Tieto Corporation. Lasse Heinonen CFO Tanja Lounevirta Head of Investor Relations 27 October 2014

Transcription

1 Tieto Corporation Lasse Heinonen CFO Tanja Lounevirta Head of Investor Relations 27 October 2014

2 Financial facts Customer sales in 2013* ) : EUR 1607 million EBIT margin excl. one-off items **) : 8.8% Sales by Service Line Tieto s market position: #1 in Finland #2 in Sweden #7 in Norway Managed Services 31% Consulting and System Integration 25% Industry Products 26% Product Development Services 18% Sales by industry ***) Financial Services 20% Forest 5% Manufacturing 6% Retail and Logistics 9% Healthcare and Welfare 15% Public Sector 9% Telecom 25% Media 3% Energy 7% Other 1% *) Restated according to IFRS 11 **) Excluding capital gains, impairments and restructuring costs EBIT by Service Line Managed Services 14% Consulting and System Integration 21% Industry Products 53% Product Development Services 13% ***) Sales by Industry Group FS 21%; MRL 19%; PHCW 25%; TME 17%; PDS 18% 2

3 Key ratios MEUR Net sales, EUR million % MEUR % EBIT excl. one-off items, % 200 Cash flow % of net sales MEUR Capital expenditure % of net sales % Net debt / EBITDA

4 Managed Services IT infrastructure and data centre services Intense growth in cloudbased infrastructure and software services Business drivers Widespread cost reductions in customer industries resulting in review of IT infrastructure 4

5 Consulting and System Integration Consulting, application development, system integrations and application management services Cross selling potential in customer base in Nordic countries Business drivers IT transformation projects Business Intelligence, mobility and ERP 5

6 Industry Products Industry specific IT products and productized software solutions Cost reductions and efficiency improvements Business drivers Business Intelligence, mobility and ERP 6

7 Product Development Services (PDS) Improving customers business results through product development Shorter R&D cycles Business Business drivers drivers Significant demand for telecom and mobile based solutions Higher demand for R&D outsourcing 7

8 Financial objectives dividend policy updated 10% EBIT margin *) by % 5% 6.3% 6.4% 6.4% 7.6% 4.4% 4.2% 5.4% 3.5% 8.8% 5.3% Target % Aim to increase dividends annually in absolute terms (minimum 50% of net result) 200% 150% 100% 50% 0% 0% +39% EBIT margin excl. one-off items +8% +11% +7% EBIT margin Dividends, EUR million Payout Ratio, % Net debt / EBITDA 1.5 as an upper limit in the long run *) Reported Net Debt/EBITDA 8

9 Market opportunity

10 IT services companies need to transform both the portfolio and competencies CAGR 2-5% Over 20% New roles 100% 80% Traditional IT 34% Emerging, cloud based IT 73% Emerging services Over -5% Traditional offerings Traditional roles 60% 40% 20% 0% 66% 27% Growth in services driving end-customer experience, cloud, IPR Decline in traditional infrastructure services and AM High demand competencies - industry knowledge, program management, user experience, etc. Lesser need for traditional AM, AD and Infra capabilities due to automation and SaaS Source: Multiple sources, Tieto analysis 10

11 Nordic IT services market expected to grow GDP estimates slightly reduced Tieto expects the Nordic IT services market to grow by around 2% in 2014 Growth may slow down towards the year-end, especially in Finland GDP forecasts slightly down Growth in the second half may be slower than in the first half Digitalization drives customers agenda Double-digit growth for customer experience management, mobility and cloud services while the traditional IT services market is likely to decline Demand for infrastructure and applications modernization remains high 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% GDP growth, % e Finland Sweden Norway Nordic region Source: Nordea, Economic Outlook September

12 Strategy execution

13 The strategy (2012) continues to build competitiveness Strategy Choices Preferred business and IT transformation partner for enterprises and the public sector Leading full lifecycle IT services player in the Nordics extending to Eastern Europe PDS global leadership in selected segments Ambition 2016 Nordic market leadership in IT services Consistent growth above market average Sustainable 10% EBIT Industries Services Markets Reinforcing industry expertise Building on our long customer relationships and customer core process understanding Expanding to provide full lifecycle IT services Investments in Consulting and System Integration capabilities Focusing on markets where we can be in TOP 3 Enterprises and the public sector in the Nordics as a current core market, building on our strengths in Finland and Sweden Product Development pursues global opportunities 13

14 We drive our service portfolio to match customer needs CSI Quality and reliability Efficiency Business results Current application operations Application modernization Consolidated application operations New services & industry vertical solutions Customer Experience Management Industrial Internet IP Forest solutions Lifecare Cards & payments MS Infrastructure Infrastructure modernization Hybrid Cloud, IaaS, PaaS, Unified Communication Hydrocarbon accounting Funds & securities Other industry solutions Outsourcing Up-to-date technology Industry thought leadership Transformation 14

15 Roadmap for consistent strategy execution 2012 Build the foundation 2013 Execute the structure and efficiency 2014 Reorienting for growth 2015 Accelerate growth portfolio Expand markets Accelerate customer renewal through digitalization Scale growth businesses CEM, Industrial internet, MS cloud, IPR Accelerate modernization AM and Infra Modernizing customers infra and apps Expand customer base in the Nordics Launch new cloud services Improve customer experience and quality Continue simplification and efficiency Expand proven growth bets beyond the Nordics New growth bets e.g. IPR 15

16 Focus on profitable growth High-growth offerings TSR Total Shareholder Return Growth Profit improvement Cloud Application and infra modernization Selected industry products New customers and markets Cost structure Business mix Quality Offshoring and automation Healthy operative cash flow Up by 97% Median for the reference group, comprising selected IT services companies: up by 58% Steady performance In progress, potential Cash flow Attractive dividend yield Optimal capital structure 16

17 Investing in offerings and innovation Estimated offering development costs in 2014 around 45-50m Double-digit growth in CEM CAGR ~20%, EUR >5B CAGR ~50%, EUR >5B CAGR >4%, EUR ~1B Customer Experience Management Big and high growth market in the Nordics by 2020 Industrial Internet Lifecare 9% growth in Healthcare 38% growth (q-on-q) in Cloud services Creating competitive advantage by excelling in our interaction with clients Supporting customers business by extending from pure equipment sales to services Leading Nordic industry solution for the healthcare and welfare sector Selected industry products: financial services, supply chain management, oil & gas Cloud services, e.g. Tieto Cloud Server and Tieto Productivity Cloud Modernization of services in application and infrastructure management 17

18 Value creation Profit improvement

19 Our investments are focused on growth bets, cloud services and modernization Profit drivers Competitive cost structure Improved productivity and utilization rate ambition Business mix More focused operations Restructuring of non-profitable businesses Full lifecycle IT services More integrated and efficient use of assets and capabilities Quality Less downtime and project overruns Offshoring Managed services automation

20 Bridge to achieve the 10% EBIT margin 10% 8.8% 2013 EBIT excl. one-off items Industry Products CSI MS PDS 2016 EBIT excl. oneoff items Annual restructuring on average 2016 Key drivers Industry Products Software suite Scalability of global products CSI AM modernization Business mix incl. CEM Quality Managed Services Cloud Automation Improved productivity PDS Global delivery Expanding customer base Salary inflation 2-3%: annual impact of around EUR 20 million Offshoring gradually increasing: 1%-point increase in offshoring = EUR 5 million impact on EBIT 20

21 Ambition by Service Line Managed Services Consulting and System Integration Tieto target profitability 2016 Tieto target profitability Average market growth 2013 Average market growth Industry Products Tieto target profitability Product Development Services Tieto target profitability Average market growth 2013 Average market growth Growth ambition: CAGR Profitability: EBIT excl. one-off items 21

22 Offshoring gradually increasing Offshore rate at ~46% Employees % Personnel Offshore % Personnel 9% 5% 6% 11% 54% 14% Onshore Czech India China Poland Other offshore 1%-point increase in offshoring = EUR 5 million impact on EBIT Poland Czech Republic China Primary expertise of each centre India Philippines Czech Managed Services India CSI & Industry Products China Product Development Services Philippines Product Development Services Poland Product Development Services 22

23 Value creation Cash flow and balance sheet

24 Healthy cash flow profile Healthy cash flow profile enables good dividends and increase in investments Cash flow totalling EUR 159 million in 2013 Investing activities Dividends MEUR % Cash flow % of net sales Other EUR 159 million EUR 159 million 24

25 Increasing dividend trend Dividend, EUR million Dividend per share, EUR MEUR % EUR % of cash flow after investing activities Dividend Yield % Aim to annually increase dividends in absolute terms 25

26 Optimal capital structure Net Debt/EBITDA Net debt/ebitda to be maintained below 1.5 in the long run Currently over EUR 200 million debt capacity Target to retain investment grade shadow rating Strong balance sheet offers strategic flexibility, incl. M&A Balance sheet efficiency Investments incl. M&A Dividends Share buy-backs 26

27 Tieto s ambition in 2016 Strong dividend payer Total Shareholder Return growth above industry average Growth above market average driven by high-growth offerings compensating for gradual legacy decline EBIT margin of 10% achieved, driven by profitable growth, business mix change and competitive cost structure 27

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29 Appendix

30 Top 10 customers 2014 City of Stockholm Ericsson Finnish Tax Administration IF Insurance Kesko Nordea NSN OP-Pohjola Group S-Group TeliaSonera Top 10 customers based on sales in alphabetical order 30

31 Sales by Service Line IT services PDS not included Financial Services Public, Healthcare and Welfare 38% 44% Managed Services CSI 39% 37% Managed Services CSI 18% Industry Producuts 24% Industry Products Manufacturing, Retail and Logistics Telecom, Media and Energy 10% 20% 42% 48% Managed Services CSI 36% Managed Services CSI Industry Products 44% Industry Products 31

32 Sales by Industry Group IT services PDS not included 24% 8% 37% 31% Industry Products Financial Services Public, Healthcare & Welfare Manufacturing, Retail & Logistics Telecom, Media & Energy 30% 14% 24% CSI Financial Services Public, Healthcare & Welfare Manufacturing, Retail & Logistics 30% 11% 29% Managed Services Financial Services Public, Healthcare & Welfare Manufacturing, Retail & Logistics 32% Telecom, Media & Energy 30% Telecom, Media & Energy 32

33 Sales by Service Line 26% 18% 31% 25% Tieto Managed Services Consulting and System Integration Industry Products Product Development Services 22% 39% Sweden Managed Services Consulting and System Integration 12% Finland Managed Services 34% 21% Consulting and System Integration 24% 15% Industry Products Product Development Services 33% Industry Products Product Development Services 33

34 Sales by Industry Group 17% 17% 26% 22% 18% Tieto Financial Services Manufacturing, Retail and Logistics Public, Healthcare and Welfare Telecom, Media and Energy Product Development Services 21% 20% Sweden Financial Services Manufacturing, Retail and Logistics 12% 12% 22% Finland Financial Services Manufacturing, Retail and Logistics 15% 34% 10% Public, Healthcare and Welfare Telecom, Media and Energy Product Development Services Public, Healthcare and Welfare 26% 28% Telecom, Media and Energy Product Development Services 34

35 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. 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.