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Tieto’s Interim Report 3/2018  Strong growth – solid profitability

24 October 2018

  • 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 13 851 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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