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Tieto's Interim Report 2/2015 – Healthy growth in IT services – competitiveness strengthens further

22 July 2015

Tieto Corporation          INTERIM REPORT        22 July 2015, 8.00 am EET

  • IT services growth close to 3% – profit as expected
  • Managed Services automation programme on track
  • Acquisition of Software Innovation strengthens Tieto’s competitiveness
  • Solid performance in Product Development Services

The full interim report with tables is available at the end of this release

Key figures for the second quarter

  • Organic growth in local currencies was -3.3% due to lower business volumes in Product Development Services  
  • In IT services, organic growth in local currencies was 2.7%
  • Order intake (Total Contract Value) amounted to EUR 340 (398) million and order backlog was EUR 1 737 (1 550) million
  • Second-quarter operating profit excl. one-off items amounted to EUR 30.1 (30.0) million, 8.3% (7.8) of sales

     
4–6/2015 4–6/2014 1–6/2015 1–6/2014
Net sales, EUR million 363.8   386.4   729.4 773.4  
   Change, % -5.8   -7.3   -5.7 -8.0  
   Organic change in local currencies, % -3.3   -1.3   -3.3  -1.3  
Operating profit (EBITA), EUR million 23.2   21.7            37.2 56.1  
Operating margin (EBITA), % 6.4   5.6   5.1  7.3  
Operating profit (EBIT), EUR million 23.1   21.5   37.0  55.5  
Operating margin (EBIT), % 6.3   5.6   5.1  7.2  
Operating profit (EBIT) excl. one-off items1), EUR million 30.1   30.0   60.8  64.5  
Operating margin (EBIT) excl. one-off items1), % 8.3   7.8   8.3  8.3  
Profit after taxes, EUR million 17.4   16.5   26.5  41.1  
EPS, EUR 0.24   0.23   0.36  0.56  
Net cash flow from operations, EUR million 12.4   16.6   49.1  66.6  
Return on equity, 12-month rolling, % 4.5   15.3   4.5  15.3  
Return on capital employed, 12-month rolling, % 7.5   14.8   7.5  14.8  
Investments, EUR million 10.6   7.1   22.2  20.5  
Interest-bearing net debt, EUR million 5.3   30.3   5.3  30.3  
Net debt/EBITDA 0.0   0.2   0.0  0.2  
Book-to-bill 0.9   1.0   1.1  1.1  
Order backlog 1 737 1 550 1 737 1 550
Personnel on 30 June 12 949  14 126    12 949  14 126 

1) Excl. capital gains, goodwill impairment charges and restructuring costs


Full-year outlook for
2015 unchanged
Tieto expects its full-year operating profit (EBIT) excluding one-off items to increase from the previous year’s level (EUR 150.2 million in 2014).

CEO’s comment
Comment regarding the interim report by Kimmo Alkio, President and CEO:

“I am pleased that we were able to deliver healthy growth in our IT services business in the second quarter. The profitability of the underlying business developed as expected and the margin somewhat improved, despite our continued investments to support long-term growth. We see this development as evidence of further improvement in competitiveness, as the macro environment remains relatively challenging.

We are continuing to make good progress in digitalizing our own services. The current major automation programme in Managed Services is progressing on schedule and we expect the customer benefits of this programme to materialize during the second half of this year. In addition, this software-driven automation programme drives further efficiency improvement.

I am also pleased with the performance of Product Development Services. Our current business, excluding the R&D activities earlier insourced by one customer, has been developing well and efficiency measures have resulted in a healthy cost structure.

Our customers are continuing to reshape their businesses by applying new technologies to their core processes. With the acquisition of Software Innovation, announced in June, we are further strengthening our position as the leading digitalization partner in the Nordic countries and accelerating our growth, especially in Norway. Software Innovation is recognized for its strong Nordic presence in digitalizing customers’ document and workflow management, which further enables us to provide a broader set of services to a larger customer base.

After the second quarter of 2015, we are on track in terms of both speed and magnitude with re-shaping Tieto’s competitiveness through active investments in both automation and new services.”


Financial performance by service line

EUR million  Customer
sales
4–6/2015
 Customer
sales
4–6/2014
Change, % Operating
profit
4–6/2015
Operating
profit
4–6/2014
Managed Services 131 132 -1 3.1 7.6
Consulting and System Integration 101 97 5 8.5 6.1
Industry Products 98 97 1 10.8 15.0
Product Development Services 33 60 -45 5.7 -2.3
Support Functions and Global Management -5.0 -4.8
Total 364 386 -6 23.1 21.5


Operating margin by service line

% Operating
margin
4–6/2015
Operating
margin
4–6/2014
Operating
margin excl.
one-off items1)
4–6/2015
Operating
margin excl.
one-off items1)
4–6/2014
Managed Services 2.4 5.8 7.6 5.8
Consulting and System Integration 8.4 6.3 8.6 7.4
Industry Products 11.0 15.3 12.2 15.6
Product Development Services 17.1 -3.8 9.6 6.1
Total 6.3 5.6 8.3 7.8
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
4–6/2015
Customer
sales adj. for divestments
4–6/2014
Change, %
Managed Services 132 132 1
Consulting and System Integration 102 97 6
Industry Products 100 97 3
IT services 335 326 3
Product Development Services 34 55 -39
Total 369 386 -3


Customer sales by industry group

EUR million Customer sales
4–6/2015
Customer sales
4–6/2014
Change, %
Financial Services 88 84 4
Manufacturing, Retail and Logistics 77 78 0
Public, Healthcare and Welfare 107 104 2
Telecom, Media and Energy 58 60 -3
IT services 330 326 1
Product Development Services 33 60 -45
Total 364 386 -6


Organic change in local currency by industry group

EUR million Customer sales
adj. for acquisitions and currency
4-6/2015
Customer sales
adj. for divestments
4-6/2014
Change, %
Financial Services 89 84 6
Manufacturing, Retail and Logistics 78 78 0
Public, Healthcare and Welfare 108 104 4
Telecom, Media and Energy 60 60 -1
IT services 335 326 3
Product Development Services 34 55 -39
Total 369 386 -3


Leadership team

Antti Vasara, Executive Vice President, Head of Product Development Services, has decided to pursue opportunities outside Tieto. Tom Leskinen, currently heading a business unit in PDS, has been nominated as Head of Product Development Services and he will report to Kimmo Alkio, President and CEO. The changes will take effect as of 1 August 2015.


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 on 22 July 2015 at Tieto’s premises in Helsinki, address: Aku Korhosen tie 2–6, 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 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 and Finnish.

TIETO CORPORATION

DISTRIBUTION
NASDAQ Helsinki
NASDAQ Stockholm
Principal Media


Tieto
is the largest IT services company in the Nordics providing full lifecycle IT services. We also provide global product development services for companies in the communications and embedded technologies arena. Through industry insight, technology vision, and innovative thinking, Tieto proactively strives to inspire and engage our customers in finding new ways of accelerating their business.

Building on a strong Nordic heritage, Tieto combines global capabilities with local presence. Headquartered in Helsinki, Finland, Tieto has around 13 000 experts in more than 20 countries. Turnover is approximately EUR 1.5 billion. Tieto’s shares are listed on NASDAQ in Helsinki and Stockholm. www.tieto.com

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