Tieto Q1 2016 · 2018. 9. 12. · Customer sales Q1 • EUR 79 (78) million, +2%, growth of 2 % in...

Tieto Q1 2016Healthy growth in IT services and

continued profitability improvement

26 April 2016

Kimmo Alkio – President and CEO

Lasse Heinonen – CFO

Tanja Lounevirta – Head of IR

© Tieto Corporation

Q1 2016 in brief

2

Healthy growth in IT services and continued profitability improvement

• Industry Products driving growth – in line with the ambition to expand software businesses

• Product Development Services performing well

• New strategy to accelerate innovation and growth launched


2015 2020

Emerging services - software & digital*

Traditional services

Sales growth in

2016–2020 (CAGR)

Industry solutions

Cloud and modernization

services

New data-driven businesses

Other integration and services

~ 50%

UP BY

10–20 %

DOWN BY

5–10%

Tieto's growth ambition for IT services:

Faster that the market** (CAGR)

**Market growth expectation (CAGR) for the Nordics at 1.5–3%

Traditional infrastructure

and application services

*Includes current high-growth businesses and internal start-ups which represented ~20% of IT services sales in 2015

Business mix shifting towards high-growth services

~ 50%

Current high-growth

businesses

• ~EUR 75 million, 23% of

IT services sales

• Growth 25%

Other emerging services

and solutions

• ~EUR 115 million, 35%

of IT services sales

• Growth 17%

Traditional services

• ~EUR 140 million, 42%

of IT services sales

• Down by 7%

Development in Q1 2016


Defined growth businesses drive growthAdditionally investments in a dynamic portfolio of over ten industry solutions

CEMCloud Services Lifecare Industrial

InternetSecurity

Services

Tieto drives scale and repeatability through investments in software businesses, with start-up

businesses providing exponential growth

• Dynamic portfolio of over ten industry solutions

• New data-driven businesses

• Selective international expansion

• Strong 72% growth

• Investments in

integrated private

and public cloud

services

• Growth of 6%

outpace the market

• National eArchive

deliveries for

private segment

started

• Sales up by 31%

• Several innovation,

advisory and new

installation cases,

e.g. Elo and

Cargotec

• Focus on

development

• Tieto Security Wall

launced, new

services in the

pipeline

• Annual sales 2015:

around EUR 30 million

• Growth: 20%


EUR 80 million

• Growth: 65%


over EUR 160 million

• Growth: 6%

• In 2015, investments

around EUR 4 million,

cash flow negative

• In 2015, Tieto’s sales

in single digit millions

• Focus on several

use-cases, e.g.Machines: Komas

Fleets: Cargotec

MacGregor

Analytics: Valmet, HUS

(Hospital District of

Helsinki and Uusimaa

Financial development


Q1 2016 key figuresNet sales• EUR 367 (366) million, +0.5%, growth of 1.4% in local

currencies• Acquisitions added EUR 16 million• Divestments impacted EUR 2 million• Currency EUR -3 million

• In IT services, sales growth 6.0%, or 7.0% in local currencies

EBIT• EBIT EUR 28.3 (13.9) million, 7.7% (3.8%)• Adjusted EBIT* EUR 31.5 (30.7) million,

8.6% (8.4%)

Order backlog • Order backlog EUR 1 907 (1 819) million• Total Contract Value EUR 325 (430) million• Book-to-bill 0.89 (1.18)

Earnings per share • EPS EUR 0.29 (0.12)• EPS EUR 0.33 (0.31), adjusted*

6

*) adjusted for restructuring costs, capital gains/losses,

goodwill impairment charges and other items

MEUR %

362 363 330 382 352

3 15

1316

8,48,3

11,5

13,0

8,6

0

2

4

6

8

10

12

14

0

100

200

300

400

500

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Net of divestement and acquisitions

Customer sales adjusted

EBIT, % excluding one-off items*


Quarterly development

7

Offshore ratio: IT services 45,2% (43.8%) PDS 60.8% (57.4%)Number of personnel down by a net amount of 256

%

MEUR

Employees MEUR

36,712,4 16,4 67,1 46,9

-11,6 -10,5 -8,7 -12,9 -9,4-15

5

25

45

65

85

105

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Net cash flow from operations and capital expenditure

Net cash from operations Capital expenditure

-0,6

0,0

0,4

0,1

-0,1

-1

-0,5

0

0,5

1

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Net debt/EBITDA

13456 12949 13179 13083 13200

45,5 46,0 45,8 46,2 46,7

0

10

20

30

40

50

60

0

5000

10000

15000

20000

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Number of full-time employees and offshore ratio

Number of personnel Offshore ratio

362 363 330 382 352

3 1 513 16

0

100

200

300

400

500

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

Net of divestement and acquisitionsCustomer sales adjusted


-4%

18%/ 7%*

2%6%

-38%16%/ 6%*3%/ -1%*2%

Growth in local currencies by Service Line

and Industry Group

8

Service

Lines

Industry

Groups

(IT services)

*) Organic growth in local currencies (not shown for businesses where acquisition impact is not significant)

126 99 94 47129 102 109 290

25

50

75

100

125

150

Managed Services Consulting and SystemIntegration

Industry Products Product DevelopmentServices

Q1/15

Q1/16

84 76 101 5789 79 119 550

25

50

75

100

125

150

Financial Services Manufacturing, Retailand Logistics

Public, Healthcare andWelfare

Telecom, Media andEnergy

Q1/15

Q1/16

© Tieto Corporation9

Service Lines

Financial

Services

Public,

Healthcare

and Welfare

Manufacturing,

Retail and

Logistics

Telecom,

Media and

Energy

Consulting and System Integration

Managed Services

Product

Development

Services

Industry Products


Managed Services

Customer sales in Q1• EUR 129 (126) million, +2%, growth of 2% in local

currencies

EBIT• EBIT EUR 10.8 (-8.3) million, 8.4% (-6.6)• Adjusted EBIT* EUR 11.3 (4.6) million, 8.7% (3.6)

Q1 highlights

• Cloud sales up by 72% in Q1, representing 20% of MS sales

• Transformation with automation, offshore transfers and new launches continued

• Operating profit improvement mainly due to the savings related to the automation programme

• Competitive cloud portfolio enhanced with investments in integrated private and public cloud services

• Operating margin will be supported by automation also in Q2

10



126 131 122 132 129

3,6

7,6

13,8 13,0

8,7

0

2

4

6

8

10

12

14

16

0

50

100

150

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

%MEUR






Customer sales Q1• EUR 102 (99) million, +3%, growth of 3% in local

currencies• Ogranic growth in local currencies -1%

EBIT• EBIT EUR 5.6 (8.2) million, 5.5% (8.3)• Adjusted EBIT* EUR 7.0 (10.8) million, 6.8% (10.8)

Q1 highlights• Acquisition of Smilehouse and Imano support growth• Demand strongest for packaged solutions and CEM

• Double-digit growth also in cloud services, incl. integration and Value Networks

• Sales for customized application management down• Future industrialization driving efficiency

• Short-term pressure in utilization rate • A number of projects delayed as anticipated• Recruitments in new growth areas

• Utilization rates are expected to improve in H2• Margin anticipated to remain below the previous

year’s level in Q2

11



99 101 88 108 98

14

10,8

8,6

5,9

10,3

6,8

0

2

4

6

8

10

12

0

50

100

150

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

%MEUR





Industry ProductsCustomer sales Q1• EUR 107 (94) million, +13%, growth of 16% in local

currencies• Ogranic growth in local currencies 6%


Q1 highlights• Strongest development in Financial Services and Public,

Healthcare and Welfare, up by 16% and 35% (in local currencies), respectively

• Healthcare and Welfare solutions (Lifecare) growth 6%• Sales affected by the acquisition of Software Innovation

and the divestment of Lean• The oil and gas segment impacted by a change in

delivery model and challenging market conditions• Operating profit somewhat up

• Improvement partly offset by new recruitments, especially in Financial Services

• Offering development costs up by EUR 2 million• Margin trend expected to follow the previous year’s path

12



93 97 91 109 95

1 1 5

12

1113,4

12,2

18,7

21,4

13,3

0

5

10

15

20

25

0

50

100

150

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

%MEUR





Product Development Services

Customer sales Q1• EUR 29 (47) million, -37%, decline of 37% in local

currencies


Q1 highlights• Increased demand in telecom cloud network function

virtualization and software-defined networking• Increased pipeline in new growth areas• Operating profit as expected – Q1 in 2015 was

exceptionally high as it included income related to temporary commercial terms

• Healthy cost structure • Operating margin expected to remain in a range

below 10%

13



47 33 29 33 29

14,0

9,6

6,2

9,48,4

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

0

50

100

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

%MEUR





Industry Groups


Managed Services

Product

Development

Services

Industry Products

Financial

Services

Public,

Healthcare

and Welfare

Manufacturing,

Retail and

Logistics

Telecom,

Media and

Energy


Financial Services

Customer sales Q1• EUR 88 (84) million, +5%, growth of 6% in local

currencies

Sales split by service line

Q1/2016 Q1/2015MS 45% 48%CSI 22% 21%IP 33% 31%

Q1 highlights

• Strong growth in Industry Products• Strong performance in a number of solutions, such

as Payments and Bank as a Service solutions in the SME segment

• Good demand all across the banking and insurance segments

• Good growth in Finland and Sweden as well as global payments markets

15

84 88 83 92 880

25

50

75

100

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

MEUR




Manufacturing, Retail and Logistics

Customer sales Q1• EUR 79 (78) million, +2%, growth of 2 % in local

currencies


Q1/2016 Q1/2015MS 51% 51%CSI 41% 40%IP 8% 9%

Q1 highlights

• Sales affected by the acquisition of Smilehouse and Imano and the divestment of Lean

• Positive development continued in the manufacturing sector due to several new agreements

• Delayed investment decisions in the retail sector in Finland, affecting CSI business

• New agreements with Volvo Car Retail Solutions, Nelly.com, Boliden

16

76 76 72 77 76

2 11

1 3

0

25

50

75

100

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

MEUR




Public, Healthcare and Welfare

Customer sales Q1• EUR 118(101) million, +17%, growth of 18% in local

currencies• Organic growth in local currencies 7%


Q1/2016 Q1/2015MS 34% 36%CSI 22% 25%IP 44% 39%

Q1 highlights• Strong growth driven by Industry Products• Acquisition of Software Innovation added EUR 11

million in sales • Demand remained good across all segments,

Healthcare and Welfare sector and the public sector in Finland and Sweden

17

101 107 95 121 107

4

12

11

0

15

30

45

60

75

90

105

120

135

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

MEUR




Telecom, Media and Energy

Customer sales Q1• EUR 53 (57) million, -7%, decline of 4% in local

currencies


Q1/2016 Q1/2015MS 16% 17%CSI 49% 45%IP 35% 38%

Q1 highlights• Sales were down as anticipated due to the expiry of

some outsourcing contracts in Media • Positive development in the energy utilities segment

continued and sales to the telecom segment remained at the previous year’s level

• In oil and gas segment, improved price competitiveness while impacted by a change in delivery model and challenging market conditions

• Tieto Smart Utility Suite launched in 2015, first go-live successfully completed in January

18

57 58 53 59 52

1

0

25

50

75

100

Q1/15 Q2/15 Q3/15 Q4/15 Q1/16

MEUR




EBIT 2016

EBIT 2015

Performance drivers in 2016

19

Sales growth andbusiness mix change

Growth investments Salary inflation Automation andindustialization and

other productivity gains

Profitability drivers in IT services

IT services

• We aim to grow faster than the market, supported by acquisitions

• Productivity gains carry to 2016

• Growth initiatives supported by recruitments and higher offering development

• Anticipated restructuring less than 2% of sales

Product Development Services

• Healthy cost structure for the existing business, margin expected to remain in a range below 10%

Strategy 2016–2020


Vertical industry insight,

consulting, software and

solutions

Full life-cycle IT services

Growth businesses and

internal start-ups

Industrialized services and

automation

Quality and efficiency

Competitive delivery centers

Capability renewal

Financial development

Tieto strategy 2012–2016

2012Build the foundation

2013Execute the structure and efficiency

2014Reorienting the growth

2015Accelerate growth portfolio

2016+Expand businesses

We are now positioned to accelerate innovation and growth


The market provides great opportunities for renewing our customers’ business

Demand for extreme productivity

Demand for new services

Co-innovate data-

driven businesses

Renew and optimize

customers’ business and IT

Opportunities

for TietoWORLD OF

DUALITY

AGILE

ENTERPRISES

& SOCIETY

Consumer expectations for on-

demand, personalized services

Ageing population and

workforce imbalance

Security vulnerability

Data-driven economy

Open ecosystems and

architectures

Rise of entrepreneurship

Key trends

We aim to be our customers’ first choice for business renewal

New data-driven

businesses

Vertical industry

solutions

Technology services

and modernization

Services to accelerate

customer value

Build solutions and capabilities

to accelerate our customers’

business performance and

renewal.

Nordic leadership and

international expansion

Further accelerate our strong

market position in the Nordics

and expand industry solutions

internationally.

Openness and

co-innovation

Co-innovate with customers

and partners, access open

talent networks and drive

continuous skill and capability

development.

Business choices

building on our

strengths

Tieto strategy 2016–2020


Ambition 2020

IT services revenue growth

above the market (CAGR)

10% reported operating

margin (EBIT)

Aim is to increase dividends

annually in absolute terms

Net debt / EBITDA 1.5 as an

upper limit in the long run

Upgraded growth ambition – while maintaining profitability focus and attractive dividend policy

The leading Nordic

software and services

company with the aim to

be customers’ first choices

for business renewal


Guidance for 2016

25

Tieto expects its full-year

adjusted operating profit*)

(EBIT) to increase from

the previous year’s level

(EUR 150.8 million in

2015).

Based on European Securities and Markets Authority

(ESMA) regulation, Tieto will report adjusted operating

profit in 2016

*) Adjusted for restructuring costs, capital gains/losses,



Q1 2016 in brief

26

Healthy growth in IT services and continued profitability improvement

• Industry Products driving growth – in line with the ambition to expand software businesses

• Product Development Services performing well

• New strategy to accelerate innovation and growth launched

Tieto Q1 2016 · 2018. 9. 12. · Customer sales Q1 • EUR 79 (78) million, +2%, growth of 2 % in...

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