Tieto Corporation · OMXHEX:TIETO
Tieto — TietoEVRY — Q2 2020 Earnings Presentation
29 slides from Tieto's earnings presentation, 2020
Slide 1: Q2 2020: Strong operational performance – synergy target increased and dividend pay-out decided
Q2 2020 Strong operational performance – synergy target increased and dividend pay-out decided Kimmo Alkio, President and CEO Tomi Hyryläinen, CFO
Slide 2: Q2 in brief
2 Q2 in brief Strong operational performance – synergy target increased and dividend pay-out decided Adjusted operating Integration well Dividend of profit EUR 80.4 Large one-time on schedule EUR 0.635/share, million / 11.7% – items for Q2 and – synergy target totaling solid performance 2020 – for f
Slide 3: Strong operational foundation enabling future shareholder returns
3 Strong operational foundation enabling future shareholder returns Resilient business Integration well on Enabling future Enabling strong performance schedule profit contribution shareholder returns Large one-time Building a solid Achieving and Attractive future items required in operational expand
Slide 4: Continuously adapting to Covid-19 – market outlook unchanged
4 Continuously adapting to Covid-19 – market outlook unchanged Industry analysts TietoEVRY business Additional short-term High productivity estimate -3% to -7% mix well resilient with savings actions to maintained with decline in IT market appr. 2% negative mitigate negative remote work – partial du
Slide 5: Strong underlying business performance in Q2
5 Strong underlying business performance in Q2 Revenue Adjusted EBIT** • Strong performance in the midst of high activity level in integration and Covid-19 EUR 686 million EUR 80.4 million uncertainty Organic growth* Adjusted EBIT** Margin • Covid-19 topline impact appr. -2%, -1% 11.7% negative prof
Slide 6: Building the foundation for future performance requires large one-time items
6 Building the foundation for future performance requires large one-time- items in Q2 and 2020 Activity Rationale • Establish TietoEVRY as a high performing digital services and software company Integration • Realize merger business case, synergies and profit expansion • One-time items for integrati
Slide 7: Large one-time items in 2020 – significantly lower in 2021
7 Large one-time items in 2020 – significantly lower in 2021 Estimated one-time items (EURm) 2020 2021 • Q2 2020 one-time items ~EUR 90 million (appr. Integration Integration incl. restructuring 75-85 30 - 40 50% of full year) Transition of services 17 6 • 2020 one-time items Redefined IBM estimate
Slide 8: Integration well on schedule – synergy target increased
8 Integration well on schedule – synergy target increased Integration focus area Current status Integrated structure • Integrated businesses and functions globally and leadership • Integrated structures for Financial Services planned for H2 Common processes • Financial restatements done and systems
Slide 9: TietoEVRY redefined IBM partnership in June 2020
9 TietoEVRY redefined IBM partnership in June 2020 Redefined IBM partnership Scope Implementation Financial impact • New scope: Mainframe technology and • ~180 employees currently employed by • Neutral to profit (EBIT adj.) short-term limited other services IBM to join TietoEVRY (12-18 months) and e
Slide 10: Redefined IBM partnership enables customers' service experience and cloud transformation
10 Redefined IBM partnership enables customers´ service experience and cloud transformation to drive higher performance Driver What does it mean? • Service experience with unified delivery models and roles Superior service • Bring proven cloud offerings to customers experience • Best tech partnershi
Slide 11: FY2019 dividend pay-out decided considering Covid-19 and large one-time items
11 FY2019 dividend pay-out decided considering Covid-19 and large one- time items in 2020 Dividend decision drivers EUR 0.635 per share / EUR 75 million • Covid-19 uncertainties continue dividend distribution decided by the Board • Strong operational performance Q1/Q2 according to AGM mandate • Soli
Slide 12: Q2 business highlights
tieto svay Q2 business — highlights
Slide 13: TietoEVRY
13 TietoEVRY Q219 Q220 -6% Revenue Business highlights Adj. EBIT ** • Revenue EUR 686 million, organic growth* -1% Adj. EBIT %** • Reported growth -6%, currency impact EUR -31 million 730 686 • Adjusted EBIT EUR 80.4 (69.8) million, 11.7% (9.6) • Currency impact EUR -5 million 11.7% 9.6% • Reported
Slide 14: Digital Consulting
14 Digital Consulting Q219 Q220 -12% Revenue Business highlights Adj. EBIT ** • Revenue EUR 163 million, organic growth* -6% Adj. EBIT %** • Adjusted EBIT EUR 17.9 (15.5) million, 11.0% (8.4) • Cloud Advisory and Analytics practice continuing to perform well 185 163 • Covid-19 impact appr. -3% on re
Slide 15: Cloud & Infra
15 Cloud & Infra Q219 Q220 -7% Revenue Business highlights Adj. EBIT ** • Revenue EUR 232 million, organic growth* -3% Adj. EBIT %** • Adjusted EBIT EUR 26.6 (25.3) million, 11.5% (10.2) 249 232 • Declining sales mainly due to one-time hardware sales in Q2/19 baseline and decline in add-on sales 11.
Slide 16: Industry Software
16 Industry Software Q219 Q220 -3% Revenue Business highlights Adj. EBIT ** • Revenue EUR 122 million, organic growth* 3% Adj. EBIT %** • Adjusted EBIT EUR 18.4 (14.8) million, 15.1% (11.8) • Growth of over 10% in healthcare, welfare and public sector 126 122 software • Covid-19 impact appr. -2% on
Slide 17: Financial Services Solutions
17 Financial Services Solutions Q219 Q220 -3% Revenue Business highlights Adj. EBIT ** • Revenue EUR 102 million, organic growth* 6% Adj. EBIT %** • Adjusted EBIT EUR 12.0 (13.2) million, 11.8% (12.6) 105 102 • Organic growth driven especially by Cards services • Covid-19 impact appr. -2% on revenue
Slide 18: Product Development Services
18 Product Development Services Q219 Q220 -3% Revenue Business highlights Adj. EBIT ** • Revenue EUR 34 million, organic growth* -2% Adj. EBIT %** • Adjusted EBIT EUR 4.0 (2.7) million, 11.5% (7.6) 35 34 • Increased profitability driven by effective cost base management 11.5% • Covid-19 impact appr.
Slide 19: CFO report
19 CFO report
Slide 20: CFO highlights
20 CFO highlights • New reportable segments implemented • Strong Q2 performance - Covid-19 profit impact fully mitigated • Large one-time items to enable future profitability • Synergy execution ahead of schedule • FX headwind continue into H2 • Capital Market Day aimed for Q4
Slide 21: Flexible cost base and stable financial position mitigates short-term risks from Covid-19
21 Flexible cost base and stable financial position mitigates short-term risks from Covid-19 • Covid-19 revenue impact approximately -2% in Q2, profit impact fully mitigated Temporary cost • Cost based scaled through temporary layoffs, volume management and procurement cost reductions optimization •
Slide 22: Solid cash flow with good receivables collection
22 Solid cash flow with good receivables collection Net cash flow from operations 140 Tieto stand-alone TietoEVRY • EUR 90.4 million cash flow from operations 120 100 • Working capital decreased by EUR 58.1 million, driven 80 by favorable AR development and increased level of 60 provisions 40 69,6 •
Slide 23: Large one-time items in Q2 and 2020 – significantly lower in 2021
23 Large one-time items in Q2 and 2020 – significantly lower in 2021 One-time items (EUR million) Q2 2020 actual H1 2020 actual H2 2020 estimate FY2020 estimate FY2021 estimate Integration cost 26 33 42-52 75-85 30-40 IBM transition of services 0 0 17 17 6 IBM old agreement items 12 19 0 19 0 Tieto
Slide 24: Merger efficiency target increased to EUR 100 million
24 Merger efficiency target increased to EUR 100 million – with EUR 45 million run rate realized to date EUR 100 million merger efficiencies achieved within three years • Target merger efficiencies increased to EUR 100 million (up from EUR 75 million), based on Merger efficiency run-rate at end of y
Slide 25: De-risking the integrated company during Q2
25 De-risking the integrated company during Q2 Delivering on the merger • EUR 45 million run-rate executed business case • Merger efficiency target increased to EUR 100 million • Revenue impact in Q2 approximately 2%, profit impact fully mitigated Resilience towards Covid-19 • Full-year Covid-19 rev
Slide 26: Performance drivers and summary
26 Performance drivers and summary
Slide 27: Performance drivers – H2 2020
27 Performance drivers – H2 2020 • Full-year impact of -2% to -5% on revenue Covid-19 impact likely • Profit impact being mitigated through cost savings higher during H2 • Additional temporary cost saving measures to continue in H2 • Increased full year synergy run-rate to EUR 70-80 million Accelera
Slide 28: Q2 in brief
28 Q2 in brief Strong operational performance – synergy target increased and dividend pay-out decided Adjusted operating Integration well Dividend of profit EUR 80.4 Large one-time on schedule EUR 0.635/share, million / 11.7% – items for Q2 and – synergy target totaling solid performance 2020 – for
Slide 29: tieto fey
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