View
1
Download
0
Category
Preview:
Citation preview
Tieto Q4/2015Strong fourth-quarter results –all businesses performing well
Kimmo Alkio – President and CEO
Lasse Heinonen – CFO
Tanja Lounevirta – Head of IR
4 February 2016
© Tieto Corporation
Q4 2015 in brief
2
Strong fourth-quarter results – all businesses performing well
• Organic growth of 3% in IT services driven by Industry Products
• Reported operating margin of 12% driven by healthy business mix and Managed Services automation programme
• Product Development Services business well stabilized
• Acquisitions accelerate shift towards growth businesses
© Tieto Corporation3
Outlook in the Nordics remains similar to 2015Weakness in Finland continues
• Positive outlook in the Sweden
• Finnish economy remains sluggish
• Tieto expects the Nordic IT services market to
grow by around 2% in 2016
• IT services market strongest in Sweden
• Long-term growth in cloud services around 30%
IT market affected by economic outlook
Service Demand and economic cycles
Project services More volatile
Application management Less volatile short-term
Infrastructure outsourcing Less volatile, even positive impact
during downturn
-2%
-1%
0%
1%
2%
3%
4%
5%
2012 2013 2014 2015e 2016e
GDP growth, %
Finland
Sweden
Norway
Nordic region
Source: Nordea Markets, Economic Outlook, 1/2016
© Tieto Corporation
2012 2015 2020
Tieto’s growth businesses up by ~ 20% in 2015
4
Tieto’s business mix
Over
-5%(CAGR)
Over
20%(CAGR)
Expected market growth of emerging services (CAGR):
• CEM ~20%
• Industrial Internet ~50%
• Lifecare >4%
• Cloud ~30%
IT services market development
2–5%(CAGR)
*) Growth in local currencies
Growth businesses
• Customer Experience Management
• Industrial Internet
• Lifecare
• Cloud
Other IT services and products, e.g.
• Consulting and system integration
• Industry-specific software
Traditional services
• Infrastructure services
• Application management
In 2015 sales over EUR 260 million
20% of IT services sales
In 2015, sales around EUR 600 million
46% of IT services sales
In 2015 sales around EUR 450 million
34% of IT services sales
Emerging services
Traditional services
20% growth*
-5%decline*
5%growth*
© Tieto Corporation
2012 2015 2020
5
Emerging services
Traditional services
Capability renewal to take advantage of market changes
Investing in competence
renewal in 2015
Competence mix evolving in line
with market change
1 800 total recruitments, of which around 500 new positions to support our capability development in emerging areas
• Main roles include Business Consultants, Solution Consultants, Architects, Software Developers, Project Managers, Sales
In IT services, acquisitions add over 400 new positions in focus businesses while 700 redundancies based on
productivity programmes, incl. MS automation
Gross
recruitments in
Sweden 230,
in Finland 200
Close to 200
software
developers
recruited
globally
Over 100
consultants
recruited in
Nordics
Headcount in
India and Czech
increased
by 200
140 new
CX experts
in CEM
© Tieto Corporation
New start-up added to growth investment areas
Customer
Experience
Management
• Smilehouse
acquisition to drive
growth across all
industries
• Innovation
ecosystems with
Tieto X Hub and
hackathon
accelerated
• New agreements
include customer
service platform
Customer Care aaS
to nelly.com
Cloud Services
• Currently around
17% of Managed
Services’ sales
• Enhanced cloud
portfolio with first
TECO deliveries
• New agreements,
e.g. Göterborg
Energi, several
contracts in the
Finnish public sector
based on frame
agreement
Lifecare
• Good growth and
order inflow
continued
• Strong development
in across all
countries
• Healhtcare and
welfare reform in
Finland provides
promising
opportunities
Industrial
Internet
• A number of solutions
introduced during the
year: M2M in a box, Real
Time Factory, Vital (fleet
maintenance), eSense
• Tieto Connect
Platform launched
• Recognized for
innovativeness in
global study by HfS
• References include
TeliaSonera, Valmet,
Orfer Ltd., MTC
Flextek, HSB Living
Lab
Security
Services
• New start-up
launched in January
• Tieto’s Security Wall
monitoring digital
security 24/7
• Cyber security
market is forecast to
grow by ~10% until
2020 and Managed
Security Services
market faster than
that
• Annual sales 2015:
around EUR 30
million
• Growth: 20%
• Annual sales 2015:
EUR 80 million
• Growth: 65%
• Annual sales 2015:
over EUR 160
million
• Growth: 6%
• In 2015,
investments around
EUR 4 million, cash
flow negative
• In 2015, Tieto’s
sales in single digit
millions
© Tieto Corporation
Accelerating growth
7
Growth
initiatives in
2015
RecruitmentsAround 500
additional roles New
partnerships• Temenos
• Workday
• Salesforce.com
• Software Innovation
• Smilehouse
• Imano
Annual sales close to
EUR 60 million
Growth businesses
delivering results
Security Services as a
new start-up
Acquisitions
Investments in
offering
development
up by
EUR 10 million
Financial development
© Tieto Corporation
Q4 2015 key figuresNet sales• EUR 396 (403) million, -1.8%, organic growth in local
currency -2.9%• Acquisitions added EUR 14 million• Currency EUR -4 million
• In IT services, organic growth in local currencies 2.8%
EBIT• EBIT EUR 46.8 (9.5) million, 11.8% (2.4%)
• EUR 4.6 million restructuring costs• EBIT excluding one-off items* EUR 51.4 (44.4) million,
13.0% (11.0%)
• EBIT excluding one-off items* in IT services EUR 48.3 (32.5) million, 13.3% (9.4%)
Order backlog • Order backlog EUR 2 030 (1 784) million• Total Contract Value EUR 641 (672) million• Book-to-bill 1.62 (1.67)
Earnings per share • EPS EUR 0.47 (0.09)• EPS EUR 0.51 (0.47), excluding one-off items*
9
*) Excluding capital gains, impairments and restructuring costs
MEUR %
386 381 340 398 362 363 330 382
1 6
6
53 1
5
138,9
7,8
11,9
11,0
8,4 8,3
11,5
13,0
0
2
4
6
8
10
12
14
0
100
200
300
400
500
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15
Net of divestement and acquisitions
Customer sales adjusted
EBIT, % excluding one-off items*
© Tieto Corporation
Favourable long-term financial developmentAnnual investments in offerings up by 20 mEUR during the past two years
10***) Excluding capital gains, impairments and restructuring costs
117 139 141 150 151
6,47,6
8,89,9 10,3
5,43,5
5,34,0
8,6
0
5
10
15
0
40
80
120
160
2011 2012 2013 2014 2015
EBIT
EBIT excl. one-off items***, EUR millionEBIT excl. one-off items***,%EBIT, %
0,4 0,2 0,1
-0,4
0,1
-1,0
-0,5
0,0
0,5
1,0
1,5
2011 2012 2013 2014 2015
Net debt/EBITDA
Net sales• EUR 1 460 (1 523) million, -4.1%, organic growth in local
currency -2.6%• Currency EUR -28 million
• In IT services, organic growth in local currencies 2.7%
EBIT• EBIT EUR 125.2 (61.1) million, 8.6% (4.0)
• EUR 31 million restructuring costs• EBIT excluding one-off items* EUR 150.8 (150.2) million,
10.3% (9.9%)
• EBIT excluding one-off items*** in IT services 136.2 (128.5) million, 10.3% (9.9%)
0,70 0,75 0,83 0,90 1,00 1,10
0,30 0,25
0,0
0,5
1,0
1,5
2010 2011 2012 2013 2014 2015
Dividend/share, EUR
*) Proposed dividend
MEUR %
*)
**)
**) Additional dividend
© Tieto Corporation
Quarterly development
11
Offshore ratio: IT services 44.6% (43.3%) PDS 60.7% (62.0%)Number of personnel down by a net amount of 637
-0,1
0,2 0,2
-0,4-0,6
0,0
0,4
0,1
-1
-0,5
0
0,5
1
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15
Net debt/EBITDA
50 16,6 11,190,2 36,7
12,4 16,4 67,1
-13,4 -7,2 -9,6 -12,8 -11,6 -10,5 -8,7 -12,9-15
5
25
45
65
85
105
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15
Net cash flow from operations and capital expenditure
Net cash from operations Capital expenditure
387 387346
403365 364
335396
0%
2%
4%
6%
8%
10%
0
100
200
300
400
500
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15
Net Sales
PDSIT servicesIT services organic growth in local currencies
14102 14126 13878 13720 13456 12949 13179 13083
45,4 45,9 46,3 46,2 45,5 46,0 45,8 46,2
0
10
20
30
40
50
60
0
5000
10000
15000
20000
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15
Number of full-time employees and offshore ratio
Number of personnel Offshore ratio
%
MEUR
Employees MEUR
© Tieto Corporation
2%
6%
-3%4%
-39%6%2%1%
Organic growth in local currencies by
Service Line and Industry Group
12
Service
Lines
Industry
Groups
(IT services)
131 107 105 54133 108 112 330
25
50
75
100
125
150
Managed Services Consulting and SystemIntegration
Industry Products Product DevelopmentServices
Q4/14
Q4/15
90 80 115 5993 78 122 600
25
50
75
100
125
150
Financial Services Manufacturing, Retailand Logistics
Public, Healthcare andWelfare
Telecom, Media andEnergy
Q4/14
Q4/15
© Tieto Corporation13
Service Lines
Financial
Services
Public,
Healthcare
and Welfare
Manufacturing,
Retail and
Logistics
Telecom,
Media and
Energy
Consulting and System Integration
Managed Services
Product
Development
Services
Industry Products
© Tieto Corporation
Managed Services
Customer sales Q4• EUR 132 (131) million, up by 1%• Organic growth in local currencies 1%EBIT• EBIT EUR 18.4 (8.2) million, 13.9% (6.2)• EBIT excluding one-off items*
EUR 17.2 (9.0) million, 13.0% (6.9)
Q4 highlights
• Cloud sales continued to grow and were up by 39% in Q4, representing 17% of MS sales
• Operating profit improvement mainly due to the savings related to the automation programme aiming at improving customer experience, competitiveness and efficiency of delivery
• Competitive cloud portfolio• First TECO delivery in online banking in Q4
14
*) Excluding capital gains, impairments and restructuring costs
127 132 121 131 126 131 122 132
8,4
5,8
9,1
6,9
3,6
7,6
13,8 13,0
0
2
4
6
8
10
12
14
16
0
50
100
150
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15
%MEUR
Net of divestement and acquisitions
Customer sales adjusted
EBIT, % excluding one-off items*
© Tieto Corporation
Consulting and System IntegrationCustomer sales Q4• EUR 109 (107) million, up by 2%• Organic growth in local currencies 2%
EBIT• EBIT EUR 8.8 (10.4) million, 8.1% (9.7)• EBIT excluding one-off items*
EUR 11.3 (10.2) million, 10.4% (9.5)
Q4 highlights• Strong demand for packaged solutions, industry
consulting and CEM, sales for traditional application management down
• Acquisition of Smilehouse and Imano drive future growth
• Recruitments in growth areas while offering development costs were down
• Savings from AM industrialization and decline in offering development costs drive profitability
• Some volatility in margins is anticipated to continue in Q1, especially in application management
• Industrialization of service deliveries continue
15
*) Excluding capital gains, impairments and restructuring costs
100 97 84 107 99 101 88 108
1
11,2
7,4
11,6
9,510,8
8,6
5,9
10,4
0
2
4
6
8
10
12
14
0
50
100
150
Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15Q4/15
%MEUR
Net of divestement and acquisitions
Customer sales adjusted
EBIT, % excluding one-off items*
© Tieto Corporation
Industry ProductsCustomer sales Q4• EUR 121 (107) million, up by 13%• Organic growth in local currencies 6%
EBIT• EBIT EUR 25.2 (19.2) million, 20.8% (18.0)• EBIT excluding one-off items*
EUR 25.8 (19.6) million, 21.4% (18.3)
Q4 highlights• Strongest development in Financial Services and
Healthcare and Welfare, up by 14% and 4%, respectively
• Acquisition of Software Innovation added EUR 12 million to sales
• Demand in the oil and gas segment remained weak and sales continued to decline
• Strong profitability improvement mainly attributable to growth and efficiency improvement
• Offering development costs continued to increase, up by EUR 2 million, mainly in Lifecare and Industrial Internet
16
*) Excluding capital gains, impairments and restructuring costs
99 96 90 106 93 97 91 109
1 11
11 1 5
1215,4 15,6
22,3
18,3
13,4
12,2
18,7
21,3
0
5
10
15
20
25
0
50
100
150
Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15Q4/15
%MEUR
Net of divestement and acquisitions
Customer sales adjusted
EBIT, % excluding one-off items*
© Tieto Corporation
Product Development Services
Customer sales Q4• EUR 33 (58) million, down by 43%• Organic growth in local currencies -39%
EBIT• EBIT EUR 2.8 (-4.4) million, 8.4% (-7.5)• EBIT excluding one-off items*
EUR 3.1 (11.9) million, 9.4% (20.5)
Q4 highlights• Increased demand in telecom cloud network function
virtualization, new wins in this area• Market for building IoT technology platforms and
connectivity for customers emerging – first common cases with Industrial Internet in the pipeline
• Operating profit down – Q4 in 2014 was exceptionally high as it included income related to temporary commercial terms
• Efficiency measures undertaken in 2014 have resulted in a healthy cost structure for the existing business
17
*) Excluding capital gains, impairments and restructuring costs
60 55 46 54 44 33 29 33
55
4
2
2,6
6,18,9
20,5
14,0
9,6
6,2
9,4
0
5
10
15
20
25
0
50
100
Q1/14Q2/14Q3/14Q4/14Q1/15Q2/15Q3/15Q4/15
%MEUR
Net of divestement and acquisitions
Customer sales adjusted
EBIT, % excluding one-off items*
© Tieto Corporation18
Industry Groups
Consulting and System Integration
Managed Services
Product
Development
Services
Industry Products
Financial
Services
Public,
Healthcare
and Welfare
Manufacturing,
Retail and
Logistics
Telecom,
Media and
Energy
© Tieto Corporation
83 84 77 90 84 88 83 920
25
50
75
100
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15
MEUR
Customer sales adjusted
Net of divestement and acquisitions
Financial Services
Customer sales Q4• EUR 92 (90) million, up by 2%• Organic growth in local currencies 4%
Sales split by service line
Q4/2015 Q4/2014MS 44% 44%CSI 20% 23%IP 36% 33%
Q4 highlights
• Good demand all across the banking and insurance segments, especially in Sweden and global payments markets
• Sales growth driven by Industry Products• Strong performance in a number of solutions, such as
Payments and business process outsourcing combined with Software as a Service in the SME segment
• New agreements include ICA Banken
19
© Tieto Corporation
78 77 72 81 77 76 72 77
1 11
11 1
11
0
25
50
75
100
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15
MEUR
Customer sales adjusted
Net of divestement and acquisitions
Manufacturing, Retail and Logistics
Customer sales Q4• EUR 78 (82) million, down by 4%• Sales in local currencies down by 3%
Sales split by service line
Q4/2015 Q4/2014MS 52% 51%CSI 39% 38%IP 9% 11%
Q4 highlights
• Positive development continued in the manufacturing and forest sectors due to several new agreements
• Q4 sales was affected by delayed investment decisions in the retail sector in Finland
• New agreements with SSAB and Suominen
20
© Tieto Corporation
100 104 91 115 101 107 95 121
3
12
0
15
30
45
60
75
90
105
120
135
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15
MEUR
Customer sales adjusted
Net of divestement and acquisitions
Public, Healthcare and Welfare
Customer sales Q4• EUR 133 (115) million, up by 16%• Organic growth in local currencies 6%
Sales split by service line
Q4/2015 Q4/2014MS 32% 35%CSI 24% 26%IP 44% 39%
Q4 highlights• In Public, Healthcare and Welfare, sales in local
currencies were organically up by 6%. • Acquisition of Software Innovation added around EUR
12 million to sales • Organic growth was mainly attributable to the
healthcare and welfare sector and the public sector in Finland
• New agreements with Finnish Ministry of Employment and Economy, City of Tampere and a number of agreements based on Valtori frame agreement
21
© Tieto Corporation
65 60 54 59 57 58 53 590
25
50
75
100
Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Q3/15 Q4/15
MEUR
Customer sales adjusted
Net of divestement and acquisitions
Telecom, Media and Energy
Customer sales Q4• EUR 59 (59) million, at the previous year’s level• Organic growth in local currencies 2%
Sales split by service line
Q4/2015 Q4/2014MS 14% 17%CSI 49% 44%IP 37% 39%
Q4 highlights• Positive development in the telecom and energy
utilities segments drive organic growth • Sales in the media segment as well as the oil and gas
segment continued to slide due to challenging market conditions
• Tieto Smart Utility Suite launched in 2015, first go-live successfully completed in January
• New wins include Göteborg Energi
22
© Tieto Corporation
Performance drivers in IT services 2015Impact on
profitability1)
Sales growth
Increase in offering development
Costs for new hires in growth businesses
Cost savings in MS and CSI
Currency fluctuations
Other efficiency gains and business mix
change
Summary of 2015 profit driversAutomation as a basis for efficient delivery and customer experience
23
1) Illustrative, in comparison with the previous year
IT services delivered good results while investments
increased
• Sales organically up by 3%, growing faster than the
market
• MS automation and industrialization in CSI result in
improved productivity and competitiveness
• Recruitments support the company transformation
• Offering development increased in order for us to ensure
a leading position in the changing market
• Other efficiency gains, e.g. related to facilities and
procurement, and change in business mix also
contributed to profitability
PDS successfully adjusted the cost base for the
existing business
© Tieto Corporation
EBIT 2016
EBIT 2015
Performance drivers in 2016
24
Sales growth andbusiness mix change
Growth investments Salary inflation Automation andindustialization and
other productivity gains
Profitability drivers in IT services
IT services
• We aim to grow faster than the market, supported by strong order backlog
• Productivity gains will carry to 2016 while Q1 seasonally weaker
• Growth initiatives supported by recruitments and higher offering development
• Anticipated restructuring less than 2% of sales
Product Development Services
• Healthy cost structure for the existing business, margin expected to remain in a range below 10%
© Tieto Corporation
Guidance for 2016
25
Tieto expects its full-year
adjusted operating profit*)
(EBIT) to increase from
the previous year’s level
(EUR 150.8 million in
2015).
Based on European Securities and Markets Authority
(ESMA) regulation, Tieto will report adjusted operating
profit in 2016
*) Adjusted for restructuring costs, capital gains/losses,
goodwill impairment charges and other one-off items
© Tieto Corporation26
Solid strategy executionTransformation as a foundation for next steps
2013
Execute the
structure and
efficiency
2016
• Drive for scale and
expansion
• New growth areas, e.g.
industry-specific software
products
2016 +
• Expand proven growth
businesses beyond the
Nordics
2012
Build the
foundation
2015
Accelerate
growth portfolio
2016+
Expand markets
2014
Reorienting for growth
• Growth initiatives
include
acquisitions and
third start-up
• Accelerated
recruitments and
offering
development
© Tieto Corporation
Opportunities related to market disruptionas a basis for our strategy evolution
Support renewal
of customers business
models using leading
industry insights and assets
Ensure business continuity
and process efficiency
through standardization
and automation
Our opportunity Successes to build on
Differentiating industry solutions
Successful internal start-ups
New business models (cloud, outcome based)
Industrialized application services
Consistent efficiency and performance delivery
Increased M&A activity
Growth in line with market
Managed services automation
Open source culture
Focused
Simplified
Positioned for future
© Tieto Corporation
Q4 2015 in brief
28
Strong fourth-quarter results – all businesses performing well
• Organic growth of 3% in IT services driven by Industry Products
• Reported operating margin of 12% driven by healthy business mix and Managed Services automation programme
• Product Development Services business well stabilized
• Acquisitions accelerate shift towards growth businesses
Recommended