Q in brief. Tieto Q4/2013. Tieto s profitability improving growth offerings defined

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1 Tieto Q4/3 Tieto s profitability improving growth offerings defined 6 February 4 Kimmo Alkio President and CEO Lasse Heinonen CFO Tanja Lounevirta Head of IR 3 Tieto Corporation Q4 3 in brief Tieto s profitability improving growth offerings defined A year of challenging demand closes with strong order intake Efficiency programme on track, causing high restructuring costs Increasing investments in selected growth businesses

2 Market development In 3, economic slowdown resulted in IT budget cuts and project delays, especially in Finland In 4, the IT services market is expected to gradually pick up Clients look for additional savings from traditional IT services Longer-term opportunities for the renewal of old legacy systems and transformation into new platforms combining traditional IT with scalable and flexible IT environments Internet-driven technology trends enable companies to renew their ways to compete, driving investments in modern technologies Tieto expects the market to grow by around % in 4 Double-digit growth for customer experience management, mobility and cloud services while the traditional IT services market is likely to decline 3 Technology changes drive new types of services CAGR Appr. % Over % New or emerging types of services (CAGR) Growth drivers Big Data Mobility/UX Software businesses Cloud SaaS Capacity services PaaS/IaaS Transformation consulting Tieto Corporation Multiple sources Over 5% Traditional offerings (CAGR) Current standard offerings IT consulting System integration Infrastructure management Application management

3 Financial development 4--6 Q4 3 key figures Net sales EUR 47 (479) million, -.9%, organic -6.6% Divestments EUR 33.5 million Currency EUR -9 million Organic growth outside the telecom sector -3.5% (excluding currency effect -.4%) EBIT EBIT EUR 7.8 (-7.8) million, 4.3% (-.6) EUR 4.4 million restructuring costs EUR.5 million (negative) related to divestments EBIT excluding one-off items* EUR 4.7 (44.) million,.% (9.) Order backlog Order backlog EUR 64 ( 73) million, divestments impact EUR 4 million TCV EUR 59 (77) million Book-to-bill.4 (.5) Earnings per share EUR. (-.6) EUR.48 (.4), excluding one-off items* EBIT, % excluding one-off items % Q/Q/Q3/Q4/Q/3Q/3Q3/3Q4/

4 Quarterly development Net sales EBIT excluding one-off items Q/ Q/ Q3/ Q4/ Q/3 Q/3 Q3/3 Q4/3 Adjusted for divestments and acquisitions Q/ Q/ Q3/ Q4/ Q/3 Q/3 Q3/3 Q4/3 Employees Number of personnel -% % 6 8 Net cash flow from operations Q/ Q/ Q3/ Q4/ Q/3 Q/3 Q3/3 Q4/3 Number of personnel down by a net amount of 838 Offshore ratio IT Services 39.8% (35.) PDS 6.% (59.) Q/ Q/ Q3/ Q4/ Q/3 Q/3 Q3/3 Q4/ Service Lines Product Development Services Financial Services Manufacturing, Retail and Logistics, Healthcare and Welfare Telecom, Media and Energy Industry Products Consulting and System Integration Managed Services 8

5 Managed Services EUR 9 (7) million, +% Organic growth +% Comparison figure for sales in included EUR ~ million in non-recurring income EBIT EBIT EUR -.7 (5.) million, -.3% (4.) EBIT excluding one-off items* EUR 6.9 million (9.9), 5.4% (7.8) Active market for projects to transform ICT infrastructure to cloud-based environments Cloud-related sales to EUR 6 million, 5% of sales, EUR million in the full year Strongest growth in Financial Services and, Healthcare and Welfare Price erosion continued Good development in quality EBIT, % excluding one-off items Q/Q/Q3/Q4/Q/3Q/3Q3/3Q4/3 % Consulting and System Integration EUR (3) million, -% Organic growth -4% EBIT EBIT EUR -.6 (4.5) million, -.6% (3.4) EBIT excluding one-off items* EUR 7.7 (8.5) million, 7.6% (4.) Challenging telecom and Finnish public sector Positive development in finance sector Demand for cloud and business transformation consulting at a healthy level A few challenging projects causing overruns Streamlining of operations continues EBIT, % excluding one-off items % Q/Q/Q3/Q4/Q/3Q/3Q3/3Q4/

6 Industry Products EUR 3 (37) million, -% Organic growth -% EBIT EBIT EUR 9.3 (.4) million, 3.8% (8.3) EBIT excluding one-off items* EUR 9.6 (8.6) million, 4.% (3.5) Sales of underlying business slightly growing when eliminating currency effect Demand for main industry sectors remained healthy Good demand and price development in maintenance services Strong profitability due to divestments, higher operational efficiency and healthier business mix - also reflecting seasonality EBIT, % excluding one-off items % Q/ Q/ Q3/ Q4/ Q/3 Q/3 Q3/3 Q4/ Product Development Services EUR 63 (84) million, -4% Organic growth -8% EBIT EBIT EUR -.3 (-3.9) million, -% (-8.6) EBIT excluding one-off items* EUR.7 (.3) million, 4.% (.8) EBIT, % excluding one-off items % Customers cost savings resulted in reduced R&D spending and insourcing Profitability has not stabilized to the targeted level Short-term fluctuation in demand expected to lead to a sales decline in H Planned cost reductions are expected to take place in early Q/Q/Q3/Q4/Q/3Q/3Q3/3Q4/

7 Industry Groups Product Development Services Financial Services Manufacturing, Retail and Logistics, Healthcare and Welfare Telecom, Media and Energy Industry Products Consulting and System Integration Managed Services 3 Financial Services EUR 93 (94) million, -% Organic growth +7% Sales split by service line -/3 -/ MS 4% 39% CSI 6% 6% IP 4% 45% Investments in front office and mobility were at a healthy level Growth in industry-specific solutions, particularly in Cards and Payments areas Ample IT transformation project opportunities Q/ Q/ Q3/ Q4/ Q/3Q/3 Q3/3 Q4/

8 Manufacturing, Retail and Logistics EUR 8 (85) million, -5% Organic growth -4% Comparison figure for sales in included EUR ~ million in non-recurring income Sales split by service line 75 -/3 -/ MS 48% 48% CSI 4% 4% IP % % 5 Underlying business remained at the previous year s level, reflecting customers budget cuts Weak development during the year turned into strong order intake new deals e.g. Valmet, Metso Lower prices in some renewals Q/ Q/ Q3/Q4/ Q/3 Q/3 Q3/3 Q4/3 4--6, Healthcare and Welfare EUR 3 (7) million, -% Organic growth -7% Sales split by service line -/3 -/ MS 34% 9% CSI % 3% IP 44% 48% In the Finnish public sector, sales declined due to reduced government spending some challenging projects Activity in the healthcare and welfare sector and the Swedish public sector remained good Q/ Q/ Q3/ Q4/ Q/3 Q/3 Q3/3 Q4/

9 Telecom, Media and Energy EUR 68 (89) million, -4% Organic growth -% Sales split by service line -/3 -/ MS 9% 6% CSI 46% 56% IP 35% 8% Most segments saw negative development, oil and gas segment (hydrocarbon accounting) continued to grow Lower volumes in consulting and system integration services for telecom operators continued Declining trend in telecom sector beginning to stabilize in H Q/ Q/ Q3/ Q4/ Q/3Q/3 Q3/3 Q4/ Competitive cost structure programme: savings target of EUR 6 million achieved 3 programme: savings target over EUR 5 million M E A S U R E S Personnel reductions: 34 positions in total 88 materialized in 3 Estimated profit improvement impact (y-o-y) in total EUR 5 million S A V I N G S C O S T S EUR million Q3 3 4 Restructuring costs in 3 cover around job cuts -> EUR 49 million 7 Q4 ~ > > >5 > Q Q Q3 Q4 Q

10 Our way forward 4 Reorienting for growth Accelerate growth portfolio 6+ Expand geographies Build the foundation 3 Execute the structure and efficiency Priorities for 4 Modernizing our customers Sales focus and new customer wins Launch new competitive services Improve customer experience and quality Simplify and drive efficiency 9 Reorienting for growth investments in high-growth offerings increasing Customer experience management Creating competitive advantage by excelling customer interaction for our clients Industrial Internet Supporting customers business by extending from pure equipment sales to services Lifecare Leading Nordic industry solution for the healthcare and welfare sector Selected industry products: financial services, supply chain management, oil & gas Cloud services, e.g. Tieto Cloud Server and Tieto Productivity Cloud Modernization of services in application and infrastructure management

11 Full-year outlook for 4 Tieto expects its full-year operating profit (EBIT) excluding one-off items to increase from the previous year s level (EUR 43.8 million in 3). Q4 3 in brief Tieto s profitability improving growth offerings defined A year of challenging demand closes with strong order intake Efficiency programme on track, causing high restructuring costs Increasing investments in selected growth businesses

12 We are committed to develop enterprises and society through information technology Appendix

13 Q4 organic growth by Service Lines and Industry Groups % -4% -% -9% Service Lines 75 5 Q4 / Q4 / Managed Services Consulting and System Integration Industry Products Product Development Services -7% Industry Groups % -4% -% Q4 / Q4 / Financial Services Manufacturing, Retail and Logistics In Financial Services Fidenta was divested on July. Some of the related business will continue within Tieto., Healthcare and Welfare Telecom, Media and Energy Impact of NWC change on cash flow Q Q Q3 Q4 Sales related net working capital change 3 * Sales related net working capital change * Q Q Q3 Q4 Accounts payable 3 Accounts payable * Accounts receivbles, unbilled, advance payments Q Q Q3 Q4 Vacation payments and social costs 3 Vac payments and social costs Q Q Q3 Q Provisions 3 Provisions

14 Top customers 3 City of Stockholm Ericsson Finnish Tax Administration IF Insurance Nordea NSN OP-Pohjola Group S-Group Region Skåne TeliaSonera 7 Top customers based on sales in alphabetical order Financial calendar 4 Week 8/4 Annual Report 3 on Tieto s website March 4 Annual General Meeting April Interim report /4 8 July Interim report /4 3 October Interim report 3/4 8