For us, economic responsibility means striving to ensure that we are profitable in order to create long-term value for our stakeholders and contribute to a global and sustainable economy. In 2015, our profitability continued to improve and reached 8.6% EBIT margin at the full-year, thus getting closer to our 10% long-term objective.
After the past years’ transformation and reshaping of Tieto, our focus is now on growth and innovation to capture the opportunities arising from industry change and digital disruption. We have continued to renew and strengthen our service portfolio and competencies in order to be a preferred digitalization partner to our customers. In 2015, we recruited new competences, 500 in total, to match the needs in new service areas. At the same time, new services are less labour-intensive and automation via self-service channels will reduce the need for certain roles. Redundancies in IT services in 2015 totalled around 700, mainly based on the automation and industrialization of service deliveries.
Three acquisitions were completed during the year, strengthening our portfolio as well as adding to the speed of service and cultural renewal of the company: Software Innovation, a leading software company in the Enterprise Content Management (ECM) business in the Nordic countries, Imano, an expert in the paper and forest industry, and Smilehouse, the largest Finnish solution provider of multichannel commerce with operations primarily in Finland and Sweden. During the year we have also invested in new services, such as the Tieto Security Services. A new start-up was launched in the beginning of 2016. Our annual, fully expensed investments in new service development have increased from EUR 40 million to EUR 60 million.
Our financial objectives are to achieve a 10% EBIT margin, increase dividends annually in absolute terms (payout ratio at minimum 50% of net results), and to have a net debt / EBITDA of 1.5 as an upper limit in the long run.
In 2015, profitability improved mainly due to the automation programme and improved business mix. Our operating margin (EBIT) rose to 8.6% (4.0) and the margin excluding one-off items to 10.3% (9.9). The proposed dividend is up by 10%, at EUR 1.10 (1.00) and, additionally, an extra dividend of EUR 0.25 is proposed. The payout ratio is 110%, including extra dividend. Our capital structure is very strong and net debt/EBITDA remained low at 0.1. The proposal to pay extra dividend addresses our objective to achieve a level of close to 1. We will maintain our capacity to invest in future growth both organically and inorganically after dividends.
Our economic contribution to our stakeholders is summarized in the graph below. It illustrates the economic impact of our operations on customers, employees, suppliers, governments and society at large.
|Economic value for different stakeholders, EUR million|
|Revenues||1 492.5||1 541.8||1 630.2|
|Employee wages and benefits||828.3||846.0||923.7|
|Payments to providers of funds 1)||100.6||70.3||72.4|
|Payments to governments 2)||22.3||20.7||15.5|
|Economic value retained||56.5||69.9||85.4|
|1) 2014 and 2013 figure changed concerning dividend to be cash basis.|
|2) of which|
Our tax strategic aim is to comply with all jurisdictions local tax legislation and other obligatory rules. We are committed to operating in a responsible way and to complying with ethically acceptable principles in all of our activities. This means that Tieto fulfils all reporting requirements and pays all legally imposed direct, indirect and other taxes in those countries where the Group has operations. Furthermore, Tieto shall always operate with full co-operation with the authorities and aim to disclose all information that is needed to determine the tax consequences.
During the year, we have received financial assistance from local governments in some of our operating countries. In Poland we received EUR 0.1 million from Polish Ministry of Economics for R&D investments. In China we received EUR 0.1 million from government as an encouragement for IT service companies. In Finland we received EUR 1.0 million from TEKES, the Finnish Funding Agency for Technology and Innovation for product development purposes. The government of the Czech Republic has provided a grant of EUR 5.7 million to support economic development and employment.
|Significant financial assistance received from government, EUR million|
For a full description of our financial performance, please read our Financial Review 2015.
In Tieto, Group-level finance operations are handled by our Chief Financial Officer’s (CFO) office. In addition, each Industry Group and Service Line has a dedicated Finance partner, who works closely with business and supports management in financial processes and reporting. Our shared service centre in Riga, Latvia, supports accounting and master data maintenance services to fulfill Group reporting and statutory reporting needs and requirements.
We have a common accounting and reporting platform, Tieto ERP. Group consolidation and reporting are based on the reporting system, which facilitates common control requirements for all legal entities reporting to the Group. Financial reporting consists of monthly performance reports, including all the key performance indicators, rolling forecasts and interim financial reports.
The correctness of our financial reporting, including interim and annual reports, and the compliance of financial reporting with regulatory requirements are ensured through our internal control practices. The Audit and Risk Committee of our Board of Directors has the oversight role in our external financial reporting.
Our financial reports are regularly reviewed by the Leadership Team and the Board of Directors. The follow-up is based on a thorough comparison of the actual figures with the set objectives, forecasts and previous periods. If the figures deviate, the Leadership Team members are responsible for initiating corrective actions.
Our Financial Handbook includes internal financial information that is directed to people involved in the financial planning and reporting or working with finance matters. The information covers a broad spectrum from steering system to detailed timetables for reporting as well as descriptions of reporting systems and financial guidelines.
Our financial reporting follows the International Financial Reporting Standards (IFRS) as adopted by the European Union. As a listed company, we are compliant with the regulations of the NASDAQ Helsinki and Stockholm Stock Exchanges.