Tieto Corporation INTERIM REPORT 23 October 2013, 8.00 am EET
- Third-quarter EBIT margin of the underlying business rose to 10.1% (8.9) despite continued weakness in the telecom sector
- Cloud services and IT legacy modernization enable more efficient delivery of IT services
- Additional efficiency measures with the target of achieving over EUR 50 million in savings ongoing
The full interim report with tables is available at the end of this release
Key figures
- Organically, net sales were down by 4% in the third quarter
- Outside the telecom sector, net sales excluding divestments were down by 1%, excluding divestments and currency effect up by 1%
- Third-quarter operating profit excl. one-off items rose to EUR 37.9 (37.5) million, margin increased to 10.1% (8.9)
| EUR million | 7-9/2013 | 7-9/2012 | 1-9/2013 | 1-9/2012 |
| Net sales, EUR million | 373.3 | 423.5 | 1 254.3 | 1 346.7 |
| Change, % | -12 | 2 | -7 | 1 |
| Organic change, % | -4 | 4 | -3 | 2 |
| Operating profit (EBITA), EUR million | 25.6 | 33.4 | 73.2 | 75.1 |
| Operating margin (EBITA), % | 6.9 | 7.9 | 5.8 | 5.6 |
| Operating profit (EBIT), EUR million | 24.8 | 32.0 | 70.4 | 70.8 |
| Operating margin (EBIT), % | 6.6 | 7.6 | 5.6 | 5.3 |
| Operating profit (EBIT) excl. one-off items1), EUR million | 37.9 | 37.5 | 101.1 | 94.5 |
| Operating margin (EBIT) excl. one-off items1), % | 10.1 | 8.9 | 8.1 | 7.0 |
| Profit after taxes, EUR million | 18.4 | 22.7 | 47.2 | 47.9 |
| EPS, EUR | 0.25 | 0.32 | 0.65 | 0.67 |
| Net cash flow from operations, EUR million | 38.9 | 36.3 | 90.1 | 101.3 |
| Return on equity, 12-month rolling, % | 5.4 | 11.2 | 5.4 | 11.2 |
| Return on capital employed, 12-month rolling, % | 12.4 | 18.5 | 12.4 | 18.5 |
| Investments, EUR million | 15.5 | 15.6 | 48.1 | 43.6 |
| Interest-bearing net debt, EUR million | 45.0 | 59.0 | 45.0 | 59.0 |
| Net debt/EBITDA | 0.2 | 0.3 | 0.2 | 0.3 |
| Book-to-bill | 0.8 | 0.7 | 1.0 | 1.0 |
| Order backlog | 1 513 | 1 652 | 1 513 | 1 652 |
| Personnel on 30 September | 15 161 | 17 404 | 15 161 | 17 404 |
1) Excl. capital gains, impairments and restructuring costs
Full-year outlook for 2013 unchanged – sales guidance specified
Outside the telecom sector, Tieto expects its organic net sales development to be at the lower end of the forecast market growth range (Nordic IT services market: 0–2%). Net sales development in the telecom sector is expected to be weaker than in Tieto’s other sectors.
Tieto expects its profitability to continue to improve and full-year operating profit (EBIT) excluding one-off items to increase from the previous year’s level (EUR 138.8 million in 2012).
Previous sales guidance:
Tieto expects its organic net sales to develop in line with the growth in the market for IT services, with the exception of the weaker outlook in the telecom sector. (Tieto’s expectations for the market growth: 0–2%)
CEO’s comment
Comment regarding the interim report by Kimmo Alkio, President and CEO:
“We are pleased to see that our focus and drive for efficiency resulted in continued profitability improvement in our underlying business, while we continued to see challenges in the telecom sector volume development. Additionally, customer satisfaction and quality especially in continuous services show improving trends.
The IT industry is in the midst of rapid changes. New technologies, such as cloud services, coupled with customer requirements to increase efficiency, accelerate modernization of old IT systems. In line with this development, demand is increasingly focusing on standardized and less labour-intensive solutions, defining new industry norms for efficiency in the whole IT services sector. Accordingly, we have to take further actions to strengthen the competitiveness of our operations. With the actions initiated during this year, we aim to achieve annual savings of over EUR 50 million.
We continue to renew our services and competences in order to seek new business opportunities both in IT services and Product Development Services. Through selective forward-looking investments we will be better positioned to meet continuously changing customer needs and drive future growth.”
Financial performance by service line
| EUR million | Customer sales 7–9/2013 | Customer sales 7–9/2012 | Change, % | Operating profit 7–9/2013 | Operating profit 7–9/2012 |
| Managed Services | 120 | 125 | -4 | 3.6 | 7.5 |
| Consulting and System Integration | 92 | 109 | -15 | 4.0 | 13.0 |
| Industry Products | 101 | 115 | -12 | 20.7 | 13.0 |
| Product Development Services | 60 | 75 | -19 | 3.0 | 0.4 |
| Support Functions and Global Management | -6.6 | -1.8 | |||
| Total | 373 | 424 | -12 | 24.8 | 32.0 |
Operating margin by service line
| % | Operating margin 7–9/2013 | Operating margin 7–9/2012 | Operating margin excl. one-off items1) 7–9/2013 | Operating margin excl. one-off items1) 7–9/2012 |
| Managed Services | 3.0 | 6.0 | 4.9 | 7.5 |
| Consulting and System Integration | 4.4 | 11.9 | 10.5 | 12.4 |
| Industry Products | 20.5 | 11.3 | 20.7 | 12.3 |
| Product Development Services | 5.0 | 0.6 | 7.9 | 2.2 |
| Total | 6.6 | 7.6 | 10.1 | 8.9 |
1) Excl. capital gains, impairments and restructuring costs
Customer sales by industry group
| EUR million | Customer sales 7–9/2013 | Customer sales 7–9/2012 | Change, % |
| Financial Services | 84 | 85 | -2 |
| Manufacturing, Retail and Logistics | 70 | 78 | -10 |
| Public, Healthcare and Welfare | 96 | 100 | -4 |
| Telecom, Media and Energy | 63 | 86 | -26 |
| Product Development Services | 60 | 75 | -19 |
| Total | 373 | 424 | -12 |
For further information, please contact:
Lasse Heinonen, CFO, tel. +358 2072 66329, +358 50393 4950, lasse.heinonen (at) tieto.com
Tanja Lounevirta, Head of Investor Relations, tel +358 2072 71725, +358 50321 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, 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: www.tieto.com/investors. 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 9543
Sweden: +46 (0)8 5033 6538
UK: +44 (0)20 3427 1918
US: +1 646 254 3362
Conference code: 9250076
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. There will also be a possibility to present questions online. An on-demand video will be available after the conference.
Tieto publishes financial information in English, Finnish and Swedish. As from the first quarter of 2013, 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 15 000 experts, the company operates in over 20 countries with net sales of approximately EUR 1.8 billion. Tieto’s shares are listed on NASDAQ OMX in Helsinki and Stockholm. Please visit www.tieto.com for more information.
