creating digital advantage for businesses and society · 2020. 8. 25. · bringing global...

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

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

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)

0

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 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

0,635**

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

Adjusted*) EBIT Net cash flow from operations

14

EVRY Additional dividend, EUR

EVRY EVRY

TietoEVRY Q2 2020

15

Q220Q219

7080

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

opportunities

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 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

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

on schedule

– synergy target

increased to EUR

100 million

TietoEVRY

25

Q220Q219

7080

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




Adj. EBIT **

Adj. EBIT %**

Digital Consulting

26

1618

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

Q220Q219

-12%

Adj. EBIT **

Adj. EBIT %**




Cloud & Infra

27

25 27

10.2%

11.5%

249 232

Business highlights



• 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


• Acceleration in Cloud transformation driving volume development

Revenue

Adj. EBIT **

Adj. EBIT %**

Q220Q219

-7%




Industry Software

28

15 18

11.8%

15.1%

Business highlights

• Revenue EUR 122 million, organic growth* 3%


• Growth of over 10% in healthcare, welfare and public sector

software

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

industrial sector


• 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

Q220Q219

-3%

Adj. EBIT **

Adj. EBIT %**




Financial Services Solutions

29

13 12

12.6%11.8%

Business highlights

• Revenue EUR 102 million, organic growth* 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

one of the largest financial institutions in the Nordics

105 102

Revenue

Q220Q219

-3%

Adj. EBIT **

Adj. EBIT %**




Product Development Services

30

3 4

7.6%

11.5%

Business highlights



• 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

Q220Q219

-3%

Adj. EBIT **

Adj. EBIT %**




creating digital advantage for businesses and society · 2020. 8. 25. · bringing global...

Documents