Tieto's Interim Report 1/2015 – Accelerated investments

Tieto Corporation          INTERIM REPORT        28 April 2015, 8.00 am EET · Modest growth in IT services – continued strong order intake · In IT services, investments in offering development and the Managed Services automation programme affect first-half profitability · Efficiency measures improve profitability in Product Development Services · Full-year outlook remains unchanged The full interim report with tables is available at the end of this release Key figures for the first quarter · Organic growth in local currencies was -3.2% · In IT services, organic growth in local currencies was 0.5% · Order intake (Total Contract Value) amounted to EUR 430 (402) million and order backlog was EUR 1 819 (1 582) million · First-quarter operating profit excl. one-off items amounted to EUR 30.7 (34.5) million, 8.4% (8.9) of sales · Operating profit includes a negative currency effect of around EUR 4 million 1–3/2015 1–3/2014 Net sales, EUR million 365.6   387.0    Change, % -5.5   -8.7    Organic change in local currencies, % -3.2   -1.4 Operating profit (EBITA), EUR million 14.0   34.4 Operating margin (EBITA), % 3.8   8.9 Operating profit (EBIT), EUR million 13.9   34.0 Operating margin (EBIT), % 3.8   8.8 Operating profit (EBIT) excl. one-off items1), EUR million 30.7   34.5 Operating margin (EBIT) excl. one-off items1), % 8.4   8.9 Profit after taxes, EUR million 9.1   24.6 EPS, EUR 0.12   0.34 Net cash flow from operations, EUR million 36.7   50.0 Return on equity, 12-month rolling, % 4.5   13.5 Return on capital employed, 12-month rolling, % 7.7   15.3 Investments, EUR million 11.6   13.4 Interest-bearing net debt, EUR million -85.9   -20.5 Net debt/EBITDA -0.6   -0.1 Book-to-bill 1.2   1.0 Order backlog 1 819  1 582 Personnel on 31 March 13 456  14 102 1) Excl. capital gains, goodwill impairment charges and restructuring costs Full-year outlook for 2015 unchanged Tieto expects its full-year operating profit (EBIT) excluding one-off items to increase from the previous year’s level (EUR 150.2 million in 2014). CEO’s comment Comment regarding the interim report by Kimmo Alkio, President and CEO: “The current era of digitalization, which impacts all industries and societies worldwide, continues to provide attractive business opportunities for Tieto. With the aim of becoming the thought leader and advisor for enterprise customers in the Nordic countries, we have accelerated our investments in areas with promising future business opportunities. Currently, we have increased our focus on digitalizing our own services. As an example, additional investments have been made in the Managed Services automation programme. This is expected to deliver a superior service experience to our customers and improved profitability levels towards the year end. In addition, we are continuing to actively invest in growth businesses such as Industrial Internet, Customer Experience Management, Healthcare and Cloud Computing. I’m pleased to see that our cloud business continued to grow in the first quarter at a year-on-year rate of over 100%. While investments for future growth and competitiveness will somewhat strain our first-half profitability, the underlying business continues to develop favourably.” Financial performance by service line EUR million  Customer  Customer Change, % Operating Operating sales sales profit profit 1–3/2015 1–3/2014 1–3/2015 1–3/2014 Managed Services 126 127 -1 -8.3 10.9 Consulting and 99 100 -1 8.2 11.1 System Integration Industry Products 94 100 -6 12.6 15.5 Product Development 47 60 -22 6.5 1.1 Services Support Functions -5.0 -4.6 and Global Management Total 366 387 -6 13.9 34.0 Operating margin by service line % Operating Operating Operating Operating margin margin margin excl. margin excl. 1–3/2015 1–3/2014 one-off items1) one-off items1) 1–3/2015 1–3/2014 Managed Services -6.6  8.5  3.6 8.4 Consulting and 8.3 11.1 10.8 11.2 System Integration Industry 13.3 15.4 13.4 15.4 Products Product 14.0 1.9 14.0 2.6 Development Services Total 3.8 8.8 8.4 8.9 1) Excl. capital gains, impairments and restructuring costs Organic change in local currency by service line EUR million Customer Customer Change, % sales adj. sales adj. for divestments for 1–3/2014 acquisitions and currency 1–3/2015 Managed Services 130 127 2 Consulting and 101 100 1 System Integration Industry 99 100 -1 Products IT services 329 327 1 Product 46 60 -24 Development Services Total 375 387 -3 Customer sales by industry group EUR million Customer sales Customer sales Change, % 1–3/2015 1–3/2014 Financial Services 84 83 0 Manufacturing, Retail and Logistics 78 79 -2 Public, Healthcare and Welfare 101 100 1 Telecom, Media and Energy 57 65 -12 IT services 319 327 -2 Product Development Services 47 60 -22 Total 366 387 -6 Organic change in local currency by industry group EUR million Customer Customer Change, % sales adj. for sales adj. for divestments acquisitions and 1-3/2014 currency 1-3/2015 Financial 87 83 5 Services Manufacturing, 79 79 0 Retail and Logistics Public, 104 100 4 Healthcare and Welfare Telecom, Media 59 65 -9 and Energy IT services 329 327 1 Product 46 60 -24 Development Services Total 375 387 -3 For further information, please contact: Lasse Heinonen, CFO, tel.+358 2072 66329, +358 50 393 4950, lasse.heinonen (at) tieto.com Tanja Lounevirta, Head of Investor Relations, tel.+358 2072 71725 (http://calltotel+358207271725), +358 50 321 7510, tanja.lounevirta (at) tieto.com Press conference for analysts and media will be held at Tieto’s premises in Stockholm, address: Fjärde Bassängvägen 15, on Tuesday 28 April 2015 at 11.00 am EET (10.00 am CET, 9.00 am UK time). The results will be presented in English by Kimmo Alkio, President and CEO, and Lasse Heinonen, CFO. The conference will be webcasted (http://webcast.tieto.com/quarterlyreport/?q=280415) and can be viewed live on Tieto's website (http://www.tieto.com/investors). To join the conference, attendees need Adobe Flash plugin version 10.1.0 or newer. The meeting participants can also join a telephone conference that will be held at the same time. The telephone conference details can be found below. Telephone conference numbers Finland: +358 (0)9 6937 9590 Sweden: +46 (0)8 5065 3937 UK: +44 (0)20 3427 1909 US: +1212 444 0896 Conference code: 8765732 To ensure that you are connected to the conference call, please dial in a few minutes before the start of the press and analyst conference. An on-demand video will be available after the conference. Tieto publishes financial information in English and Finnish. TIETO CORPORATION DISTRIBUTION NASDAQ Helsinki NASDAQ Stockholm Principal Media Tieto is the largest IT services company in the Nordics providing full lifecycle IT services. We also provide global product development services for companies in the communications and embedded technologies arena. Through industry insight, technology vision, and innovative thinking, Tieto proactively strives to inspire and engage our customers in finding new ways of accelerating their business. Building on a strong Nordic heritage, Tieto combines global capabilities with local presence. Headquartered in Helsinki, Finland, Tieto has over 13 000 experts in more than 20 countries. Turnover is approximately EUR 1.5 billion. Tieto’s shares are listed on NASDAQ in Helsinki and Stockholm. www.tieto.com