Tieto Q4/2015 · 2018-12-11 · Q4 2015 in brief 2 Strong fourth ... • Industrial Internet • Lifecare • Cloud Other IT services and products, e.g. • Consulting and system

Tieto Q4/2015Strong fourth-quarter results –all businesses performing well

Kimmo Alkio – President and CEO

Lasse Heinonen – CFO

Tanja Lounevirta – Head of IR

4 February 2016

© Tieto Corporation

Q4 2015 in brief

2

Strong fourth-quarter results – all businesses performing well

• Organic growth of 3% in IT services driven by Industry Products

• Reported operating margin of 12% driven by healthy business mix and Managed Services automation programme

• Product Development Services business well stabilized

• Acquisitions accelerate shift towards growth businesses

© Tieto Corporation3

Outlook in the Nordics remains similar to 2015Weakness in Finland continues

• Positive outlook in the Sweden

• Finnish economy remains sluggish

• Tieto expects the Nordic IT services market to

grow by around 2% in 2016

• IT services market strongest in Sweden

• Long-term growth in cloud services around 30%

IT market affected by economic outlook

Service Demand and economic cycles

Project services More volatile

Application management Less volatile short-term

Infrastructure outsourcing Less volatile, even positive impact

during downturn

-2%

-1%

0%

1%

2%

3%

4%

5%

2012 2013 2014 2015e 2016e

GDP growth, %

Finland

Sweden

Norway

Nordic region

Source: Nordea Markets, Economic Outlook, 1/2016


2012 2015 2020

Tieto’s growth businesses up by ~ 20% in 2015

4

Tieto’s business mix

Over

-5%(CAGR)

Over

20%(CAGR)

Expected market growth of emerging services (CAGR):

• CEM ~20%

• Industrial Internet ~50%

• Lifecare >4%

• Cloud ~30%

IT services market development

2–5%(CAGR)

*) Growth in local currencies

Growth businesses

• Customer Experience Management

• Industrial Internet

• Lifecare

• Cloud

Other IT services and products, e.g.

• Consulting and system integration

• Industry-specific software

Traditional services

• Infrastructure services

• Application management

In 2015 sales over EUR 260 million

20% of IT services sales

In 2015, sales around EUR 600 million


In 2015 sales around EUR 450 million


Emerging services


20% growth*

-5%decline*

5%growth*


2012 2015 2020

5

Emerging services


Capability renewal to take advantage of market changes

Investing in competence

renewal in 2015

Competence mix evolving in line

with market change

1 800 total recruitments, of which around 500 new positions to support our capability development in emerging areas

• Main roles include Business Consultants, Solution Consultants, Architects, Software Developers, Project Managers, Sales

In IT services, acquisitions add over 400 new positions in focus businesses while 700 redundancies based on

productivity programmes, incl. MS automation

Gross

recruitments in

Sweden 230,

in Finland 200

Close to 200

software

developers

recruited

globally

Over 100

consultants

recruited in

Nordics

Headcount in

India and Czech

increased

by 200

140 new

CX experts

in CEM


New start-up added to growth investment areas

Customer

Experience

Management

• Smilehouse

acquisition to drive

growth across all

industries

• Innovation

ecosystems with

Tieto X Hub and

hackathon

accelerated

• New agreements

include customer

service platform

Customer Care aaS

to nelly.com

Cloud Services

• Currently around

17% of Managed

Services’ sales

• Enhanced cloud

portfolio with first

TECO deliveries

• New agreements,

e.g. Göterborg

Energi, several

contracts in the

Finnish public sector

based on frame

agreement

Lifecare

• Good growth and

order inflow

continued

• Strong development

in across all

countries

• Healhtcare and

welfare reform in

Finland provides

promising

opportunities

Industrial

Internet

• A number of solutions

introduced during the

year: M2M in a box, Real

Time Factory, Vital (fleet

maintenance), eSense

• Tieto Connect

Platform launched

• Recognized for

innovativeness in

global study by HfS

• References include

TeliaSonera, Valmet,

Orfer Ltd., MTC

Flextek, HSB Living

Lab

Security

Services

• New start-up

launched in January

• Tieto’s Security Wall

monitoring digital

security 24/7

• Cyber security

market is forecast to

grow by ~10% until

2020 and Managed

Security Services

market faster than

that

• 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

http://nelly.com/


Accelerating growth

7

Growth

initiatives in

2015

RecruitmentsAround 500

additional roles New

partnerships• Temenos

• Workday

• Salesforce.com

• Software Innovation

• Smilehouse

• Imano

Annual sales close to

EUR 60 million

Growth businesses

delivering results

Security Services as a

new start-up

Acquisitions

Investments in

offering

development

up by

EUR 10 million

Financial development


Q4 2015 key figuresNet sales• EUR 396 (403) million, -1.8%, organic growth in local

currency -2.9%• Acquisitions added EUR 14 million• Currency EUR -4 million

• In IT services, organic growth in local currencies 2.8%

EBIT• EBIT EUR 46.8 (9.5) million, 11.8% (2.4%)

• EUR 4.6 million restructuring costs• EBIT excluding one-off items* EUR 51.4 (44.4) million,

13.0% (11.0%)

• EBIT excluding one-off items* in IT services EUR 48.3 (32.5) million, 13.3% (9.4%)

Order backlog • Order backlog EUR 2 030 (1 784) million• Total Contract Value EUR 641 (672) million• Book-to-bill 1.62 (1.67)

Earnings per share • EPS EUR 0.47 (0.09)• EPS EUR 0.51 (0.47), excluding one-off items*

9

*) Excluding capital gains, impairments and restructuring costs

MEUR %

386 381 340 398 362 363 330 382

1 6

6

53 1

5

138,9

7,8

11,9

11,0

8,4 8,3

11,5

13,0

0

2

4

6

8

10

12

14

0

100

200

300

400

500

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

Net of divestement and acquisitions

Customer sales adjusted

EBIT, % excluding one-off items*


Favourable long-term financial developmentAnnual investments in offerings up by 20 mEUR during the past two years

10***) Excluding capital gains, impairments and restructuring costs

117 139 141 150 151

6,47,6

8,89,9 10,3

5,43,5

5,34,0

8,6

0

5

10

15

0

40

80

120

160

2011 2012 2013 2014 2015

EBIT

EBIT excl. one-off items***, EUR millionEBIT excl. one-off items***,%EBIT, %

0,4 0,2 0,1

-0,4

0,1

-1,0

-0,5

0,0

0,5

1,0

1,5

2011 2012 2013 2014 2015

Net debt/EBITDA

Net sales• EUR 1 460 (1 523) million, -4.1%, organic growth in local

currency -2.6%• Currency EUR -28 million

• In IT services, organic growth in local currencies 2.7%

EBIT• EBIT EUR 125.2 (61.1) million, 8.6% (4.0)

• EUR 31 million restructuring costs• EBIT excluding one-off items* EUR 150.8 (150.2) million,

10.3% (9.9%)

• EBIT excluding one-off items*** in IT services 136.2 (128.5) million, 10.3% (9.9%)

0,70 0,75 0,83 0,90 1,00 1,10

0,30 0,25

0,0

0,5

1,0

1,5

2010 2011 2012 2013 2014 2015

Dividend/share, EUR

*) Proposed dividend

MEUR %

*)

**)

**) Additional dividend


Quarterly development

11

Offshore ratio: IT services 44.6% (43.3%) PDS 60.7% (62.0%)Number of personnel down by a net amount of 637

-0,1

0,2 0,2

-0,4-0,6

0,0

0,4

0,1

-1

-0,5

0

0,5

1

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

Net debt/EBITDA

50 16,6 11,190,2 36,7

12,4 16,4 67,1

-13,4 -7,2 -9,6 -12,8 -11,6 -10,5 -8,7 -12,9-15

5

25

45

65

85

105

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

Net cash flow from operations and capital expenditure

Net cash from operations Capital expenditure

387 387346

403365 364

335396

0%

2%

4%

6%

8%

10%

0

100

200

300

400

500

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

Net Sales

PDSIT servicesIT services organic growth in local currencies

14102 14126 13878 13720 13456 12949 13179 13083

45,4 45,9 46,3 46,2 45,5 46,0 45,8 46,2

0

10

20

30

40

50

60

0

5000

10000

15000

20000

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

Number of full-time employees and offshore ratio

Number of personnel Offshore ratio

%

MEUR

Employees MEUR


2%

6%

-3%4%

-39%6%2%1%

Organic growth in local currencies by

Service Line and Industry Group

12

Service

Lines

Industry

Groups

(IT services)

131 107 105 54133 108 112 330

25

50

75

100

125

150

Managed Services Consulting and SystemIntegration

Industry Products Product DevelopmentServices

Q4/14

Q4/15

90 80 115 5993 78 122 600

25

50

75

100

125

150

Financial Services Manufacturing, Retailand Logistics

Public, Healthcare andWelfare

Telecom, Media andEnergy

Q4/14

Q4/15


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 Q4• EUR 132 (131) million, up by 1%• Organic growth in local currencies 1%EBIT• EBIT EUR 18.4 (8.2) million, 13.9% (6.2)• EBIT excluding one-off items*

EUR 17.2 (9.0) million, 13.0% (6.9)

Q4 highlights

• Cloud sales continued to grow and were up by 39% in Q4, representing 17% of MS sales

• Operating profit improvement mainly due to the savings related to the automation programme aiming at improving customer experience, competitiveness and efficiency of delivery

• Competitive cloud portfolio• First TECO delivery in online banking in Q4

14


127 132 121 131 126 131 122 132

8,4

5,8

9,1

6,9

3,6

7,6

13,8 13,0

0

2

4

6

8

10

12

14

16

0

50

100

150

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

%MEUR





Consulting and System IntegrationCustomer sales Q4• EUR 109 (107) million, up by 2%• Organic growth in local currencies 2%

EBIT• EBIT EUR 8.8 (10.4) million, 8.1% (9.7)• EBIT excluding one-off items*

EUR 11.3 (10.2) million, 10.4% (9.5)

Q4 highlights• Strong demand for packaged solutions, industry

consulting and CEM, sales for traditional application management down

• Acquisition of Smilehouse and Imano drive future growth

• Recruitments in growth areas while offering development costs were down

• Savings from AM industrialization and decline in offering development costs drive profitability

• Some volatility in margins is anticipated to continue in Q1, especially in application management

• Industrialization of service deliveries continue

15


100 97 84 107 99 101 88 108

1

11,2

7,4

11,6

9,510,8

8,6

5,9

10,4

0

2

4

6

8

10

12

14

0

50

100

150

Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15Q4/15

%MEUR





Industry ProductsCustomer sales Q4• EUR 121 (107) million, up by 13%• Organic growth in local currencies 6%

EBIT• EBIT EUR 25.2 (19.2) million, 20.8% (18.0)• EBIT excluding one-off items*

EUR 25.8 (19.6) million, 21.4% (18.3)

Q4 highlights• Strongest development in Financial Services and

Healthcare and Welfare, up by 14% and 4%, respectively

• Acquisition of Software Innovation added EUR 12 million to sales

• Demand in the oil and gas segment remained weak and sales continued to decline

• Strong profitability improvement mainly attributable to growth and efficiency improvement

• Offering development costs continued to increase, up by EUR 2 million, mainly in Lifecare and Industrial Internet

16


99 96 90 106 93 97 91 109

1 11

11 1 5

1215,4 15,6

22,3

18,3

13,4

12,2

18,7

21,3

0

5

10

15

20

25

0

50

100

150

Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15Q4/15

%MEUR





Product Development Services

Customer sales Q4• EUR 33 (58) million, down by 43%• Organic growth in local currencies -39%

EBIT• EBIT EUR 2.8 (-4.4) million, 8.4% (-7.5)• EBIT excluding one-off items*

EUR 3.1 (11.9) million, 9.4% (20.5)

Q4 highlights• Increased demand in telecom cloud network function

virtualization, new wins in this area• Market for building IoT technology platforms and

connectivity for customers emerging – first common cases with Industrial Internet in the pipeline

• Operating profit down – Q4 in 2014 was exceptionally high as it included income related to temporary commercial terms

• Efficiency measures undertaken in 2014 have resulted in a healthy cost structure for the existing business

17


60 55 46 54 44 33 29 33

55

4

2

2,6

6,18,9

20,5

14,0

9,6

6,2

9,4

0

5

10

15

20

25

0

50

100

Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15Q4/15

%MEUR





Industry Groups

Consulting and System Integration

Managed Services

Product

Development

Services

Industry Products

Financial

Services

Public,

Healthcare

and Welfare

Manufacturing,

Retail and

Logistics

Telecom,

Media and

Energy


83 84 77 90 84 88 83 920

25

50

75

100

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

MEUR



Financial Services

Customer sales Q4• EUR 92 (90) million, up by 2%• Organic growth in local currencies 4%

Sales split by service line

Q4/2015 Q4/2014MS 44% 44%CSI 20% 23%IP 36% 33%

Q4 highlights

• Good demand all across the banking and insurance segments, especially in Sweden and global payments markets

• Sales growth driven by Industry Products• Strong performance in a number of solutions, such as

Payments and business process outsourcing combined with Software as a Service in the SME segment

• New agreements include ICA Banken

19


78 77 72 81 77 76 72 77

1 11

11 1

11

0

25

50

75

100

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

MEUR



Manufacturing, Retail and Logistics

Customer sales Q4• EUR 78 (82) million, down by 4%• Sales in local currencies down by 3%


Q4/2015 Q4/2014MS 52% 51%CSI 39% 38%IP 9% 11%

Q4 highlights

• Positive development continued in the manufacturing and forest sectors due to several new agreements

• Q4 sales was affected by delayed investment decisions in the retail sector in Finland

• New agreements with SSAB and Suominen

20


100 104 91 115 101 107 95 121

3

12

0

15

30

45

60

75

90

105

120

135

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

MEUR



Public, Healthcare and Welfare

Customer sales Q4• EUR 133 (115) million, up by 16%• Organic growth in local currencies 6%


Q4/2015 Q4/2014MS 32% 35%CSI 24% 26%IP 44% 39%

Q4 highlights• In Public, Healthcare and Welfare, sales in local

currencies were organically up by 6%. • Acquisition of Software Innovation added around EUR

12 million to sales • Organic growth was mainly attributable to the

healthcare and welfare sector and the public sector in Finland

• New agreements with Finnish Ministry of Employment and Economy, City of Tampere and a number of agreements based on Valtori frame agreement

21


65 60 54 59 57 58 53 590

25

50

75

100

Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15

MEUR



Telecom, Media and Energy

Customer sales Q4• EUR 59 (59) million, at the previous year’s level• Organic growth in local currencies 2%


Q4/2015 Q4/2014MS 14% 17%CSI 49% 44%IP 37% 39%

Q4 highlights• Positive development in the telecom and energy

utilities segments drive organic growth • Sales in the media segment as well as the oil and gas

segment continued to slide due to challenging market conditions

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

• New wins include Göteborg Energi

22


Performance drivers in IT services 2015Impact on

profitability1)

Sales growth

Increase in offering development

Costs for new hires in growth businesses

Cost savings in MS and CSI

Currency fluctuations

Other efficiency gains and business mix

change

Summary of 2015 profit driversAutomation as a basis for efficient delivery and customer experience

23

1) Illustrative, in comparison with the previous year

IT services delivered good results while investments

increased

• Sales organically up by 3%, growing faster than the

market

• MS automation and industrialization in CSI result in

improved productivity and competitiveness

• Recruitments support the company transformation

• Offering development increased in order for us to ensure

a leading position in the changing market

• Other efficiency gains, e.g. related to facilities and

procurement, and change in business mix also

contributed to profitability

PDS successfully adjusted the cost base for the

existing business


EBIT 2016

EBIT 2015

Performance drivers in 2016

24

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 strong order backlog

• Productivity gains will carry to 2016 while Q1 seasonally weaker

• 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%


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,

goodwill impairment charges and other one-off items


Solid strategy executionTransformation as a foundation for next steps

2013

Execute the

structure and

efficiency

2016

• Drive for scale and

expansion

• New growth areas, e.g.

industry-specific software

products

2016 +

• Expand proven growth

businesses beyond the

Nordics

2012

Build the

foundation

2015

Accelerate

growth portfolio

2016+

Expand markets

2014

Reorienting for growth

• Growth initiatives

include

acquisitions and

third start-up

• Accelerated

recruitments and

offering

development


Opportunities related to market disruptionas a basis for our strategy evolution

Support renewal

of customers business

models using leading

industry insights and assets

Ensure business continuity

and process efficiency

through standardization

and automation

Our opportunity Successes to build on

Differentiating industry solutions

Successful internal start-ups

New business models (cloud, outcome based)

Industrialized application services

Consistent efficiency and performance delivery

Increased M&A activity

Growth in line with market

Managed services automation

Open source culture

Focused

Simplified

Positioned for future


Q4 2015 in brief

28

Strong fourth-quarter results – all businesses performing well

• Organic growth of 3% in IT services driven by Industry Products

• Reported operating margin of 12% driven by healthy business mix and Managed Services automation programme

• Product Development Services business well stabilized

• Acquisitions accelerate shift towards growth businesses

Documents

Tieto Q4/2015 · 2018-12-11 · Q4 2015 in brief 2 Strong fourth ... • Industrial Internet • Lifecare • Cloud Other IT services and products, e.g. • Consulting and system