Accelerating innovation and growth. 26 October 2016

Transcription

1 Accelerating innovation and growth 26 October 2016

2 Financial facts Customer sales in 2015: EUR million Adjusted *) EBIT margin: 10.3% Tieto s market position: Market leader in Finland Among top 3 in Sweden Among top 7 in Norway Sales by Service Line Technology Services and Modernization 52% Business Consulting and Implementation 9% Industry Solutions 30% Product Development Services 10% Sales by industry group Financial Services 24% Adjusted *) EBIT by Service Line Public, Healthcare and Welfare 30% Industrial and Consumer Services 37% Product Development Services 10% Technology Services and Modernization 53% Business Consulting and Implementation 2% Industry Solutions 36% Product Development Services 9% 2 *) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items

3 Key ratios MEUR Net sales, EUR million % MEUR % Adjusted*) EBIT, % 200 Cash flow % of net sales MEUR Capital expenditure % of net sales % Net debt / EBITDA *) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items

4 Market opportunity

5 The market provides great opportunities for renewing our customers business Key trends Consumer expectations for ondemand, personalized services Ageing population and workforce imbalance Demand for new services Co-innovate datadriven businesses Data-driven economy Open ecosystems and architectures WORLD OF DUALITY AGILE ENTERPRISES & SOCIETY Opportunities for Tieto Security vulnerability Rise of entrepreneurship Demand for extreme productivity Renew and optimize customers business and IT 5

6 Business mix shifting towards high-growth services Tieto's growth ambition for IT services: Faster than the market** (CAGR ) Sales growth in (CAGR) Development 1 9/ 2016 ~ 50% ~ 50% Emerging services - software & digital* Traditional services UP BY % DOWN BY 5 10% Industry solutions Cloud and modernization services New data-driven businesses Other integration and services Traditional infrastructure and application services High-growth businesses ~EUR 243 million, 24% of IT services sales Growth 20% Other emerging services and solutions ~EUR 327 million, 33% of IT services sales Growth 9% Traditional services ~EUR 433 million, 43% of IT services sales Down by 5% *Includes high-growth businesses and internal start-ups which represented ~20% of IT services sales in 2015 **Market growth expectation (CAGR) for the Nordics at 1.5 3% 6

7 Strong solution foundation to accelerate growth High-growth businesses *) up by 20% Cloud Services Lifecare CEM Industrial Internet 29% growth in Q3 TECO, our automated AM platform posted healthy growth Annual sales 2015: EUR 80 million Growth: 65% 4% growth in Q3 Some slipping to Q4 Market opportunities across the Nordics Annual sales 2015: over EUR 160 million Growth: 6% Over 40% growth in Q3, driven by M&A Strong development, especially in Sweden Annual sales 2015: around EUR 30 million Growth: 20% Industrial Internet as a basis for our new Datadriven businesses In 2015, investments around EUR 4 million, cash flow negative Security Services 18% growth based on enhanced offering portfolio - investments continue In 2015, Tieto s sales in single digit millions Additional focus Financial services: Banking and payments Energy: SmartUtility Manufacturing: Production Excellence Public sector: Case management Oil & Gas: Hydrocarbon accounting 7 *Includes five high-growth businesses and internal start-ups which represented ~20% of IT services sales in 2015

8 Strategy

9 We are now positioned to accelerate innovation and growth 2012 Build the foundation Tieto strategy Reorienting the growth 2013 Execute the structure and efficiency Expand businesses 2015 Accelerate growth portfolio 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 9

10 Tieto strategy We aim to be our customers first choice for business renewal 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 Vertical industry solutions Technology services and modernization New data-driven businesses

11 We build upon our strengths to accelerate customer value Business choices Industry solutions Technology services and modernization New data-driven businesses Expand from existing Industry Products to solutions with higher value and broader scope, including integration, consulting and partner solutions. Actively advise and modernize customers IT with standardization and cognitive automation, incl. applications and infrastructure Pioneer new data-driven businesses through co-innovation with customers and partners. Value for customers Industry-leading solution expertise Optimized processes and rapid business renewal Assured business outcomes Faster technology adoption and return on investments Business continuity, high quality and cost efficient operations Access to global capacity and resources New revenue streams Superior end-consumer experience Rapid innovation and co-creation cycles 11

12 Product Development Services continues to drive R&D speed and efficiency for customers Continue innovating with world-leading global companies in network equipment, semiconductor and consumer businesses Grow by enabling connectivity in new industry segments such as connected equipment and connected traffic Increase customer value by investing into own products and solution accelerators Consumer devices Network Equipment Providers Semiconductor vendors Connected Enterprise and Equipment Intelligent traffic

13 We build upon our Nordic leadership and expand internationally Continued focus on Nordic enterprises and the public sector Industry solutions proven in current markets to selectively expand internationally Poland The Czech Republic Baltics China Large-scale expansion to adjacent markets considered in the longer term India Keep building on strong global delivery capabilities Maintain current setup in New Market countries Employing experts globally Serving customers in over 85 countries world-wide 13

14 We implement the strategy in phases Actively expand internationally Expand productized services internationally Drive large-scale expansion to adjacent markets Drive innovation and selective market entry Scale chosen industry solutions internationally Accelerate and commercialize data-driven businesses Operationalize open talent networks and innovation ecosystem Standardize service architectures and cognitive automation Accelerate capabilities in Sweden and industry solutions Accelerate capabilities and growth in Sweden Implement new operating model Invest into SIAM*, service productization and cognitive automation Expand selected industry solutions internationally Pilot data-driven businesses 14 *Service Integration and Management

15 Acquisitions accelerate our role as the preferred business renewal partner Software Innovation (August 2015) Leading software company in the Enterprise Content Management (ECM) business in the Nordic countries Sales EUR 41 million in 2014, around 350 employees Enterprise value EUR 67 million Smilehouse (December 2015) Drives Tieto Customer Experience Management growth by strengthening our ecommerce capabilities Sales around EUR 10 million in 2015, 75 employees Imano (December 2015) Consulting company helping us become the largest IT services provider in the paper and forest industries in Sweden and Norway Sales EUR 7 million, around 50 employees Emric (September 2016) The Nordic market leader in software and services for credit processing Sales EUR 20 million, around 200 employees 15 Enterprise Value EUR 32 million 15

16 We align our structure with the strategic choices New data-driven businesses Financial Services Public, Healthcare and Welfare Industrial and Consumer Services Speed to customer and market Industry-driven go-to-market Industry advisory and implementation capabilities in each industry Business consulting & implementation Software businesses and system integration combined into scalable industry solutions Industry solutions Consolidate all managed services (applications and infrastructure) for scale and productivity Technology Services and Modernization Product Development Services Support Functions Independent data-driven businesses drive co-innovation Product Development Services continues as-is Effective as of 1 July

17 Comparison of reportable segments New structure effective as from 1 July 2016 Sales 2015, EUR million EBIT 2015, EUR million 410 Pre-packaged solutions *) Managed Services logics **), mainly AM Joint ventures 3 Industry Products -> Industry Solutions Consulting and System Integration -> Business Consulting and Implementation Managed Services -> Technology Services and Modernization Product Development Services *) Incl. Intelligent Transportation, CEM for Financial Services **) Incl. Application Management and Value Networks, our solution for the management of financial value chain 17 17

18 Revenue MEUR Our competitiveness is driven by industry specific software, customer knowledge, industrialized services and partnerships Drivers of competitiveness 2500 Growth and business mix Software portfolio expansion and SaaS Data-driven businesses Pre-packaged industry solutions incl. vertical platform based BPO (BPaaS) Industrialization and cognitive automation Agile co-innovation with customers and partners Product development services Industry solutions Data-driven businesses Business consulting Product and implementation development services Technology servies Industry solutions and modernization Business consulting and implementation Technology services and modernization 18 18

19 Our choices to significantly improve scale Scale drivers Software businesses Industry specific software, standard architectures and SaaS Focus during strategy Pre-packaged solutions Automation Repeatable solutions, partnerships and business models Optimized work processes, reduced labor intensity and continuous improvement Customer base expansion Solution repeatability Delivery efficiency and quality Key drivers for consistent 10% profitability Open API Open APIs to drive faster time to market and accelerate solution portfolio Agile resourcing Global talent network incl. delivery centers Faster access to talent through delivery centers and open talent networks 1919

20 Value creation

21 Increased growth focus and continued attention on profitability dividend policy unchanged Ambition 2020 IT services revenue growth above the market (CAGR) Focus on new businesses and expansion of industry solutions increased investments Organic growth at least at market rate 10% reported operating margin (EBIT) Adjusted *) margin sustainably above 10% Offering development below 5% of sales (OPEX) Aim is to increase dividends annually in absolute terms Strong cash flow driving attractive dividend profile Net debt / EBITDA 1.5 as an upper limit in the long run Investment capacity for organic and inorganic growth CAPEX expected to remain below 4% of sales *) Adjusted for restructuring costs, capital gains/losses, impairment charges and other one-off items

22 Adjusted profit M Revenue M Accelerated value creation and further upside 2500 Revenue growth Market average Further potential Strategic objective Adjusted EBIT margin from 7.6% to 10.3% Profit growth Growth-related profit improvement Margin improvement Profit improvement mainly driven by growth

23 Key drivers Productivity gains driving margin improvement ambition to achieve 10% before 2020 Adjusted EBIT margin % Adjusted EBIT margin % EBIT margin 10% 2015 Business mix Productivity increase SG&A Offering development Salary inflation/ other <2020 Annual restructuring <2020 Growth of higher-margin business Automation and standardization improving revenue/fte Growth expected to drive improved SG&A ratio Offering development expected to remain below 5% of sales Salary inflation ~2 3% annually 23 23

24 Ambitions by Service Line Technology Services and Modernization Target profitability Business Consulting and Implementation Target profitability 2020 TSM Cognitive automation and standardization while price erosion continues Industry Solutions Target profitability 0% Average market growth Product Development Services Target profitability 0% Average market growth 0% 0% Average market growth Average market growth 2015* BCI Pre-packaged services improving scalability Industrialized delivery IS Scalable industry solutions New data-driven businesses PDS Flexible resourcing for targeted utilization rates 24 *) excluding the business related to the key customer insourcing R&D

25 Dividends Net Debt/ EBITDA Strong balance sheet dividends increasing while maintaining flexibility to invest in growth Net Debt/EBITDA Dividends, EUR million Additional dividends, EUR million Debt capacity for M&A while maintaining dividend policy EUR 200+ million Assuming net debt/ebitda <1.5 EUR 300+ million Assuming net debt/ebitda temporarily at

26 Q3

27 Q key figures Net sales EUR 341 (355) million, +1.6%, growth in local currencies +2.2% Acquisitions added EUR 11 million MEUR % 14 Divestments impacted EUR 1.6 million 11.5 Currency EUR -1.9 million In IT services, sales growth 2.6%, or 3.1% in local currencies Organic growth in local currencies 0.1% EBIT 8 EBIT EUR 35.1 (41.4) million, 10.3% (12.4%) Adjusted* EBIT EUR 35.4 (38.6) million, % (11.5%) 6 4 Order backlog Order backlog EUR (1 864) million Total Contract Value EUR 406 (490) million Book-to-bill 1.2 (1.5) Earnings per share EPS EUR 0.37 (0.40) EPS EUR 0.38 (0.38), adjusted *) Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Net of divestment and acquisitions Customer sales adjusted Adjusted* EBIT, % *) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items 27

28 Growth in local currencies by Service Line and Industry Group Service Lines Industry Groups (IT services) % 7% 5%/ -6%* 8%/ 4%* 5%/ -1%* Technology Services and Modernization Business Consulting and Integration Industry Solutions -4% -8% Product Development Services Financial Services Public, Healthcare and Welfare Industrial and Consumer Services Q3/15 Q3/16 Q3/15 Q3/16 28 *) Organic growth in local currencies (not shown for businesses where acquisition impact is not significant)

29 Technology Services and Modernization Customer sales in Q3 EUR 179 (177) million, +1%, growth of 1% in local currencies EBIT EBIT EUR 24.2 (22.9) million, 13.5% (12.9) Adjusted* EBIT EUR 24.0 (23.4) million, 13.4% (13.2) Q3 highlights Cloud sales up by 29% in Q3, representing 22% of infrastructure services Strong growth in shared, standardized workspace services Positive effect from automation partly offset by Price reductions in some large agreements Debt restructuring of one customer Significant agreements won during the quarter Automation initiatives proceeding Q3 seasonally strongest, Q4 margin expected to be at or above the first-half level MEUR Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Net of divestment and acquisitions Customer sales adjusted Adjusted* EBIT, % *) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items %

30 Business Consulting & Implementation Customer sales Q3 EUR 30 (28) million, +5%, growth of 5% in local currencies Organic growth in local currencies -6% EBIT EBIT EUR -0.2 (-0.5) million, -0.6% (-1.6) Adjusted* EBIT EUR -1.5 (0.0) million, -4.9% (-0.1) Q3 highlights MEUR % Growth supported by acquisitions of Smilehouse and Imano Demand strongest in Customer Experience Management and consulting services Organic growth challenged due to short-term decline in Enterprise Applications (latency in starting won projects) Significant agreements won during the quarter Q3 seasonally low profit while further impact by temporarily higher free capacity in Enterprise Applications and investments in CEM Clear improvement expected for Q4 revenue and operating margin is anticipated to exceed Q4/2015 level Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Net of divestment and acquisitions Customer sales adjusted Adjusted* EBIT, % *) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items

31 Industry Solutions Customer sales Q3 EUR 106 (101) million, +4%, growth of +5% in local currencies Organic growth in local currencies -1% EBIT EBIT EUR 13.0 (22.7) million, 12.3% (22.3) Adjusted* EBIT EUR 13.2 (16.6) million, 12.5% (16.4) Q3 highlights Good growth continued in Public, Healthcare and Welfare, organically up by 6% Sales affected by the acquisition of Software Innovation and Emric and the divestment of Lean System Organic growth affected by unfavourable timing of licence sales Lifecare growth 4%, some slipping to Q4 In Financial Services high comparison number: Q3/2015 included EUR 2 million advance licence sales Offering development for high-growth businesses up by EUR 3 million Strong Q4 expected healthy revenue growth and profit margin at or above Q4/2015 level MEUR Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Net of divestment and acquisitions Customer sales adjusted Adjusted* EBIT, % *) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items %

32 Product Development Services Customer sales Q3 EUR 26 (29) million, -9%, decline of 8% in local currencies EBIT EBIT EUR 1.7 (0.6) million, 6.4% (2.1) Adjusted* EBIT EUR 1.7 (1.8) million, 6.5% (6.2) Q3 highlights Business with key customers progressing as expected Sales decline due to a few expected end-of-life projects Sales and profit margin affected by project ramp-ups Healthy cost structure for the existing business, Q3 typically seasonally weaker New customer acquisition proceeding and opening up new growth opportunities Q4 performance anticipated to follow the previous year s trend MEUR Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Net of divestment and acquisitions Customer sales adjusted Adjusted* EBIT, % *) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items %

33 Performance drivers 2016 Full year IT services We aim to grow faster than the market, growth supported by acquisitions Automation and industrialization expected to result in savings of around 30 meur in total Growth initiatives supported by recruitments and higher offering development Anticipated restructuring less than 1% of sales Performance drivers in IT services in /2016 IT services Growth of 5%, organically 2% Savings amounted to 25 meur Increase in net recruitments: 18 meur (9 meur in Q3) Offering development costs up by 9 meur Restructuring costs 0.6% of sales End of year dynamics Healthy growth 5 meur / qrt + additional productivity gains Recruitment peak in Q2, limited new hires Investment pace slightly slower Adjusted EBIT 2015 Adjusted EBIT 2016 Sales growth and business mix change Growth investments Salary inflation Automation and industialization and other productivity gains 33

34 We continue to drive shareholder return above the industry average Positive financial development to continue Increased investments to support innovation and growth Attractive dividend policy Total Shareholder Return above industry average The leading Nordic software and services company with the aim to be customers first choice for business renewal 34 34

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36 Internal Supporting sustainability Corporate Responsibility Objectives Minimize environmental impact Received gender equality certificate from Swiss EDGE Certified Foundation (Tieto Sweden) Helped to reach underprivileged children in India through NGO cooperation In 2015, we... Helped reduce customer CO 2 emissions by 223 ktons* Be an ethical forerunner in global society Create value for stakeholders Reduced indirect energy consumption by 9% and reported CO 2 emissions by 3% Reached 95% ISO environmental certificate coverage among employees *Estimate based on our digital transaction services 36

37 Appendix

38 Top 10 customers 2016 City of Stockholm Ericsson IF Insurance Kesko Nordea OP-Pohjola Group State Services (FI) S-Group Skåne Region TeliaSonera 38

39 Sales by Service Line IT services PDS not included Financial Services 36 % Technology Services and Modernization Business Consulting and Implementation Public Healthcare and Welfare 4 % 60 % Industry Solutions Technology Services and Modernization Industrial and Consumer Services 44 % 48 % Business Consulting and Implementation 23 % Technology Services and Modernization 8 % Industry Solutions 14 % Business Consulting and Implementation 63 % Industry Solutions 39

40 Sales by Industry Group IT services PDS not included Technology Services and Modernization 27 % Financial Services 45 % Public, Healthcare & Welfare Business Consulting and Implementation 28 % Industrial and Consumer Services 11 % Financial Services Industry Solutions 60 % 29 % Public, Healthcare & Welfare Industrial and Consumer Services 28 % 28 % Financial Services Public, Healthcare & Welfare 44 % Industrial and Consumer Services 40

41 Sales by Service Line 10 % Tieto Technology Services and Modernization 30 % 8 % 52 % Business Consulting and Implementation Industry Solutions Product Development Services 19 % 47 % Sweden Technology Services and Modernization Business Consulting and Implementation 19 % 2 % Finland Technology Services and Modernization 27 % 7 % Industry Solutions Product Development Services 9 % 70 % Business Consulting and Implementation Industry Solutions Product Development Services 41

42 Sales by Industry Group 10 % 24 % Tieto Financial Services 36 % 30 % Public Healthcare and Welfare Industrial and Consumer Services Product Development Services 19 % 22 % Sweden Financial Services Public Healthcare and Welfare 2 % 25 % Finland Financial Services 22 % 37 % Industrial and Consumer Services Product Development Services 44 % Public Healthcare and Welfare Industrial and Consumer Services 29 % Product Development Services 42

43 Sales by Industry 3 % 10 % 12 % Insurance Tieto 4 % Banking 11 % Forest 9 % Manufacturing 6 % Retail and Logistics 16 % 7 % Healthcare and Welfare Public Telecom and Media 8 % Oil and Gas 14 % Energy utilities PDS 43

44 All information in this material is for informational purposes only. The opinions and viewpoints regarding, inter alia, the future of the company and markets are of Tieto and may not actually materialize. This information should not be construed as an investment recommendation or investment advice. All information expressed herein is subject to change without notice. Neither Tieto nor its officers nor employees shall have any liability for any loss sustained by anyone who has relied on the information provided.