Tieto Corporation INTERIM REPORT 23 October 2014, 8.00 am EET
- Underlying operating margin close to 12% mainly due to continued efficiency improvement
- Strong order intake driven by the manufacturing and retail industries as well as continued strong performance in Managed Services
- In Product Development Services, capacity adjustments initiated due to the insourcing decision taken by one key customer – one-off goodwill impairment charges impacting operating profit
The full interim report with tables is available at the end of this release
Key figures
- Net sales in local currencies were organically down by 2.6%
- In IT services, organic growth in local currencies was 1.0%
- Order intake (Total Contract Value) amounted to EUR 395 (299) million and order backlog was EUR 1 558 (1 421) million
- Third-quarter operating profit excl. one-off items rose to EUR 41.3 (37.5) million, margin increased to 11.9% (10.4)
- Operating profit includes goodwill impairment charges of EUR 40 million
| 7–9/2014 | 7–9/20132) | 1–9/2014 | 1–9/20132) | |
| Net sales, EUR million | 346.2 | 361.1 | 1 119.6 | 1 201.7 |
| Change, % | -4.1 | n/a | -6.8 | n/a |
| Organic change in local currencies, % | -2.6 | n/a | -1.7 | n/a |
| Operating profit (EBITA), EUR million | -3.7 | 25.2 | 52.4 | 71.2 |
| Operating margin (EBITA), % | -1.1 | 7.0 | 4.7 | 5.9 |
| Operating profit (EBIT), EUR million | -3.9 | 24.3 | 51.6 | 68.4 |
| Operating margin (EBIT), % | -1.1 | 6.7 | 4.6 | 5.7 |
| Operating profit (EBIT) excl. one-off items1), EUR million | 41.3 | 37.5 | 105.8 | 99.1 |
| Operating margin (EBIT) excl. one-off items1), % | 11.9 | 10.4 | 9.5 | 8.2 |
| Profit after taxes, EUR million | -12.8 | 18.4 | 28.3 | 47.2 |
| EPS, EUR | -0.17 | 0.25 | 0.39 | 0.65 |
| Net cash flow from operations, EUR million | 11.1 | 40.8 | 77.7 | 101.5 |
| Return on equity, 12-month rolling, % | 8.7 | 5.4 | 8.7 | 5.4 |
| Return on capital employed, 12-month rolling, % 3) | 10.4 | 9.0 | 10.4 | 9.0 |
| Investments, EUR million | 10.1 | 15.5 | 30.6 | 48.1 |
| Interest-bearing net debt, EUR million | 25.7 | 52.6 | 25.7 | 52.6 |
| Net debt/EBITDA | 0.2 | 0.2 | 0.2 | 0.2 |
| Book-to-bill | 1.1 | 0.8 | 1.1 | 1.0 |
| Order backlog | 1 558 | 1 421 | 1 558 | 1 421 |
| Personnel on 30 Sep | 13 878 | 14 778 | 13 878 | 14 778 |
1) Excl. capital gains, goodwill impairment charges and restructuring costs
2) Figures restated according to IFRS 11 ‘Joint arrangements’
3) The figure for 2013 has been restated.
Full-year outlook for 2014 unchanged
Tieto expects its full-year operating profit (EBIT) excluding one-off items to increase from the previous year’s level (EUR 141.2 million in 2013).
CEO’s comment
Comment regarding the interim report by Kimmo Alkio, President and CEO:
“We are pleased to see the continued performance improvement in both our core IT services business and the underlying profitability of the Group. I’m also satisfied with the healthy order intake in many of our businesses, especially in the manufacturing and retail industries as well as the Managed Services business as a whole.
The market environment for our Product Development Services business remains challenging due to the recent insourcing decision made by one of our large customers. Consequently, we have initiated actions to reduce the cost base and to improve our performance in this area within our existing customer base. Additionally, we continue to seek growth for Product Development Services through new customers globally.
At Tieto, we continue to invest in several business areas that are expected to drive future growth of the company. Cloud services have been successful for our customers and have delivered over 100% cloud services growth for Tieto during the last nine months. Momentum remains high in our start-up operations for both Industrial Internet and Customer Experience Management. I remain optimistic that our investments will continue to deliver double-digit growth in the chosen areas.”
Financial performance by service line
| EUR million |
Customer sales 7–9/2014 |
Customer sales 7–9/2013 |
Change, % |
Operating profit 7–9/2014 |
Operating profit 7–9/2013 |
| Managed Services | 121 | 117 | 3 | 11.0 | 3.7 |
| Consulting and System Integration | 84 | 92 | -9 | 7.2 | 4.0 |
| Industry Products | 91 | 91 | 0 | 20.3 | 19.9 |
| Product Development Services | 51 | 60 | -15 | -37.4 | 3.0 |
| Support Functions and Global Management | -5.0 | -6.3 | |||
| Total | 346 | 361 | -4 | -3.9 | 24.3 |
Operating margin by service line
| % |
Operating margin 7–9/2014 |
Operating margin 7–9/2013 |
Operating margin excl. one-off items1) 7–9/2014 |
Operating margin excl. one-off items1) 7–9/2013 |
| Managed Services | 9.0 | 3.2 | 9.1 | 5.1 |
| Consulting and System Integration | 8.6 | 4.3 | 11.6 | 10.4 |
| Industry Products | 22.4 | 21.9 | 22.3 | 22.1 |
| Product Development Services | -73.0 | 5.0 | 8.9 | 7.9 |
| Total | -1.1 | 6.7 | 11.9 | 10.4 |
| 1) Excl. capital gains, impairments and restructuring costs | ||||
Organic change in local currency by service line
| EUR million |
Customer sales adj. for acquisitions and currency 7–9/2014 |
Customer sales adj. for divestments 7–9/2013 |
Change, % |
| Managed Services | 125 | 117 | 7 |
| Consulting and System Integration | 85 | 91 | -7 |
| Industry Products | 94 | 91 | 4 |
| IT services | 303 | 300 | 1 |
| Product Development Services | 48 | 60 | -21 |
| Total | 351 | 360 | -3 |
Third-quarter sales were affected by the divestment of the security solutions business in Denmark. Additionally, the acquisitions of Canvisa Consulting and part of Siemens Convergence Creators' business are eliminated.
Customer sales by industry group
| EUR million |
Customer sales 7–9/2014 |
Customer sales 7–9/2013 |
Change, % |
| Financial Services | 77 | 77 | 0 |
| Manufacturing, Retail and Logistics | 73 | 70 | 5 |
| Public, Healthcare and Welfare | 91 | 90 | 1 |
| Telecom, Media and Energy | 54 | 63 | -14 |
| IT services | 295 | 300 | -2 |
| Product Development Services | 51 | 60 | -15 |
| Total | 346 | 361 | -4 |
Organic change in local currency by industry group
| EUR million |
Customer sales adj. for acquisitions and currency 7–9/2014 |
Customer sales adj. for divestments 7–9/2013 |
Change, % |
| Financial Services | 79 | 77 | 3 |
| Manufacturing, Retail and Logistics | 74 | 69 | 7 |
| Public, Healthcare and Welfare | 94 | 90 | 4 |
| Telecom, Media and Energy | 56 | 63 | -11 |
| IT services | 303 | 300 | 1 |
| Product Development Services | 48 | 60 | -21 |
| Total | 351 | 360 | -3 |
Third-quarter sales were affected by the divestment of the security solutions business in Denmark. Additionally, the acquisitions of Canvisa Consulting and part of Siemens Convergence Creators' business are eliminated.
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 Bassängvägen 15, on Thursday 23 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. Tieto currently provides only Adobe Flash -based webcast and to join the conference, attendees need Adobe Flash plugin version 10.1.0 or newer. In order to ensure access, attendees are requested to test compatibility beforehand. In case problems exist, please contact tieto@reloadmedia.fi.
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, Finnish and Swedish. The full interim report with tables is available only in English and Finnish.
TIETO CORPORATION
DISTRIBUTION
NASDAQ OMX Helsinki
NASDAQ OMX Stockholm
Principal Media
Tieto is the largest Nordic IT services company providing full life-cycle services for both the private and public sectors and product development services in the field of communications and embedded technologies. The company has global presence through its product development business and global delivery centres. Tieto is committed to developing enterprises and society through IT by realizing new opportunities in customers’ business transformation. At Tieto, we believe in professional development and results.
Founded 1968, headquartered in Helsinki, Finland and with approximately 14 000 experts, the company operates in over 20 countries with net sales of approximately EUR 1.6 billion. Tieto’s shares are listed on NASDAQ OMX in Helsinki and Stockholm. Please visit www.tieto.com for more information.
