Creating digital advantage for businesses and society€¦ · Digital advantage for businesses and...

Creating digital advantage for businesses and society

Outline

• Value proposition, strategy and market

• Merger and integration status

• Q1 in brief

• Performance drivers and guidance 2020

• Why invest in TietoEVRY?

• Appendix

2

Value proposition, strategy and market

IndiaPoland

Czech Republic China

Ukraine

10 000 More than

customersEUR

3 billion

Turnover of approximately

24 000professionals globally

Investments in technology and services more than

EUR 120 million* per year

*incl. capital expenditure

and operational costs

Serving customers in over

90 countries worldwide

Estonia, Latvia, Lithuania

Bringing Global capabilities to the Nordics in Digital

Consulting and Cloud & Infrastructure Services

Scaling the Nordic mindset globally in Industry Software,

Financial Services and Product Development Services

The market leader

in Digital Services

in Norway, Sweden

and Finland

Digital advantage for businesses and societies

4

We are the backbone of the Nordic society, transforming businesses with expertise, technology and data,

to harness the biggest opportunities of our time

Digital Consulting

Cloud & Infra

Industry-specific

software

Financial Services

Solutions

Product Development

Services (PDS)

Global capabilities and ecosystems

NordicServices focus International

• Drive competitiveness of Nordic

enterprises and public sector

• Accelerate digital consulting and cloud

services to realize customers digital

agenda

• Industry Software and Financial Services

leading international expansion

• PDS expands its global customer base

across industries

Note: Other businesses in the portfolio include a) local businesses in Austria, Latvia, Lithuania, Estonia, Russia and b) non-Nordic customers served from India and Ukraine, with own go-to-market

Our value proposition & strategy

Our five service lines (adopted as from Q2 2020)

Bringing global capabilitiesto the Nordics

Scaling the Nordic mindset globally

Product Development

Services

We accelerate ‘time to market’ for high-tech

software products by applying over 25

years of software R&D expertise deployed

globally

Industry Software

We accelerate value creation and

realization with deep understanding of

customers’ industries and requirements with

our rich portfolio of industry-specific

software deployed globally

Financial Services

SolutionsWe deliver all core financial services and

processes full stack with our flexible

modules and innovative global software

platforms built with deep understanding and

experience of the financial services

industry.

Cloud & Infrastructure

We modernize, simplify and secure

customers’ businesses with automated

solutions enhanced by the largest

magnitude of technology alternatives &

delivery capability in the Nordics

Digital Consulting

We help capture new value from technology

and data throughout customers’ digital

journeys, powered by one of the largest

pool of passionate digital specialists

6

IT market outlook

Covid-19 expected to have negative

impact on IT market in 2020

Industry analysts market growth

estimates range from --3% to -7%

7

New digital services, business

continuity and cost optimization

continue to be a driver for

investments

Adapting to Covid-19

8

Initiated

measures to

secure health and

safety of

employees and

ensure continuity

of customer

services

Current market

indicators imply a

2-5% negative

full-year revenue

impact due to

Covid-19 in 2020

Short-term cost

savings to

mitigate potential

financial impact

Resilience

towards Covid-19

supported by

industry mix and

long-term nature

of infrastructure,

application and

software

businesses

Adapting to a new

normal through

digital services

Recilience towards Covid-19 varies by businesses

Digital consulting - Most impacted

Product development services -

Impacted less than digital consulting

Infrastructure services - Impacted

slightly more than industry software

Industry software, incl. Financial

Services Solutions - Least impacted

• Primarily short-term contracts while relationships with customers are long

• Application services with long-term agreements represent approximately

20% of the consulting revenue

• Primarily short-term contracts, while relationships with customers are long.

• Stability due to our role in key customers core development roadmaps

• Primarily long-term commitments of 3-5 years

• Fluctuations in demand in some services in the short term, e.g. increase in

network capacity while some onsite installations postponed

• Primarily long-term contractual periods up to 5-7 years with customer

relationships lasting much longer

30 % of

revenue

5 % of

revenue

30 % of

revenue

35 % of

revenue

9

10

Merger and integration update

Integration well on schedule

• Several important integration milestones

completed

• New organization and operating model

in place

• Leadership appointments across all

businesses and functions

• Active common collaboration

tools/platform

• Actions taken to drive competitiveness

through merger efficiencies

11

12

Integrated structure and

leadership

Common processes and

systems

Integrated go-to-market and

service portfolio

Employee engagement and

cultural integration

Continuous focus on customer engagement, delivery quality and efficiency continues during integration

Synergy planning and realization

Integration focus area Current status

*Progress relative to target-state as an integrated TietoEVRY

• Organization established

• Leadership nominated at all levels

• Interoperating collaboration tools in place

• Active development of reporting and forecasting

• Common customer teams active in the market

• Unified services and delivery teams

• Employee onboarding at all levels

• Active engagement through leadership continues

• Planning ongoing per business and function

• Competitive cost structure actions initiated

Integration progressing as planned

13

• Merger efficiency run rate increased to EUR 45-55

million (up from EUR 30-40 million) by end of

2020

• One-time integration costs for 2020 estimated to be

EUR 50-60 million (up from EUR 40-50 million)

• Union consultations started concerning potential

restructuring of 570 roles

• Leadership appointments finalized

• Roadmap for most important premises

consolidation finalized, expected to deliver

EUR 5-6 million run rate synergies by 2022

EUR 75 million merger efficiencies achieved within three years

Merger efficiency run-rate at end of year (MEUR)

10

0

50

20

30

40

60

70

8015-25

2020 2021

0-5

2022 Total

45-55

EUR 120-140 million of one-time integration cost expected in 2020-2022

75

EUR 75 million of merger efficiencies confirmed – 2020 execution ahead of schedule

14

Services and go-to-

market

Support functions

External costs

including facilities

Infrastructure

partnerships

• Consolidate managerial, sales and administrative roles

• Adopt proven global delivery model and common processes

• Rationalize offering portfolio

• Capture scale in combined investments

• Consolidate managerial and administrative roles

• Harmonize applications and processes

• Optimize use of shared service centers

• Capture scale in combined investments

• Improve commercial terms due to increased volumes

• Consolidate supplier base and phase out duplicate products and services

• Consolidate facilities in common locations

• Consolidation of infrastructure platforms and partnerships

EUR 30-40 million

EUR 20-30 million

EUR 20-30 million

Revenue synergies• Combined growth opportunity especially in Digital Consulting, Cloud & Infra

and Financial Services Solutions

Further potential

in addition to

EUR 75 million

+

Estimated impact by 2022

Efficiency area Examples of main efficiency levers Estimated efficiency

15

Financial performance

2015 2016 2017 2018 2019

1) Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital

gains/losses, goodwill impairment charges and other items affecting comparability

Multi-year performance improvement

2015 2016 2017 2018 2019

2015 2016 2017 2018 2019

2015 2016 2017 2018 2019

Customer experience / NPS

Employee engagement score

Revenue growth

2015 2016 2017 2018 2019

2015 2016 2017 2018 2019

1 4601 543 1 600 1 614

1 493

151 161 168182

152

200

150

100

50

0

300

250

200

150

100

50

0

1,5

1,3

1,1

0,9

0,7

1,101,20 1,25 1,27

1,15

133151

174238

97

Revenue, mEUR

EBIT Adj., mEUR Net cash flow from operations, mEUR

Dividend / share

Base dividend, EUR

0,250,22

0,20

40

0,20

14

1202000

1500

1000

500

0

Adusted1) EBIT Net cash flow from operations

16

EVRY Additional dividend, EUR

EVRY EVRY

17

Q120Q119

75 78

10.0% 10.5%

749 744

TietoEVRY Q1 2020

-1%Revenue

EBIT Adj.**

EBIT Adj. %**

Business highlights

• 3% organic* growth

• Software business, cloud services and strong performance in Norway contributed to growth

• Negative currency impact of 3% points on growth

• Adjusted EBIT 10.5% (10.0%) – improvement primarily driven by cloud and infrastructure business

* Adjusted for currency effects, acquisitions and divestments

**Adjusted for amortization of acquisition-related intangible assets, restructuring

costs, capital gains/losses, goodwill impairment charges and other items affecting

comparability

Guidance and performance drivers

Guidance 2020 withdrawn

Full-year guidance

withdrawn on 27 March

Given the uncertainties

in the market outlook, it

is not possible to

estimate the potential

impact of Covid-19 on

profitability

Further guidance issued

as soon as visibility to

the market outlook has

improved and significant

uncertainties are cleared

19

Key performance drivers

20

Covid-19

Current market indicators imply a

2-5% negative full-year revenue

impact

Covid-19 impact are actively

being mitigated

FX impact

Depreciation of SEK and NOK

impacting financial results

FX impact* on revenue around

EUR 50 million in Q2 and over

EUR 150 million in the full

year

2020

Long term ambition to grow above market

* Based on March-average exchange rates

Merger-specific

Run-rate of EUR 45-55 million

in cost synergies expected at

year end

One-time integration costs

expected to be in the range of

EUR 50-60 million

Why invest in TietoEVRY?

Key investment highlights

22

Strong cash flow

generation allowing

attractive dividend policy,

deleveraging and

flexibility for investment

opportunities

Continued profit

improvement

– cost synergies of EUR

75 million bring attractive

profit expansion

Attractive business

mix consisting of longer-

term continuous services

and software businesses

– and agile digital

consulting business

Clear market leader in a

growing dynamic Nordic

IT market and

international growth

potential

Appendix

Group structure and leadership

International

Product Development

Services (PDS)

Tom Leskinen

Finland, Satu Kiiskinen

Sweden, Karin Schreil

Norway, Christian Pedersen

Digital

Consulting

Industry

Software

Cloud &

Infra

Financial

Services

Financial Services

Christian SegersvenIndustry Software

Christian Segersven

Cloud & Infra

Johan Torstensson

Digital Consulting

Thomas Nordås

Integration Officer, Malin Fors-Skjæveland

CFO, Tomi Hyryläinen HR, Trond Vinje Operations, Ari Järvelä Strategy, Kishore Ghadiyaram

CEO, Kimmo Alkio

Country teams

Service lines

and PDS

Group functions

and CEO

25

Group structure and leadership

Managing Partner

Finland

Satu Kiiskinen

Managing Partner

Norway

Christian Pedersen

Managing Partner

Sweden

Karin Schreil

Head of Digital

Consulting

Thomas Nordås

Head of

Cloud & Infra

Johan Torstensson

Head of Industry Software

and Financial Services

Christian Segersven

Head of PDS

Tom Leskinen

Integration Officer

Malin Fors-Skjæveland

CEO

Kimmo Alkio

CFO

Tomi Hyryläinen

Head of HR

Trond Vinje

Head of Strategy

Kishore

Ghadiyaram

Head of Operations

Ari Järvelä

26

Q1 in brief

Solid performance –integration on schedule

27

Organic growth of 3%

driven by software

business and cloud

services

Measures in place to

mitigate potential

Covid-19 impact

Integration proceeding

well and end-of-year

synergy run-rate

increased from EUR

30-40 million to EUR

45-55 million

Adjusted operating

margin improvement to

10.5% driven especially

by cloud and

infrastructure business

28

Q120Q119

75 78

10.0% 10.5%

749 744

TietoEVRY

-1%Revenue

EBIT Adj.**

EBIT Adj. %**




comparability

Business highlights


• Software business, cloud services and strong performance in

Norway contributed to growth

• Negative currency impact of 3% points on growth

• Adjusted EBIT 10.5% (10.0%) – improvement primarily driven

by cloud and infrastructure business

29

19 16

14.9%

12.6%

Digital Experience

130 123

Revenue

EBIT Adj.**

EBIT Adj. %**

Q120Q119

-5%




comparability

Business highlights

• -4% organic* growth

• Revenue impacted by one large-scale customer insourcing in

application services

• Limited impact of Covid-19

• Adjusted EBIT 12.6% (14.9%) – profitability affected by lower

utilization

30

916

6.9%

11.8%

129 135

Hybrid Infra

Revenue

EBIT Adj.**

EBIT Adj. %**

Q120Q119

4%




comparability

Business highlights

• 6% organic* growth driven by infrastructure cloud, up by 19%

• Revenue from traditional infrastructure at Q119 level

• Adjusted EBIT 11.8% (6.9%) – clear improvement supported

by strong growth and the efficiency measures

31

14 12

12.5%

10.3%

Industry Software

113 117

Revenue

EBIT Adj.**

EBIT Adj. %**

Q120Q119

4%*




comparability

Business highlights


• Strong growth in Payments and Oil & Gas solutions, revenue

up by over 20%

• Good growth in healthcare and welfare solutions continued,

up by 6%

• Adjusted EBIT 10.3% (12.5%) – affected by the continued

technological renewal of SmartUtilities

32

5 5

12.3% 12.1%

Product Development Services

37 38

Revenue

EBIT Adj.**

EBIT Adj. %**

Q120Q119

3%




comparability

Business highlights


• Strong volume development with the largest key customers

focused on Radio and 5G technologies

• Good development continued in the automotive segment with

new key customers

• Adjusted EBIT 12.1% (12.3%) – continued strong profitability

33

34 35

EVRY

Business highlights

• 3% organic* growth and solid margin 10.5%

• 8% organic* growth in Norway, driven by digital consulting

• Adjusted EBIT 10.5% (9.9%) – improvement both in Norway

and Sweden

Q1 2020 RevenueOrganic

growth*

EBIT

ADJ.**

EBIT

ADJ. %**

Norway 154 8% 18 12%

Sweden 78 -4% 4 5%

Financial Services 87 1% 7 8%

EVRY Subsegment details

9.9% 10.5%

341 331

Revenue

EBIT Adj.**

EBIT Adj. %**




comparability

Q120Q119

-3%

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