our Capital Markets Day on 3 December, our new financial targets include revenue growth of 5% by 2023, profitability (adjusted EBITA) of 15% by 2023 as well as annual increase in dividends. Based on strong profitability and cash flow in 2020, the dividend proposal for the Annual General Meeting is EUR 1.32 per share – continuing the longer-term dividend attractiveness of the company.
As TietoEVRY, we are energized by the opportunity to guide and support our customers on their digital and data-rich journeys – and contribute to the advancement of the societies we live in. Our path forward is supported by the recently launched Sustainability Game Plan 2023 – including ambitions for gender balance and climate actions in our operations. This supports us in developing our highly talented professionals and attracting future talent to join us in this exciting and meaningful journey.”
Comparable financial information for illustrative purposes
These tables include comparable financial information with comparison figures restated to account for the new segment structure.
Financial performance in October–December
| Revenue, EUR million | Revenue, EUR million |
Growth, % | Organic growth, %2) | Adjusted1) operating profit, EUR million | Adjusted1) operating profit, EUR million |
Adjusted1) operating margin, % | Adjusted1) operating margin % | ||||||||
| 10–12/ 2020 |
10–12/ 2019 |
10–12/2020 | 10–12/ 2019 |
10–12/ 2020 |
10–12/ 2019 |
||||||||||
| Digital Consulting | 172.8 | 188.7 | -8 | -6 | 29.9 | 24.0 | 17.3 | 12.7 | |||||||
| Cloud & Infra | 227.3 | 264.8 | -14 | -13 | 19.3 | 34.7 | 8.5 | 13.1 | |||||||
| Industry Software | 134.3 | 136.6 | -2 | -1 | 35.1 | 25.8 | 26.2 | 18.9 | |||||||
| Financial Services Solutions | 108.8 | 116.8 | -7 | -3 | 15.2 | 17.2 | 14.0 | 14.7 | |||||||
| Product Development Services | 36.0 | 39.1 | -8 | -10 | 5.0 | 4.4 | 13.8 | 11.1 | |||||||
| Other | 32.8 | 32.0 | 2 | 16 | 1.9 | -0.9 | — | — | |||||||
| Total | 712.0 | 778.1 | -9 | -6 | 106.4 | 105.2 | 14.9 | 13.5 | |||||||
1) Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability
2) Adjusted for currency effects and impact from acquisitions and divestments
Financial performance in January–December
|
Revenue, EUR million |
Revenue, EUR million | Growth, % | Organic growth, %2) | Adjusted1) operating profit, EUR million |
Adjusted1) operating profit, EUR million |
Adjusted1) operating margin, % | Adjusted1) operating margin % | |||||||
| 1–12/ 2020 |
1–12/ 2019 |
1–12/ 2020 |
1–12/ 2019 |
1–12/ 2020 |
1–12/ 2019 |
|||||||||
| Digital Consulting | 662.0 | 736.2 | -10 | -6 | 92.8 | 87.5 | 14.0 | 11.9 | ||||||
| Cloud & Infra | 931.6 | 1005.0 | -7 | -5 | 93.5 | 112.5 | 10.0 | 11.2 | ||||||
| Industry Software | 501.1 | 509.2 | -2 | 2 | 91.5 | 74.4 | 18.3 | 14.6 | ||||||
| Financial Services Solutions | 418.8 | 434.0 | -4 | 2 | 54.4 | 58.9 | 13.0 | 13.6 | ||||||
| Product Development Services | 142.4 | 146.6 | -3 | -3 | 18.0 | 14.8 | 12.7 | 10.1 | ||||||
| Other | 130.5 | 119.9 | 8 | 13 | 4.8 | -6.4 | — | — | ||||||
| Total | 2 786.4 | 2 950.9 | -6 | -2 | 355.0 | 341.7 | 12.7 | 11.6 | ||||||
For further information, please contact:
Tomi Hyryläinen, Chief Financial Officer, tel. +358 50 555 0363, tomi.hyrylainen (at) tietoevry.com
Kjell Arne Hansen, Head of Investor Relations, tel. +47 9504 0372, kjell.hansen (at) tietoevry.com
A teleconference for analysts and media will be held on Wednesday 17 February 2021 10.00 am EET (9.00 am CET, 8.00 am UK time). Kimmo Alkio, President and CEO, and Tomi Hyryläinen, CFO, will present the results online in English. The presentation can be followed on TietoEVRY's website.
Teleconference numbers
Finland: +358 981 710 310
Sweden: +46 856 642 651
Norway: +47 235 002 43
United Kingdom: +44 333 300 0804
United States: +1 631 913 1422
Conference code: 11869732#
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.
TietoEVRY publishes its financial information in English and Finnish.
TIETOEVRY CORPORATION
DISTRIBUTION
NASDAQ Helsinki
Oslo Børs
Principal Media
TietoEVRY creates digital advantage for businesses and society. We are a leading digital services and software company with local presence and global capabilities. Our Nordic values and heritage steer our success.
Headquartered in Finland, TietoEVRY employs around 24 000 experts globally. The company serves thousands of enterprise and public sector customers in more than 90 countries. TietoEVRY’s annual turnover is approximately EUR 3 billion and its shares are listed on the NASDAQ in Helsinki and Stockholm as well as on the Oslo Børs. www.tietoevry.com
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