Tieto Q2 Report Progress in difficult markets Hannu Syrjälä President and CEO Seppo Haapalainen CFO Reeta Kaukiainen EVP, Comms&IR Challenging market conditions continue Markets weakness in demand Project and consulting demand soft Application management and infrastructure services stable Outsourcing market offers growth opportunities Competition intense and price pressure remains hard Customers cost savings and efficiency in focus Telecom under pressure, move to offshore continues Financial services still weak, regulatory changes create new demand Manufacturing suffering from global recession, recovery not yet in sight Public sector stable, uncertainty in future demand, but plenty of opportunities 1 2
Tieto s transformation progresses according to the plans Tieto s key focus areas Capacity cut to current demand reduction of ~5 employees since Jan/9 Internal productivity actions organisational model, cost cuts and process investments Investments in quality and GDM offshoring rate now at 26% Offering development geared towards productivity and efficiency outsourcing and advanced IT solutions: healthcare, financial services and energy EquaTerra outsourcing survey 29: Tieto ranked as the best partner for application management outsourcing in the Nordics 3 Performance highlights Sales down 7% to EUR 448.8 million. In local currencies down 3%. EBIT, excluding OTI, EUR 24.6 million. One time items: Sale of TietoSaab EUR 5.2 million Revenue recognition EUR 5.5 million Cost of streamlining actions EUR -24.9 million EPS EUR.14 Negative cash EUR -12.1 million due to increase in working capital. Strong liquidity EUR 11.7 million. 2 4
Q2 financials progress from Q1 Q2/29 Q2/28 H1/29 H1/28 Net sales, EUR million 444.8 48.1 882.8 948.4 Operating profit, EUR million 1.4 29.6 15.3 54.2 EBIT, % 2.3 6.2 1.7 5.7 Operating profit excl. one-off items, EUR million 24.6 33.2 39.4 7.9 EPS, EUR.14.26.15.48 Gearing, % 3.1 29.3 3.1 29.3 Net cash flow from operations -12.1 59.3 29.9 118.5 Personnel on 3 June 16 195 16 31 16 195 16 31 5 Quarterly development MEUR 6 4 2 Net sales MEUR 5 4 3 2 1 Operating profit and margin (excl. one-time items) % 1 8 6 4 2 Net cash flow from operations MEUR 1 8 6 4 2-2 Gearing % 5 4 3 2 1 3 6
Streamlining actions progressing well Savings target EUR 1 million EUR 7 million expected to materialize in 29, mainly in Q3 and Q4 Estimated one-off costs approximately EUR 35 million in 29 EUR 24.9 million booked in Q2 Finland EUR 7.3 million Sweden EUR 7.4 million International EUR 9.9 million Group EUR.3 million Actions Personnel adjustments Decreasing the number of subcontractors Consolidation of offices Cutting down business expenses 7 Offshoring target 3% in 29 Q2 actual at 26% 5 45 4 35 3 25 2 15 1 5 3 % 25 % 2 % 15 % 1 % 5 % % Q1 4 Q3 4 Q1 5 Q3 5 Q1 6 Q3 6 Q1 7 Q3 7 Q1 8 Q3 8 Q1 9 Czech and Poland Baltics, Russia and Belarus India, China, Malaysia and Indonesia Offshore of total, % 4 8
Country sales by quarter EUR million 6 5 4 3 2 1 144 152 14 141 143 144 141 123 119 116 23 199 239 227 23 Finland Sweden International 9 Finland Sales flat, but outsourcing market strong Profitability down 2% due to restructuring and other costs Public and healthcare and welfare continue to grow Sound development in financial services Personnel negotiations completed in May Net sales, MEUR EBIT, % Q2/29 Q2/28 23 198 244 227 23 Net sales, MEUR EBIT, MEUR EBIT, % Employees 23 25.2 1.9 5 863 23 31.6 13.7 6 111 5 1
Sweden Sales fell by 19% due to weak telecom segment and currency impact; 7% decline in SEK Profitability burdened by low sales and exchange rates; lower costs insufficient to offset the negative impact Strong development in healthcare and welfare, public and retail and logistics Q2/29 Q2/28 Net sales, MEUR 116 144 144 123 141 119 116 EBIT, MEUR -6.7 7.4 EBIT, % -5.8 5.2 Employees 3 122 3 331 Net sales, MEUR EBIT, % 11 International Flat sales of EUR 143 million Loss of EUR 6.6 million, including one-off EUR 9.9 million in restructuring costs Finance and telecom the most challenging areas Denmark and UK had a weak performance Q2/29 Q2/28 Net sales, MEUR 143 144 144 14 152 141 143 EBIT, MEUR -6.6 2.1 Net sales, MEUR EBIT, % EBIT, % Employees 4 48 (>6%) in offshore countries -4.6 7 21 1.4 6 859 6 12
Customer sectors Top 1 customers account for 35% of sales Apoteket Retail Ericsson Telecom If Insurance Finance Kesko Retail The National Board of Taxes (FI) Government Nokia Telecom Nokia Siemens Networks Telecom Nordea Finance TeliaSonera Telecom Varma Finance Share of Group sales by customer sector 45% 21% 34% None of the customers exceeds 1% in net sales on Group level Telecom Finance Industry sectors 13 Telecom Net sales down by 13%, half of the drop from lower volumes Operating profit declined due to lower utilization rates and prices Cost savings and supplier consolidation continue, Tieto well-positioned Offshoring to Asia high on the agenda 2 15 1 5 172 147 162 153 149 7 14
Finance Net sales down 8% More than half due to currency effect Additional impact from two ending contracts Operating profit remained on a relatively good level Products business suffering most Stable business in Finland, but more challenging in Sweden and International countries 12 1 8 6 4 2 12 92 14 89 94 15 Industry sectors* Sales declined by 2% Net sales include EUR 5.5 million one-time income Manufacturing, forest and automotive weakest areas Healthcare and welfare and public continued to grow Profitability in most industry sectors at a healthy level 25 2 15 1 5 26 186 226 197 21 8 * Automotive, energy, forest, healthcare and welfare, manufacturing, public, retail and logistics 16
Outlook for 29 Uncertainty continues in the IT market. Tieto expects the IT services market to decline and tough market conditions to continue in 29. Tieto expects full-year net sales and operating profit to decline from last year. In the Nordic countries, the best prospects for growth in 29 are seen in the outsourcing of application and ICT infrastructure management. 17 Questions & Answers 9