Tieto Corporation · OMXHEX:TIETO
Tieto — Q4 2014 Earnings Presentation
30 slides from Tieto's earnings presentation, Feb 5, 2015
Slide 1: Tieto Q4/2014
Tieto Q4/2014 Solid profitability and strong cash flow 5 February 2015 Kimmo Alkio – President and CEO Lasse Heinonen – CFO Tanja Lounevirta – Head of IR
Slide 2: Q4 2014 in brief
Q4 2014 in brief Solid profitability and strong cash flow • Growth emerging in IT services driven by cloud services • Increased investments in growth businesses • High one-off restructuring costs in Product Development Services as guided 2 © Tieto Corporation
Slide 3: Nordic IT services market expected to grow by 2%
Nordic IT services market expected to grow by 2% IT market affected by economic outlook 5.0% GDP growth, % • Tieto expects the Nordic IT services market to grow by around 2% in 2015 4.0% • Positive outlook in the Swedish economy while 3.0% the Finnish GDP continues to contract • IT services market s
Slide 4: Renewing services and competences
Renewing services and competences CAGR Tieto’s growth drivers 2-5% • Over 40% growth in Customer Experience Over Management (CEM) in 2014 20% • Industrial internet in start-up phase – first Emerging pilots ongoing services • Cloud services growing by 153% in 2014 • Healthcare growth at 9% in 2014 Ov
Slide 5: Financial development
Financial development
Slide 6: Q4 2014 key figures
Q4 2014 key figures Net sales MEUR % • EUR 403 (405) million, -0.5%, organic growth in local currency +0.9% 500 14 • Divestments EUR 1 million 11.9 • Currency EUR -9 million 10.4 10.4 11.0 12 400 21 19 6 • In IT services, organic growth in local currencies 3.5% 2 1 6 2 8.9 10 EBIT 7.8 6 • EBIT EUR 9
Slide 7: Quarterly development
Quarterly development MEUR Net sales Net debt/EBITDA 500 2.0 400 21 19 2 1 6 6 2 6 1.5 300 1.0 200 0.5 0.4 0.1 0.2 0.0 -0.1 0.2 0.2 -0.4 100 0.0 403 398 359 403 386 380 340 397 0 -0.5 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/13 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Adjusted for divestm
Slide 8: Performance improvement continues across businesses
Performance improvement continues across businesses Product Development Services IT services 44 42 MEUR MEUR Profit related to Efficiency Decrease Increase Performance Salary Incentives Offering Currency Q4 2013 Q4 2014 temporary measures and in business in business improvement in inflation developm
Slide 9: Organic growth in local currencies by Service Line and Industry Group
Organic growth in local currencies by Service Line and Industry Group 150 4% 8% / 2% *) -1% 125 -13% 100 Service 75 Q4/13 Lines 50 Q4/14 25 130 131 102 107 111 107 63 58 0 Managed Services Consulting and System Industry Products Product Development Integration Services *) Comparable growth 2% 125 12
Slide 10: Service Lines
Service Lines Financial Manufacturing, Public, Telecom, Product Services Retail and Healthcare Media and Development Logistics and Welfare Energy Services Industry Products Consulting and System Integration Managed Services 10 © Tieto Corporation
Slide 11: Managed Services
Managed Services MEUR % Customer sales 150 9.1 10 • EUR 131 (130) million, up by 1% • Organic growth in local currencies 4% 8.4 6.9 6.9 8 EBIT 100 5.8 • EBIT EUR 8.2 (0.4) million, 6.2% (0.3) 6 5.1 • EBIT excluding one-off items* 4.6 EUR 9.0 (9.0) million, 6.9% (6.9) 4 Q4 highlights 50 • Strong sust
Slide 12: Consulting and System Integration
Consulting and System Integration Customer sales MEUR % • EUR 107 (102) million, up by 5% 150 15 • Organic growth in local currencies 8%, comparable growth 2% 11.2 11.6 EBIT 10.4 9.5 • EBIT EUR 10.4 (-1.6) million, 9.8% (-1.6) 7 7 1 100 8.9 2 1 10 • EBIT excluding one-off items* 2 1 7.6 7.4 1 EUR 10
Slide 13: Industry Products
Industry Products Customer sales • EUR 107 (111) million, down by 4% MEUR % • Organic growth in local currencies -1% 150 30 25.7 22.1 22.3 25 EBIT • EBIT EUR 17.4 (28.3) million, 16.3% (25.5) 100 5 5 18.3 20 • EBIT excluding one-off items* 16.1 15.8 15.4 15.6 EUR 19.6 (28.5) million, 18.3% (25.7) 15
Slide 14: Product Development Services
Product Development Services Customer sales MEUR % • EUR 58 (63) million, down by 8% 100 25 • Organic growth in local currencies -13% EBIT 9 20.5 20 75 8 • EBIT EUR -4.4 (-1.3) million, -7.5% (-2.0) • EBIT excluding one-off items*) 15 EUR 11.9 (2.7) million, 20.5% (4.2), mainly driven by temporary 5
Slide 15: Industry Groups
Industry Groups Product Financial Manufacturing, Public, Telecom, Development Services Retail and Healthcare Media and Services Logistics and Welfare Energy Industry Products Consulting and System Integration Managed Services 15 © Tieto Corporation
Slide 16: Financial Services
Financial Services Customer sales Q4 MEUR • EUR 90 (89) million, up by 2% • Organic growth in local currencies 4% 100 1 1 1 1 1 Sales split by service line 2 1 1 75 2014 2013 MS 45% 44% 50 CSI 21% 18% IP 34% 38% 25 Q4 highlights • Good development with several large existing and new 79 83 77 87 82 8
Slide 17: Manufacturing, Retail and Logistics
Manufacturing, Retail and Logistics Customer sales Q4 • EUR 82 (81) million, up by 1% MEUR • Organic growth in local currencies 3% 100 Sales split by service line 1 75 1 2 2014 2013 1 MS 51% 48% CSI 38% 41% 50 IP 11% 11% 25 Q4 highlights • Good development attributable mainly to outsourcing activiti
Slide 18: Public, Healthcare and Welfare
Public, Healthcare and Welfare Customer sales Q4 • EUR 115 (105) million, up by 10% MEUR • Organic growth in local currencies 12%, comparable growth 10% 150 Sales split by service line 125 2014 2013 100 5 5 MS 38% 37% CSI 24% 24% 75 IP 38% 39% 50 Q4 highlights 25 • Healthy growth in both public sect
Slide 19: Telecom, Media and Energy
Telecom, Media and Energy Customer sales Q4 MEUR • EUR 59 (68) million, down by 14% 100 • Organic growth in local currencies -11% Sales split by service line 75 5 4 2014 2013 MS 19% 20% 50 CSI 43% 44% IP 38% 36% 25 Q4 highlights 70 70 63 68 65 60 54 59 • Interest in starting new projects is low in a
Slide 20: Accelerating growth in focus
Accelerating growth in focus 2016+ Expand 2015 markets Accelerate growth • Expand proven growth bets portfolio beyond the Nordics • New growth bets e.g. IPR 2014 • Accelerate customer renewal through Reorienting digitalization for growth • Scale growth businesses – CEM, Industrial 2013 internet, MS
Slide 21: IT service businesses progressing towards longer-term ambition
IT service businesses progressing towards longer-term ambition Managed Services Consulting and System Integration Tieto target Tieto target profitability 2016 profitability 2016 2012 2016 2014 2016 2014 2012 Average market growth Average market growth Industry Products Product Development Services T
Slide 22: Targeted investments to accelerate growth
Targeted investments to accelerate growth Investment level of EUR 50 million to be maintained in 2015 and new growth areas to be evaluated Over 40% 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
Slide 23: Performance drivers in 2015
Performance drivers in 2015 • In PDS, sales anticipated to decline in the full year • Impacted by the insourcing decision by one key customer – sales to the customer less than 2% (5) of the Group sales in Q1, contract ending in early Q2 • Cost base planned to be adjusted in parallel with the reducti
Slide 24: Guidance for 2015
Guidance for 2015 Tieto expects its full-year operating profit (EBIT) excluding one-off items to increase from the previous year’s level (EUR 150.2 million in 2014). 24 © Tieto Corporation
Slide 25: Capital structure addressed – dividends increasing while maintaining flexibility to invest in growth
Capital structure addressed – dividends increasing while maintaining flexibility to invest in growth 1.5 Dividend/share, EUR • Proposed dividend EUR 1.00 (0.90) per share, 0.30* up by 11% 1.0 • An additional dividend of EUR 0.30 is proposed 0.5 0.83 0.90 1.00 due to strong cash flow and targeted cap
Slide 26: Q4 2014 in brief
Q4 2014 in brief Solid profitability and strong cash flow • Growth emerging in IT services driven by cloud services • Increased investments in growth businesses • High one-off restructuring costs in Product Development Services as guided 26 © Tieto Corporation
Slide 27: Changing perspectives
Changing perspectives” sal
Slide 28: Appendix
Appendix”
Slide 29: We enable enterprises to reinvent business models through cloud services
We enable enterprises to reinvent business models through cloud services Public cloud Tieto Cloud Server Government Cloud Tieto Productivity Cloud Pay-as- Flexible and SAP Dynamic Landscape you-go / alternative Google free business Archiving as a Service services models Lifecare as a Service Private
Slide 30: Top 10 customers 2014
Top 10 customers 2014 • City of Stockholm • Ericsson • Finnish Tax Administration • IF Insurance • Kesko • Nordea • Nokia • OP-Pohjola Group • S-Group • TeliaSonera 30 © Tieto Corporation