Creating great everyday experiences

Transcription

1 Creating great everyday experiences

2 Consistently creating value to all stakeholders Digital Experience acceleration 2012 Re-structuring 2014 Orienting for growth Accelerating innovation and growth 2

3 Financial facts Customer sales in 2018: EUR million Adjusted 1) EBIT margin: 10.2% Tieto s market position: Leading market position in Finland Among top 3 vendors in Sweden Among top 8 vendors in Norway Sales by industry group Sales by Service Line Technology Services and Modernization 46% Business Consulting and Implementation 15% Industry Solutions 30% Product Development Services 8% Financial Services 24% Adjusted 1) EBIT by Service Line Public, Healthcare and Welfare 33% Industrial and Consumer Services 35% Product Development Services 8% Technology Services and Modernization 57% Business Consulting and Implementation 11% Industry Solutions 31% Product Development Services 9% 1) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items

4 2018 as a continuation of our multi-year performance improvement CUSTOMER EXPERIENCE / NPS REVENUE GROWTH, % NET DEBT / EBITDA % 2% 1,0 0,8 0, % 0,4 0, % -4% 0,0-0,2-0, Net Sales, EUR million Growth % -6% -0,6 EMPLOYEE ENGAGEMENT SCORE OPERATING MARGIN, % DIVIDEND/SHARE, EUR % 10% 5% 0% 1,6 1,4 1,2 1,0 0,8 0,6 0,4 0,2 0, EBIT, EUR million EBIT % -5% Base dividend Additional dividend

5 Market opportunity and strategy

6 Changing industry paradigm with new data-driven experiences and business models Omnichannel Customer agenda for driving competitiveness Industry 4.0 VALUE CREATION Make my product / service better, faster and cheaper Definite products, processes and technologies TODAY Designed experiences and data-driven services Agile business models, services and ways of working TIME Smart cities IoT Servitization Sustainability Connected vehicles Realtime payments Digital citizen services Connected consumer products Predictive healthcare Industry clouds Personalized experiences Data-driven value Cross-industry ecosystems Agile and adaptive 6

7 Data at the core of innovation and value creation Active innovation agenda in the market Design and data led Agility driving both innovation and efficiency Faster time to market Renew applications Adapt enterprise architecture Agile Design and experience Data and insights Agile sprints co-creating business outcomes for customers 7 Cloud first Connected products Agile AI Ecosystems Platforms Hybrid Infrastructure Automation ML/NLP/RPA Cyber security Microservices

8 We aim to make customers more competitive Strategy 2019 choices and ambition Services enabling customers competitiveness Leading CX in the market Networked ways of working and leadership Most engaging workplace Context-rich customer engagement Upgraded financial ambition 8

9 Services enabling customers competitiveness Tieto Service portfolio Digital Experience Enable new business models and experiences for customers. Capability uplift Agile at scale Hybrid Infra Ensure customer s business continuity, efficiency and unified service experience. Multi-cloud and scale Automation and quality Industry Software Drive customer s business critical processes and functions. Common R&D practices Expansion Product Development Services Making customers products connected with world-class engineering. New industry segments Global expansion 9

10 Nordic focus, serving customers globally with a global Tieto team Building on strong global delivery capabilities and long term off-shore development Focus on Nordic enterprises and the public sector Selective international expansion of Industry Software Longer term ambition for broader Tieto expansion in European markets Key markets: Finland, Sweden and Norway Global delivery capabilities: China, Czech, India and Poland PDS continues to grow its global customer base - focusing on software R&D 10 Tieto Corporation Serving customers in over 90 countries world-wide Employing experts globally

11 Tieto s business and go-to-market structure Networked ways of working CUSTOMER Country market share CX, EX Resource prioritization Country Management Network FI SE NO Growth, P&L CX, EX and quality High customer activity Digital Experience FI SE NO Hybrid Infra Industry Software Product Development Services Centers of Excellence and Global Delivery centers Group management and Support 11 Four distinct businesses with full accountability: Digital Experience, Hybrid Infra, Industry Software and PDS Digital Experience businesses per country to maximize local consulting led market opportunity Go-to-market in the Nordics led through a country management network, represented by all relevant businesses Centers of Excellence to incubate new technologies, solutions and services

12 Agile implementation of strategy in annual sprints New businesses and market expansion Leading CX in the market Most engaging workplace >5% growth and 13% adj. operating margin 2018 Accelerate innovation and growth Transition and Digital Experience acceleration Operational transition and efficiency Renew customer engagement Investments into Digital Experience acceleration Continued focus on quality and automation PDS expansion continues 12 Long term positive development in CX and EX Growth 7% in local currencies Reached long-term profit ambition of 10% EBIT

13 Value creation 13

14 Consistent value creation continues Well positioned to gain market share in the Nordics Attractive dividend policy continues Healthy company with strong balance sheet Innovation and investments in datadriven opportunities drive future growth M&A agenda continues Growth as a key driver for improvement in operating profit

15 Higher growth and profit ambitions while maintaining attractive dividend policy Ambition 2022 Growth over 5% (CAGR ) Continued active M&A in addition to organic growth Adjusted operating margin (EBIT) 13% 1) Main drivers include growth, simplified operations and automation Net debt/ebitda below 2.0 Temporarily may exceed 2.0 during the period in the long term 2) CAPEX expected to remain below 4% of sales Aim is to increase base dividend annually in absolute terms Strong cash flow driving attractive dividend profile 1) Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability In accordance with IFRS 16, taking effect on 1 Jan ) In accordance with IFRS 16, taking effect on 1 Jan 2019 equals to around 1.5 prior to IFRS 16 15

16 All businesses contributing to Tieto s growth and profitability ambition by 2022 Businesses Digital Experience Hybrid Infra Share of sales Growth Profitability Performance drivers Consulting-led market demand Active investments into capabilities Agile ways of working Investments into service experience Customer base and partnerships Automation activities Businesses as the reportable segments Industry Software Product Development Services Low Contribution... Best-in-class competitive software Software functionality and SaaS Common practices and knowledge Demand for connected products and 5G Knowledge in connectivity domain Global customer reach and delivery High Updated segment reporting effective as of Q

17 Investments focusing on accelerating digital capabilities and software business expansion Investment focus Investment drivers Digital Experience Industry Software Other Accelerate digital capabilities e.g. Design, AI, Public cloud Incubate future technologies e.g. Blockchain Solution accelerators, data assets and platforms Ongoing renewals in Healthcare, Utilities and Payments Expand functionality to drive competitiveness Selective international expansion and SaaS models Infra service experience and multi-cloud orchestration Enable PDS customer base expansion Skill renewal and learning as a Lifestyle 70-80% of investments Total investment level to be maintained at 5% of revenues 17

18 Summary Strategy to make customers more competitive focusing on Digital Experience Renewed customer engagement Simplified operations Digital Experience as the main growth driver, while all businesses expected to grow above market Investments to build data-driven services and capabilities - addition of people during the strategy period to drive growth Operational simplification potentially impacting 700 roles globally, resulting in annualized savings of 30-35M Upgraded financial ambition growth >5%, adjusted operating margin 13%, attractive dividend policy maintained Gradual transition to the new structures during Q

19 Q4, 2018 and outlook for

20 2018 key figures Full-year net sales up by 4% EUR (1 543) million Growth in local currency 7% Organic growth in local currencies 4% Full-year EBIT EBIT EUR (139.1) million, 9.7% (9.0%) Adjusted 1) EBIT EUR (161.4) million, 10.2% (10.5%) Investments in offering development up by EUR 6 million, of which EUR 3.6 million capitalized Currency impact EUR 8 million Includes EUR 5.2 (4.3) million in amortization of acquisition-related intangible assets 1,5 1,0 0,5 0,0 Dividend/share, EUR 0,30 0,25 0,22 0,20 0,20 1,00 1,10 1,15 1,20 1, ) 3) Dividend proposal Proposed dividend EUR 1.45 per share Base dividend EUR 1.25 (1.20) Additional dividend EUR 0.20 (0.20) Dividend yield 6.1% 1) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items 2) Additional dividend 3) Base dividend

21 Two-fold development with strong growth in growth services and continued decline in infrastructure services WE AIM TO GROW FASTER THAN THE MARKET* SHARE OF IT SERVICES 2018 GROWTH % Growth businesses ** 7% EMERGING SERVICES 17% Other services and solutions *** 19% TRADITIONAL SERVICES % Traditional services 1% Traditional services Emerging services *IT market growth expectation (CAGR ) for the Nordics at 2 3% Tieto Corporation * Application services growth in local currencies 7%, incl. in traditional services ** Growth solution portfolio described on the next slide *** Including Avega

22 Investments supporting continuous renewal and growth Up by 7% in local currencies in 2018 Customer Experience Data-Driven Businesses Cloud services Security services Management +16% +120% +15% +16% Selected industry solutions +3% Lifecare Credit solutions Production excellence Hydrocarbon management Tieto Corporation Payments Case management SmartUtilities

23 Q key figures Net sales up by 3% EUR (409.6) million Growth in local currencies 5% Organic growth in local currencies 3% EBIT margin 10.8% (11.7%) EBIT EUR 45.7 (47.9) million Adjusted 1) EBIT EUR 49.8 (49.2) million, 11.8% (12.0%) Includes EUR 1.2 (1.2) million in amortization of acquisition-related intangible assets EUR 1.9 million of offering development costs capitalized Order backlog EUR (1 849) million Negative currency impact Order backlog provides support for the 2019 growth ambition Book-to-bill 1.3 (1.3) MEUR % ,0 9,2 11,6 2 12, ,0 8,6 11, ,8 11 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Net of divestment and acquisitions Customer sales adjusted Adjusted1) EBIT, % 1) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items

24 Quarterly development MEUR Net sales Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Net of divestment and acquisitions Customer sales adjusted 11 1,5 1 0,5 0 0,2 0,9 Net debt/ebitda 0,8 0,8 0,5 1,0 1,0 0,7 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Employees Number of full-time employees and offshore ratio 48,6 49,0 49,6 48,7 49,4 49,8 50,6 50, Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Number of personnel Offshore ratio Number of personnel up by a net amount of 861 Offshore ratio: IT services 48.2% (46.2%) PDS 71.5% (69.8%) % MEUR ,7-9,3 Net cash flow from operations and capital expenditure -6,1-16,9 66,6 61,5 10,8 12,3 18,7 81,7-9,1-11,6-8,2-11,4-8,7-16,7 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Net cash from operations Capital expenditure

25 Growth in local currencies by Service Line and Industry Group Service Lines MEUR MEUR Industry 150 Groups 125 (IT services) % 0% 27% / 9%* 9% / 7%* -1% / 1%* 10% Technology Services and Modernization Business Consulting and Implementation Industry Solutions Product Development Services 4% / -1%* Financial Services Public, Healthcare and Welfare Industrial and Consumer Services *) Organic growth in local currencies (not shown for businesses where acquisition impact is not significant) Q4/17 Q4/18 Q4/17 Q4/18

26 Service Lines New data-driven businesses *) Financial Services Public, Healthcare and Welfare Industrial and Consumer Services Industry Solutions Business Consulting and Implementation Technology Services and Modernization Product Development Services Support Functions *) Reported in Industry Solutions

27 Technology Services and Modernization Customer sales in Q4 EUR 190 (190) million, growth at Q level, or +2% in local currencies EBIT Adjusted 1) EBIT EUR 24.8 (24.3) million, 13.0% (12.8) Q4 highlights Growth (in local currencies) driven by infrastructure cloud and application services up by 15% and 7% in full year, respectively Decline in traditional infrastructure services continued, down by 3% in full year Operating margin somewhat improved, mainly owing to good Application Services development Q1 adjusted operating margin is anticipated to be below Q1/2018 level, which was supported by the efficiency programme MEUR ,4 11,7 13,5 12,8 11,0 12,3 13,8 13, Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Net of divestment and acquisitions Customer sales adjusted Adjusted1) EBIT, % 1 1 % ) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items

28 Business Consulting and Implementation Customer sales Q4 EUR 67 (54) million, +24%, or +27% in local currencies Organic growth in local currencies +9% EBIT Adjusted 1) EBIT EUR 5.5 (4.3) million, 8.2% (8.1) Q4 highlights Growth supported by the acquisition of Avega and Meridium Organic growth driven by CEM Adjusted operating profit improved, mainly due to good volume development and the acquisitions Q1 adjusted operating margin is anticipated to be at or above Q1/2018 level MEUR ,2 7,7 8,2 8,1 13 8,7 12 9, ,8 9 8,2 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Net of divestment and acquisitions Customer sales adjusted Adjusted1) EBIT, % % ) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items

29 Industry Solutions Customer sales Q4 EUR 129 (133) million, -3%, or -1% in local currencies Organic growth in local currencies 1% EBIT Adjusted 1) EBIT EUR 20.4 (20.8) million, 15.8% (15.7) Q4 highlights Strong growth in Hydrocarbon Management and Payments solutions Architectural renewal continued to affect SmartUtilities Lifecare growth somewhat affected by the reform in the Finnish healthcare segment and the solution renewal Technology renewal continues in selected solutions Offering development costs up by EUR 3 million as planned EUR 1.9 million related to platform development capitalized Q1 adjusted operating margin expected to be close to Q1/2018 level MEUR ,1 9,4 14,1 2 15,7 2 7,5 4, ) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items 14,3 15,8 Q1/17Q2/17Q3/17Q4/17Q1/18Q2/18Q3/18Q4/18 Net of divestment and acquisitions Customer sales adjusted Adjusted1) EBIT, % %

30 Product Development Services Customer sales Q4 EUR 36 (34) million, +6%, or +10% in local currencies EBIT Adjusted 1) EBIT EUR 3.7 (3.5) million, 10.1% (10.1) Q4 highlights Strong volume development with the largest key customers and good development in automotive EBIT margin remained at a healthy level while improvement somewhat curbed by negative currency effects Q1 adjusted operating margin is anticipated to be below Q1/2018 level MEUR ,4 8,0 7,2 10,1 12,7 8,7 9,9 10, Q1/17Q2/17Q3/17Q4/17Q1/18Q2/18Q3/18Q4/18 Net of divestment and acquisitions Customer sales adjusted Adjusted1) EBIT, % % ) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items

31 Industry Groups New data-driven businesses *) Financial Services Public, Healthcare and Welfare Industrial and Consumer Services Industry Solutions Business Consulting & Implementation Technology Services and Modernization Product Development Services *) Reported in Industry Solutions

32 Financial Services Customer sales Q4 EUR 98 (100) million, -2%, growth in local currencies at Q level Sales split by service line Q4/2018 Q4/2017 TSM 54% 55% BCI 10% 10% IS 36% 35% Q4 highlights Sales affected by large customers transformation programmes and price erosion Positive development in Industry Solutions with strong growth in the Payments area New agreements include If Insurance and EnterCard MEUR Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Net of divestment and acquisitions Customer sales adjusted 1 1

33 Public, Healthcare and Welfare Customer sales Q4 EUR 144 (135) million, +6%, or +9% in local currencies Sales split by service line Q4/2018 Q4/2017 TSM 44% 44% BCI 13% 10% IS 43% 46% Q4 highlights Healthy development across the markets and businesses Lifecare growth somewhat affected by the ongoing reform in the Finnish healthcare segment Active market with several digitalization initiatives and transition projects ongoing New agreements include Region Skåne MEUR Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Net of divestment and acquisitions Customer sales adjusted 1 2

34 Industrial and Consumer Services Customer sales Q4 EUR 144 (140) million, +3%, or +4% in local currencies Organic growth in local currencies -1% Sales split by service line MEUR Q4/2018 Q4/2017 TSM 52% 54% BCI 26% 21% IS 22% 25% Q4 highlights Growth supported by the acquisition of Avega Healthy growth especially in Hydrocarbon Management whereas sales development in SmartUtilities negative due to the ongoing largescale renewal New agreements include SSAB and Volvo Car Dealers Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Net of divestment and acquisitions Customer sales adjusted

35 Performance drivers in 2019 Growth above the market Offering development costs around 5% of Group sales Efficiency and productivity improvement measures, incl. automation, optimized subcontracting, offshoring, management of competence pyramid Salary inflation over EUR 30 million New strategy to enhance competitiveness launched Operational simplification anticipated to affect around 700 roles globally Annualized gross savings of EUR million, partially affecting performance in 2019

36 Guidance for 2019 Tieto expects its full-year adjusted 1) operating profit (EBIT) to increase from the previous year s level (EUR million 2) in 2018) 1) adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability 2) not restated for IFRS 16 Tieto Corporation

37 Appendix

38 Key customers Top 10 customers account for 29% of sales Financial Services Public, Healthcare and Welfare Industrial and Consumer Services Tieto has around 900 customers across industry groups. According to the terms and conditions of the customer agreements, Tieto is able to introduce only part of them. Tieto Corporation

39 Sales by Service Line IT services PDS not included Financial Services 34 % Technology Services and Modernization 56 % Business Consulting and Implementation Public Healthcare and Welfare 10 % Industry Solutions Technology Services and Modernization Industrial and Consumer Services 43 % 45 % Business Consulting and Implementation 22 % Technology Services and Modernization 12 % Industry Solutions 25 % 53 % Business Consulting and Implementation Industry Solutions

40 Sales by Industry Group IT services PDS not included Technology Services and Modernization 39 % 29 % Financial Services Public, Healthcare & Welfare Business Consulting and Implementation 32 % Industrial and Consumer Services 16 % Financial Services Industry Solutions 57 % 27 % Public, Healthcare & Welfare Industrial and Consumer Services 26 % 27 % Financial Services Public, Healthcare & Welfare 47 % Industrial and Consumer Services

41 Sales by Service Line 9 % Tieto Technology Services and Modernization 30 % 15 % 46 % Business Consulting and Implementation Industry Solutions Product Development Services 16 % 39 % Sweden Technology Services and Modernization Business Consulting and Implementation 17 % 1 % Finland Technology Services and Modernization 28 % 17 % Industry Solutions Product Development Services 15 % 67 % Business Consulting and Implementation Industry Solutions Product Development Services

42 Sales by Industry Group 8 % 24 % Tieto Financial Services 35 % 33 % Public Healthcare and Welfare Industrial and Consumer Services Product Development Services 16 % 22 % Sweden Financial Services Public Healthcare and Welfare 1 % 25 % Finland Financial Services 26 % 36 % Industrial and Consumer Services Product Development Services 39 % Public Healthcare and Welfare Industrial and Consumer Services 35 % Product Development Services

43 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.

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