Capital Markets Day - Affecto | Combining information with …€¦ · · 2017-07-18Relaunching Affecto to the Capital Markets. ... customers and sharing capabilities across

Capital Markets Day20 May, 2016

Speakers of the day

Juko H Martti N Henri E

Håvard E Stig S Mikko E

Provide you with a more

comprehensive and

transparent view of Affecto

and our business today.

Present a more granular and

concrete overview of our

business and operating model

as well as our Segments and

Growth Programs.

Describe our strategic choices

and show our path forward.

1. 2. 3.

Objectives of the dayRelaunching Affecto to the Capital Markets

Long term financial targets

The company is in the process of updating its strategy. Until the strategy process is completed, the company does

not provide long term financial targets. The company expects to update its long term financial targets at its

2017 Capital Markets Day.

Agenda

9:00 Agenda and objectives of the day Martti N

9:10 Evolving with Passion – CEO review Juko H

• #WeAreAffecto

• Review of strategic choices

• Way forward

9:45 Business and Operating mix Martti N

10:00 Segment reviews

• Finland Henri E

• Scandinavia Håvard E

• Baltic Stig S

10:50 Break

11:00 Growth program reviews

• Industrial Henri E

• B2C Mikko E

• Managed services Stig S

11:45 Financial update Martti N

12:00 CEO summary and Q&A Juko H

12:15 Lunch

#WeAreAffecto~1000 professionals excited about information

7.5 m€

Long term, committed

customer relationships

with 100+ essential

Northern European

companies and 100+

essential public

institutions

Northern Europe’s

largest capability in

enterprise information

management,

advanced business

process systems, agile

software development

and location solutions

Unique local presence

with 18 offices forming a

powerful grid, serving

customers and sharing

capabilities across

the region

116 m€ 1000

We started our journey by defining our core capabilities in 2015 as well as

five key steps of our evolution

Strong core capabilities supporting each other

Business Intelligence and data warehousing

Master Data Management

Budgeting, planning and forecasting

Document and Case Management

Customized solutions

Package business process applications, e.g. Insurance system implementation

Application Service Management

Geographical systems, services and consumer products

Location

Solutions

Enterprise

Information

Management

Advanced

Business Process

Systems

1. Increasing value of information for our customers

2. Directing our focus towards customer value

3. Selecting our focus customer industries and topics

4. Evolving our analytics & technology capabilities

5. Bringing our 1000 people, 18 offices and customers closer to each other

Industrial

and Energy

Business to

Consumer

Public to

Citizen

Financial

Services

We are a technology company excited by information and analytics

Challenges

• Changing customer needs and competitive

landscape

• Reworking of work

• Revenue growth and the stage of our

evolution

• Low level of integration within Affecto’s

operational model

Strengths

• Long term committed customers

• Day-to-day delivery of business critical solutions

& services

• Strong and capable communities of experts

• Recurring revenue base

• Cross Nordic reach

• Cash flow based funding of our evolution

Hands-on day-to-day leadership and concurrent management of business

transformation & performance

Our day-to-day focus todayLeveraging our set of core strengths and responding to challenges

Our traditional market is transforming andthe business technology market is growing

2015 2016 2017

TRADITIONAL IT & ANALYTICS

So

urc

es: A

ffec

toA

na

lysis, B

MI, C

EB

, Ga

rtne

r, IDC

, No

rde

a, M

cK

inse

y, Te

ch

na

vio

BUSINESS TECHNOLOGY & ANALYTICS

Customer 360°

Sales digitalization

Preventive maintenance / IoT

Telecom & media streaming

Preventive health operations

Production automation

Robotization

Insurance claims systems

Sensing products

EXAMPLES OF OUR EXPERTISE

CEO, COO, Business

& product line

leaders, sales &

marketing leaders,

production and

logistics leaders,

and customer

service

EXAMPLE CUSTOMER ROLES

CA

GR

> 1

0 %

FLA

T GR

OW

TH

Budgeting and finance

applications and DWs

CFO Dashboards

Planning and consolidation

HR applications & reporting

Intranets and collaboration

ERP based DWs

EXAMPLES OF OUR EXPERTISE

CIO, CFO, IT, HR and

Finance organizations,

Internal support

organizations

EXAMPLE CUSTOMER ROLES

Technology and analytics for our customers‘ core business top & bottom line needs

Technology and analytics for our customers’ support organizations’ needs

Our Strategic Choices

Bases for Growth opportunities: Growing business technology &

analytics market, Pockets in traditional IT & analytics market

and Sweden

Data Driven business for our customers and for ourselves

Customer Value First: Steadfast focus in long term

customer value

Our Power Grid:

A lean and locally strong

network of customers,1000

professionals and 18 offices

in Northern Europe

Competitive positioning:

merging into our customer

industries’ value chains with

nimble economies of scale

Learning and

speedy approach for

transformation.

Building a culture and

capabillities for

growth

We are finalizing the first wave of our evolution.Getting geared up to move to the second

Deliver every year

Clarify direction: focus on customer value and evolve our core

Boost collaboration and leadership

Launch & learn growth programs: B2C & Industrial

Communicate core strengths and update brand

Create an updated strategy and co-operation model with our people and customers

Data driven Affecto: Invest in new and nimble platforms to integrate the operating model

Industry play for growth initiatives: Explore new business initiatives with customers and partners in start up mode

Integrate to the value chains of our customer industries

Scale initiatives within proven new business and value generation models

Integrated and data driven operational core instruments scale growth initiatives

Agenda



• #WeAreAffecto


• Way forward



• Finland Henri E


• Baltic Stig S

10:50 Break



• B2C Mikko E




12:15 Lunch

• Consulting services

• Systems integration services

• Managed services

• Own products, e.g. Karttakeskus and Marela

• 3rd party software license

• 3rd party software maintenance

We have 6 key business models

Affecto business mixProfessional Services is the largest element of our business mix in all of our

segments, software license and maintenance revenue accounts for ~20%

Baltic

3rd party software

maintenance, ~15%

3rd party software

license sales, ~5%

Busi

ne

ss m

ix

Segment share of 2015 revenue

Professional Services, ~80%

• Consulting

• Systems integration

• Managed services

• Own products

NorwayFinland Sweden Denmark

Our current operating model is based on5 independently evolved geographical segments

Striving towards nimble economies of scale and an integrated operating model

• Affecto has grown organically

and inorganically to become

the company it is today

• We are currently operating 5

independent businesses and

operating models which are fit

for purpose for local

environments

• The level of integration of our IT

systems and process is low

• Integration of operating

model kicked off; unified

processes and

Business/Finance IT systems in

focus

• Constructing common scale

initiatives and pursuing them in

an agile manner

Background of the current operating model and its key characteristics

Our opportunity and challenge

• Local relevance close to our

customers

• Untapped opportunities for

increased leverage of our

capabilities and scale across

whole Affecto

Towards an integrated operating model

3rd party software maintenance and managed services as sources of recurring revenue

3rd party software maintenance revenue

Managed services revenue

Recurring revenue, ~2/5

Based on 2015 revenue, the company estimates that approximately ~2/5 of its revenue is recurring by nature

Non-recurring revenue, ~3/5



• #WeAreAffecto


• Way forward



• Finland Henri E


• Baltic Stig S

10:50 Break



• B2C Mikko E




12:15 LunchAgenda

Affecto FinlandCapital Markets Day 20.5.2016

Henri Engström

Affecto FinlandOur largest and most versatile segment

• Network of 400+ professionals, 6 offices

• We are the leader and a brand name in the area of

• Information Management & Business Intelligence for

Finance and IT

• Information intensive solutions for Business process owners

• Location intensive services for public entities and selected

industries

• CFO Services

3.5 m€49.5 m€ 404

2015

Our market position and how we monetizeStrong in all industries –growth in Business Technology

Industrial & Energy Public to CitizenBusiness to ConsumerFinancial Sector Karttakeskus

Relative size

today

Addressable

Market growth

Examples of

solution areas

Some of our

customers

Utilities invoicing

Production Automation

Real time analytics

Managed services

Customer portal

Media streaming services

Customer 360

PIM/PLM

Digital citizen services

Medicine logistics

Functional intranets

Physical & digital maps

Spatial analytics

Location centric solutions

20% 15% 20% 25% 20%

Ongoing / proceeding Started Planned

Defining new value for our customers

Short-term focus

• Leverage our position as a brand name in

information intensive services, supporting

growth through our own Affecto power

grid

• Bring best-of-breed custom software

solutions to where our customer’s value is

being created

• Leverage our unique mix of capabilities in

the edge of digital and physical through

Karttakeskus

• Focus on efficiently delivering our healthy

order backlog

Long-term focus

• Grow by leveraging the Nearshoring value

• Prefer managed services and rental

business models to gain recurring revenue

• Build scalable data and software assets to

gain revenue streams which are not

dependent on amount labor

Affecto ScandinaviaCapital Markets Day 20.5.2016

Håvard Ellefsen

Affecto in ScandinaviaTransforming to capture new growth

0

5

10

15

20

25

30

0

50

100

150

200

250

2010 2011 2012 2013 2014 2015

Norway (MNOK)

Revenue EBIT

-20

-10

0

10

20

30

-150

-100

-50

0

50

100

150

200

250

2010 2011 2012 2013 2014 2015

Sweden (MSEK)

Revenue EBIT

-1

4

9

14

19

24

0

20

40

60

80

100

120

140

160

180

200

2010 2011 2012 2013 2014 2015

Denmark (MDKR)

Revenue EBIT

• Strong focus on traditional Business Intelligence and

Information Management towards large and medium

sized businesses and public sector entities.

• Professional services business with strong technology focus

mainly targeting local customers.

• 3rd party software sales and maintenance based on a

large installed base of customers and long term

partnerships.

2.6 m€50.6 m€ 272

2015

Scandinavian market positionBusiness driven digitalization and modernization initiatives driving new growth

Industrial & Energy Public to CitizenBusiness to ConsumerFinancial Sector

Affecto

growth

potential

20% 25%

5%

20%

5%

25%Traditional IT

Business

Technology

Relative

size today


Strategy and roadmapCapturing short term opportunities and ensuring long term adaptability

On-going Actions / Initiatives

• Adding customer and industry focus on top

of our strong technology and solution skills

• Increase the use whole Affecto including

near-shoring

• Renewing our technology capability while

maintaining strong partnerships and

moving into the cloud.

• Bring Industrial and B2C growth initiatives

into Scandinavia.

• Business Digitalization initiative

• Capturing Managed Services opportunities

Long term focus/ plans

• Broader, more modern and more customer

driven approach to unlock the value from

our customers’ information

• Bring new capabilities like agile and

modern software development into

Scandinavian market

• Grow Swedish business inorganically

Affecto BalticCapital Markets Day 20.5.2016

Stig-Göran Sandberg

Affecto Baltic OverviewVersatile business and nearshoring powerhouse

Estonia is relatively small market, but a growing due to investments into eServices

(=digital P2C services). Customers mainly from P2C and B2C segments.

In Lithuania the biggest IT spending is done by public organizations, funded

mainly by the EU. Affecto is the biggest IT service provider in Lithuania. Customers

mainly from P2C, Energy and Financial services.

In Insurance solutions, Affecto is implementing 3rd party software and selling

add-ons on top. Global business.

In Nearshoring, we are delivering our expertise to our Nordic engagements

2015

3.9 m€20.1 m€ 3340,0

1,0

2,0

3,0

4,0

5,0

0,0

5,0

10,0

15,0

20,0

25,0

2010 2011 2012 2013 2014 2015

Revenue m€ Ebit m€

Our market and positionCustom software development, analytics and managed services offering

Industrial & Energy Public to CitizenBusiness to ConsumerFinancial Sector

Addressable

market growth

trend

Analytics

solution

Energy billing, managed service Insurance core system

Datawarehouse, analytics

Development of betting

platform

Development of analytics

solutions

Digital services for citizens and

for companies

Healthcare solutions

Digital services for citizens and

for companies

Finance solution, managed

service

Nearshoring

Clients

10% 30% 10% 40% 10%Relative

size today


Strategy and roadmapContinuously capturing growth opportunities

Short term actions

• Leading our nearshoring growth

• Grow the share of revenue from private

customers in Lithuania

• Retain the market share in Public sector in

Lithuania

• Grow in Estonia in digital services, eHealth

and analytics

• Creation of additional add-on solutions on

top of insurance core systems

Long term focus

• Nearshoring is essential part of our delivery

• Consistently seek for more cost effective

delivery means

• Seek for industry specific competencies

Information

From unlimited amounts

of raw data to

impactful information

put into context

PhysicalPhysical world produces increasing

amounts of digital data. Everything is

getting connected and smart.

DigitalOur core competences with digital

information now have a firm grip also

of the events of physical world. From

single events to complex systems and

beyond.

Creating value for the Industrial Area

Applied Real-time Information is now the most valuable

Industrial Asset.

Analytics & Automation

Systematic and analytical approach

to real world phenomena

Understand, Control, Automate

Innovate, Improve

Nordic Industrial CXOs:

74%will invest into integrating digital

technologies into smart production

processes by 2017. (ME)

By end of 2016

30%of businesses will have begun directly

of indirectly monetizing their

information assets. (Gartner)

Business leaders are driving industrial digitalization

Already in 2010, manufacturing

churned out more than

1800 petabytesof data, double that of all branches

of US Government – the next largest

sector. Close behind is Banking and

Communications/Media at roughly

775 petabytes each. (DMDII)

Less than

1%of this data is being used to optimize

and prediction, which provide the

greatest value (McKinsey)

We are building growth on top of our existing Industrial business

EXISTING BUSINESS

TRADITIONAL BUSINESS TECHNOLOGY TRADITIONAL IT & BUSINESS SUPPORT

PILOT APPROACH

E.G. SENSING INDUSTRIAL

Further examples of delivered value so far

Physical sensors replaced by soft sensors based on advanced mathematical analysis and automation.

Manufacturer of Heavy Machinery

o High value for the process, Lower production costs, Very quick deployment

o No retrofitting needed – software update will automatically bring the new features to all equipment

o Affecto’s role: Finding and defining the mathematical model & computer program to replace physical sensors.

o Assessed customer value 3M€+

Using new sensoring and near-realtime data to predict fuel yield and to optimize production and fuel mix.

Heat & Power Company

o Gain insight into fuel quality to optimize burning process

o New sensor technology piloted together with hardware design & prototyping partner

o Affecto’s role: Suggesting the business case, defining the needs for new sensor development, developing the mathematical model to predict fuel yield based on history performance and measured data.


Predicting and proactively preventing damaging of conveyer belt. Business model rental & remote management.

Industrial Automation

o Predict and prevent operational issues at an unmanned facility, aim for 100% availability

o Analysis based on sensory information from 12 most significant factors

o Affecto’s role: Suggesting the business case, finding and defining the mathematical model & computer program for automatically predicting a specific significant maintenance need.


Many-to-many interactionUnified collaboration solutions as well as

scalable data platform solutions. Services for

human and automated interaction.

Transparent and real-time

processes and decisions Understand and optimize all the factors driving

efficiency. Analysed, in-context information rapidly

replacing old habits and beliefs.

Evolution of measured

value creation and risk sharingOptimized OEE

Pay-per-use

Pay-per-outcome

Autonomous pull-economy

Outsourcing for product lifecycle

Rise of new ecosystemsQuickly gain agility through partner networks to

be able to adjust to the ever changing environment

Information in context, real timeProvide meaningful visualization and automation.

Swiftly integrated, As a service, as a platform.

Asset design & delivery partnerBe the outsourcing partner for product and service

design in components and processes.

Quantifying and automating tasks and processes.

Market demand by our customers and Affecto’s approach

Short-term focus

• Fast development of our capabilities through lead customer cases and prototypes

• Drive Affecto -wide Industrial skills: Share and leverage for the benefit our customers

• Launch in the Swedish market, strengthen in Finland and Denmark


Long-term focus

• Focusing on industry value phenomena: Seek scalable growth in automated analytics

• Build our capabilities in augmented and virtual reality, possibly through M&A

Seeking growth in business technology and assets, improving profitability

Our short and long-term focus

PhysicalThe next big wave of

digitalization will affect the

physical realm. Everything is

becoming connected and smart.

DigitalOur core competences in digital

information now have a direct

impact into consumer

experiences and interfaces in

the physical world.

Creating value for the B2C industries

Real-time use of information empowers personalized

consumer experiences

Analytics & AutomationAdvanced, real-time analytics

responding automatically to real

world phenomena

Understand, Act,

Innovate, Improve, Learn InformationFrom unlimited amounts

of unstructured data

to structured information

put into context

Swedish marketers invest in online and mobile1.4 B€

annually

Business leaders and CMOs are driving IT & business technology spend

Retail analytics marketwill grow from

2 B€ to 4.5 B€

by 2020 globally

Nordic software market for advanced analytics, CRM, digital marketing and eCommerce

will grow from

0.7B€ to 1.1B€

by 2020

Sources: IDC, Gartner, Markets and Markets, Technavio, IAB

Facial expression detection software marketwill grow from

13M€ to 8 B€

by 2020 globally

of business leaders believe that customer experience will be their primary basis for competition.

89%

RETAIL

MEDIA

TRAVELHEALTH

BRANDS

TELECOMS

A day in the life of a consumer in 2020:Real-time use of information empowers personalized experiences

Sensing Retail• Video analytics solution for recognizing the consumer’s age,

gender & mood, and displaying targeted marketing

• Location aware mobile application for recognizing the

individual and offering personalized messages

Improve customer lifetime value and

profitability by gathering and utilizing all

transactional, behavioral, analytical data to create a

360° consumer view in real time

Compete with customer valueby providing experiences and interactions that

sense, forecast and respond to the consumer’s

actions and needs

Increase sales and customer loyaltyby recognizing the individual consumer and

providing personalized, targeted and contextually

relevant offers in real time

Consumer 360°• Data platform for storing and analyzing structured and

unstructured consumer data

• Analytical engine for scoring customers and products, and

creating next best offers, predicting and preventing churn

• Marketing automation for multi-channel engagement

Sensing Products and Services• Service design and user experience design

• Custom software and mobile application development

utilizing sensors and big data for contextual response

• Augmented reality applications for providing context to

daily consumer scenarios

Customer business value drivers Affecto’s solutions

We are building solutions to help B2C companies improve customer experience,

increase customer lifetime value and loyalty

We are building new growth through pilots and evolving our existing B2C business

EG. CUSTOMER 360° & FRONT-OFFICE TRADITIONAL IT & BUSINESS SUPPORT

EXISTING BUSINESSPILOT APPROACH

E.G. SENSING RETAIL

Short-term actions

I. Expand our core value proposition and proven new elements in eg. Customer 360° and marketing automation

II. Address the Swedish B2C market by leveraging and expanding existing key customers

III. Launch the Affecto B2C Mythbusters approach: together with the customers validate the business impact of new technologies and solutions through prototyping and pilots

Long-term focus & initiatives

• Build scalable assets to gain revenue streams not based on professional services (eg. retail video analytics)

• Prefer as-a-service business models to gain recurring revenue

• Grow the B2C business through acquisitions

B2C will evolve to a cross-Affecto growth stream


Affecto Managed servicesWell-established part of our business

Application and

platform

development &

managementValue

Architects

Functionas a service

Business platformas a service

Solution supportas a service

Platform supportas a service

Resourcingas a service

Business model

Growing and varying customer baseOur strive towards increased value creation

Value add

Addressable

market cross

industry • Analytics and BI

functions

• Information

intensive

solutions

Time & Material Fixed Transaction/Value

• Flexibility – One size does not fit all! We can provide

flexibility through on/near-shore delivery

• Scalability – Ramp up and down according to needs

• Know-how – Certified consultants implementing

information management solutions for an enterprise

• Delivery Capability – We are ISO certified

• Proven Methodology – Affecto Quality Framework

• Experience – Positive international delivery reference list

• Cultural understanding and experience in project teams –

We have the European business culture

• We are on the same time zone

• We are inside EU – We are able to handle personal data

Affecto’s delivery modelBenefit from the well-functioning and proven nearshore

PMs

Nearshore

Teams

Landed

Nearshore

Teams

Team 1

Team 2

Team 3

Team 4

Competitive delivery model which combines the local

presence and experts near the customer with the best

experts from which ever location

Search for bigger/longer engagements

Utilizing better our nearshoring capabilities

Learning to work better together in blended

teams

Seek for more cost effective delivery means

In co-operation with our other growth programs

seek for specific competencies and grow them,

eg mobile development skills

Prepare for value based business models

Way forwardContinuous improvements



• #WeAreAffecto


• Way forward



• Finland Henri E


• Baltic Stig S

10:50 Break



• B2C Mikko E




12:15 LunchAgenda

Revenue by business mixProfessional

services, 80%

3rd party

software

license, 5%

3rd party

software

maintenance,

15%

Finland, 42%

Norway, 18%

Sweden, 15%

Denmark, 9%

Baltic, 16%

Revenue by segment

Finland, 35%

Norway, 15%

Sweden, 7%

Denmark, 4%

Baltic, 39%

Operational segment result

• Revenue 116 M€, -6.7 M€ or -5% y-o-y

• Operating profit 7.5 M€ / 6 %, +6.6 M€ or +5Pts y-o-y

• Net cash from operating activities 9.3 M€, +1.0 M€ y-o-y

• Number of employees 985 at the end of the year

• Finland 398

• Norway 102

• Sweden 106

• Denmark 64

• Baltic 315

Key figures

2015 financial overview

*2014 operating profit impacted by a 7.4M€ goodwill impairment

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

2

4

6

8

10

12

2011 2012 2013 2014 2015

Operating Profit Operating Profit %

M€

Operating profit performance

*

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0

2

4

6

8

10

12

2011 2012 2013 2014 2015

Net cash from operating activities, M€

Net cash from operating activities, % of revenueM€

0%

10%

20%

30%

40%

50%

60%

0

0,5

1

1,5

2

2,5

3

3,5

4

2011 2012 2013 2014 2015

Dividend, M€

Dividend, % of cash flow after investing activitiesM€

Track record of solid cash flow generationCash flow enabling dividends and providing for the evolution journey

Strong balance sheetBalance sheet strength offering the flexibility to consider

also inorganic growth strategies

The company is in the process of completing the negotiations regarding the

loan renewal about the 18.5 M€ loan due at the end of June, 2016.

-1

-0,5

0

0,5

1

1,5

2011 2012 2013 2014 2015

Net Debt / EBITDA

2016 guidance

• Affecto expects its revenue to stay at the same level or grow slightly and

its operating profit to grow in 2016

• The company does not provide an exact quarterly

guidance for revenue or operating profit development, as single projects

and timing of license sales may have large impact on quarterly sales and

profit



• #WeAreAffecto


• Way forward



• Finland Henri E


• Baltic Stig S

10:50 Break



• B2C Mikko E




12:15 LunchAgenda

In Summary

We have strong

customer

relationships and

deliveries

throughout the

Northern Europe

We are

transforming to

meet the value

chains of our

customers

32

Our purpose to

make our

customers data

driven is even

more valid today

than before

1

Running our

evolution and our

daily business

hand in hand is our

way

4

We are

determined to

scale proven

growth

opportunities

5

Q&ACapital Markets Day

Thank you.Capital Markets Day

Documents

Capital Markets Day - Affecto | Combining information with …€¦ · · 2017-07-18Relaunching Affecto to the Capital Markets. ... customers and sharing capabilities across