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Tieto’s Interim Report 4/2018: Solid performance in the fourth quarter with strong growth and cash flow

06 February 2019

  •  Growth in local currencies 5% in the fourth quarter, 7% for the full year
  •  Fourth-quarter operating margin 11%, long-term target of 10% reached for the full year  
  •  Dividend of EUR 1.45 proposed
  •  New strategy launched and financial objectives upgraded 

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

Key figures for the fourth quarter

IT services

  • Sales growth totalled 2.7%, sales in local currencies up by 4.8%
  • Adjusted operating profit amounted to EUR 50.6 (49.4) million, 13.1% (13.2) of sales

The Group

  • Sales growth totalled 3.0%, sales in local currencies up by 5.3%
  • Adjusted operating profit amounted to EUR 49.8 (49.2) million, 11.8% (12.0) of sales
  • Net cash flow from operations amounted to EUR 81.7 (66.6) million

Key figures for the full year

IT services

  • Sales growth totalled 3.3%, sales in local currencies up by 6.1%
  • Adjusted operating profit amounted to EUR 162.1 (162.6) million, 11.1% (11.5) of sales

The Group

  • Sales growth totalled 3.6%, sales in local currencies up by 6.6%
  • Adjusted operating profit amounted to EUR 162.8 (161.4) million, 10.2% (10.5) of sales
  • Net cash flow from operations amounted to EUR 174.2 (151.0) million
  • Proposed dividend EUR 1.45 per share, including base dividend of EUR 1.25 (1.20) and an additional dividend of EUR 0.20 (0.20), representing dividend yield of 6.1%
10–12/2018 10–12/2017 1–12/2018 1–12/2017
Net sales, EUR million  421.9 409.6 1 599.5 1 543.4
   Change, %  3.0 1.5 3.6 3.4
   Change in local currencies, %  5.3 2.4 6.6 4.1
Operating profit (EBITA), EUR million   46.1 51.6 167.6 154.3
Operating margin (EBITA), %   10.9 12.6 10.5 10.0
Operating profit (EBIT), EUR million [1]
45.7 47.9 154.7 139.1
Operating margin (EBIT), % [1]
10.8 11.7 9.7 9.0
Adjusted [1] [2] operating profit (EBIT), EUR million  49.8 49.2 162.8 161.4
Adjusted [1[ [2] operating margin (EBIT), %  11.8 12.0 10.2 10.5
Profit after taxes, EUR million  35.6 36.7 123.2 107.7
EPS, EUR  0.48 0.50 1.67 1.46
Net cash flow from operations, EUR million  81.7 66.6 174.2 151.0
Return on equity, 12-month rolling, %   25.7 22.3 25.7 22.3
Return on capital employed, 12-month rolling, %   20.9 20.5 20.9 20.5
Capital expenditure, EUR million  16.7 11.4 45.0 50.8
Acquisitions, EUR million  4.3 49.3 14.5 49.3
Interest-bearing net debt, EUR million  137.4 155.7 137.4 155.7
Net debt/EBITDA   0.7 0.8 0.7 0.8
Order backlog  1 698 1 860 1 698 1 860
Personnel on 31 December       15 190 14 329  15 190 14 329

[1] the fourth quarter includes EUR 1.2 (1.2) million in amortization of acquisition-related intangible assets, EUR 5.2 (4.3) in the full year
[2] adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability

Full-year outlook for 2019
Tieto expects its full-year adjusted1)operating profit (EBIT) to increase from the previous year’s level (EUR 168.0 million2)in 2018). The definition of adjusted operating profit has been revised to improve comparability of operating profit also in light of the company’s acquisitions.

[1] adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability
[2] not restated for IFRS 16 

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

“We are pleased with our year-end performance with good growth, 11% profitability and strong cash flow. The year now ended demonstrated the continuation of our multi-year performance improvement with growth accelerating to 7% in local currencies and profitability reaching a level of 10% – all supported by our strongest-ever customer experience (rNPS) results. While we have maintained our investment agenda for future competitiveness, strong overall performance continued in our Technology Services and Modernization and Product Development Service businesses.

During the past year, as we celebrated our 50th anniversary as a company, Tieto was recognized as a Top 100 Global Technology Leader thanks to our employees’ long-term commitment to innovation, performance, quality and social responsibility. In addition, Equileap ranked us among the Top 25 companies globally in gender equality – the highest-ranked technology company on their list. At Tieto, we are proud of these recognitions and continue to reinforce our open source culture and ecosystem-based innovations as well as enhance continuous learning opportunities and employee experience. We continue to be inspired by opportunities to contribute to society-level advancement through smarter use of data and technology.

Today, we are launching our new strategy, aiming to further accelerate our competitiveness and enhance value creation for our customers, shareholders and employees. Innovation and business creation opportunities in the expanding data-rich world open up new avenues for business and profitability expansion. We will embrace and expand design and data-led consulting services, create new capabilities for customer engagement, simplify our operations into networked ways of working, and once again set our financial ambitions higher for the upcoming years.”

Financial performance by service line

EUR million Customer
sales

10–12/
2018
Customer
sales
10–12/
2017
Change, % Operating
profit
10–12/
2018
Operating
profit
10–12/
2017
Technology Services and Modernization 190.3 189.5 0 20.6 22.7
Business Consulting and Implementation 66.6 53.5 24 5.1 4.8
Industry Solutions 128.7 132.5 -3 22.9 22.7
Product Development Services 36.2 34.2 6 3.6 3.5
Support Functions and Global Management - - - -6.4 -5.8
Total 421.9 409.6 3  45.7 47.9

Operating margin by service line

% Operating
margin
10–12/
2018
Operating
margin
10–12/
2017
Adjusted[1]
operating
margin
10–12/
2018
Adjusted[1]
operating
margin
10–12/
2017
Technology Services and Modernization 10.8 12.0 13.0 12.8
Business Consulting and Implementation 7.6 9.0 8.2 8.1
Industry Solutions 17.8 17.1 15.8 15.7
Product Development Services 9.9 10.1 10.1 10.1
Total 10.8 11.7 11.8 12.0
[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
10–12/2018
Customer sales
10–12/2017
Change, %
Financial Services 97.7 99.9 -2
Public, Healthcare and Welfare 144.0 135.4 6
Industrial and Consumer Services 143.9 140.1 3
IT services  385.7 375.4 3
Product Development Services 36.2 34.2 6
Total 421.9 409.6 3

M&A impact by service line

Sales growth, %
(in local currencies)
10–12/2018 
Organic growth, %
(in local currencies)
10–12/2018 
Technology Services and Modernization
Business Consulting and Implementation  27 
Industry Solutions  -1 
IT services  5  2 
Product Development Services  10  10 
Total  5  3 

M&A impact by industry group

Sales growth, %
(in local currencies)
10–12/2018 
Organic growth, %
(in local currencies)
10–12/2018 
Financial Services  -1 
Public, Healthcare and Welfare 
Industrial and Consumer Services  -1 
IT services  5  2 
Product Development Services  10  10 
Total  5  3 

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 6 February 2019 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 Espoo, address: Keilalahdentie 2-4.

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 1.6 billion and shares listed on NASDAQ in Helsinki and Stockholm. www.tieto.com

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