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© Tieto Corporation
Public
Public
Kimmo Alkio, President and CEO
Lasse Heinonen, CFO
Tanja Lounevirta, Head of IR
26 April 2018
Q1 2018
Strong start for 2018
© Tieto Corporation
Q1 2018 in brief
2
Strong start for 2018
› Growth in local currencies 6%, organically 3%
› Strong profitability in Technology Services and Modernization and
Product Development Services
› Industry Solutions renewal progressing – investments continue
› Order backlog supports the growth ambitions for 2018
Outlook in the Nordic IT market remains healthy
› Solid economic outlook continues to support IT market
› Current currency trend unfavorable for Tieto
› Tieto expects the Nordic IT services market to grow by ~2% in 2018
Mahdollisuuksia
Market drivers in the data-driven world
› Design-led services
› Advanced analytics/AI
› Software driven
› Ecosystems
› Cyber security, DevOps, SIAM
› Cloud
› Business process optimization
› Technology modernization
› Robotics process automation
New
businesses
and innovation
Agility and
efficiency
Public
© Tieto Corporation
2015 2020
Traditional services Emerging services
Business mix change driven by growth businesses and
application services*
WE AIM TO GROW FASTER THAN THE MARKET*
*IT market growth expectation (CAGR
2015–2020) for the Nordics at 1.5–3%
SHARE OF IT SERVICES Q1/2018
Growth
businesses**
Other services and
solutions***
Traditional services42%
GROWTH Q1/2018
9%
17%
-1%
* Application services growth in local currencies 8%, incl. in traditional services
** Growth solution portfolio described on the next slide
***Including Avega
39%
19%EMERGING SERVICES
TRADITIONAL SERVICES
© Tieto Corporation
Selected industry solutions
Customer Experience
ManagementData-Driven Businesses Cloud services Security services
Enhanced solution portfolio to drive growthUp by 9% in local currencies
+12% +23% -2%+34%
+5%
Lifecare
Payments
Credit solutions
Case management
Production excellence
SmartUtilities
Hydrocarbon
management
© Tieto Corporation
392 384 354 408 393
1 21
2 13
9,0 9,2
11,612,0
9,0
0
2
4
6
8
10
12
14
0
100
200
300
400
500
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18
Net of divestment and acquisitions
Customer sales adjusted
Adjusted* EBIT, %
Q1 2018 key figures
Net sales up by 3.4%› EUR 406.3 (393.1) million› Growth in local currencies 6%› Organic growth in local currencies 3%
EBIT margin 9.2% (5.6%)› EBIT EUR 37.3 (22.0) million› Adjusted* EBIT EUR 36.6 (35.6) million, 9.0%
(9.0%)
Order backlog EUR 1 787 (1 864) million› Negative currency impact› Order backlog for 2018 provides support for the
growth ambitions for the year
7
MEUR %
*) adjusted for restructuring costs, capital gains/losses,
goodwill impairment charges and other items
© Tieto Corporation
79,7
-6,110,8
66,6 61,5
-9,3-16,9
-9,2 -11,6 -8,2
-25
-5
15
35
55
75
95
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18
Net cash flow from operations and capital expenditure
Net cash from operations Capital expenditure
13822 13754 13851 14329 14581
48,6 49,0 49,6 48,7 49,4
0
10
20
30
40
50
60
0
5000
10000
15000
20000
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18
Number of full-time employees and offshore ratio
Number of personnel Offshore ratio
0,2
0,90,8 0,8
0,5
0
0,5
1
1,5
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18
Net debt/EBITDA
392 384 354 408 393
1 2 1 2 13
0100200300400500
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18
Net sales
Net of divestment and acquisitionsCustomer sales adjusted
Quarterly development
8
Number of personnel up by a net amount of 760
Offshore ratio: IT services 47.0% (46.8%) PDS 69.9% (66.0%)
%
MEUR
Employees
MEUR
© Tieto Corporation10
Service Lines
Technology Services and Modernization
Industry Solutions
Industrial and
Consumer ServicesPublic, Healthcare
and WelfareFinancial Services
Product Development Services
New
data-driven
businesses *)
*) Reported in Industry Solutions
Business Consulting and Implementation
Support Functions
© Tieto Corporation
198 194 180 199 199
10,911,9
13,8 13,211,6
0
2
4
6
8
10
12
14
16
0
50
100
150
200
250
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18
%MEUR
Net of divestment and acquisitions
Customer sales adjusted
Adjusted* EBIT, %
Technology Services and Modernization
Customer sales in Q1› EUR 199 (198) million, +1%, or +3% in local
currencies
EBIT› Adjusted* EBIT EUR 23.1 (21.6) million, 11.6% (10.9)
Q1 highlights› Growth (in local currencies) driven by infrastructure
cloud, up by 23%, and application services, up by 8%› Decline in traditional infrastructure services continued,
down by 6% › Continued service standardization and strong add-on
sales contributed to profitability› Q2 profitability anticipated to be close to Q2/2017
level
11*) adjusted for restructuring costs, capital gains/losses,
goodwill impairment charges and other items
© Tieto Corporation
39 38 32 38 37
413
7,1
4,0
2,8
4,85,5
0
1
2
3
4
5
6
7
8
0
10
20
30
40
50
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18
%MEUR
Net of divestment and acquisitions
Customer sales adjusted
Adjusted* EBIT, %
Business Consulting and Implementation
Customer sales Q1› EUR 50 (39) million, +28%, or +31% in local currencies› Organic growth in local currencies -3%
EBIT› Adjusted* EBIT EUR 2.8 (2.8) million, 5.5% (7.1)
Q1 highlights› Growth supported by the acquisition of Avega› Good growth in CEM continued› Lower number of working days and currency changes
impacted both growth and profitability› Ari Järvelä appointed as Head of BCI as from 1 April › Q2 profitability anticipated to improve from Q2/2017
12*) adjusted for restructuring costs, capital gains/losses,
goodwill impairment charges and other items
© Tieto Corporation
123 121 113 134 123
1 11
1
8,09,0
14,415,8
7,6
0
2
4
6
8
10
12
14
16
18
0
50
100
150
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18
%MEUR
Net of divestment and acquisitions
Customer sales adjusted
Adjusted* EBIT, %
Industry Solutions
Customer sales Q1› EUR 123 (124) million, -1%, or +3% in local currencies
EBIT› Adjusted* EBIT EUR 9.4 (9.9) million, 7.6% (8.0)
Q1 highlights› Good growth in SmartUtilities, Production Excellence and
Case Management› Lifecare growth slightly above the market› Sales for Payments lower – preparations for new product
launch ongoing› Technology renewal and business model change
continue in a number of key solutions› Adjusted EBIT affected by technology investments and
negative currency effects› Q2 adjusted operating margin expected to remain close
to Q2/2018 level
13*) adjusted for restructuring costs, capital gains/losses,
goodwill impairment charges and other items
© Tieto Corporation
32 31 29 34 34
13,6
8,37,5
10,3
12,7
0
2
4
6
8
10
12
14
16
0
5
10
15
20
25
30
35
40
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18
%MEUR
Net of divestment and acquisitions
Customer sales adjusted
Adjusted* EBIT, %
Product Development Services
Customer sales Q1› EUR 34 (32) million, +7%, or +11% in local
currencies
EBIT› Adjusted* EBIT EUR 4.3 (4.3) million, 12.7% (13.6)
Q1 highlights› Strong volume development with the largest key
customers and good development in automotive› Periodical licence sales contributed to growth and
profitability› Strong EBIT margin despite the negative working day
impact› Q2 adjusted EBIT margin anticipated to be at
Q2/2017 level
14*) adjusted for restructuring costs, capital gains/losses,
goodwill impairment charges and other items
© Tieto Corporation
Business Consulting
& Implementation
15
Industry Groups
Technology Services and Modernization
Industry Solutions
Product Development Services
New
data-driven
businesses *)
Public, Healthcare
and WelfareFinancial Services
Industrial and
Consumer Services
*) Reported in Industry Solutions
© Tieto Corporation
96 97 92 100 95
1
0
25
50
75
100
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18
MEUR
Customer sales adjusted
Net of divestment and acquisitions
Financial ServicesCustomer sales Q1› EUR 96 (96) million, at Q1/2017 level, +3% in local
currencies
Sales split by service line
Q1/2018 Q1/2017TSM 58% 57%BCI 6% 5%IS 36% 38%
Q1 highlights› Good development in TSM, especially in cloud-based
platform services, volume growth and new agreements in application services
› Investments, specifically in Payments, to drive future growth
› New agreements include Kraft Bank and Ilmarinen
16
© Tieto Corporation
128 127 112 136 131
2
0
25
50
75
100
125
150
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18
MEUR
Customer sales adjusted
Net of divestment and acquisitions
Public, Healthcare and WelfareCustomer sales Q1› EUR 133 (128) million, +4%, or +7% in local currencies
Sales split by service line
Q1/2018 Q1/2017TSM 47% 47%BCI 9% 8%IS 44% 45%
Q1 highlights› Development strongest in Technology Services and
Modernization, driven by cloud, end-user and application services
› Large Electronic Medical Record procurements ongoing in all Nordic countries while delays in some large-scale renewal projects
› Several agreements, e.g. Nynäshamn and Värmdö municipalities
17
© Tieto Corporation
137 130 121 139 133
1 21
1 10
0
25
50
75
100
125
150
175
Q1/17 Q2/17 Q3/17 Q4/17 Q1/18
MEUR
Customer sales adjusted
Net of divestment and acquisitions
Industrial and Consumer ServicesCustomer sales Q1› EUR 143 (138) million, +4%, or +6% in local
currencies› Organically, sales in local currencies at Q1/2017 level
Sales split by service line
Q1/2018 Q1/2017TSM 56% 60%BCI 22% 17%IS 22% 23%
Q1 highlights› Growth supported by the acquisition of Avega› Healthy development in Energy Sweden continued› Good growth especially in SmartUtilities and
Production Excellence solutions› New agreements include Posti, S Group, Sodexo
18
Way forward
Performance drivers
2018 – IT services
› We aim to grow faster than the market
› Based on current rates, currency impact on is ~EUR 37
million and on profit ~EUR 8 million
› Efficiency programme: drive for productivity continues
› Offering development costs around 5% of Group sales
› Restructuring costs 1–2% of Group sales
Q2 revenue and profitability
› Negative currency effects
› A higher number of working days
Guidance for 2018 unchanged
› Tieto expects its full-year adjusted*)
operating profit (EBIT) to increase
from the previous year’s level
(EUR 161.4 million**) in 2017)
*) Adjusted for restructuring costs, capital gains/losses,
goodwill impairment charges and other items
**) Restated due to the adoption of IFRS 15
Public
© Tieto Corporation
2018 – strong start for the year
Shareholders
Value creation and
sustainability
Market
Dynamic
data-driven world
Employees
Celebrating
Tieto50