Systems Solutions

Order entry

Development of business

The first half of 2020 was dominated by efforts to develop our realigned systems solutions business. Investments in growth areas and innovation fields (such as the public cloud, the Internet of Things (IoT), digital solutions, security) create the basis for us to continue to focus our segment strategy on a sustainable shift into strategic growth areas. In parallel, we are working to strengthen our telecommunications operations and successfully manage the decline in traditional IT business.

Under an extensive transformation program, we realigned our organization and workflows, adjusted capacities, and developed a new strategy for our portfolio. Stand-alone portfolio units look after not only our growth areas (public cloud, Internet of Things (IoT), digital solutions, security, SAP, classified ICT, and road charging) but also our traditional IT and telecommunications businesses. Consistent with our efforts to implement the Group’s strategy pillar “Lead in business productivity,” on July 1, 2020, we also combined our B2B telecommunications operations and the Classified ICT unit within our Germany operating segment.

Furthermore, the effects of the coronavirus pandemic on the global economy impact on the financial position of our business customers. In some cases, this led to delays in current projects and the postponement of deal closures, especially in the areas of traditional IT and digital solutions. As a result, order entry in our Systems Solutions operating segment decreased year-on-year by 19.1 percent in the first half of 2020, which was also below our expectations.

Development of operations

Total revenue

Total revenue in our Systems Solutions operating segment in the first six months of 2020 decreased slightly year-on-year to EUR 3.2 billion, reflecting the decline of the IT market in Western Europe driven by the coronavirus pandemic. The upward revenue trend in our growth areas public cloud and security was not sufficient to fully offset the declines in traditional IT and project business. The development of our growth area digital solutions was particularly affected by the impact of the coronavirus pandemic on the automotive industry.

EBITDA AL, adjusted EBITDA AL

In the first half of 2020, adjusted EBITDA AL at our Systems Solutions operating segment decreased by EUR 20 million year-on-year to EUR 199 million, driven mainly by the decrease in earnings in traditional IT and project business, partly due to the effects of the coronavirus pandemic. EBITDA AL increased by EUR 42 million compared with the prior year to EUR 85 million, thanks to the streamlining of the portfolio in 2019. As a result, special factors were down EUR 62 million on the prior year, at EUR -114 million.

EBIT, adjusted EBIT

Adjusted EBIT in our Systems Solutions operating segment in the first half of 2020 decreased by EUR 5 million year-on-year, coming in at EUR 23 million. The effects described under adjusted EBITDA AL were the main drivers of this increase. EBIT increased by EUR 85 million in the reporting period to EUR -90 million, also due to the effects described under EBITDA AL.

Cash capex

Cash capex in the Systems Solutions operating segment stood at EUR 101 million in the first half of 2020, compared with EUR 167 million in the prior year. This was due to a reduced need for investments in traditional IT and in the growth area digital solutions, which was impacted by the effects of the coronavirus pandemic on the automotive industry. Going forward, capital expenditures remain focused on developing our operations in growth areas, such as digital solutions, the Internet of Things (IoT), and road charging.