Creating digital advantage for businesses and society Outline - - PowerPoint PPT Presentation

Creating digital advantage for businesses and society

Outline

• Value proposition, strategy and market
• Merger and integration status
• Q2 in brief
• Performance drivers and guidance 2020
• Why invest in TietoEVRY?
• Appendix

2

Value proposition, strategy and market

India Poland Czech Republic China Ukraine

10 000

More than customers

EUR 3 billion

Turnover of approximately

24 000

professionals 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

Nordic Services 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 capabilities to 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

• ur rich portfolio of industry-specific

software deployed globally

Financial Services Solutions

We 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

Continuously adapting to Covid-19 – market outlook unchanged

8

Industry analysts estimate -3% to -7% decline in IT market due to Covid-19 TietoEVRY maintains its estimate of 2-5% negative full-year revenue impact due to Covid-19 in 2020 TietoEVRY business mix well resilient with

• appr. 2% negative

revenue impact in Q2 Demand uncertainty expected to continue in H2 Additional short-term savings actions to mitigate negative Covid-19 profit impact – will continue throughout 2020 High productivity maintained with remote work – partial return to office expected H2

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

11

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

Merger efficiency target increased to EUR 100 million – with EUR 45 million run rate realized to date

• Target merger efficiencies increased to EUR 100

million (up from EUR 75 million), based on current execution and plans

• Merger efficiency run rate of EUR 70-80 million

(up from EUR 45-55 million) by end of 2020

• EUR 45 million run-rate already executed per

end Q2 2020, expected to impact H2 2020 adjusted EBIT positively by EUR 23 million

• One-time integration costs for 2020 estimated to

be EUR 75-85 million (up from EUR 50-60 million), with EUR 33 million realized year-to-date

EUR 100 million merger efficiencies achieved within three years

Merger efficiency run-rate at end of year (EUR million)

60 20 40 80 100 120

15-20

2020 2021

5-10

2022 Total

70-80

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

100

12

13

Financial performance

2015 2016 2017 2018 2019

* Adjusted for amortization of acquisition-related intangible assets, restructuring costs, capital gains/losses, goodwill impairment charges and other items affecting comparability ** Original proposal 1,27

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 1 460 1 543 1 600 1 614 1 493 151 161 168 182 152

200 150 100 50 300 250 200 150 100 50 1,5 1,3 1,1 0,9 0,7

1,10 1,20 1,25 0,635** 1,15 133 151 174 238 97

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

Dividend / share

Base dividend, EUR

0,25 0,22 0,20 40 0,20 14 120

2000 1500 1000 500

Adjusted*) EBIT Net cash flow from operations

14 EVRY Additional dividend, EUR EVRY EVRY

TietoEVRY Q2 2020

15

Q220 Q219

70 80

9.6% 11.7%

730 686

• 6%

Revenue

Business highlights

• Revenue EUR 686 million, organic growth* -1%
• Reported growth -6%, currency impact EUR -31 million
• Adjusted EBIT EUR 80.4 (69.8) million, 11.7% (9.6)
• Currency impact EUR -5 million
• Reported EBIT EUR -9.8 (43.9) million, -1.4% (6.0)
• Good growth in Financial Services Solutions (6%) and in

Industry Software (3%)

• Covid-19 impact appr. -2% on revenue, profit impact fully

mitigated

* 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

• Adj. EBIT **
• Adj. EBIT %**

Performance drivers

Performance drivers – H2 2020

17

Consistent performance improvement

Other operational drivers

• Entering H2 with healthy business momentum – major risk mitigation in Q2
• Cost base increase in Cloud & Infra during H2 due to IBM transition
• Expiring customer contract, as informed earlier, gradually affecting

volumes – negative impact ~3% on Cloud & Infra H2 revenue

Negative FX impact

• Weaker NOK and SEK
• Estimated negative impact on revenue ~EUR 80 million and ~EUR 13

million on adjusted EBIT for the full year of 2020

Accelerated synergies

• Increased full year synergy run-rate to EUR 70-80 million
• EUR 45 million run rate achieved - ~ EUR 23 million contributing to 2020

adjusted EBIT

Covid-19 impact likely higher during H2

• Full-year impact of -2% to -5% on revenue
• Profit impact being mitigated through cost savings
• Additional temporary cost saving measures to continue in H2

Why invest in TietoEVRY?

Key investment highlights

19

Strong cash flow generation allowing attractive dividend policy, deleveraging and flexibility for investment

• pportunities

Continued profit improvement – cost synergies of EUR 100 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 Segersven Industry 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

22

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 23

Q2 in brief

Strong operational performance – synergy target increased and dividend pay-out decided

24

Adjusted operating profit EUR 80.4 million / 11.7% – solid performance across all businesses Large one-time items for Q2 and 2020 – for future profit contribution Dividend of EUR 0.635/share, totaling EUR 75 million, decided for 2019 Integration well

• n schedule

– synergy target increased to EUR 100 million

TietoEVRY

25

Q220 Q219

70 80

9.6% 11.7%

730 686

• 6%

Revenue

Business highlights

• Revenue EUR 686 million, organic growth* -1%
• Reported growth -6%, currency impact EUR -31 million
• Adjusted EBIT EUR 80.4 (69.8) million, 11.7% (9.6)
• Currency impact EUR -5 million
• Reported EBIT EUR -9.8 (43.9) million, -1.4% (6.0)
• Good growth in Financial Services Solutions (6%) and in

Industry Software (3%)

• Covid-19 impact appr. -2% on revenue, profit impact fully

mitigated

* 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

• Adj. EBIT **
• Adj. EBIT %**

Digital Consulting

26

16 18

8.4% 11.0%

Business highlights

• Revenue EUR 163 million, organic growth* -6%
• Adjusted EBIT EUR 17.9 (15.5) million, 11.0% (8.4)
• Cloud Advisory and Analytics practice continuing to perform well
• Covid-19 impact appr. -3% on revenue, primarily visible in

Customer Experience and Business Consulting practices

• Profitability development driven by continuous efficiency

improvement and mitigation of Covid-19

• Pipeline gaining ground across key markets

185 163

Revenue

Q220 Q219

• 12%
• Adj. EBIT **
• Adj. EBIT %**

* 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

Cloud & Infra

27

25 27

10.2% 11.5%

249 232

Business highlights

• Revenue EUR 232 million, organic growth* -3%
• Adjusted EBIT EUR 26.6 (25.3) million, 11.5% (10.2)
• Declining sales mainly due to one-time hardware sales in Q2/19

baseline and decline in add-on sales

• Minor Covid-19 impact on revenue
• Profitability development driven by continuous efficiency

improvement and mitigation of Covid-19

• Acceleration in Cloud transformation driving volume

development

Revenue

• Adj. EBIT **
• Adj. EBIT %**

Q220 Q219

• 7%

* 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

Industry Software

28

15 18

11.8% 15.1%

Business highlights

• Revenue EUR 122 million, organic growth* 3%
• Adjusted EBIT EUR 18.4 (14.8) million, 15.1% (11.8)
• Growth of over 10% in healthcare, welfare and public sector

software

• Covid-19 impact appr. -2% on revenue, primarily in the

industrial sector

• Profitability development driven by continuous efficiency

improvement and mitigation of Covid-19

• End-of-life decision for the common SmartUtilities platform
• All probable risks booked in Q2
• TSU has had a negative impact of appr. 2% on Industry

Software EBIT margin during 2019

126 122

Revenue

Q220 Q219

• 3%
• Adj. EBIT **
• Adj. EBIT %**

* 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

Financial Services Solutions

29

13 12

12.6% 11.8%

Business highlights

• Revenue EUR 102 million, organic growth* 6%
• Adjusted EBIT EUR 12.0 (13.2) million, 11.8% (12.6)
• Organic growth driven especially by Cards services
• Covid-19 impact appr. -2% on revenue
• Adjusted EBIT reflecting ongoing growth investments in the

Cards business – to support new volumes

• In the Cards business, a new long-term agreement signed with
• ne of the largest financial institutions in the Nordics

105 102

Revenue

Q220 Q219

• 3%
• Adj. EBIT **
• Adj. EBIT %**

* 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

Product Development Services

30

3 4

7.6% 11.5%

Business highlights

• Revenue EUR 34 million, organic growth* -2%
• Adjusted EBIT EUR 4.0 (2.7) million, 11.5% (7.6)
• Increased profitability driven by effective cost base

management

• Covid-19 impact appr. -6% on revenue primarily driven by

decline in automotive sector

• New customer acquisition proceeding well in telecom and

automotive

35 34

Revenue

Q220 Q219

• 3%
• Adj. EBIT **
• Adj. EBIT %**

* 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