Financial performance

Net sales increased by 3.4% to EUR 1 543.2 (1 492.6) million, growth of 4.1% in local currencies. In IT services, net sales were up by 3.0%, in local currencies up by 3.6%. In Product Development Services, sales increased by 7.9%, in local currencies up by 9.6%. Acquisitions added EUR 17 million in sales, affecting Industry Solutions and Business Consulting and Implementation. Currency fluctuations had a negative impact of EUR 10 million on sales, mainly due to the weaker Swedish Krona.

Net sales and growth
Net sales and growth by service line
Net sales and growth by industry group
Net sales by quarter

Operating profit (EBIT) amounted to EUR 139.2 (140.8) million, representing a margin of 9.0% (9.4). Operating profit was strained by restructuring costs related to the automation and efficiency improvement programme initiated in January 2017. Adjusted1) operating profit stood at EUR 161.5 (152.2) million, or 10.5% (10.2) of net sales. Further details on adjustments are available in a table on page Reported alternative performance measures.

The efficiency improvement programme had an impact of around EUR 20 million on the cost base in the full year, whereas improvement was curbed by salary inflation of around EUR 18 million. The performance-based incentive accruals, including both short-term and long-term incentives, were EUR 37.6 (25.6) million. Offering development costs remained at the previous year’s level at close to EUR 75 million. 

Depreciation and amortization amounted to EUR 54.7 (53.9) million, including EUR 4.3 (3.3) million in amortization of acquisition-related intangible assets. Net financial expenses stood at EUR 3.4 (4.0) million in the full year. Net interest expenses were EUR 2.1 (2.1) million and net losses from foreign exchange transactions EUR 0.2 (1.1) million. Other financial income and expenses amounted to EUR -1.1 (-0.8) million.

Earnings per share (EPS) totalled EUR 1.46 (1.46). Adjusted1) earnings per share amounted to EUR 1.69 (1.58).

1)  adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items

Operating profit and margin
Adjusted operating profit and margin
Adjusted operating profit and margin by quarter
Adjusted operating profit by service line
Financial performance by service line
EUR million Customer sales 1–12/2017 Customer sales 1–12/2016 Change, % Operating profit 1–12/2017 Operating profit 1–12/2016
Technology Services and Modernization 771 762 1 84.8 89.0
Business Consulting and Implementation 150 139 8 8.0 4.1
Industry Solutions 496 475 5 55.4 55.2
Product Development Services 127 117 8 12.3 10.9
Support Functions and Global Management       -21.2 -18.5
Total 1 543 1 493 3 139.2 140.8
Operating margin by service line
% Operating margin
1–12/2017
Operating margin
1–12/2016
Adjusted1) operating
margin
1–12/2017
Adjusted1) operating
margin
1–12/2016
Technology Services and Modernization 11.0 11.7 12.4 12.1
Business Consulting and Implementation 5.3 3.0 4.8 1.2
Industry Solutions 11.2 11.6 11.8 12.5
Product Development Services 9.7 9.3 10.0 9.4
Total 9.0 9.4 10.5 10.2
 

    

In Technology Services and Modernization, sales in local currencies were up by 2%. Development in traditional services has remained twofold. Application services saw growth of 4% while the decline in traditional infrastructure services was 5%. Cloud services’ sales continued to grow and full-year cloud sales were up by 10%1). Operating margin remained at a good level due to continued service standardization and automation. 

In Business Consulting and Implementation, sales growth was supported by the acquisition of Avega as well as good performance in Customer Experience Management with growth of 26% and increased demand in consulting. Adjusted operating profit improved due to the higher billing rate and lower offering development investments.  

In Industry Solutions, sales in local currencies were up by 5%. Development was healthy across industry groups. Financial Services’ solutions were supported by the acquisition of Emric, contributing to Banking solutions’ growth of over 20%. Additionally, solutions such as Lifecare and SmartUtility remained good with growth of 5% in both. Investments in selected solutions continued and offering development costs were up by around EUR 5 million. Despite improved efficiency, adjusted operating profit was down.

In Product Development Services (PDS), sales growth remained strong throughout the year. Growth was attributable to strong volume development with the largest key customers. Development was strong especially in the Radio and Smart Traffic areas. Operating margin improvement is attributable to improved the billing ratio driven by growth.

1) Cloud services growth of 10% includes both infrastructure cloud and selected services such as cloud-enabled consulting and shared integration services. Infrastructure cloud (Infrastructure as a Service and Platform as a Service) sales in the full year were up by over 15%.

Customer sales by industry group
EUR million Customer sales
1–12/2017
Customer sales
1–12/2016
Change, %
Financial Services 385 370 4
Public, Healthcare and Welfare 502 479 5
Industrial and Consumer Services 531 527 1
IT services 1 416 1 376 3
Product Development Services 127 117 8
Total 1 543 1 493 3
M&A impact by service line
  Growth, %
(in local currencies)
1–12/2017
Organic growth, %
(in local currencies)
1–12/2017
Technology Services and Modernization 1.8 1.8
Business Consulting and Implementation 8.7 5.9
Industry Solutions 5.2 2.5
IT services 3.6 2.4
Product Development Services 9.6 9.6
Total 4.1 3.0
M&A impact by industry group
  Growth, %
(in local currencies)
1–12/2017
Organic growth, %
(in local currencies)
1–12/2017
Financial Services 4.4 1.1
Public, Healthcare and Welfare 5.6 5.4
Industrial and Consumer Services 1.3 0.6
IT services 3.6 2.4
Product Development Services 9.6 9.6
Total 4.1 3.0