Tieto Corporation INTERIM REPORT 18 July 2014, 8.00 am EET
- IT services organic growth in local currencies close to 3%
- Profitability continued to improve despite costs related to exceptional project termination
- Customer insourcing results in lower volumes in Product Development Services
The full interim report with tables is available at the end of this release
Key figures
- Net sales in local currencies were organically down by 1.3%
- In IT services, organic growth in local currencies was 2.6%
- Second-quarter operating profit excl. one-off items amounted to EUR 30.0 (30.6) million, margin increased to 7.8% (7.3)
| 4–6/ 2014 | 4–6/ 20132) | 1–6/ 2014 | 1–6/ 20132) | |
| Net sales, EUR million | 386.4 | 416.7 | 773.4 | 840.6 |
| Change, % | -7.3 | n/a | -8.0 | n/a |
| Organic change in local currencies, % | -1.3 | n/a | -1.3 | n/a |
| Operating profit (EBITA), EUR million | 21.7 | 15.6 | 56.1 | 45.9 |
| Operating margin (EBITA), % | 5.6 | 3.7 | 7.3 | 5.5 |
| Operating profit (EBIT), EUR million | 21.5 | 14.8 | 55.5 | 44.1 |
| Operating margin (EBIT), % | 5.6 | 3.5 | 7.2 | 5.2 |
| Operating profit (EBIT) excl. one-off items1), EUR million | 30.0 | 30.6 | 64.5 | 61.7 |
| Operating margin (EBIT) excl. one-off items1), % | 7.8 | 7.3 | 8.3 | 7.3 |
| Profit after taxes, EUR million | 16.5 | 7.4 | 41.1 | 28.8 |
| EPS, EUR | 0.23 | 0.10 | 0.56 | 0.40 |
| Net cash flow from operations, EUR million | 16.6 | 10.7 | 66.6 | 60.7 |
| Return on equity, 12-month rolling, % | 15.3 | 6.6 | 15.3 | 6.6 |
| Return on capital employed, 12-month rolling, % 3) | 14.8 | 10.3 | 14.8 | 10.3 |
| Investments, EUR million | 7.1 | 15.3 | 20.5 | 32.6 |
| Interest-bearing net debt, EUR million | 30.3 | 81.1 | 30.3 | 81.1 |
| Net debt/EBITDA | 0.2 | 0.4 | 0.2 | 0.4 |
| Book-to-bill | 1.0 | 1.4 | 1.1 | 1.1 |
| Order backlog | 1 550 | 1 469 | 1 550 | 1 469 |
| Personnel on 30 June | 14 126 | 14 933 | 14 126 | 14 933 |
1) Excl. capital gains, impairments and restructuring costs
2) Figures restated according to IFRS 11 ‘Joint arrangements’
3) The figure for 2013 has been restated
Full-year outlook for 2014 unchanged
Tieto expects its full-year operating profit (EBIT) excluding one-off items to increase from the previous year’s level (EUR 141.2 million in 2013).
CEO’s comment
Comment regarding the interim report by Kimmo Alkio, President and CEO:
“Our second quarter demonstrated continued good performance in our IT services business as a result of longer-term improvement in businesses across the company. The market remains attractive, providing a combination of opportunities for new growth investments and for modernization of old IT systems. Our position as the leader in Nordic Enterprise Cloud services has further strengthened in the second quarter, as proven by our accelerated growth in this business. I’m also glad to see continued improvement in customer confidence towards Tieto – demonstrated by multiple wins for new contracts across the financial services, public and manufacturing sectors.
We continue to take actions in our Product Development Services business where volumes are negatively impacted by customer insourcing and the market environment is changing. We will drive renewal of competencies and swiftly manage capacity to improve the business’ competitiveness and profitability.
Tieto has experienced an extended period of strategy and culture renewal and I want to express my gratitude to our employees for achieving the improved level of competitiveness and performance. I expect the speed of change in the market to remain high and continue to provide attractive new opportunities for Tieto.”
Financial performance by service line
| EUR million | Customer sales 4–6/2014 | Customer sales 4–6/2013 | Change, % | Operating profit 4–6/2014 | Operating profit 4–6/2013 |
| Managed Services | 132 | 125 | 5 | 7.6 | 5.4 |
| Consulting and System Integration | 97 | 108 | -10 | 6.1 | 2.8 |
| Industry Products | 97 | 105 | -7 | 15.0 | 15.4 |
| Product Development Services | 60 | 79 | -24 | -2.3 | -2.6 |
| Support Functions and Global Management | -4.8 | -6.1 | |||
| Total | 386 | 417 | -7 | 21.5 | 14.8 |
Operating margin by service line
| % | Operating margin 4–6/2014 | Operating margin 4–6/2013 | Operating margin excl. one-off items1) 4–6/2014 | Operating margin excl. one-off items1) 4–6/2013 |
| Managed Services | 5.8 | 4.3 | 5.8 | 4.6 |
| Consulting and System Integration | 6.3 | 2.6 | 7.4 | 8.9 |
| Industry Products | 15.3 | 14.7 | 15.6 | 15.8 |
| Product Development Services | -3.8 | -3.4 | 6.1 | 2.6 |
| Total | 5.6 | 3.5 | 7.8 | 7.3 |
| 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 4–6/2014 | Customer sales adj. for divestments 4–6/2013 | Change, % |
| Managed Services | 136 | 125 | 9 |
| Consulting and System Integration | 97 | 101 | -4 |
| Industry Products | 102 | 100 | 2 |
| IT services | 335 | 327 | 3 |
| Product Development Services | 57 | 71 | -19 |
| Total | 393 | 398 | -1 |
The following divestments affected second-quarter sales: local businesses in Germany and the Netherlands and the security solutions business in Denmark. Additionally, the acquisitions of Canvisa Consulting and part of Siemens Convergence Creators' business are eliminated.
Customer sales by industry group
| EUR million | Customer sales 4–6/2014 | Customer sales 4–6/2013 | Change, % |
| Financial Services | 84 | 84 | 0 |
| Manufacturing, Retail and Logistics | 78 | 78 | 0 |
| Public, Healthcare and Welfare | 104 | 102 | 3 |
| Telecom, Media and Energy | 60 | 74 | -19 |
| Product Development Services | 60 | 79 | -24 |
| Total | 386 | 417 | -7 |
Organic change in local currency by industry group
| EUR million | Customer sales adj. for acquisitions and currency 4–6/2014 | Customer sales adj. for divestments 4–6/2013 | Change, % |
| Financial Services | 86 | 83 | 3 |
| Manufacturing, Retail and Logistics | 79 | 76 | 3 |
| Public, Healthcare and Welfare | 108 | 97 | 11 |
| Telecom, Media and Energy | 63 | 70 | -10 |
| IT services | 335 | 327 | 3 |
| Product Development Services | 57 | 71 | -19 |
| Total | 393 | 398 | -1 |
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 Helsinki, address: Aku Korhosen tie 2–6, on 18 July 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. As from the second-quarter conference, Tieto provides only Adobe Flash -based webcast. To join the conference, attendees need Adobe Flash plugin version 10.1.0or newer. In order to ensure access, attendees are requested to test compatibility beforehand. In case problems exist, please contact tieto@reloadmedia.fi.
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 6539
UK: +44 (0)20 3427 0503
US: +1212 444 0895
Conference code: 7353033
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, Finnish and Swedish. 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 14 000 experts, the company operates in over 20 countries with net sales of approximately EUR 1.6 billion. Tieto’s shares are listed on NASDAQ OMX in Helsinki and Stockholm. Please visit www.tieto.com for more information.
