Tieto's Interim Report 3/2015 – Solid performance and accelerated growth in IT services

Tieto Corporation          INTERIM REPORT        22 October 2015, 8.00 am EET

  · Organic growth in IT services 5% - Industry Products and add-on sales as key
drivers
  · Solid profitability in IT services while investing in new services and
competences
  · Product Development Services business successfully stabilized

The full interim report with tables is available at the end of this release

Key figures for the third quarter

IT services

  · Organic growth in local currencies was 5.1%
  · Operating profit excl. one-off items amounted to EUR 36.8 (36.8) million,
12.0% (12.5) of sales

The Group

  · Organic growth in local currencies was -0.6% – affected by lower business
volumes in Product Development Services as announced in 2014
  · Third-quarter operating profit excl. one-off items amounted to EUR 38.6
(41.3) million, 11.5% (11.9) of sales
  · Order intake (Total Contract Value) amounted to EUR 490 (395) million and
order backlog was EUR 1 864 (1 558) million

+-----------------------------+--------+--------+---------+---------+
|                             |7–9/2015|7–9/2014| 1–9/2015| 1–9/2014|
+-----------------------------+--------+--------+---------+---------+
|Net sales, EUR million       | 335.1  | 346.2  |1 064.5  |1 119.6  |
+-----------------------------+--------+--------+---------+---------+
|   Change, %                 |  -3.2  |  -4.1  |   -4.9  |   -6.8  |
+-----------------------------+--------+--------+---------+---------+
|   Organic change in local   |  -0.6  |  -2.6  |   -2.4  |   -1.7  |
|currencies, %                |        |        |         |         |
+-----------------------------+--------+--------+---------+---------+
|Operating profit (EBITA), EUR|  41.7  |  -3.7  |   79.0  |   52.4  |
|million                      |        |        |         |         |
+-----------------------------+--------+--------+---------+---------+
|Operating margin (EBITA), %  |  12.4  |  -1.1  |    7.4  |    4.7  |
+-----------------------------+--------+--------+---------+---------+
|Operating profit (EBIT), EUR |  41.4  |  -3.9  |   78.4  |   51.6  |
|million                      |        |        |         |         |
+-----------------------------+--------+--------+---------+---------+
|Operating margin (EBIT), %   |  12.4  |  -1.1  |    7.4  |    4.6  |
+-----------------------------+--------+--------+---------+---------+
|Operating profit (EBIT) excl.|  38.6  |  41.3  |   99.4  |  105.8  |
|one-off items1), EUR million |        |        |         |         |
+-----------------------------+--------+--------+---------+---------+
|Operating margin (EBIT) excl.|  11.5  |  11.9  |    9.3  |    9.5  |
|one-off items1), %           |        |        |         |         |
+-----------------------------+--------+--------+---------+---------+
|Profit after taxes, EUR      |  29.6  | -12.8  |   56.1  |   28.3  |
|million                      |        |        |         |         |
+-----------------------------+--------+--------+---------+---------+
|EPS, EUR                     |  0.40  | -0.17  |   0.76  |   0.39  |
+-----------------------------+--------+--------+---------+---------+
|Net cash flow from           |  16.4  |  11.1  |   65.5  |   77.7  |
|operations, EUR million      |        |        |         |         |
+-----------------------------+--------+--------+---------+---------+
|Return on equity, 12-month   |  13.8  |   8.7  |   13.8  |    8.7  |
|rolling, %                   |        |        |         |         |
+-----------------------------+--------+--------+---------+---------+
|Return on capital employed,  |  14.8  |  10.4  |   14.8  |   10.4  |
|12-month rolling, %          |        |        |         |         |
+-----------------------------+--------+--------+---------+---------+
|Investments, EUR million     |  81.8  |  10.1  |  104.0  |   30.6  |
+-----------------------------+--------+--------+---------+---------+
|Interest-bearing net debt,   |  57.7  |  25.7  |   57.7  |   25.7  |
|EUR million                  |        |        |         |         |
+-----------------------------+--------+--------+---------+---------+
|Net debt/EBITDA              |   0.4  |   0.2  |    0.4  |    0.2  |
+-----------------------------+--------+--------+---------+---------+
|Book-to-bill                 |   1.5  |   1.1  |    1.2  |    1.1  |
+-----------------------------+--------+--------+---------+---------+
|Order backlog                |   1 864|   1 558|    1 864|    1 558|
+-----------------------------+--------+--------+---------+---------+
|Personnel on 30 September    |  13 179|  13 878|   13 179|   13 878|
+-----------------------------+--------+--------+---------+---------+

1)Excl. capital gains, goodwill impairment charges and restructuring costs

Full-year outlook for 2015 unchanged
Tieto expects its full-year operating profit (EBIT) excluding one-off items to
increase from the previous year’s level (EUR 150.2 million in 2014).

CEO’s comment
Comment regarding the interim report by Kimmo Alkio, President and CEO:

“We have good reasons to be satisfied with our third-quarter performance. This
was the highest growth quarter in many years in our main business of IT
services. The combination of 5% growth and strong order intake demonstrates our
current competitiveness all across the Nordics. In the recent quarter,
especially our software product businesses and Consulting & System Integration
services grew faster than the market. Furthermore, our Product Development
Services business has stabilized and we have won new business in the
semiconductor area and identified several interesting new opportunities.
We are also pleased to continue pursuing new service areas and thereby capture
the opportunities provided by digitalization. We have maintained our investments
into our start-up operations and related recruitments at a somewhat higher level
to accelerate growth of new services and innovations. Our Managed Services
automation programme, initiated earlier in the year, is also well on track and
has already contributed to our intended efficiency improvement. Our financial
performance continues to develop favourably even with higher, fully expensed
investments in service development and currency headwinds – these combined
totalled over EUR 20 million during the first nine months of the current year.

In the past quarter, we concluded both our annual customer satisfaction and
employee engagement surveys, whose results confirmed the positive renewal of
Tieto. I’m particularly pleased with the significant improvement in employee
engagement, which gives us a strong foundation to provide exciting professional
opportunities and drive innovation with our customers.”

Financial performance by service line

+-------------------+---------+---------+---------+---------+---------+
|EUR million        | Customer| Customer|Change, %|Operating|Operating|
|                   |    sales|    sales|         |   profit|   profit|
|                   | 7-9/2015| 7-9/2014|         | 7-9/2015| 7-9/2014|
+-------------------+---------+---------+---------+---------+---------+
|Managed Services   |      122|      121|        1|     16.7|     11.0|
+-------------------+---------+---------+---------+---------+---------+
|Consulting and     |       88|       84|        5|      4.4|      7.2|
|System Integration |         |         |         |         |         |
+-------------------+---------+---------+---------+---------+---------+
|Industry Products  |       96|       91|        6|     24.0|     20.3|
+-------------------+---------+---------+---------+---------+---------+
|Product Development|       29|       51|      -43|      0.6|    -37.4|
|Services           |         |         |         |         |         |
+-------------------+---------+---------+---------+---------+---------+
|Support Functions  |         |         |         |     -4.2|     -5.0|
|and Global         |         |         |         |         |         |
|Management         |         |         |         |         |         |
+-------------------+---------+---------+---------+---------+---------+
|Total              |      335|      346|       -3|     41.4|     -3.9|
+-------------------+---------+---------+---------+---------+---------+

Operating margin by service line

+----------------+---------+---------+---------------+---------------+
|%               |Operating|Operating|      Operating|      Operating|
|                |   margin|   margin|   margin excl.|   margin excl.|
|                | 7-9/2015| 7-9/2014|one-off items1)|one-off items1)|
|                |         |         |       7-9/2015|       7-9/2014|
+----------------+---------+---------+---------------+---------------+
|Managed Services|     13.7|      9.0|           13.8|            9.1|
+----------------+---------+---------+---------------+---------------+
|Consulting and  |      5.0|      8.6|            5.9|           11.6|
|System          |         |         |               |               |
|Integration     |         |         |               |               |
+----------------+---------+---------+---------------+---------------+
|Industry        |     24.9|     22.4|           18.7|           22.3|
|Products        |         |         |               |               |
+----------------+---------+---------+---------------+---------------+
|Product         |      2.1|    -73.0|            6.2|            8.9|
|Development     |         |         |               |               |
|Services        |         |         |               |               |
+----------------+---------+---------+---------------+---------------+
|Total           |     12.4|     -1.1|           11.5|           11.9|
+----------------+---------+---------+---------------+---------------+

1)Excl. capital gains, impairments and restructuring costs

Organic change in local currency by service line

+----------------+------------+--------------------------+---------+
|                |    Customer|                  Customer|Change, %|
|                |  sales adj.|sales adj. for divestments|         |
|                |         for|                  7-9/2014|         |
|                |acquisitions|                          |         |
|                |and currency|                          |         |
|                |    7-9/2015|                          |         |
+----------------+------------+--------------------------+---------+
|Managed Services|         124|                       121|        2|
+----------------+------------+--------------------------+---------+
|Consulting and  |          90|                        84|        7|
|System          |            |                          |         |
|Integration     |            |                          |         |
+----------------+------------+--------------------------+---------+
|Industry        |          97|                        91|        8|
|Products        |            |                          |         |
+----------------+------------+--------------------------+---------+
|IT services     |         310|                       295|        5|
+----------------+------------+--------------------------+---------+
|Product         |          29|                        47|      -37|
|Development     |            |                          |         |
|Services        |            |                          |         |
+----------------+------------+--------------------------+---------+
|Total           |         339|                       342|       -1|
+----------------+------------+--------------------------+---------+

Customer sales by industry group

+-----------------------------------+--------------+--------------+---------+
|EUR million                        |Customer sales|Customer sales|Change, %|
|                                   |      7-9/2015|      7-9/2014|         |
+-----------------------------------+--------------+--------------+---------+
|Financial Services                 |            83|            77|        7|
+-----------------------------------+--------------+--------------+---------+
|Manufacturing, Retail and Logistics|            73|            73|        0|
+-----------------------------------+--------------+--------------+---------+
|Public, Healthcare and Welfare     |            98|            91|        8|
+-----------------------------------+--------------+--------------+---------+
|Telecom, Media and Energy          |            53|            54|       -2|
+-----------------------------------+--------------+--------------+---------+
|IT services                        |           306|           295|        4|
+-----------------------------------+--------------+--------------+---------+
|Product Development Services       |            29|            51|      -43|
+-----------------------------------+--------------+--------------+---------+
|Total                              |           335|           346|       -3|
+-----------------------------------+--------------+--------------+---------+

Organic change in local currency by industry group

+--------------+----------------+--------------------------+---------+
|EUR million   |        Customer|                  Customer|Change, %|
|              |  sales adj. for|sales adj. for divestments|         |
|              |acquisitions and|                  7-9/2014|         |
|              |        currency|                          |         |
|              |        7-9/2015|                          |         |
+--------------+----------------+--------------------------+---------+
|Financial     |              85|                        78|       10|
|Services      |                |                          |         |
+--------------+----------------+--------------------------+---------+
|Manufacturing,|              74|                        73|        1|
|Retail and    |                |                          |         |
|Logistics     |                |                          |         |
+--------------+----------------+--------------------------+---------+
|Public,       |              97|                        91|        6|
|Healthcare and|                |                          |         |
|Welfare       |                |                          |         |
+--------------+----------------+--------------------------+---------+
|Telecom, Media|              55|                        54|        2|
|and Energy    |                |                          |         |
+--------------+----------------+--------------------------+---------+
|IT services   |             310|                       295|        5|
+--------------+----------------+--------------------------+---------+
|Product       |              29|                        47|      -37|
|Development   |                |                          |         |
|Services      |                |                          |         |
+--------------+----------------+--------------------------+---------+
|Total         |             339|                       342|       -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 22 October 2015 at
Tieto’s premises in Stockholm, address: Fjärde Bassängvägen 15, 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=221015) 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 6937 9590
Sweden: +46 (0)8 5065 3937
UK: +44 (0)20 3427 1909
US: +1212 444 0896
Conference code: 8765732

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
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NASDAQ Stockholm
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Tieto is the largest IT services company in the Nordics providing full lifecycle
IT services. We also provide global product development services for companies
in the communications and embedded technologies arena. Through industry insight,
technology vision, and innovative thinking, Tieto proactively strives to inspire
and engage our customers in finding new ways of accelerating their business.

Building on a strong Nordic heritage, Tieto combines global capabilities with
local presence. Headquartered in Helsinki, Finland, Tieto has over 13 000
experts in more than 20 countries. Turnover is approximately EUR 1.5 billion.
Tieto’s shares are listed on NASDAQ in Helsinki and Stockholm. www.tieto.com