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Tieto's Interim Report 3/2019: Strong growth and profitability

24 October 2019

  • Record-high third-quarter adjusted profit of EUR 50 million, margin at 13%
  • Growth of 5% in local currencies
  • Third-quarter profit driven by strong performance in all businesses, execution of efficiency improvement programme and positive working day impact
  • Merger integration planning continues on schedule - new TietoEVRY Group Leadership appointed

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

Key figures for the third quarter 

  • Net sales increased by 3.4%, sales in local currencies were up by 4.6%
  • Adjusted operating profit amounted to EUR 50.1 (43.0) million, 13.2% (11.7) of sales
  7–9/2019  7–9/2018  1–9/2019  1–9/2018 
Net sales, EUR million  379.6    367.1    1 191.2    1 177.6   
Change, %  3.4    3.4    1.2    3.9   
Change in local currencies, %  4.6    7.3    2.6    7.1   
Operating profit (EBIT), EUR million  37.8    40.4    92.7    109.0   
Operating margin (EBIT), %  10.0    11.0    7.8    9.3   
Adjusted[1] operating profit (EBIT), EUR million 50.1    43.0    125.0    117.1   
Adjusted[1] operating margin (EBIT), % 13.2    11.7    10.5    9.9   
Profit after taxes, EUR million  21.9    33.0    67.0    87.6   
EPS, EUR  0.30    0.45    0.91    1.19   
Net cash flow from operations, EUR million  69.6    18.7    150.0    92.5   
Return on equity, 12-month rolling, %  23.7    27.8    23.7    27.8   
Return on capital employed, 12-month rolling, %  18.5    23.5    18.5    23.5   
Capital expenditure, EUR million  11.6    9.6    33.5    28.3   
Acquisitions, EUR million  0.1    —    0.7    10.2   
Interest-bearing net debt, EUR million  309.1    199.7    309.1    199.7   
Net debt/EBITDA[2] 1.3    1.0    1.3    1.0   
Order backlog  1 649    1 564    1 649    1 564   
Personnel on 30 September  15 175    15 109    15 175    15 109   

[1] Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability.
[2] EBITDA is 12-month average and is modified to reflect the impact of IFRS 16 on depreciations.

Full-year outlook for 2019 unchanged 

Tieto expects its full-year adjusted[1] operating profit (EBIT) to increase from the previous year’s level (EUR 168.0 million in 2018) added by the impact of IFRS 16[2] to maintain comparability after the adoption of the new standard.

[1] Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability.
[2] The company estimates that the adoption of IFRS 16 will have a positive impact on operating profit in 2019. In the nine-month period, the impact on EBIT was EUR 2.7 million. Comparative periods are not restated.

CEO’s comment 

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

"I am very pleased that we delivered record-high third-quarter performance for the company. It is gratifying to see all of our businesses performing well - and delivering 5% local currency growth. Especially our Hybrid Infra business outperformed the market with favourable volume development and cloud sales growth of 23%.

Our strategic renewal continued with an emphasis on data-driven services, simplified operations and efficiency improvement. Following the completion of our significant organizational change in the early part of this year, operational execution was at a healthy level in the third quarter. Our global Tieto community has quickly adapted to the ongoing strategic and operational change, which is an important capability in a rapidly evolving industry like ours.

During the quarter, we again received significant industry recognitions. Our innovation agenda has been well received in the market and we were recognized as a Top 25 global provider of financial technology by the IDC FinTech Rankings for the third consecutive year. Additionally, Tieto was again ranked among the Top 3 companies in the technology sector in Equileap's 2019 Global Gender Equality Ranking.

Integration planning for the merger of Tieto and EVRY is on schedule as we wait for approvals from the competition authorities. The integration planning focuses on cultural integration, operational readiness and synergy implementation. Recently, we also announced a new Group Leadership for TietoEVRY. These appointments will come into effect after the closing of the merger, which we expect to take place during the fourth quarter, or the first quarter of 2020 at the latest. I firmly believe that everyone in the management will make a significant contribution to full merger implementation and delivering on our objective of creating the leading digital services company in the Nordics. With the combined strengths of both Tieto and EVRY, we will be able to accelerate growth and to achieve higher performance in support of the interests of our customers, employees and shareholders. I personally look forward to this very exciting time of joining forces with EVRY.”

Financial performance by segment 

  Customer
sales
 
Customer
sales
 
Change  Operating profit  Operating profit 
EUR million  7–9/2019  7–9/2018  %  7–9/2019  7–9/2018 
Digital Experience  107.6    105.9      11.8    11.1   
Hybrid Infra  131.1    124.1      18.1    15.2   
Industry Software  107.0    104.7      13.9    16.6   
Product Development Services  33.6    31.9      3.3    3.1   
Segments total  379.4    366.7    3    47.0    46.0   
Other operations  0.2    0.5    -60    -9.2    -5.6   
Group total  379.6    367.1    3    37.8    40.4   

Operating margin by segment 

  Operating margin  Operating margin  Adjusted[1] operating
margin
 
Adjusted[1] operating
margin
 
%  7–9/2019  7–9/2018  7–9/2019  7–9/2018 
Digital Experience  10.9    10.5    14.5    10.9   
Hybrid Infra  13.8    12.2    15.5    12.5   
Industry Software  13.0    15.8    15.2    16.9   
Product Development Services  9.7    9.7    9.6    9.9   
Total  10.0    11.0    13.2    11.7   

[1] Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability.

M&A impact by business 

  Growth, %
(in local currencies)
 
Organic growth, % (in local currencies) 
  7–9/2019  7–9/2019 
Digital Experience     
Hybrid Infra     
Industry Software     
Product Development Services     
Total  5    4   

For further information, please contact: 

Tomi Hyryläinen, Chief Financial Officer, tel. +358 50 555 0363, tomi.hyrylainen (at) tieto.com
Tanja Lounevirta, Head of Investor Relations, tel. +358 2072 71725, tanja.lounevirta (at) tieto.com 

A teleconference for analysts and media will be held on Thursday 24 October 2019 at 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 Tieto's website

Teleconference numbers
Finland: +358 981 710 310
Sweden: +46 856 642 651
United Kingdom: +44 333 300 08 04
United States: +1 631 913 14 22
Conference code: 74597758#

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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