Tieto's Interim Report 2/2016 – Growth of 5% – profit

Tieto Corporation          INTERIM REPORT        22 July 2016, 8.00 am EET · Group sales growing by 5% driven by 12% growth in software-based Industry Products · Adjusted operating margin improves to above 9% · Healthy profitability in Product Development Services The full interim report with tables is available at the end of this release Key figures for the second quarter IT services · Sales growth totalled 6.1%, sales in local currencies up by 7.3% · Adjusted operating profit amounted to EUR 32.4 (26.9) million, 9.3% (8.1) of sales The Group · Sales growth totalled 4.7%, sales in local currencies up by 5.9% · Adjusted operating profit amounted to EUR 35.8 (30.1) million, 9.4% (8.3) of sales · Order intake (Total Contract Value) at EUR 326 (340) million, order backlog at EUR 1 757 (1 737) million – stronger order intake expected for the second half +------------------------+--------+--------+--------+--------+ | |4–6/2016|4–6/2015|1–6/2016|1–6/2015| +------------------------+--------+--------+--------+--------+ |Net sales, EUR million | 381.0  | 363.8  | 748.5  | 729.4  | +------------------------+--------+--------+--------+--------+ |   Change, % | 4.7   | -5.8  | 2.6  | -5.7  | +------------------------+--------+--------+--------+--------+ |   Change in local | 5.9   | -4.5  | 3.6  | -3.6  | |currencies, % | | | | | +------------------------+--------+--------+--------+--------+ |Operating profit | 35.7  | 26.2  | 67.3  | 43.4  | |(EBITA), EUR million 1) | | | | | +------------------------+--------+--------+--------+--------+ |Operating margin | 9.4  | 7.2  | 9.0  | 5.9  | |(EBITA), % | | | | | +------------------------+--------+--------+--------+--------+ |Operating profit (EBIT),| 32.3   | 23.1  | 60.6  | 37.0  | |EUR million | | | | | +------------------------+--------+--------+--------+--------+ |Operating margin (EBIT),| 8.5   | 6.3  | 8.1  | 5.1  | |% | | | | | +------------------------+--------+--------+--------+--------+ |Adjusted 2) operating | 35.8   | 30.1  | 67.3  | 60.8  | |profit (EBIT), EUR | | | | | |million | | | | | +------------------------+--------+--------+--------+--------+ |Adjusted 2)  operating | 9.4   | 8.3  | 9.0  | 8.3  | |margin (EBIT), % | | | | | +------------------------+--------+--------+--------+--------+ |Profit after taxes, EUR | 24.2   | 17.4  | 45.7  | 26.5  | |million | | | | | +------------------------+--------+--------+--------+--------+ |EPS, EUR | 0.33  | 0.24  | 0.62  | 0.36  | +------------------------+--------+--------+--------+--------+ |Net cash flow from |-13.7   | 12.4  | 33.2  | 49.1  | |operations, EUR million | | | | | +------------------------+--------+--------+--------+--------+ |Return on equity, 12 | 26.2  | 4.5  | 26.2  | 4.5  | |-month rolling, % | | | | | +------------------------+--------+--------+--------+--------+ |Return on capital | 25.9  | 7.5  | 25.9  | 7.5  | |employed, 12-month | | | | | |rolling, % | | | | | +------------------------+--------+--------+--------+--------+ |Capital expenditure and | 11.8   | 10.6  | 21.2  | 22.2  | |acquisitions, EUR | | | | | |million | | | | | +------------------------+--------+--------+--------+--------+ |Interest-bearing net | 103.3  | 5.3   | 103.3  | 5.3  | |debt, EUR million | | | | | +------------------------+--------+--------+--------+--------+ |Net debt/EBITDA | 0.5   | 0.0  | 0.5  | 0.0  | +------------------------+--------+--------+--------+--------+ |Book-to-bill | 0.9   | 0.9   | 0.9  | 1.1  | +------------------------+--------+--------+--------+--------+ |Order backlog | 1 757| 1 737 |  1 757|  1 737 | +------------------------+--------+--------+--------+--------+ |Personnel on 30 June  | 13 381 | 12 949| 13 381| 12 949| +------------------------+--------+--------+--------+--------+ 1) includes amortization of all intangible items; previously, only acquisition -related intangible items included 2) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items Full-year outlook for 2016 unchanged Tieto expects its adjusted1) full-year operating profit (EBIT) to increase from the previous year’s level (EUR 150.8 million in 2015). 1) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items CEO’s comment Comment regarding the interim report by Kimmo Alkio, President and CEO: “It is gratifying to see good growth of 5% for the company, and somewhat higher growth for our IT services business. Simultaneously, our profitability development continued on a positive trend line and we achieved an adjusted operating margin level of over 9%. During the second quarter, our software-based industry solutions and Consulting and System Integration delivered especially strong results. Also Financial Services has consistently performed well. I’m pleased to see our business strengthening based on continued investments in future innovation and growth businesses. We are maintaining our investment agenda in areas such as cloud computing, Customer Experience Management, Industrial Internet, and new Security Services. In addition, we invest in software-based industry solutions to increase value for our customers and support our growth ambitions. It is encouraging to see the good engagement we have been able to create among our stakeholders after the launch of our new strategy. We are building on this positive momentum and look forward to a good second half of the year.” Financial performance by service line +-------------------+---------+---------+---------+---------+---------+ |EUR million | Customer| Customer|Change, %|Operating|Operating| | | sales| sales| | profit| profit| | | 4–6/2016| 4–6/2015| | 4–6/2016| 4–6/2015| +-------------------+---------+---------+---------+---------+---------+ |Managed Services | 134 | 131| 2 | 9.8| 3.1| +-------------------+---------+---------+---------+---------+---------+ |Consulting and | 107| 101| 6| 10.9| 8.5| |System Integration | | | | | | +-------------------+---------+---------+---------+---------+---------+ |Industry Products | 110| 98| 12| 12.5| 10.8| +-------------------+---------+---------+---------+---------+---------+ |Product Development| 31| 33| -9| 3.3| 5.7| |Services | | | | | | +-------------------+---------+---------+---------+---------+---------+ |Support Functions | | | | -4.2| -5.0| |and Global | | | | | | |Management | | | | | | +-------------------+---------+---------+---------+---------+---------+ |Total | 381 | 364| 5 | 32.3| 23.1| +-------------------+---------+---------+---------+---------+---------+ Operating margin by service line +----------------+---------+---------+-----------+---------------------+ |% |Operating|Operating|Adjusted1) |Adjusted1)  operating| | | margin| margin| operating| margin| | | 4–6/2016| 4–6/2015| margin| 4–6/2015| | | | | 4–6/2016| | +----------------+---------+---------+-----------+---------------------+ |Managed Services| 7.4 | 2.4| 7.4| 7.6| +----------------+---------+---------+-----------+---------------------+ |Consulting and | 10.2| 8.4| 10.6| 8.6| |System | | | | | |Integration | | | | | +----------------+---------+---------+-----------+---------------------+ |Industry | 11.4| 11.0| 12.9| 12.2| |Products | | | | | +----------------+---------+---------+-----------+---------------------+ |Product | 10.7| 17.1| 11.1| 9.6| |Development | | | | | |Services | | | | | +----------------+---------+---------+-----------+---------------------+ |Total | 8.5| 6.3| 9.4| 8.3| +----------------+---------+---------+-----------+---------------------+ 1) adjusted for restructuring costs, capital gains/losses, goodwill impairment charges and other items Customer sales by industry group +-----------------------------------+--------------+--------------+---------+ |EUR million |Customer sales|Customer sales|Change, %| | | 4–6/2016| 4–6/2015| | +-----------------------------------+--------------+--------------+---------+ |Financial Services | 93| 88| 5| +-----------------------------------+--------------+--------------+---------+ |Manufacturing, Retail and Logistics| 82| 77| 6| +-----------------------------------+--------------+--------------+---------+ |Public, Healthcare and Welfare | 120| 107| 13| +-----------------------------------+--------------+--------------+---------+ |Telecom, Media and Energy | 56| 58| -3| +-----------------------------------+--------------+--------------+---------+ |IT services  | 350| 330| 6| +-----------------------------------+--------------+--------------+---------+ |Product Development Services | 31 | 33| -9| +-----------------------------------+--------------+--------------+---------+ |Total | 381| 364| 5| +-----------------------------------+--------------+--------------+---------+ M&A impact by service line +----------------------------------+---------------------+---------------------+ | | Growth, %| Organic growth, %| | |(in local currencies)|(in local currencies)| | | 4–6/2016| 4–6/2016| +----------------------------------+---------------------+---------------------+ |Managed Services | 2.7| 2.7| +----------------------------------+---------------------+---------------------+ |Consulting and System Integration | 6.1 | 1.1 | +----------------------------------+---------------------+---------------------+ |Industry Products   | 15.4 | 6.5 | +----------------------------------+---------------------+---------------------+ |IT services  | 7.3 | 3.1 | +----------------------------------+---------------------+---------------------+ |Product Development Services  | -8.3 | -8.3 | +----------------------------------+---------------------+---------------------+ |Total  | 5.9 | 2.1 | +----------------------------------+---------------------+---------------------+ M&A impact by industry group +------------------------------------+---------------------+-------------------- -+ | | Growth, %| Organic growth, %| | |(in local currencies)|(in local currencies)| | | 4–6/2016| 4–6/2016| +------------------------------------+---------------------+-------------------- -+ |Financial Services  | 7.1 | 6.8 | +------------------------------------+---------------------+-------------------- -+ |Manufacturing, Retail and Logistics | 5.9 | 2.3 | +------------------------------------+---------------------+-------------------- -+ |Public, Healthcare and Welfare  | 13.3 | 5.5 | +------------------------------------+---------------------+-------------------- -+ |Telecom, Media and Energy  | -0.9 | -5.2 | +------------------------------------+---------------------+-------------------- -+ |IT services  | 7.3 | 3.1 | +------------------------------------+---------------------+-------------------- -+ |Product Development Services  | -8.3 | -8.3 | +------------------------------------+---------------------+-------------------- -+ |Total  | 5.9 | 2.1 | +------------------------------------+---------------------+-------------------- -+ 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, +358 50 321 7510, tanja.lounevirta (at) tieto.com Press conference for analysts and media will be held on Friday 22 July at Tieto’s premises in Helsinki, address: Aku Korhosen tie 2-6 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=220716)  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 7479 0361 Sweden: +46 (0)8 5033 6574 UK: +44 (0)203 043 2002 US: +1 719 325 2131 Conference code: 6304748 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 aims to capture the significant opportunities of the data-driven world and turn them into lifelong value for people, business and society. We aim to be customers’ first choice for business renewal by combining our software and services capabilities with a strong drive for co-innovation and ecosystems. Headquartered in Finland, Tieto has over 13,000 experts in close to 20 countries. Tieto’s turnover is approximately EUR 1.5 billion and shares listed on NASDAQ in Helsinki and Stockholm.  www.tieto.com