Tieto's Interim Report 1/2016 – Healthy growth in IT services and continued profitability improvement


Tieto Corporation          INTERIM REPORT        26 April 2016, 8.00 am EET

  · Industry Products driving growth – in line with the ambition to expand
software businesses
  · Product Development Services performing well
  · New strategy to accelerate innovation and growth launched

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

Key figures for the first quarter

IT services

  · Sales growth totalled 6.0%, sales in local currencies up by 7.0%
  · Adjusted operating profit amounted to EUR 29.1 (24.2) million, 8.6% (7.6) of
sales

The Group

  · Sales growth totalled 0.5%, sales in local currencies up by 1.4%
  · Adjusted operating profit amounted to EUR 31.5 (30.7) million, 8.6% (8.4) of
sales
  · Order intake (Total Contract Value) at an anticipated level of EUR 325 (430)
million, down due to the timing of new agreements – order backlog at EUR 1 907
(1 819) million

+-------------------------------------------------+--------+--------+
|                                                 |1–3/2016|1–3/2015|
+-------------------------------------------------+--------+--------+
|Net sales, EUR million                           | 367.5  | 365.6  |
+-------------------------------------------------+--------+--------+
|   Change, %                                     |   0.5  |  -5.5  |
+-------------------------------------------------+--------+--------+
|   Change in local currencies, %                 |   1.4  |  -3.2  |
+-------------------------------------------------+--------+--------+
|Operating profit (EBITA), EUR million 1)         |  31.6  |  17.2  |
+-------------------------------------------------+--------+--------+
|Operating margin (EBITA), %                      |   8.6  |   4.7  |
+-------------------------------------------------+--------+--------+
|Operating profit (EBIT), EUR million             |  28.3  |  13.9  |
+-------------------------------------------------+--------+--------+
|Operating margin (EBIT), %                       |   7.7  |   3.8  |
+-------------------------------------------------+--------+--------+
|Adjusted 2) operating profit (EBIT), EUR million |  31.5  |  30.7  |
+-------------------------------------------------+--------+--------+
|Adjusted 2)  operating margin (EBIT), %          |   8.6  |   8.4  |
+-------------------------------------------------+--------+--------+
|Profit after taxes, EUR million                  |  21.5  |   9.1  |
+-------------------------------------------------+--------+--------+
|EPS, EUR                                         |  0.29  |  0.12  |
+-------------------------------------------------+--------+--------+
|Net cash flow from operations, EUR million       |  46.9  |  36.7  |
+-------------------------------------------------+--------+--------+
|Return on equity, 12-month rolling, %            |  25.7  |   4.5  |
+-------------------------------------------------+--------+--------+
|Return on capital employed, 12-month rolling, %  |  27.2  |   7.7  |
+-------------------------------------------------+--------+--------+
|Capital expenditure and acquisitions, EUR million|   9.4  |  11.6  |
+-------------------------------------------------+--------+--------+
|Interest-bearing net debt, EUR million           | -21.3  | -85.9  |
+-------------------------------------------------+--------+--------+
|Net debt/EBITDA                                  |  -0.1  |  -0.6  |
+-------------------------------------------------+--------+--------+
|Book-to-bill                                     |   0.9  |   1.2  |
+-------------------------------------------------+--------+--------+
|Order backlog                                    |  1 907 |  1 819 |
+-------------------------------------------------+--------+--------+
|Personnel on 31 March                            |13 200  | 13 456 |
+-------------------------------------------------+--------+--------+

1) includes amortization of all intangible items; previously, only acquisition
-related intangible items included
2) adjusted for restructuring costs, capital gains/losses, goodwill impairment
charges and other items

Full-year outlook for 2016

Tieto expects its adjusted 1) full-year operating profit (EBIT) to increase from
the previous year’s level (EUR 150.8 million in 2015).

1) adjusted for restructuring costs, capital gains/losses, goodwill impairment
charges and other items


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

“We had a good start for the year with accelerated growth and improved
profitability in IT services – with growth supported by our recent acquisitions.
It is very encouraging to see a number of our businesses outperforming the
market. Of the industries, Financial Services and Public, Healthcare and Welfare
had a really strong quarter. This success was also visible in Industry Products,
which delivered strong growth of 13%. In addition, our cloud services’
competitiveness is demonstrated by revenue growth of 72%.

I’m pleased to see that our performance in the past quarter is well in line with
the main choices made in our recently launched strategy. Our ambition is to be
customers’ first choice in their business renewal – the dynamic marketplace with
its digitalization initiatives opens up new opportunities for both our customers
and us. The combination of software-centric industry solutions with our growth
investments and high availability cloud services provides us with attractive
growth opportunities. While continuing to invest in new technologies and new
growth opportunities, we maintain our commitment to continued profitability
improvement and an attractive dividend policy.

While we aim to be customers’ first choice for business renewal, it is highly
inspiring for all of us at Tieto to take an active role in the creation of open
ecosystems in pursuit of new sources of innovation and growth.”

Financial performance by service line

+-------------------+---------+---------+-------+---------+----------------+
|EUR million        | Customer| Customer|Change,|Operating|Operating profit|
|                   |    sales|    sales|      %|   profit|        1–3/2015|
|                   |1–3 /2016| 1–3/2015|       | 1–3/2016|                |
+-------------------+---------+---------+-------+---------+----------------+
|Managed Services   |      129|      126|      2|     10.8|            -8.3|
+-------------------+---------+---------+-------+---------+----------------+
|Consulting and     |      102|       99|      3|      5.6|             8.2|
|System Integration |         |         |       |         |                |
+-------------------+---------+---------+-------+---------+----------------+
|Industry Products  |      107|       94|     13|     13.8|            12.6|
+-------------------+---------+---------+-------+---------+----------------+
|Product Development|       29|       47|    -37|      2.6|             6.5|
|Services           |         |         |       |         |                |
+-------------------+---------+---------+-------+---------+----------------+
|Support Functions  |         |         |       |     -4.7|            -5.0|
|and Global         |         |         |       |         |                |
|Management         |         |         |       |         |                |
+-------------------+---------+---------+-------+---------+----------------+
|Total              |      367|      366|      1|     28.3|            13.9|
+-------------------+---------+---------+-------+---------+----------------+

Operating margin by service line

+---------------------------------+----------+----------+-----------+----------
-+
|%
|Operating |Operating |Adjusted1) |Adjusted1) |
|                                 |    margin|    margin|  operating|
operating|
|                                 | 1–3 /2016|  1–3/2015|    margin |
margin|
|                                 |          |          |  1–3 /2016|
1–3/2015|
+---------------------------------+----------+----------+-----------+----------
-+
|Managed Services                 |       8.4|      -6.6|        8.7|
3.6|
+---------------------------------+----------+----------+-----------+----------
-+
|Consulting and System Integration|       5.5|       8.3|        6.8|
10.8|
+---------------------------------+----------+----------+-----------+----------
-+
|Industry Products                |      13.0|      13.3|       13.3|
13.4|
+---------------------------------+----------+----------+-----------+----------
-+
|Product Development Services     |       9.0|      14.0|        8.4|
14.0|
+---------------------------------+----------+----------+-----------+----------
-+
|Total                            |       7.7|       3.8|        8.6|
8.4|
+---------------------------------+----------+----------+-----------+----------
-+

1) adjusted for restructuring costs, capital gains/losses, goodwill impairment
charges and other items


Customer sales by industry group

+-----------------------------------+--------------+--------------+---------+
|EUR million                        |Customer sales|Customer sales|Change, %|
|                                   |     1–3 /2016|     1–3 /2015|         |
+-----------------------------------+--------------+--------------+---------+
|Financial Services                 |            88|            84|        5|
+-----------------------------------+--------------+--------------+---------+
|Manufacturing, Retail and Logistics|            79|            78|        2|
+-----------------------------------+--------------+--------------+---------+
|Public, Healthcare and Welfare     |           118|           101|       17|
+-----------------------------------+--------------+--------------+---------+
|Telecom, Media and Energy          |            53|            57|       -7|
+-----------------------------------+--------------+--------------+---------+
|IT services                        |           338|           319|        6|
+-----------------------------------+--------------+--------------+---------+
|Product Development Services       |            29|            47|      -37|
+-----------------------------------+--------------+--------------+---------+
|Total                              |           367|           366|        1|
+-----------------------------------+--------------+--------------+---------+

M&A impact by service line

+---------------------------------+---------------------+---------------------+
|                                 |            Growth, %|    Organic growth, %|
|                                 |(in local currencies)|(in local currencies)|
|                                 |            1–3 /2016|            1–3 /2016|
+---------------------------------+---------------------+---------------------+
|Managed Services                 |                  2.4|                  2.4|
+---------------------------------+---------------------+---------------------+
|Consulting and System Integration|                  3.2|                 -1.3|
+---------------------------------+---------------------+---------------------+
|Industry Products                |                 15.8|                  5.8|
+---------------------------------+---------------------+---------------------+
|IT services                      |                  7.0|                  2.6|
+---------------------------------+---------------------+---------------------+
|Product Development Services     |                 37.5|                 37.5|
+---------------------------------+---------------------+---------------------+
|Total                            |                  1.4|                 -2.5|
+---------------------------------+---------------------+---------------------+

M&A impact by industry group

+-----------------------------------+---------------------+--------------------
-+
|                                   |            Growth, %|    Organic growth,
%|
|                                   |(in local currencies)|(in local
currencies)|
|                                   |            1–3 /2016|            1–3
/2016|
+-----------------------------------+---------------------+--------------------
-+
|Financial Services                 |                  6.3|
6.3|
+-----------------------------------+---------------------+--------------------
-+
|Manufacturing, Retail and Logistics|                  1.8|
0.1|
+-----------------------------------+---------------------+--------------------
-+
|Public, Healthcare and Welfare     |                 17.7|
6.5|
+-----------------------------------+---------------------+--------------------
-+
|Telecom, Media and Energy          |                 -4.4|
-6.8|
+-----------------------------------+---------------------+--------------------
-+
|IT services                        |                  7.0|
2.6|
+-----------------------------------+---------------------+--------------------
-+
|Product Development Services       |                -37.5|
-37.5|
+-----------------------------------+---------------------+--------------------
-+
|Total                              |                  1.4|
-2.5|
+-----------------------------------+---------------------+--------------------
-+

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 (http://calltotel+358207271725), +358 50 321 7510, tanja.lou
n 
evirta (at) tieto.com

Press conference for analysts and media will be held on Tuesday, April 26, 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=260416)  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 7479 0361
Sweden: +46 (0)8 5033 6574
UK: +44 (0)203 043 2002
US: +1 719 325 2131
Conference code: 6304748

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
NASDAQ Helsinki
NASDAQ Stockholm
Principal Media


Tieto aims to capture the significant opportunities of the data-driven world and
turn them into lifelong value for people, business and society. We aim to be
customers’ first choice for business renewal by combining our software and
services capabilities with a strong drive for co-innovation and ecosystems.

Headquartered in Finland, Tieto has over 13,000 experts in close to 20
countries. Tieto’s turnover is approximately EUR 1.5 billion and shares listed
on NASDAQ in Helsinki and Stockholm.  www.tieto.com

Attachments

04254246.pdf