Tieto Corporation · OMXHEX:TIETO
Tieto — Investor Presentation (October 2014)
35 slides from Tieto's investor presentation, Oct 27, 2014
Slide 1: Tieto Corporation
Tieto Corporation Lasse Heinonen – CFO Tanja Lounevirta – Head of Investor Relations 27 October 2014
Slide 2: Financial facts
Financial facts Customer sales in 2013*): EUR 1607 million Sales by Service Line EBIT margin excl. one-off items**): 8.8% Managed Services 31% Tieto’s market position: Consulting and System Integration 25% #1 in Finland #2 in Sweden Industry Products 26% #7 in Norway Product Development Services 18%
Slide 3: Key ratios
Key ratios MEUR Net sales, EUR million % MEUR % EBIT excl. one-off items, % 200 Cash flow % of net sales 15 2000 10 8 150 1500 8.8 10 7.6 6 100 9.9 1000 6.3 6.4 6.4 8.9 4 8.3 7.4 6.7 5 500 50 2 1706 1714 1828 1825 1607 126 143 123 162 159 0 0 0 0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 MEU
Slide 4: Managed Services
Managed Services IT infrastructure and data centre services Intense growth in cloud- based infrastructure and software services Business drivers Widespread cost reductions in customer industries resulting in review of IT infrastructure 4 © Tieto Corporation
Slide 5: Consulting and System Integration
Consulting and System Integration Consulting, application development, system integrations and application management services Cross selling potential in customer base in Nordic countries IT Business transformation drivers projects Business Intelligence, mobility and ERP 5 © Tieto Corporation
Slide 6: Industry Products
Industry Products Industry specific IT products and productized software solutions Cost reductions and efficiency improvements Business drivers Business Intelligence, mobility and ERP 6 © Tieto Corporation
Slide 7: Product Development Services (PDS)
Product Development Services (PDS) Improving customers’ business results through product development Shorter R&D cycles Business Significant demand for drivers telecom and mobile based Business solutions drivers Higher demand for R&D outsourcing 7 © Tieto Corporation
Slide 8: Financial objectives – dividend policy updated
Financial objectives – dividend policy updated 8.8% 10% 7.6% Target 6.3% 6.4% 6.4% 5.3% 2016 5.4% 3.5% 10% EBIT margin*) by 2016 5% 4.4% 4.2% 0% 2009 2010 2011 2012 2013 2014 2015 2016 EBIT margin excl. one-off items EBIT margin 200% 80 +7% +8% +11% Aim to increase dividends annually 150% +39% 0% in
Slide 9: Market opportunity
Market opportunity
Slide 10: IT services companies need to transform both the portfolio and competencies
IT services companies need to transform both the portfolio and competencies Emerging, Traditional IT cloud CAGR based IT 2-5% 100% Over 34% 73% 20% New roles 80% Emerging 60% services Traditional roles 40% 66% Over -5% 20% 27% Traditional 2012 2015 2020 0% offerings • Growth in services driving end-
Slide 11: Nordic IT services market expected to grow
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 4.0% GDP growth, % • Growth may slow down towards the year-end, especially in Finland 3.0% • GDP forecasts slightly down • Growth in the second half ma
Slide 12: Strategy execution
Strategy execution
Slide 13: The strategy (2012) continues to build competitiveness
The strategy (2012) continues to build competitiveness Strategy Choices • Preferred business and IT transformation partner for Reinforcing industry expertise enterprises and the public sector Industries Building on our long customer relationships and • Leading full lifecycle IT services player in th
Slide 14: We drive our service portfolio to match customer needs
We drive our service portfolio to match customer needs Quality and reliability Efficiency Business results New services & industry vertical solutions Customer CSI Experience IP Lifecare Current Consolidated Management application application Forest operations Application operations Industrial soluti
Slide 15: Roadmap for consistent strategy execution
Roadmap for consistent strategy execution 2016+ Expand 2015 markets Accelerate growth • Expand proven growth bets portfolio beyond the Nordics • New growth bets e.g. IPR 2014 Reorienting • Accelerate customer renewal through digitalization for growth • Scale growth businesses – CEM, Industrial 2013
Slide 16: Focus on profitable growth
Focus on profitable growth High-growth offerings TSR 2012–2014 Cloud Up by 97% Application and infra Growth modernization Selected industry products Median for the reference group, comprising New customers and markets selected IT services Total companies: up by 58% Cost structure Shareholder Profit
Slide 17: Investing in offerings and innovation
Investing in offerings and innovation Estimated offering development costs in 2014 around €45-50m Double-digit Big and high growth market in the Nordics by 2020 9% growth in growth in CAGR ~20%, EUR >5B CAGR ~50%, EUR >5B CAGR >4%, EUR ~1B Healthcare CEM Customer Experience Industrial Lifecare Manag
Slide 18: Value creation: Profit improvement
Value creation Profit improvement
Slide 19: Our investments are focused on growth bets, cloud services and modernization
Our investments are focused on growth bets, cloud services and modernization Profit drivers 2012 2016 ambition Competitive cost structure Improved productivity and utilization rate Business mix More focused operations Restructuring of non-profitable businesses Full lifecycle IT services More integra
Slide 20: Bridge to achieve the 10% EBIT margin
Bridge to achieve the 10% EBIT margin 10% 8.8% 2013 Industry CSI MS PDS 2016 Annual 2016 EBIT excl. Products EBIT excl. one- restructuring one-off items off items on average Industry Products CSI Managed Services PDS Key drivers Software suite AM modernization Cloud Global delivery Scalability of gl
Slide 21: Ambition by Service Line
Ambition by Service Line Managed Services Consulting and System Integration Tieto target Tieto target profitability 2016 profitability 2016 2016 2016 2013 2013 Average market growth Average market growth Industry Products Product Development Services Tieto target 2016 Tieto target profitability 2016
Slide 22: Offshoring gradually increasing
Offshoring gradually increasing Offshore rate at ~46% Employees % 1%-point increase in offshoring = 20000 Personnel Offshore % 60 EUR 5 million impact on EBIT 15000 40 42 45 10000 37 40 30 20 5000 16663 17757 18123 16537 14318 0 0 Poland Czech Republic 2009 2010 2011 2012 2013 China Personnel Onshor
Slide 23: Value creation: Cash flow and balance sheet
Value creation Cash flow and balance sheet
Slide 24: Healthy cash flow profile
Healthy cash flow profile Healthy cash flow profile enables good dividends and increase in investments Cash flow totalling MEUR % Cash flow % of net sales EUR 159 million in 2013 200 10 9.5 8.9 8.3 8 150 Investing activities 7.4 6.7 6 100 Dividends 4 50 2 Other 126 143 123 162 159 0 0 2009 2010 2011
Slide 25: Increasing dividend trend
Increasing dividend trend Dividend, EUR million Dividend per share, EUR MEUR % EUR Dividend Yield % % of cash flow after investing activities 100 120 1 8 98 6.8 100 5.6 79 79 5.4 6 4.9 80 50 49 51 60 0.5 3.4 4 40 2 20 36 50 54 60 64 0.50 0.70 0.75 0.83 0.90 0 0 0 0 2009 2010 2011 2012 2013 2009 2010
Slide 26: Optimal capital structure
Optimal capital structure 1.5 1.0 0.5 0.4 0.5 0.3 0.2 0.1 0.0 2009 2010 2011 2012 2013 Net Debt/EBITDA • Net debt/EBITDA to be maintained below 1.5 in the long run Balance sheet efficiency • Currently over EUR 200 million debt capacity • Investments incl. M&A • Target to retain investment grade shad
Slide 27: Tieto’s ambition in 2016
Tieto’s ambition in 2016 Strong dividend payer Total Shareholder Return growth above industry average Growth above market average EBIT margin of 10% achieved, driven by high-growth offerings driven by profitable growth, compensating for gradual legacy business mix change and decline competitive cost
Slide 28: Changing perspectives
Changing perspectives” <a
Slide 29: Appendix
Appendix - a
Slide 30: Top 10 customers 2014
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 © Tieto Corporation
Slide 31: Sales by Service Line – IT services
Sales by Service Line – IT services PDS not included Financial Services Public, Healthcare and Welfare Managed Services Managed Services 38% 39% 37% 44% CSI CSI Industry Producuts Industry Products 18% 24% Manufacturing, Retail and Logistics Telecom, Media and Energy 10% 20% 36% Managed Services Man
Slide 32: Sales by Industry Group – IT services
Sales by Industry Group – IT services PDS not included Industry Products 24% Financial Services 31% Public, Healthcare & Welfare 14% CSI 8% Manufacturing, Retail & Logistics Financial Services 30% 37% Telecom, Media & Energy Public, Healthcare & Welfare 24% Manufacturing, Retail & Logistics 32% Tele
Slide 33: Sales by Service Line
Sales by Service Line Tieto 18% Managed Services 31% Consulting and System Integration 26% Industry Products Sweden 25% Product Development Services Managed Services 22% 39% Consulting and System Integration Industry Products 24% 12% Finland 15% Product Development Services Managed Services 34% 21%
Slide 34: Sales by Industry Group
Sales by Industry Group Tieto 17% 22% Financial Services Manufacturing, Retail and Logistics 17% 18% Public, Healthcare and Welfare Sweden Telecom, Media and Energy Financial Services 26% Product Development Services 20% 21% Manufacturing, Retail and Logistics 10% Public, Healthcare and Welfare 15%
Slide 35: All information in this material is for informational purposes only
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.