Tieto Oyj: TIETO's Interim Report 4/2014 – Solid Profitability and Strong Cash Flow

HELSINKI--()--Regulatory News:

  • Growth emerging in IT services driven by cloud services
  • Increased investments in growth businesses
  • High one-off restructuring costs in Product Development Services as guided

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

Key figures for the fourth quarter

  • Organic growth in local currencies was 0.9%
  • In IT services organic growth in local currencies was 3.5%
  • Order intake (Total Contract Value) amounted to EUR 672 (551) million and order backlog was EUR 1 784 (1 540) million
  • Fourth-quarter operating profit excl. one-off items rose to EUR 44.4 (42.0) million, 11.0% (10.4) of sales
  • Cash flow rose to EUR 90.2 (57.5) million

Key figures for the full year

  • Organically, net sales in local currencies were down by 1.1%
  • In IT services, organic growth in local currencies was 2.6%
  • Full-year operating profit excl. one-off items rose to EUR 150.2 (141.2) million, 9.9% (8.8) of sales
  • Proposed dividend EUR 1.00 (0.90) per share, up by 11%, and an additional dividend of EUR 0.30
  • Dividend yield of 6%, or close to 5% excluding additional dividend
       
10-12/
2014
10-12/
2013 2)
1-12/
2014
1–12/
2013 2)
Net sales, EUR million 402.9 405.1 1 522.5 1 606.8

    Change, %

-0.6

n/a

-5.3

n/a

 Organic change in local currencies, %

0.9 n/a -1.1 n/a
Operating profit (EBITA), EUR million 9.7 18.2 62.1 89.4
Operating margin (EBITA), % 2.4 4.5 4.1 5.6
Operating profit (EBIT), EUR million 9.5 17.3 61.1 85.7
Operating margin (EBIT), % 2.4 4.3 4.0 5.3
Operating profit (EBIT) excl. one-off items1), EUR million 44.4 42.0 150.2 141.2
Operating margin (EBIT) excl. one-off items1), % 11.0 10.4 9.9 8.8
Profit after taxes, EUR million 6.7 15.0 35.0 62.2
EPS, EUR 0.09 0.21 0.48 0.86
Net cash flow from operations, EUR million 90.2 57.5 167.9 159.0
Return on equity, 12-month rolling, % 7.1 12.0 7.1 12.0
Return on capital employed, 12-month rolling, % 3) 9.8 13.5 9.8 13.5
Investments, EUR million 12.9 23.6 43.5 71.7
Interest-bearing net debt, EUR million -59.2 15.5 -59.2 15.5
Net debt/EBITDA -0.4 0.1 -0.4 0.1
Book-to-bill 1.7 1.4 1.2 1.1
Order backlog 1 784 1 540 1 784 1 540
Personnel on 31 Dec 13 720 14 318 13 720 14 318

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

2) Figures restated according to IFRS 11 ‘Joint arrangements’

3) The figure for 2013 has been restated.

Full-year outlook for 2015

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 are pleased with the performance improvement of our IT services business throughout 2014. Our quality and efficiency measures progressed well during the year and supported the improvement in underlying margins, which was also visible in our fourth-quarter performance.

During 2014, our IT services business grew by nearly 3% in local currencies while order intake growth was 5% and further accelerated in the fourth quarter. Underlying profitability of IT services continued to improve despite increased investments in new services. Simultaneously, our Product Development Services underwent significant changes due to external market conditions. I’m also pleased with the progress of our start-up operations – they drive innovation with our customers and provide highly agile ways of working. These serve as good role models to reinvent the culture within Tieto.

The global IT services market continues to change at a fast pace, driven primarily by our customers’ digitalization agenda. This rapid pace of change provides ample new business opportunities, while requiring us to continuously renew our own operations. The actions that we announced in early January 2015 regarding our service portfolio and competence renewal are proactive measures to take Tieto into a market leading position. It has been exciting to shift our attention towards new services and growth acceleration, as visible in increased investments towards the year end. The next stage of our strategy combines efficiency, innovation and growth, which I expect to be highly beneficial and inspiring to our customers and employees."

Financial performance by service line

EUR million  

Customer sales
10-12/ 2014

  Customer sales
10–12/ 2013
  Change, %   Operating profit
10–12/ 2014
  Operating profit
10–12/ 2013
Managed Services 131 129 1 8.2 0.4
Consulting and System Integration 107 102 5 10.4 -1.6
Industry Products 107 111 -4 17.4 28.3
Product Development Services 58 63 -8 -4.4 -1.3
Support Functions and Global Management -22.1 -8.5
Total 403 405 -1 9.5 17.3
 

Operating margin by service line

%  

Operating
margin
10–12/2014

 

Operating
margin
10–12/2013

 

Operating margin excl. one-
off items1) 10–12/2014

 

Operating margin excl. one-
off items1) 10–12/2013

Managed Services 6.2 0.3 6.9 6.9
Consulting and System Integration 9.8 -1.6 9.5 7.6
Industry Products 16.3 25.5 18.3 25.7
Product Development Services -7.5 -2.0 20.5 4.2
Total 2.4 4.3 11.0 10.4
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 10–12/2014

 

Customer sales adj. for divestments
10–12/2013

  Change, %
Managed Services 134 130 4
Consulting and System Integration 108 101 8
Industry Products 110 111 -1
IT services 353 341 4
Product Development Services 55 63 -13
Total 408 404 1

Fourth-quarter sales were affected by the divestment of the security solutions business in Denmark. Additionally, the
acquisitions of part of Siemens Convergence Creators' business are eliminated.

 

Customer sales by industry group

EUR million   Customer sales 10–12/2014   Customer sales 10–12/2013   Change, %
Financial Services 90 89 2
Manufacturing, Retail and Logistics 82 81 1
Public, Healthcare and Welfare 115 105 9
Telecom, Media and Energy 59 68 -14
IT services 345 342 1
Product Development Services 58 63 -8
Total 403 405 -1
 

Organic change in local currency by industry group

EUR million  

Customer sales adj. for acquisitions and
currency 10–12/2014

 

Customer sales adj. for divestments
10–12/2013

  Change, %
Financial Services 92 89 4
Manufacturing, Retail and Logistics 83 80 3
Public, Healthcare and Welfare 118 105 12
Telecom, Media and Energy 60 68 -11
IT services 353 341 4
Product Development Services 55 63 -13
Total 408 404 1

Fourth-quarter sales were affected by the divestment of the security solutions business in Denmark. Additionally, the
acquisitions of part of Siemens Convergence Creators' business are eliminated.

 

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 at Tieto’s premises in Helsinki, address: Aku Korhosen tie 2–6, on Thursday 5 February 2015 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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Contacts

Tieto Oyj
Lasse Heinonen, +358 2072 66329, +358 50 393 4950
CFO
lasse.heinonen (at) tieto.com
or
Tanja Lounevirta, +358 2072 71725 , +358 50 321 7510
Head of Investor Relations
tanja.lounevirta (at) tieto.com

Contacts

Tieto Oyj
Lasse Heinonen, +358 2072 66329, +358 50 393 4950
CFO
lasse.heinonen (at) tieto.com
or
Tanja Lounevirta, +358 2072 71725 , +358 50 321 7510
Head of Investor Relations
tanja.lounevirta (at) tieto.com