Tieto Q4/2012

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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 DataCloud Social

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, %


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


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


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, %


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


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, %


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


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

Num

ber o

f per

sonn

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 2013Tieto 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

Sale

s an

d EB

IT fo

r Ser

vice

Lin

es w

ill

be re

port

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

We are committed to developenterprises and society through information technology

Tieto Q4/2012

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