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Systems Solutions

Order entry

millions of €

 

 

 

 

 

 

2021

2020

Change

Change
%

2019

Order entry

4,174

4,564

(390)

(8.5)

4,740

Development of business

The 2021 financial year continued to be dominated by the focusing of our systems solutions business on growth and future viability and the continuation of our transformation program. Under the transformation program, we continued to drive forward the alignment of our organization, workflows, and capacities, and the fine-tuning of the strategy for our portfolio. Stand-alone portfolio units assume responsibility not only for our growth areas (e.g., public cloud and security) but also for our traditional IT business.

We have defined selected industries (automotive, healthcare, public sector, and public transport), for which we have increased our offer of vertical solutions based on our expertise. In addition, we have agreed partnerships with leading cloud service providers (e.g., Amazon, Google, Microsoft), so as to be able to offer our customers an even broader and more flexible range of cloud solutions. Consistent with our efforts to implement the Group’s strategy pillar “Lead in business productivity,” we transferred our IoT (Internet of Things) portfolio unit to the Germany operating segment effective January 1, 2021.

Order entry in our Systems Solutions operating segment decreased year-on-year by 8.5 % in the 2021 financial year, putting it below our expectations. This development was mainly due to a decline in both traditional IT infrastructure business and SAP business, which was only partially offset by the strong upward trends in our growth areas. In addition, the prior-year figure included two major deals signed with important existing customers in late 2020.

Development of operations

millions of €

 

 

 

 

 

 

 

 

2021

2020

Change

Change
%

2019

Total revenue

 

4,019

4,159

(140)

(3.4)

4,411

Of which: external revenue

 

3,171

3,237

(66)

(2.0)

3,418

Service revenuea

 

3,893

3,903

(10)

(0.3)

n.a.

Profit (loss) from operations (EBIT)

 

(242)

(534)

292

54.7

(336)

Special factors affecting EBIT

 

(393)

(582)

189

32.5

(332)

EBIT (adjusted for special factors)

 

151

48

103

n.a.

(4)

EBIT margin (adjusted for special factors)

%

3.8

1.2

 

 

(0.1)

Depreciation, amortization and impairment losses

 

(425)

(720)

295

41.0

(452)

EBITDA

 

183

185

(2)

(1.1)

116

Special factors affecting EBITDA

 

(213)

(209)

(4)

(1.9)

(304)

EBITDA (adjusted for special factors)

 

396

394

2

0.5

421

EBITDA AL

 

73

70

3

4.3

2

Special factors affecting EBITDA AL

 

(213)

(209)

(4)

(1.9)

(304)

EBITDA AL (adjusted for special factors)

 

286

279

7

2.5

307

EBITDA AL margin (adjusted for special factors)

%

7.1

6.7

 

 

7.0

Cash capex

 

(237)

(235)

(2)

(0.9)

(324)

a

The definition of “service revenue” was not applied consistently Group-wide for the years prior to 2020.

Total revenue, service revenue

Total revenue in our Systems Solutions operating segment in the 2021 financial year amounted to EUR 4.0 billion, down 3.4 % year-on-year. Service revenue remained more or less stable year-on-year. The decrease in total revenue was mainly driven by the expected decline in traditional IT infrastructure business, due in part to deliberate business decisions such as the reduction in end-user services. Inorganic effects, including the sale of a business operation, further contributed to the decrease in revenue. By contrast, our growth areas grew significantly, especially public cloud (+19.2 %), digital solutions (+13.5 %), and road charging (+13.4 %).

Adjusted EBITDA AL, EBITDA AL

In the 2021 financial year, adjusted EBITDA AL at our Systems Solutions operating segment increased by 2.5 % year-on-year to EUR 286 million. Efficiency effects from our transformation program and effects from increased revenue in our growth areas exceeded the decline in earnings in the traditional IT infrastructure business. EBITDA AL increased by EUR 3 million compared with the prior year to EUR 73 million. Negative special factors were up EUR 4 million on the prior year at EUR 213 million, mainly due to a loss on deconsolidation in connection with the sale of a business operation and a contrasting effect of lower restructuring costs.

Adjusted EBIT, EBIT

Adjusted EBIT in our Systems Solutions operating segment in the 2021 financial year improved by EUR 103 million year-on-year, coming in at EUR 151 million, mainly as a result of declines in depreciation and amortization. EBIT increased by EUR 292 million compared with the prior year to EUR ‑242 million. The expense arising from special factors decreased by EUR 189 million year-on-year, to EUR 393 million. In the prior year, a non-cash impairment loss on non-current assets reduced EBIT by EUR 0.4 billion, which resulted in a reduction in the depreciation and amortization base. In the reporting year, non-cash impairment losses on non-current assets totaling EUR 0.2 billion were recorded as special factors. This was a consequence of several factors, including the ad hoc impairment testing carried out in the Systems Solutions cash-generating unit in the prior year. In addition, despite the marginal improvement in the business outlook, the increase in the cost of capital in the reporting year prompted further impairment losses to be recognized on non-current assets at the end of 2021.

Cash capex

Cash capex in the Systems Solutions operating segment stood at EUR 237 million in the 2021 financial year, which was on a par with the prior year. Going forward, we will continue to focus our investments on developing our growth business.

AL – After Leases
Since the start of the 2019 financial year, we have taken the effects of the first-time application of IFRS 16 “Leases” into account when determining our financial performance indicators. “EBITDA after leases” (EBITDA AL) is calculated by adjusting EBITDA for depreciation of the right-of-use assets and for interest expenses on recognized lease liabilities. When determining “free cash flow after leases” (free cash flow AL), free cash flow is adjusted for the repayment of lease liabilities.
Glossary
IoT – Internet of Things
The IoT enables the intelligent networking of things like sensors, devices, machines, vehicles, etc., with the aim of automating applications and decision-making processes. Deutsche Telekom’s IoT portfolio ranges from SIM cards and flexible data rate plans to IoT platforms in the cloud and complete solutions from a single source.
Glossary