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
Digital advantage for businesses and societies Bringing Global capabilities to the Nordics in Digital Consulting and Cloud & Infrastructure Services The market leader Scaling the Nordic mindset globally in Industry Software, in Digital Services Financial Services and Product Development Services in Norway , Sweden and Finland Serving customers Investments in technology 24 000 in over and services more than professionals Estonia, Latvia, Lithuania countries 90 EUR 120 million* per year globally worldwide *incl. capital expenditure Ukraine India Poland and operational costs China Turnover of More than Czech Republic approximately 10 000 EUR customers 3 billion 4
Our value proposition & strategy We are the backbone of the Nordic society, transforming businesses with expertise, technology and data, to harness the biggest opportunities of our time Services focus Nordic International • Drive competitiveness of Nordic Digital Consulting enterprises and public sector Cloud & Infra • Accelerate digital consulting and cloud services to realize customers digital agenda Industry-specific software • Industry Software and Financial Services Financial Services leading international expansion Solutions • PDS expands its global customer base Product Development across industries Services (PDS) Global capabilities and ecosystems 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 five service lines (adopted as from Q2 2020) Bringing global capabilities Digital Consulting Cloud & Infrastructure to the Nordics We help capture new value from technology We modernize, simplify and secure and data throughout customers’ digital customers’ businesses with automated Scaling the Nordic mindset journeys, powered by one of the largest solutions enhanced by the largest pool of passionate digital specialists magnitude of technology alternatives & globally delivery capability in the Nordics Industry Software Financial Services Product Development Services Solutions We accelerate value creation and We deliver all core financial services and We accelerate ‘time to market’ for high -tech realization with deep understanding of processes full stack with our flexible software products by applying over 25 customers’ industries and requirements with modules and innovative global software years of software R&D expertise deployed our rich portfolio of industry-specific platforms built with deep understanding and globally software deployed globally experience of the financial services industry. 6
7 IT market outlook New digital services, business Covid-19 expected to have negative continuity and cost optimization impact on IT market in 2020 continue to be a driver for Industry analysts market growth investments estimates range from --3% to -7%
8 Continuously adapting to Covid-19 – market outlook unchanged Industry analysts TietoEVRY business Additional short-term High productivity estimate -3% to -7% mix well resilient with savings actions to maintained with remote work – partial decline in IT market appr. 2% negative mitigate negative due to Covid-19 revenue impact in Q2 Covid-19 profit impact return to office – will continue expected H2 TietoEVRY maintains Demand uncertainty throughout 2020 its estimate of 2-5% expected to continue negative full-year in H2 revenue impact due to Covid-19 in 2020
9 Recilience towards Covid-19 varies by businesses • Primarily short-term contracts while relationships with customers are long 30 % of Digital consulting - Most impacted • Application services with long-term agreements represent approximately revenue 20% of the consulting revenue Product development services - • Primarily short-term contracts, while relationships with customers are long. 5 % of revenue • Impacted less than digital consulting Stability due to our role in key customers core development roadmaps • Primarily long-term commitments of 3-5 years Infrastructure services - Impacted 30 % of • Fluctuations in demand in some services in the short term, e.g. increase in revenue slightly more than industry software network capacity while some onsite installations postponed Industry software, incl. Financial • Primarily long-term contractual periods up to 5-7 years with customer 35 % of revenue relationships lasting much longer Services Solutions - Least impacted
10 Merger and integration update
11 Integration progressing as planned Integration focus area Current status • Integrated structure and Organization established • leadership Leadership nominated at all levels • Common processes and Interoperating collaboration tools in place • systems Active development of reporting and forecasting • Integrated go-to-market and Common customer teams active in the market • service portfolio Unified services and delivery teams • Employee engagement and Employee onboarding at all levels • cultural integration Active engagement through leadership continues • Planning ongoing per business and function Synergy planning and realization • Competitive cost structure actions initiated Continuous focus on customer engagement, delivery quality and efficiency continues during integration *Progress relative to target-state as an integrated TietoEVRY
12 Merger efficiency target increased to EUR 100 million – with EUR 45 million run rate realized to date EUR 100 million merger efficiencies achieved within three years • Target merger efficiencies increased to EUR 100 million (up from EUR 75 million), based on Merger efficiency run-rate at end of year (EUR million) current execution and plans 120 5-10 100 • Merger efficiency run rate of EUR 70-80 million 15-20 100 (up from EUR 45-55 million) by end of 2020 70-80 80 • EUR 45 million run-rate already executed per 60 end Q2 2020, expected to impact H2 2020 adjusted EBIT positively by EUR 23 million 40 • One-time integration costs for 2020 estimated to 20 be EUR 75-85 million (up from EUR 50-60 0 million), with EUR 33 million realized year-to-date 2020 2021 2022 Total EUR 120-140 million of one-time integration cost expected in 2020-2022
13 Financial performance
14 Multi-year performance improvement Customer experience / NPS Revenue growth Dividend / share Revenue, mEUR Base dividend, EUR 2000 1,5 120 EVRY Additional dividend, EUR 0,20 1500 1,3 0,20 0,22 0,25 1,1 1000 1 614 1 600 1 543 1,25 1 493 1,20 1 460 1,15 0,9 500 1,10 0,635** 0 0,7 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Employee engagement score Adjusted *) EBIT Net cash flow from operations 200 14 EBIT Adj., mEUR 300 Net cash flow from operations, mEUR 40 EVRY EVRY 250 150 200 100 150 182 168 161 151 152 238 100 174 50 151 133 97 50 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 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
15 TietoEVRY Q2 2020 Q219 Q220 -6% Revenue Business highlights Adj. EBIT ** • Revenue EUR 686 million, organic growth* -1% Adj. EBIT %** 730 686 • Reported growth -6%, currency impact EUR -31 million • Adjusted EBIT EUR 80.4 (69.8) million, 11.7% (9.6) 11.7% • Currency impact EUR -5 million 9.6% • Reported EBIT EUR -9.8 (43.9) million, -1.4% (6.0) • Good growth in Financial Services Solutions (6%) and in 80 Industry Software (3%) 70 • 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
Performance drivers
17 Performance drivers – H2 2020 • Full-year impact of -2% to -5% on revenue Covid-19 impact likely • Profit impact being mitigated through cost savings higher during H2 • Additional temporary cost saving measures to continue in H2 • Increased full year synergy run-rate to EUR 70-80 million • Accelerated synergies EUR 45 million run rate achieved - ~ EUR 23 million contributing to 2020 adjusted EBIT Consistent performance • Weaker NOK and SEK • Negative FX impact Estimated negative impact on revenue ~EUR 80 million and ~EUR 13 improvement million on adjusted EBIT for the full year of 2020 • Entering H2 with healthy business momentum – major risk mitigation in Q2 Other operational • Cost base increase in Cloud & Infra during H2 due to IBM transition • Expiring customer contract, as informed earlier, gradually affecting drivers volumes – negative impact ~3% on Cloud & Infra H2 revenue
Why invest in TietoEVRY?
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