Systems Solutions

Order entry

Development of business

We realigned our strategy for the Systems Solutions operating segment with a focus on returning to sustained growth in this area. Our previous investments in growth areas and innovation fields (such as cloud computing, the Internet of Things, all IP) along with efforts to scale back the number of risk-prone legacy contracts in our traditional IT operations mark important steps on our transformation journey. On this basis, we continue to realign the segment strategy to focus on consistently moving the business into strategic growth areas while simultaneously strengthening our telecommunications business and successfully managing the decline in traditional IT business.

With this goal in mind, we have rolled out a comprehensive transformation program that specifically includes a clear portfolio strategy as part of our performance management activities. According to this portfolio strategy, we are differentiating between the following portfolios: telecommunications operations, traditional IT business, and growth areas (cloud computing, Internet of Things, SAP, security, digital solutions, toll collection systems).

Order entry in our Systems Solutions operating segment was up by 18.7 percent in the first three quarters of 2018, marking a particularly positive development compared with the prior-year period. This is due in part to a number of big deals that we closed in traditional IT business this year, which were not included in the prior-year figure. Order entry in our growth areas also developed very well in the first three quarters of 2018.

Development of operations^a

Total revenue

In the first three quarters of 2018, total revenue in our Systems Solutions operating segment was on a par with the prior-year level at EUR 5.1 billion. Revenue in our growth areas developed positively, driven mainly by cloud computing, the Internet of Things, digital solutions, toll collection systems, and SAP. By contrast, revenue in traditional IT business declined year-on-year as expected on account of lower revenues from international corporate customers and the general downswing in our core market of Western Europe.

EBITDA, adjusted EBITDA

In the first three quarters of 2018, adjusted EBITDA at our Systems Solutions operating segment declined by EUR 44 million to EUR 318 million, which was in line with our expectations. The decrease was attributable mainly to the higher costs involved in establishing operations in growth areas and to higher financial burdens in our telecommunications business due to the ongoing migration to all IP. EBITDA decreased by EUR 39 million year-on-year to EUR 175 million, mainly due to the effects described under adjusted EBITDA. Special factors were slightly below the prior-year level.

EBIT, adjusted EBIT

Adjusted EBIT in our Systems Solutions operating segment declined by EUR 51 million compared with the first three quarters of 2017, coming in at EUR 25 million. The effects described under adjusted EBITDA were the main drivers of this decrease. Depreciation, amortization and impairment losses were substantially below the prior-year level due to the impairment loss on goodwill of EUR 1.2 billion recognized in the third quarter of 2017. EBIT was significantly higher than in the prior-year period, coming in at EUR -121 million, due to the effects described above.

Cash capex

Cash capex in the Systems Solutions operating segment stood at EUR 352 million in the reporting period, compared with EUR 264 million in the prior-year period. Capital expenditures remain focused on developing our operations in growth areas, such as digital solutions, the Internet of Things, and toll collection systems. In parallel, we are investing in the upgrade of our in-house IT systems.

For further details, please refer to our (PDF:) IR Backup (PDF).