Tieto Q1’10 Profitability improves, growth still pending

© 2010 Tieto o Corporation

4 May 2010 St kh l S Stockholm, Sweden d Seppo Haapalainen – CFO Pasi Hiedanpää – IR Manager

Markets and customers: Activity in the market up – growth still pending • •

IT market in the Nordic countries has stabilized and activity has picked up Growth expected in the latter half of 2010 •

• • • • •

2

Market estimates vary from 0% to 2%

Telecom: volumes are up, but increased offshoring lowers market prices Finance: fierce competition and long decision-making cycles, but good progress p g in p parts of p product businesses Public, healthcare, retail and logistics are growing, but manufacturing still challenging Good demand for outsourcing and new service models Recent customer wins: Metso, Cargotec, Kuopion Energia, Bilprovningen, Kammarkollgiet, Smurfit Kappa Kraftliner and Sollentuna municipality

© 2010 Tieto Corporation

2010-05-04

IT budgets to grow in ’10 10

• • •

3

In Europe CIOs expect budgets to be up 0.9% Actual spending usually lags by 1 1-2 2 quarters In IT services best demand in cloud computing-related technologies such as virtualization and SaaS

© 2010 Tieto Corporation

2010-05-04

Q1 highlights Improved efficiency and cost savings boost profitability •

Sales down by 3%

N t sales Net l

EBIT %

500

9

• EUR 13 million positive currency impact

•

EBIT 4.5% 4 5% (1.1%) (1 1%) •

•

• •

400

7

6.3% (3.4%) excluding one-off items

Changing delivery mix leads to lower unit prices prices, but at the same time average unit costs are also declining Cost savings EUR 28 million EPS 0.17 euros

8

7.6% 6.9%

6

300

5 4.5%

200

4 3

2.3%

100

2

1.1%

1 0

4

© 2010 Tieto Corporation

438

445

383

440

423

Q1/09

Q2/09

Q3/09

Q4/09

Q1/10

2010-05-04

0

Q1 highlights Progress in strategy execution Focus on strategy •

Acquisition of T&T Telecom in Russia

•

Acquisition of full ownership of Tieto Broadcasting IT

•

Divestment of pulp and paper business in the US

•

Divestment of non-core telecom business in France (April)

•

New centres in Bangalore, India and Hangzhou, China to further strengthen Asia presence

Investment and offerings

5

•

Datacentre investments in Finland, Sweden and Russia

•

Unified communications network integration for telecom operators in partnership with Microsoft

•

CMMI level 3 certification in Pune, India

© 2010 Tieto Corporation

2010-05-04

Quarterly y development p Operating profit and margin

Net sales 600

50 40 30 20 10 0

400 200 0 MEUR

(excl. one-time items)

Q1/09 Q2/09 Q3/09 Q4/09 Q1/10

MEUR

Cash flow 75 60 45 30 15 0 -15 MEUR

6

10 8 6 4 2 0 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10

%

Gearing 40 30 20 10 0

Q1/09 Q2/09 Q3/09 Q4/09 Q1/10

© 2010 Tieto Corporation

%

Q1/09 Q2/09 Q3/09 Q4/09 Q1/10

2010-05-04

First quarter in brief Gearing down to 10.2% Q1/2010

Q1/2009

FY/2009

422.9

438.0

1 706.3

18 8 18.8

49 4.9

75 3 75.3

4.5

1.1

4.4

26.6

14.8

108.0

6.3

3.4

6.3

Profit after taxes, EUR million

12.0

1.0

55.1

EPS, EUR

0.17

0.01

0.77

Net cash flow from operations

27.9

38.7

126.4

Gearing % Gearing,

10 2 10.2

17 5 17.5

12 7 12.7

16 880

16 638

16 663

Net sales, EUR million Operating profit profit, EUR million EBIT, % Operating profit excl. one-off items, EUR million Operating margin excluding one-off items, %

Personnel at the end of period

7

© 2010 Tieto Corporation

2010-05-04

Income statement Q1/2010

Q1/2009

Change %

FY 2009

422.9

438.0

-3

1 706.3

7.0

2.9

141

17.5

254.5

266.9

-5

986.7

23.0

17.3

33

70.7

133 6 133.6

151 8 151.8

-12 12

591 1 591.1

18.8

4.9

284

75.3

3.8

0.8

375

5.8

-5.6

-2.3

143

-13.7

0.7

-1.3

-

2.9

Profit before taxes

17 7 17.7

21 2.1

743

70 3 70.3

Income taxes

-5.7

-1.1

418

-15.2

Net profit for the period

12.0

1.0

1 100

55.1

EUR million Net sales Other operating income Employee benefit expenses Depreciation and amortization Oth operating Other ti expenses Operating profit (EBIT) Interest and other financial income Interest and other financial expenses Net exchange losses/gains

8

© 2010 Tieto Corporation

2010-05-04

Offshoring ratio at 32% Headcount in China more than double

6000

35 %

5000

30 %

Snapshot of China

25 %

• 727 (352) employees • Beijing, Chengdu and Hangzhou • Diversified customer base • Focus on telecom • New country head Patrick Lui

4000

20 % 3000 15 % 2000

Target for 2010

10 %

1000

5%

0

0% 2004

2005

2006

2007

2008

2009 Q1/2010

India, China, Malaysia and Indonesia Baltic countries, Belarus and Russia C ech and Poland Czech Total, % 9

© 2010 Tieto Corporation

2010-05-04

Offshoring’s impact on gross margin and expenses Topline growth affected by offshore transfers • Volumes measured by manhours are up • Average A unitit price i d down d due tto d delivery li mix with higher offshore ratio • Price pressure, other than offshore related,, expected p to ease

K€

95 90 85 80

Transfers contribute to lower costs • Cost base managed tightly • Average unit cost down due to higher offshore ratio • Efficiency and utilization rates are up

10

© 2010 Tieto Corporation

75 Q1/09

Q2/09

Q3/09

Q4/09

Rolling 12 mth Gross Margin per average FTE Rolling 12 mth Expenses per average FTE

2010-05-04

Q1/10

Share of net sales 27%

Country sales by quarter

48%

25%

600 500 139

135

125

119

199

233

222

Q3/09

Q4/09

Q1/10

143

400

141

300

119

116

227

230

Q1/09

Q2/09

130 103

200 100

© 2010 Tieto o Corporation

0 MEUR

Finland Note: Internal sales included

Sweden

International

Finland Profitability safeguarded by improved utilization • • • • • •

Sales down by 2% Operating profit EUR 22.6 (22.7) million i.e. 10.2% (10.0) Outsourcing market continues to grow Project business still pending Good demand in the utilities, healthcare and welfare Employees 5 773 (6 036)

14 1% 14.1% 11.1%

10.2%

10.0%

227

230

199

233

222

Q1/09

Q2/09

Q3/09

Q4/09

Q1/10

Sales MEUR Sales,

12

© 2010 Tieto Corporation

14 6% 14.6%

2010-05-04

EBIT % EBIT,

Sweden The turnaround is real • •

Sales flat; 9% decline in SEK Operating profit EUR 5.8 (-8.8) million i.e. 4.9% (-7.4) •

• • •

6 3% 6.3%

Excl. one-off items EUR 6.8 (0.8) million, i.e. 5.7% (0.7)

Telecom weakest due to offshore transition Good demand in finance, public, healthcare, retail and logistics Employees 2 998 (3 257)

4.0% 119 Q1/09

116

103

Q2/09 Q3/09 -5.3%

© 2010 Tieto Corporation

125

119

Q4/09

Q1/10

-7.4% 7 4%

Sales, MEUR

13

4.9%

2010-05-04

EBIT, %

International Good performance in delivery countries • •

Sales down by 4% Operating profit EUR -1.4 (-3.7) million, i.e. -1.0% (-2.6) •

• • •

•

EBIT % EBIT,

Excl. one-off items EUR 5 Excl 5.4 4 (-5 (-5.7) 7) million million, i.e. 4.0% (-4.0)

Sales grew in delivery countries q of T&T Telecom in Russia Acquisition Divestment of pulp and paper operations in North-America and French subsidiary Employees 8 109 (7 345) • Fastest growth in China

14

S l Sales, MEUR

© 2010 Tieto Corporation

1.7% 0 7% 0.7% 141

143

130

139

Q1/09 -2.6%

Q2/09

Q3/09

Q4/09

-4.3%

2010-05-04

135 -1.0% Q1/10

Top 10 customers: 39% of net sales Apoteket

Healthcare & Welfare/ Retail

Ericsson

Telecom

IF Insurance

Finance

Kesko

Retail

Share of Group net sales by customer sector

Telecom

The National Board of Government T Taxes (FI) Nokia

Telecom

Nordea

Finance

OP-Pohjola Group

Finance

TeliaSonera

Telecom

Varma

Finance

34% 45%

Industry sectors

21%

Customers are listed in alphabethical order.

15

© 2010 Tieto Corporation

Fi Finance

2010-05-04

Telecom & Media Leading the offshoring trend •

• •

16

Sales S l ffellll by b 7% d due tto delayed d l d investment decisions and offshore transition Network equipment manufacturers lead the offshoring trend Profitability improved thanks to lower costs and improved efficiency

© 2010 Tieto Corporation

N t sales, Net l MEUR 200 150 100 50 0

153

149

132

149

142

Q1/09

Q2/09

Q3/09

Q4/09

Q1/10

2010-05-04

Financial Services • • • • •

17

Flat sales boosted byy positive p currency impacts Pension insurance segment in Finland shrunk UK business remained tough Sales increased in all other markets p due to cost Profitabilityy improved savings and downsizing of underperforming businesses

© 2010 Tieto Corporation

Net sales, sales MEUR 100 75 50 25 0

89

94

87

89

88

Q1/09

Q2/09

Q3/09

Q4/09

Q1/10

2010-05-04

Industry sectors* •

• •

Sales S l down d by b 2% 2%, b butt flflatt excl. l currency impacts and one-off income in 2009 Public healthcare Public, healthcare, retail and logistics are growing Profitability remained at a healthy level

Net sales, sales MEUR

250 200 150 100 50 0

197

201

165

203

193

Q1/09

Q2/09

Q3/09

Q4/09

Q1/10

* Automotive, energy, gy forest, healthcare and welfare, manufacturing, public, retail and logistics 18

© 2010 Tieto Corporation

2010-05-04

Actions for 2010 1. Drive quality and sales excellence 2. Increase offshore capacity; y target g 35% of people in offshore countries 3. Improve Tieto’s competitiveness and profitability in the telecom business 4. Invest in growth and new offerings 5. Execute portfolio adjustments 6 Manage the cost base 6.

19

© 2010 Tieto Corporation

2010-05-04

Outlook for 2010 • • •

20

The IT markets have bottomed out Tieto expects its net sales to develop in line with the IT services market relevant to the company Operating profit is expected to be higher than in 2009

© 2010 Tieto Corporation

2010-05-04

Knowledge. g Passion. Results.