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TietoEVRY's Interim Report 1/2020: Solid performance – integration on schedule

28 April 2020

TietoEVRY Corporation   INTERIM REPORT   28 April 2020, 8.00 am EET    

  • Organic growth of 3% driven by software business and cloud services
  • Adjusted operating margin improved to 10.5%, driven especially by cloud and infrastructure business 
  • Measures in place to mitigate potential Covid-19 impact
  • Integration proceeding well and end-of-year synergy run-rate increased from EUR 30-40 million to EUR 45-55 million

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

About this report  

  • Tieto’s and EVRY’s merger was concluded on 5 December 2019. The report is based on the official financial figures of TietoEVRY, with EVRY being consolidated as one reporting segment of TietoEVRY as from 5 December 2019. Comparative figures have not been restated.

Comparable financial information for illustrative purposes

  • This was the first full quarter for TietoEVRY as a combined company. As additional information, the report includes comparable financial information with comparison figures for the EVRY reporting segment and businesses for the full period. EVRY’s financial information until 5 December 2019 is prepared in accordance with its accounting policies. There are no material differences between EVRY's and TietoEVRY's accounting policies.

TietoEVRY will adopt a new reporting structure as from the second quarter of 2020 and release comparison figures prior to the publication of the respective interim report.

Key figures

(Comparable financial information for illustrative purposes)

 

1–3/2020

1–3/2019
Revenue, EUR million 744.2 749.2
Change, % -0.7 -
Organic growth1), % 2.7 -
Adjusted2) operating profit (EBIT), EUR million 78.2 74.7
Adjusted2) operating margin (EBIT), % 10.5 10.0
Order backlog 3 353 -
Net debt/EBITDA3) 2.7 -

1) Adjusted for currency effects and impact from acquisitions and divestments 
2) Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability. 
3) EBITDA is 12-month average including the full period for both Tieto and EVRY. This is in line with the additional debt due to the merger being included in net debt.

Full-year outlook for 2021 withdrawn

Due to the Covid-19 pandemic, the current economic outlook in TietoEVRY’s main markets involves significant uncertainties. Given the uncertainties in the market outlook, it is not possible to estimate the potential impact of the pandemic on the company’s profitability. Hence the full-year guidance was withdrawn on 27 March. Further guidance will be issued as soon as visibility to the market outlook has improved and significant uncertainties are cleared.

CEO’s comment

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

“The quarter was characterized by significant integration milestones and our measures to cope with the initial implications of the Covid-19 outbreak. However, we achieved a good start for 2020 and our first post-merger quarter. I thank our employees for their continued commitment and attention to delivering business-critical services for many sectors across society.

Financially, the first quarter was solid, with organic growth of 3% and margin improvement to over 10%. The main growth drivers were our cloud services, a number of software businesses and digital consulting business in Norway. Profitability improvement was supported by continued attention on the company’s cost structure and strong volume development in the cloud and infrastructure business.

The TietoEVRY merger and operational integration continues to proceed well and on schedule. Very importantly, we have been able to keep our attention focused on customer engagement and pursue important digitalization projects for the benefit of our customers. During the quarter, a new aligned organization and operating model was implemented - supported by extensive leadership appointments across all businesses and functions. The integration process has achieved several important milestones in combining the two companies into one new structure. To continue our efficiency improvement, we have recently also announced new employee consultations. Given the current pace of integration and continued pursuit of a competitive cost structure, we are increasing our anticipated end-of-year outlook for cost synergies.

The Covid-19 pandemic is affecting businesses and individual lives in many ways. Our priority is to safeguard the well-being of our employees and to protect services for our customers. This enables us to best contribute to the functioning of society during this period of uncertainty. We are pleased to have had the opportunity to join a consortium of companies to support the doubling of Covid-19 testing capacity in Finland. As the pandemic creates short-term uncertainties in demand, we have already initiated a number of short-term cost-saving activities to ensure cost competitiveness and financial health. It is our strong belief that once the pandemic has been overcome, our industry will be a growth sector and TietoEVRY will play an important part in the creation of the modern data-rich Nordic societies. With this in mind, our longer-term outlook remains positive with the ambition of continued performance improvement.

During these times of uncertainty, it is of utmost importance to emphasize and rely on our strong values of openness, trust and diversity. We need to emphasize humility and care in individual interactions more than ever before to compensate for global uncertainties. We have a strong belief that with this mindset we will come out of this era of uncertainty stronger - both in terms of values and attractiveness in the market.”

Financial performance
(Comparable financial information for illustrative purposes)

Revenue,
EUR
million
1–3/2020

Revenue,
EUR
million
1–3/2019

Growth, %
 
Organic
growth, %2)

 

Adjusted1)
operating
profit, EUR
million
1–3/2020

Adjusted1)
operating
profit, EUR
million
1–3/2019

Adjusted1)
  operating
margin, %
1–3/2020

Adjusted1)
operating
margin %
1–3/2019

Digital Experience 123.4 129.7 -5 -4 15.6 19.3 12.6 14.9
Hybrid Infra 134.7 129.0 4 6 16.0 8.9 11.8 6.9
Industry Software 117.1 112.7 4 7 12.1 14.0 10.3 12.5
Product Development Services 37.8 36.8 3 5 4.6 4.5 12.1 12.3
EVRY 331.2 340.8 -3 3 34.8 33.8 10.5 9.9
        Financial Services 86.7 91.0 -5 1 7.0 9.7 8.1 10.6
        Sweden 77.9 82.8 -6 -4 3.9 3.1 5.0 3.8
        Norway 154.4 154.1 0 8 17.9 16.1 11.6 10.4
        Other 12.2 12.9 - - 5.9 5.0 - -
Segments total 744.2 748.9 -1 3 83.0    80.6 11.2 10.8
Other operations 0.0 0.3 -100 - -4.9    -5.8 - -
Total 744.2 749.2 -1 3 78.2 74.7 10.5 10.0

1) Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability
2) Adjusted for currency effects and impact from acquisitions and divestments 

 

For further information, please contact:
Tomi Hyryläinen, Chief Financial Officer, tel. +358 50 555 0363, tomi.hyrylainen (at) tietoevry.com
Kjell Arne Hansen, Investor Relations, tel. +47 9504 0372, kjell.hansen (at) tietoevry.com

A teleconference for analysts and media will be held on Tuesday 28 April 2020 at 10.00 am EEST (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 TietoEVRY's website.

Teleconference numbers

Finland: +358 981 710 310
Sweden: +46 856 642 651
Norway: +47 235 002 43
United Kingdom: +44 333 300 0804
United States: +1 631 913 1422
Conference code: 54836932#

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.

TietoEVRY publishes its financial information in English and Finnish.

TIETOEVRY CORPORATION

DISTRIBUTION
NASDAQ Helsinki
Oslo Börs
Principal Media

TietoEVRY creates digital advantage for businesses and society. We are a leading digital services and software company with local presence and global capabilities. Our Nordic values and heritage steer our success.

Headquartered in Finland, TietoEVRY employs around 24 000 experts globally. The company serves thousands of enterprise and public sector customers in more than 90 countries. TietoEVRY’s annual turnover is approximately EUR 3 billion and its shares are listed on the NASDAQ in Helsinki and Stockholm as well as on the Oslo Börs. www.tietoevry.com

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