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Tieto Q4/2012Kimmo Alkio – President and CEOLasse Heinonen – CFOPellervo Hämäläinen – VP, Communications & IR
6 February 2013
1
Q4 2012 in brief
• Strong improvement in underlying profitability
• Strategy execution on schedule
• Divestments of low-synergy businesses
2
IT service market and market drivers
3
• The macroeconomic outlook in Northern Europe and the IT services market in Tieto’s core countries have remained relatively stable
• Overall IT services market may reflect cautiousness at the beginning of 2013 • The Nordic IT services market expected to grow by ~2% in 2013• IT outsourcing the strongest growing area• The telecom sector expected to remain sluggish in 2013 due to
customers’ cost savings programmes
Mobility Big Data
CloudSocial Media
Market drivers
© 2012 Tieto Corporation
Q4 highlightsStrong improvement in underlying profitability - strategy execution on schedule
Net sales• EUR 478.6 (489.7) million, down by 2%
• Excluding currency effects and divestments, net sales were down by 2%
Operating profit (EBIT)• EUR -8.3 (26.1) million, or -1.7% (5.3) of net sales
• Includes impairments of EUR 33.6 and restructuring costs of EUR 18.5
• EBIT excluding one-off items EUR 43.8 (34.2) million, or 9.2% (7.0) of net sales
Order intake• Book-to-bill 1.1 (1.2)• Order intake EUR 550 (601) million• Order backlog EUR 1 703 (1 719)
Earnings per share• EUR -0.26 (0.18)• EPS excluding one-off items EUR 0.41 (0.28)
4
Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/120
100
200
300
400
500
0
1
2
3
4
5
6
7
8
9
10
462 462 415 490 467 456 424 478.6
5.2%
5.3%
8.3%
7.0%
6.0% 6.2%
8.8%
9.2%
Net sales EBIT excl one-off items, %
© 2012 Tieto Corporation
Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/120
10
20
30
40
50
40.7 41.637.8 40.340.440.038.6 40.7
Quarterly developmentNet cash flow
Offshore ratio
ME
UR
Number of personnel
%
Net debt/EBITDA
-8.8%
5
• Offshore ratio of IT Services increased to 35%• Offshore ratio of PES 59%
• Number of personnel down by a net amount of 1 586
Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/120
0.5
1
1.5
0.1 0.9 0.7 0.4 0.5 0.5 0.3 0.2
Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/120
25
50
75
38.8 0.0 40.7 43.7 69.3-2.5
36.3 60.6
Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/120
5000
10000
15000
20000
18 136 18 071 18 145 18 123 18 121 17 723 17 404 16 537
6
2012 – executing strategy
Divest Danish union business Divest financial services product business in UK Divest Italy and Spain Divest Belarus delivery center and closing of Bangalore center Divest local businesses in Germany and Netherlands
Lifecare solution launched Tieto cloud server and Productivity cloud launched Recognized as most competent Microsoft partner in Northern Europe Group-level technology strategy defined
Large outsourcing agreement with NSN Ticket and information system for Helsinki Region Transport City of Stockholm IT operations Folksam IT operations Five year agreement with Kesko Apoteket contract renewal
Strategy defined Competitive cost structure actions initiated Operating model to support strategy execution in place New Leadership Team nominated
• Strategy and organization
• New Service offering and technology
• Key customerWINs
• Divest businesses with low synergy
EBIT excluding one-off items, EUR million 43.8 (34.2)
+28%
137.1 (117.1)
+17%
7
Q4/2012 2012
Net sales, EUR million 479 (490)
-2%
1825 (1828)
0%
Impairment charges mainly related to Germany
-33.6 -34.1
One-off items total -52.1 -75.8
EBIT, including one-off items, EUR million -8.3 (26.1)
-
61.3 (98.1)
-45%
Year of restructuring
Restructuring costs -18.5 -57.1
Capital gain related to the divestment of UK business
15.4
EBIT margin excluding one-off items, % 9.2% (7.0) 7.5% (6.4)
8
Dividend proposal
Dividend policy • Dividend payout ratio
minimum 50% of net result• Average payout ratio in the
past few years at 80%
Dividend proposal for 2012• EUR 0.83 (0.75) per share
Cash flow• 52% of free cash flow*
Strong balance sheet• Net debt / EBITDA currently at 0.2• Financial targets: net debt / EBITDA
less than 1.5
0.00
0.20
0.40
0.60
0.80
1.00
0.50 0.50 0.50
0.700.75
0.83*)
*) Proposal by the Board of Directors
2007 2008 2009 2010 2011 2012
*) Net cash flow from operations - CAPEX
EUR
Market units and business lines Q4 2013
9
© 2012 Tieto Corporation
Finland and the Baltic countriesPositive sales development continued in most sectors
Net sales at EUR 205 (202) million, up by 2%• Strong CSI growth• Strongest growth in the finance and
public sector
EBIT at EUR 21.1 (23.9) million, or 10.3% (11.9%)
• EBIT excluding one-off items EUR 24.7 (24.6) million, or 12.0% (12.2)
• The cost savings programme contributed to continued profit improvement
10
Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12
184 178 169 202 193 190 176 205
7.4%
2.3%
11.5%12.2%
8.9%8.2%
11.0%12.0%
Sales, MEUR
© 2012 Tieto Corporation
ScandinaviaStrongest growth in healthcare, welfare, media and energy sectors
Net sales at EUR 143 (147) million, down by 2%
• Excluding currency effects and the divestment, net sales were down by 4%
• Decreased internal sales to Global Accounts
• External sales up by 1%• Growth in Sweden and Norway
• Good performance in the healthcare and welfare solutions as well as the media and the energy sectors
EBIT at EUR 7.7 (2.4) million, or 5.4% (1.6)
• EBIT excluding one-off items EUR 11.5 (2.4) million, or 8.0% (1.6)
• Subcontracting costs declined substantially• Profit development was partly attributable to weak
comparison figure
11
Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12
141 140 120 147 141 135 129 143
3.7%
7.2%6.6%
1.6%
4.4%
5.7%
8.3% 8.0%
Sales, MEUREBIT excl one-off items, %
© 2012 Tieto Corporation
Central Europe* & RussiaPreparations to divest German and Dutch operations
Net sales at EUR 31 (36) million, external sales at the previous year’s level
• Net sales down by 13% due to internal business transfers
• Largest increase in Russia, especially in the Cards area
• Negative development in Product Engineering Solutions continued
EBIT at EUR -22.4 (-6.8) million, or -71.7% (-18.9)
• EBIT excluding one-off items EUR -2.7(-5.3) million, or -8.5% (-14.7)
• Positive trend continued in Russia• German operations remained
unsatisfactory in the fourth quarter• Spanish and Italian operations divested• Divestment of German and Dutch operations
announced in February 2013
* Austria, Germany, the Netherlands and Poland12
Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12
31 33 31 36 34 31 30 31
-15.8%-16.5%-11.4%-14.1% -12.1%-11.9% -10.6% -8.5%
Sales, MEUR
© 2012 Tieto Corporation
Global AccountsSales declined, profitability improved
Net sales at 166 (185) EUR, down by 10%• Excluding divestment and currency fluctuations,
net sales were down by 7%• Decline in Industry Solutions and Enterprise
Solutions due to customers’ cost savings programmes
EBIT at EUR -10.1 (9.6) million, or -6.1% (5.2)• EBIT excl. one-off items EUR 15.1 (15.3) million,
or 9.1% (8.3)• Profitability improved
• Operations successfully adjusted to meet lower demand
• Substantially lower subcontracting costs
Includes ~20 accounts, sales offices (Canada/USA, Italy, Spain, the UK) and offshore countries China, the Czech Republic, India and Philippines
13
Q1/11 Q2/11 Q3/11 Q4/11 Q1/12 Q2/12 Q3/12 Q4/12
190 193 162 185 175 170 150 166
8.1%
9.6%
7.7% 8.3%8.9%
5.7%
8.6%9.1%
Sales, MEUR EBIT excl one-off items, %
© 2012 Tieto Corporation
Business Lines
Industry Solutions
Enterprise Solutions
Managed Services & Transformation
Product Engineering
• Customer sales EUR 148 (147) million• Healthy growth continued in the energy and HC&W sector• Good sales pipeline for Tieto’s Lifecare solutions• Underlying profitability improved further
• Customer sales EUR 71 (71) million• Finland continued as the strongest market• Profitability improved substantially, mainly due to the
cost savings programme
• Customer sales down to EUR 175 (182) million, partly due to some large transformation projects in Sweden
• Profitability improved: weak comparison figure and cost savings programme
• Customer sales EUR 85 (90) million• Mobile devices segment still under pressure, healthy
development in network equipment manufacturers’ segment • Sales decline partly attributable to PES operations in German• Still potential to improve the utilization rate
31%(30)
15%(14)
36%(37)
18%(18)
% of total sales
14
© 2012 Tieto Corporation
Competitive cost structure programme ahead of plan• Target to achieve annualized net savings of EUR 60 m
• Net savings of around EUR 25 million gained in 2012• Total restructuring costs of EUR 57.1 million booked by the end of 2012
• Including ~200 redundancies mainly in Q1 2013
• In 2013, one-off costs are expected to be far lower, around half of the 2012 level
15
300
1 400
600
18 100
16 500
1 Jan 2012
31 Dec 2012Competitive cost structure
reductions
Divestments Outsourcing deals
Recruitment for new
competences
18 000
17 000
100
16 000
Of whichFinland 450Sweden 300Germany 180other 470
Nu
mb
er
of
pe
rso
nn
el
~ 550 employees
~ 100 employees
HC Central Europe~ 100
employees
Industrial R&D~ 150
employees
Events after review periodDivestment of local German and Dutch businesses
Divested local businesses
Tieto Germany
Tieto Netherlands
From Tieto India(dedicated to
Germany)
From Tieto Poland
(dedicated to Germany)
TIPS for forest industry~100 employees
Energy Component industry
~20 employees
Continuing global businesses in Tieto
Global PES and other global roles ~20 employees
• Tieto divests its local operations in Germany and Netherlands to German industrial group AURELIUS
• Some 900 employees will be transferred to new company
Tieto India (~1 450) and Poland (~950) remain key delivery
centers for IT services and Product Engineering
Services
16
• Net sales of divested businesses amounted to over EUR 110 million in 2012
• Tieto’s operating margin of underlying business will improve by some 0.5 percentage points based on 2012 performance
• German businesses were loss-making in 2012
• Tieto booked about EUR 30 million in impairment in Q4 2012
• Tieto is expected to book some EUR 5 million in additional divestment costs
• Mainly related to taxes, at the time of the closing
• Cash flow impact will amount to approximately EUR 20 million negative• Mainly due to the restoration of shareholders equity in Tieto
Deutschland GmbH, which occur between signing and closing
• Closing is expected to take place Q2 2013
Events after review periodDivestment of local German and Dutch businesses
17
Full-year outlook for 2013
Tieto expects its organic net sales development to be at the level of the IT services market growth, with the exception of weaker outlook in the telecom sector
Tieto expects its profitability to continue to improve and full-year operating profit (EBIT) excluding one-off items to increase from the previous year’s level (EUR 137.1 million in 2012)
18
Strategy update
FocusedSimplifiedPositioned for future
19
Strategy implementation has specific topics for each year
• Transition to industry driven structure• Accelerate Consulting and System Integration
expansion and Managed Services automation• Implement competitive cost structure• Focus on 2012 operating plan
• Expand full life-cycle IT services• Make future market choices and initiate execution• Product Engineering Services strategy defined and
execution to pursue global opportunities starts
• Seek growth in and beyond core markets
• Consider strategic inorganic opportunities
2015-2016Focus on
future growth
2013-2014Expand service
scope
2012Build the
foundation
20
Priorities for 2013
• Transformation driven customer value
• High quality project based operations
• Employer of choice
• Proactively transform customers’ legacy environments
• Drive mobility and SaaS models for our industry products
• Expand PES’ global customer base
• Enhance industry specific full-stack implementations
• Continue standardization and quality focus in managed services
• Accelerate global delivery capability
• Increase industry process competencies
• Promote knowledge sharing networks
• Invest into CSI transformation competencies
Priorities Objectives
Financial objectives (Profitability, Cash flow, Revenue, Order intake)
21
New operating model based onproject-driven steeringReporting segments in 2013
Financial Services
Public,Healthcareand Welfare
Manufacturing,Retail andLogistics
Telecom, Media, Energy and Utilities
Enterprise Solutions Consulting and System Integration
Managed Services and Transformation Managed Services
Product Engineering Services
Industry Solutions Industry Products
Sa
les
an
d E
BIT
fo
r S
erv
ice
Lin
es
wil
l b
e r
ep
ort
ed
Sales for Industry Groups will be reported
2013
22
Q4 2012 in brief
• Strong improvement in underlying profitability
• Strategy execution on schedule
• Divestments of low-synergy businesses
23
Financial calendar
Week 8/2013 Annual Report 2012 on Tieto's website
25 March 2013 Annual General Meeting
25 April 2013 Interim report 1/2013
19 July 2013 Interim report 2/2013
23 October 2013 Interim report 3/2013
24
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