Tieto's Interim Report 2/2015 – Healthy growth in IT services – competitiveness strengthens further

Tieto Corporation          INTERIM REPORT        22 July 2015, 8.00 am EET

  · IT services growth close to 3% – profit as expected
  · Managed Services automation programme on track
  · Acquisition of Software Innovation strengthens Tieto’s competitiveness
  · Solid performance in Product Development Services

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

Key figures for the second quarter

  · Organic growth in local currencies was -3.3% due to lower business volumes
in Product Development Services
  · In IT services, organic growth in local currencies was 2.7%
  · Order intake (Total Contract Value) amounted to EUR 340 (398) million and
order backlog was EUR 1 737 (1 550) million
  · Second-quarter operating profit excl. one-off items amounted to EUR 30.1
(30.0) million, 8.3% (7.8) of sales


+-----------------------------+--------+---------+-------------+--------+
|                             |4–6/2015| 4–6/2014|     1–6/2015|1–6/2014|
+-----------------------------+--------+---------+-------------+--------+
|Net sales, EUR million       | 363.8  |  386.4  |        729.4| 773.4  |
+-----------------------------+--------+---------+-------------+--------+
|   Change, %                 |  -5.8  |   -7.3  |         -5.7|  -8.0  |
+-----------------------------+--------+---------+-------------+--------+
|   Organic change in local   |  -3.3  |   -1.3  |        -3.3 |  -1.3  |
|currencies, %                |        |         |             |        |
+-----------------------------+--------+---------+-------------+--------+
|Operating profit (EBITA), EUR|  23.2  |   21.7  |         37.2|  56.1  |
|million                      |        |         |             |        |
+-----------------------------+--------+---------+-------------+--------+
|Operating margin (EBITA), %  |   6.4  |    5.6  |         5.1 |   7.3  |
+-----------------------------+--------+---------+-------------+--------+
|Operating profit (EBIT), EUR |  23.1  |   21.5  |        37.0 |  55.5  |
|million                      |        |         |             |        |
+-----------------------------+--------+---------+-------------+--------+
|Operating margin (EBIT), %   |   6.3  |    5.6  |         5.1 |   7.2  |
+-----------------------------+--------+---------+-------------+--------+
|Operating profit (EBIT) excl.|  30.1  |   30.0  |        60.8 |  64.5  |
|one-off items1), EUR million |        |         |             |        |
+-----------------------------+--------+---------+-------------+--------+
|Operating margin (EBIT) excl.|   8.3  |    7.8  |         8.3 |   8.3  |
|one-off items1), %           |        |         |             |        |
+-----------------------------+--------+---------+-------------+--------+
|Profit after taxes, EUR      |  17.4  |   16.5  |        26.5 |  41.1  |
|million                      |        |         |             |        |
+-----------------------------+--------+---------+-------------+--------+
|EPS, EUR                     |  0.24  |   0.23  |        0.36 |  0.56  |
+-----------------------------+--------+---------+-------------+--------+
|Net cash flow from           |  12.4  |   16.6  |        49.1 |  66.6  |
|operations, EUR million      |        |         |             |        |
+-----------------------------+--------+---------+-------------+--------+
|Return on equity, 12-month   |   4.5  |   15.3  |         4.5 |  15.3  |
|rolling, %                   |        |         |             |        |
+-----------------------------+--------+---------+-------------+--------+
|Return on capital employed,  |   7.5  |   14.8  |         7.5 |  14.8  |
|12-month rolling, %          |        |         |             |        |
+-----------------------------+--------+---------+-------------+--------+
|Investments, EUR million     |  10.6  |    7.1  |        22.2 |  20.5  |
+-----------------------------+--------+---------+-------------+--------+
|Interest-bearing net debt,   |   5.3  |   30.3  |         5.3 |  30.3  |
|EUR million                  |        |         |             |        |
+-----------------------------+--------+---------+-------------+--------+
|Net debt/EBITDA              |   0.0  |    0.2  |         0.0 |   0.2  |
+-----------------------------+--------+---------+-------------+--------+
|Book-to-bill                 |   0.9  |    1.0  |         1.1 |   1.1  |
+-----------------------------+--------+---------+-------------+--------+
|Order backlog                |   1 737|    1 550|        1 737|   1 550|
+-----------------------------+--------+---------+-------------+--------+
|Personnel on 30 June         | 12 949 |14 126   |      12 949 | 14 126 |
+-----------------------------+--------+---------+-------------+--------+

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:
“I am pleased that we were able to deliver healthy growth in our IT services
business in the second quarter. The profitability of the underlying business
developed as expected and the margin somewhat improved, despite our continued
investments to support long-term growth. We see this development as evidence of
further improvement in competitiveness, as the macro environment remains
relatively challenging.

We are continuing to make good progress in digitalizing our own services. The
current major automation programme in Managed Services is progressing on
schedule and we expect the customer benefits of this programme to materialize
during the second half of this year. In addition, this software-driven
automation programme drives further efficiency improvement.

I am also pleased with the performance of Product Development Services. Our
current business, excluding the R&D activities earlier insourced by one
customer, has been developing well and efficiency measures have resulted in a
healthy cost structure.

Our customers are continuing to reshape their businesses by applying new
technologies to their core processes. With the acquisition of Software
Innovation, announced in June, we are further strengthening our position as the
leading digitalization partner in the Nordic countries and accelerating our
growth, especially in Norway. Software Innovation is recognized for its strong
Nordic presence in digitalizing customers’ document and workflow management,
which further enables us to provide a broader set of services to a larger
customer base.

After the second quarter of 2015, we are on track in terms of both speed and
magnitude with re-shaping Tieto’s competitiveness through active investments in
both automation and new services.”
Financial performance by service line

+-------------------+---------+---------+---------+---------+---------+
|EUR million        | Customer| Customer|Change, %|Operating|Operating|
|                   |    sales|    sales|         |   profit|   profit|
|                   | 4–6/2015| 4–6/2014|         | 4–6/2015| 4–6/2014|
+-------------------+---------+---------+---------+---------+---------+
|Managed Services   |      131|      132|       -1|      3.1|      7.6|
+-------------------+---------+---------+---------+---------+---------+
|Consulting and     |      101|       97|        5|      8.5|      6.1|
|System Integration |         |         |         |         |         |
+-------------------+---------+---------+---------+---------+---------+
|Industry Products  |       98|       97|        1|     10.8|     15.0|
+-------------------+---------+---------+---------+---------+---------+
|Product Development|       33|       60|      -45|      5.7|     -2.3|
|Services           |         |         |         |         |         |
+-------------------+---------+---------+---------+---------+---------+
|Support Functions  |         |         |         |     -5.0|     -4.8|
|and Global         |         |         |         |         |         |
|Management         |         |         |         |         |         |
+-------------------+---------+---------+---------+---------+---------+
|Total              |      364|      386|       -6|     23.1|     21.5|
+-------------------+---------+---------+---------+---------+---------+

Operating margin by service line

+----------------+---------+---------+---------------+---------------+
|%               |Operating|Operating|      Operating|      Operating|
|                |   margin|   margin|   margin excl.|   margin excl.|
|                | 4–6/2015| 4–6/2014|one-off items1)|one-off items1)|
|                |         |         |       4–6/2015|       4–6/2014|
+----------------+---------+---------+---------------+---------------+
|Managed Services|      2.4|      5.8|            7.6|            5.8|
+----------------+---------+---------+---------------+---------------+
|Consulting and  |      8.4|      6.3|            8.6|            7.4|
|System          |         |         |               |               |
|Integration     |         |         |               |               |
+----------------+---------+---------+---------------+---------------+
|Industry        |     11.0|     15.3|           12.2|           15.6|
|Products        |         |         |               |               |
+----------------+---------+---------+---------------+---------------+
|Product         |     17.1|     -3.8|            9.6|            6.1|
|Development     |         |         |               |               |
|Services        |         |         |               |               |
+----------------+---------+---------+---------------+---------------+
|Total           |      6.3|      5.6|            8.3|            7.8|
+----------------+---------+---------+---------------+---------------+
|1) Excl. capital                                                    |
|gains,                                                              |
|impairments and                                                     |
|restructuring                                                       |
|costs                                                               |
+----------------+---------+---------+---------------+---------------+

Organic change in local currency by service line

+----------------+------------+--------------------------+---------+
|EUR million     |    Customer|                  Customer|Change, %|
|                |  sales adj.|sales adj. for divestments|         |
|                |         for|                  4–6/2014|         |
|                |acquisitions|                          |         |
|                |and currency|                          |         |
|                |    4–6/2015|                          |         |
+----------------+------------+--------------------------+---------+
|Managed Services|         132|                       132|        1|
+----------------+------------+--------------------------+---------+
|Consulting and  |         102|                        97|        6|
|System          |            |                          |         |
|Integration     |            |                          |         |
+----------------+------------+--------------------------+---------+
|Industry        |         100|                        97|        3|
|Products        |            |                          |         |
+----------------+------------+--------------------------+---------+
|IT services     |         335|                       326|        3|
+----------------+------------+--------------------------+---------+
|Product         |          34|                        55|      -39|
|Development     |            |                          |         |
|Services        |            |                          |         |
+----------------+------------+--------------------------+---------+
|Total           |         369|                       386|       -3|
+----------------+------------+--------------------------+---------+

Customer sales by industry group

+-----------------------------------+--------------+--------------+---------+
|EUR million                        |Customer sales|Customer sales|Change, %|
|                                   |      4–6/2015|      4–6/2014|         |
+-----------------------------------+--------------+--------------+---------+
|Financial Services                 |            88|            84|        4|
+-----------------------------------+--------------+--------------+---------+
|Manufacturing, Retail and Logistics|            77|            78|        0|
+-----------------------------------+--------------+--------------+---------+
|Public, Healthcare and Welfare     |           107|           104|        2|
+-----------------------------------+--------------+--------------+---------+
|Telecom, Media and Energy          |            58|            60|       -3|
+-----------------------------------+--------------+--------------+---------+
|IT services                        |           330|           326|        1|
+-----------------------------------+--------------+--------------+---------+
|Product Development Services       |            33|            60|      -45|
+-----------------------------------+--------------+--------------+---------+
|Total                              |           364|           386|       -6|
+-----------------------------------+--------------+--------------+---------+

Organic change in local currency by industry group

+--------------+----------------+--------------------+---------+
|EUR million   |  Customer sales|      Customer sales|Change, %|
|              |        adj. for|adj. for divestments|         |
|              |acquisitions and|            4-6/2014|         |
|              |        currency|                    |         |
|              |        4-6/2015|                    |         |
+--------------+----------------+--------------------+---------+
|Financial     |              89|                  84|        6|
|Services      |                |                    |         |
+--------------+----------------+--------------------+---------+
|Manufacturing,|              78|                  78|        0|
|Retail and    |                |                    |         |
|Logistics     |                |                    |         |
+--------------+----------------+--------------------+---------+
|Public,       |             108|                 104|        4|
|Healthcare and|                |                    |         |
|Welfare       |                |                    |         |
+--------------+----------------+--------------------+---------+
|Telecom, Media|              60|                  60|       -1|
|and Energy    |                |                    |         |
+--------------+----------------+--------------------+---------+
|IT services   |             335|                 326|        3|
+--------------+----------------+--------------------+---------+
|Product       |              34|                  55|      -39|
|Development   |                |                    |         |
|Services      |                |                    |         |
+--------------+----------------+--------------------+---------+
|Total         |             369|                 386|       -3|
+--------------+----------------+--------------------+---------+

Leadership team

Antti Vasara, Executive Vice President, Head of Product Development Services,
has decided to pursue opportunities outside Tieto. Tom Leskinen, currently
heading a business unit in PDS, has been nominated as Head of Product
Development Services and he will report to Kimmo Alkio, President and CEO. The
changes will take effect as of 1 August 2015.

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 July 2015 at Tieto’s
premises in Helsinki, address: Aku Korhosen tie 2–6, 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=220715) 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
NASDAQ Helsinki
NASDAQ Stockholm
Principal Media

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 around 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