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Tieto's Interim Report 3/2015 – Solid performance and accelerated growth in IT services

22 October 2015

Tieto Corporation          INTERIM REPORT        22 October 2015, 8.00 am EET

  • Organic growth in IT services 5% - Industry Products and add-on sales as key drivers
  • Solid profitability in IT services while investing in new services and competences
  • Product Development Services business successfully stabilized

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

Key figures for the third quarter

IT services

  • Organic growth in local currencies was 5.1%
  • Operating profit excl. one-off items amounted to EUR 36.8 (36.8) million, 12.0% (12.5) of sales

The Group

  • Organic growth in local currencies was -0.6% – affected by lower business volumes in Product Development Services as announced in 2014 
  • Third-quarter operating profit excl. one-off items amounted to EUR 38.6 (41.3) million, 11.5% (11.9) of sales
  • Order intake (Total Contract Value) amounted to EUR 490 (395) million and order backlog was EUR 1 864 (1 558) million
7–9/2015 7–9/2014 1–9/2015 1–9/2014
Net sales, EUR million 335.1   346.2   1 064.5   1 119.6  
   Change, % -3.2   -4.1   -4.9   -6.8  
   Organic change in local currencies, % -0.6   -2.6   -2.4   -1.7  
Operating profit (EBITA), EUR million 41.7   -3.7   79.0   52.4  
Operating margin (EBITA), % 12.4   -1.1   7.4   4.7  
Operating profit (EBIT), EUR million 41.4   -3.9   78.4   51.6  
Operating margin (EBIT), % 12.4   -1.1   7.4   4.6  
Operating profit (EBIT) excl. one-off items1), EUR million 38.6   41.3   99.4   105.8  
Operating margin (EBIT) excl. one-off items1), % 11.5   11.9   9.3   9.5  
Profit after taxes, EUR million 29.6   -12.8   56.1   28.3  
EPS, EUR 0.40   -0.17   0.76   0.39  
Net cash flow from operations, EUR million 16.4   11.1   65.5   77.7  
Return on equity, 12-month rolling, % 13.8   8.7   13.8   8.7  
Return on capital employed, 12-month rolling, % 14.8   10.4   14.8   10.4  
Investments, EUR million 81.8   10.1   104.0   30.6  
Interest-bearing net debt, EUR million 57.7   25.7   57.7   25.7  
Net debt/EBITDA 0.4   0.2   0.4   0.2  
Book-to-bill 1.5   1.1   1.2   1.1  
Order backlog 1 864 1 558 1 864 1 558
Personnel on 30 September 13 179 13 878 13 179 13 878

1)Excl. capital gains, goodwill impairment charges and restructuring costs


Full-year outlook for 2015 unchanged

Tieto expects its full-year operating profit (EBIT) excluding one-off items to increase from the previous year’s level (EUR 150.2 million in 2014).

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

“We have good reasons to be satisfied with our third-quarter performance. This was the highest growth quarter in many years in our main business of IT services. The combination of 5% growth and strong order intake demonstrates our current competitiveness all across the Nordics. In the recent quarter, especially our software product businesses and Consulting & System Integration services grew faster than the market. Furthermore, our Product Development Services business has stabilized and we have won new business in the semiconductor area and identified several interesting new opportunities. 

We are also pleased to continue pursuing new service areas and thereby capture the opportunities provided by digitalization. We have maintained our investments into our start-up operations and related recruitments at a somewhat higher level to accelerate growth of new services and innovations. Our Managed Services automation programme, initiated earlier in the year, is also well on track and has already contributed to our intended efficiency improvement. Our financial performance continues to develop favourably even with higher, fully expensed investments in service development and currency headwinds – these combined totalled over EUR 20 million during the first nine months of the current year.

In the past quarter, we concluded both our annual customer satisfaction and employee engagement surveys, whose results confirmed the positive renewal of Tieto. I’m particularly pleased with the significant improvement in employee engagement, which gives us a strong foundation to provide exciting professional opportunities and drive innovation with our customers.”

Financial performance by service line

EUR million  Customer
sales
7-9/2015
 Customer
sales
7-9/2014
Change, % Operating
profit
7-9/2015
Operating
profit
7-9/2014
Managed Services 122 121 1 16.7 11.0
Consulting and System Integration 88 84 5 4.4 7.2
Industry Products 96 91 6 24.0 20.3
Product Development Services 29 51 -43 0.6 -37.4
Support Functions and Global Management -4.2 -5.0
Total 335 346 -3 41.4 -3.9


Operating margin by service line

% Operating
margin
7-9/2015
Operating
margin
7-9/2014
Operating
margin excl.
one-off items1)
7-9/2015
Operating
margin excl.
one-off items1)
7-9/2014
Managed Services 13.7 9.0 13.8 9.1
Consulting and System Integration 5.0 8.6 5.9 11.6
Industry Products 24.9 22.4 18.7 22.3
Product Development Services 2.1 -73.0 6.2 8.9
Total 12.4 -1.1 11.5 11.9

1)Excl. capital gains, impairments and restructuring costs


Organic change in local currency by service line

Customer
sales adj. for
acquisitions and currency
7-9/2015
Customer
sales adj. for divestments
7-9/2014
Change, %
Managed Services 124 121 2
Consulting and System Integration 90 84 7
Industry Products 97 91 8
IT services 310 295 5
Product Development Services 29 47 -37
Total 339 342 -1


Customer sales by industry group

EUR million Customer sales
7-9/2015
Customer sales
7-9/2014
Change, %
Financial Services 83 77 7
Manufacturing, Retail and Logistics 73 73 0
Public, Healthcare and Welfare 98 91 8
Telecom, Media and Energy 53 54 -2
IT services 306 295 4
Product Development Services 29 51 -43
Total 335 346 -3


Organic change in local currency by industry group

EUR million Customer
sales adj. for acquisitions and currency
7-9/2015
Customer
sales adj. for divestments
7-9/2014
Change, %
Financial Services 85 78 10
Manufacturing, Retail and Logistics 74 73 1
Public, Healthcare and Welfare 97 91 6
Telecom, Media and Energy 55 54 2
IT services 310 295 5
Product Development Services 29 47 -37
Total 339 342 -1


For further information, please contact:
Lasse Heinonen, CFO, tel.+358 2072 66329, +358 50 393 4950, lasse.heinonen (at) tieto.com
Tanja Lounevirta, Head of Investor Relations,  tel.+358 2072 71725, +358 50 321 7510, tanja.lounevirta (at) tieto.com
 


Press conference for analysts and media
will be held on 22 October 2015 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. To join the conference, attendees need Adobe Flash plugin version 10.1.0 or newer. 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 9590
Sweden: +46 (0)8 5065 3937
UK: +44 (0)20 3427 1909
US: +1212 444 0896
Conference code: 8765732

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 and Finnish.

TIETO CORPORATION

DISTRIBUTION
NASDAQ Helsinki
NASDAQ Stockholm
Principal Media

Tieto is the largest IT services company in the Nordics providing full lifecycle IT services. We also provide global product development services for companies in the communications and embedded technologies arena. Through industry insight, technology vision, and innovative thinking, Tieto proactively strives to inspire and engage our customers in finding new ways of accelerating their business.

Building on a strong Nordic heritage, Tieto combines global capabilities with local presence. Headquartered in Helsinki, Finland, Tieto has over 13 000 experts in more than 20 countries. Turnover is approximately EUR 1.5 billion. Tieto’s shares are listed on NASDAQ in Helsinki and Stockholm. www.tieto.com

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