Tieto Oyj - Interim report (Q1 and Q3)

Tieto’s Interim Report 3/2017 – Good third-quarter performance – strong improvement in customer experience results

  · Revenue growth over 4% – continued solid market demand
  · Operating margin close to 12% – improvement in all businesses with Industry
Solutions’ margin rising to over 14%
  · All-time high Net Promoter Score as customer experience initiatives paying
off
  · Public offer to acquire Avega announced in October – to accelerate growth in
Sweden

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

Key figures for the third quarter

IT services

  · Sales growth totalled 3.8%, sales in local currencies up by 4.0%
  · Adjusted operating profit amounted to EUR 39.0 (33.7) million, 12.0% (10.7)
of sales

The Group

  · Sales growth totalled 4.2%, sales in local currencies up by 4.5%
  · Adjusted operating profit amounted to EUR 41.2 (35.4) million, 11.6% (10.4)
of sales
  · Order intake (Total Contract Value) at EUR 271 (406) million – book-to-bill
0.8 (1.2)

+---------------------------------------------------+------+------+-------+-----
--+
|                                                   |  7–9/|  7–9/|   1–9/|
1–9/|
|                                                   |  2017|  2016|   2017|
2016|
+---------------------------------------------------+------+------+-------+-----
--+
|Net sales, EUR million                             | 354.9|
340.5|1 133.6|1 089.0|
+---------------------------------------------------+------+------+-------+-----
--+
|Change, %                                          |   4.2|   1.6|    4.1|
2.3|
+---------------------------------------------------+------+------+-------+-----
--+
|Change in local currencies, %                      |   4.5|   2.2|    4.7|
3.1|
+---------------------------------------------------+------+------+-------+-----
--+
|Operating profit (EBITA), EUR million              |  45.0|  38.6|  102.6|
105.9|
+---------------------------------------------------+------+------+-------+-----
--+
|Operating margin (EBITA), %                        |  12.7|  11.3|    9.1|
9.7|
+---------------------------------------------------+------+------+-------+-----
--+
|Operating profit (EBIT), EUR million 1)            |  41.1|  35.1|   91.2|
95.7|
+---------------------------------------------------+------+------+-------+-----
--+
|Operating margin (EBIT), % 1)                      |  11.6|  10.3|    8.0|
8.8|
+---------------------------------------------------+------+------+-------+-----
--+
|Adjusted 1) 2) operating profit (EBIT), EUR million|  41.2|  35.4|  112.2|
102.7|
+---------------------------------------------------+------+------+-------+-----
--+
|Adjusted 1) 2) operating margin (EBIT), %          |  11.6|  10.4|    9.9|
9.4|
+---------------------------------------------------+------+------+-------+-----
--+
|Profit after taxes, EUR million                    |  34.3|  27.3|   71.0|
73.0|
+---------------------------------------------------+------+------+-------+-----
--+
|EPS, EUR                                           |  0.46|  0.37|   0.96|
0.99|
+---------------------------------------------------+------+------+-------+-----
--+
|Net cash flow from operations, EUR million         |  10.8|  13.8|   84.4|
47.0|
+---------------------------------------------------+------+------+-------+-----
--+
|Return on equity, 12-month rolling, %              |  23.6|  24.4|   23.6|
24.4|
+---------------------------------------------------+------+------+-------+-----
--+
|Return on capital employed, 12-month rolling, %    |  21.0|  22.6|   21.0|
22.6|
+---------------------------------------------------+------+------+-------+-----
--+
|Capital expenditure, EUR million                   |   9.1|  16.0|   39.4|
37.2|
+---------------------------------------------------+------+------+-------+-----
--+
|Interest-bearing net debt, EUR million             | 161.4| 136.4|  161.4|
136.4|
+---------------------------------------------------+------+------+-------+-----
--+
|Net debt/EBITDA                                    |   0.8|   0.7|    0.8|
0.7|
+---------------------------------------------------+------+------+-------+-----
--+
|Book-to-bill                                       |   0.8|   1.2|    0.9|
1.0|
+---------------------------------------------------+------+------+-------+-----
--+
|Order backlog                                      | 1 689| 1 722|  1 689|  1
722|
+---------------------------------------------------+------+------+-------+-----
--+
|Personnel on 30 September                          |13 851|13 758| 13 851| 13
758|
+---------------------------------------------------+------+------+-------+-----
--+

1)the third quarter includes EUR 1.0 (0.8) million and the nine-month period EUR
3.1 (2.2) million in amortization of acquisition-related intangible assets
2)adjusted for restructuring costs, capital gains/losses, goodwill impairment
charges and other items

Full-year outlook for 2017 unchanged

Tieto expects its adjusted1) full-year operating profit (EBIT) to increase from
the previous year’s level (EUR 152.2 million in 2016).

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 are really pleased with the strong third-quarter performance – especially as
all businesses developed favourably. We had solid growth of over 4% and healthy
profitability with an operating margin close to 12%. Our recent performance
confirms that our focus on selective solutions and strategy implementation is
creating greater value to our customers and a more competitive company overall.

During the past quarter, as expected, our industry solutions businesses
delivered good performance with 8% growth and solid profitability of over 14%.
These solutions are a clear market differentiator for Tieto and we continue to
invest in attractive software-centric growth opportunities. Of our high-growth
businesses, we are especially pleased with the development in Customer
Experience Management related solutions, which saw growth of over 30%.

As announced on 23 October, we have made a public offer to acquire Avega, a
Swedish consulting company with around 350 employees, which would strengthen our
advisory capabilities in the Swedish consulting-led market. This is a logical
step in our strategy of aiming to accelerate our role as the preferred partner
for business renewal for our customers. This announced transaction is expected
to close during the latter part of the fourth quarter.

We saw strong improvement in our recent annual customer experience results with
our Net Promoter Score reaching an all-time high. It is positive to see that our
multi-year attention to quality and customer experience is starting to pay off.
This lays a good foundation for continuing our efforts to improve our customer
satisfaction and competitiveness as well as drive longer-term market share
gains.”

Financial performance by service line

+-------------------+--------+--------+---------+---------+---------+
|EUR million        |Customer|Customer|Change, %|Operating|Operating|
|                   |   sales|   sales|         |   profit|   profit|
|                   |7–9/2017|7–9/2016|         | 7–9/2017| 7–9/2016|
+-------------------+--------+--------+---------+---------+---------+
|Technology Services|     180|     179|        1|     25.0|     24.2|
|and Modernization  |        |        |         |         |         |
+-------------------+--------+--------+---------+---------+---------+
|Business Consulting|      32|      30|        7|      0.7|     -0.2|
|and Implementation |        |        |         |         |         |
+-------------------+--------+--------+---------+---------+---------+
|Industry Solutions |     114|     106|        8|     16.6|     13.0|
+-------------------+--------+--------+---------+---------+---------+
|Product Development|      29|      26|       10|      2.2|      1.7|
|Services           |        |        |         |         |         |
+-------------------+--------+--------+---------+---------+---------+
|Support Functions  |        |        |         |     -3.4|     -3.5|
|and Global         |        |        |         |         |         |
|Management         |        |        |         |         |         |
+-------------------+--------+--------+---------+---------+---------+
|Total              |     355|     341|        4|     41.1|     35.1|
+-------------------+--------+--------+---------+---------+---------+

Operating margin by service line

+-------------------+---------+---------+----------+--------------------+
|%                  |Operating|Operating|Adjusted1)|Adjusted1) operating|
|                   |   margin|   margin| operating|              margin|
|                   | 7–9/2017| 7–9/2016|    margin|            7–9/2016|
|                   |         |         |  7–9/2017|                    |
+-------------------+---------+---------+----------+--------------------+
|Technology Services|    13.9 |     13.5|      13.8|                13.4|
|and Modernization  |         |         |          |                    |
+-------------------+---------+---------+----------+--------------------+
|Business Consulting|      2.3|     -0.6|       2.8|                -4.9|
|and Implementation |         |         |          |                    |
+-------------------+---------+---------+----------+--------------------+
|Industry Solutions |     14.5|     12.3|      14.4|                12.5|
+-------------------+---------+---------+----------+--------------------+
|Product Development|      7.6|      6.4|       7.5|                 6.5|
|Services           |         |         |          |                    |
+-------------------+---------+---------+----------+--------------------+
|Total              |     11.6|     10.3|      11.6|                10.4|
+-------------------+---------+---------+----------+--------------------+
|1) adjusted for                                                        |
|restructuring                                                          |
|costs, capital                                                         |
|gains/losses,                                                          |
|goodwill impairment                                                    |
|charges and other                                                      |
|items                                                                  |
+-------------------+---------+---------+----------+--------------------+

Customer sales by industry group

+--------------------------------+--------+--------+--------+
|EUR million                     |Customer|Customer|Change,%|
|                                |   sales|   sales|        |
|                                |7–9/2017|7–9/2016|        |
+--------------------------------+--------+--------+--------+
|Financial Services              |      92|      88|       5|
+--------------------------------+--------+--------+--------+
|Public, Healthcare and Welfare  |     112|     106|       6|
+--------------------------------+--------+--------+--------+
|Industrial and Consumer Services|     122|     121|       0|
+--------------------------------+--------+--------+--------+
|IT services                     |     326|     315|       4|
+--------------------------------+--------+--------+--------+
|Product Development Services    |      29|      26|       9|
+--------------------------------+--------+--------+--------+
|Total                           |     355|     341|       4|
+--------------------------------+--------+--------+--------+

M&A impact by service line

+-------------------+--------------------+---------------------+
|                   | Growth, % (in local|Organic growth, % (in|
|                   |currencies) 7–9/2017|    local currencies)|
|                   |                    |             7–9/2017|
+-------------------+--------------------+---------------------+
|Technology Services|                 0.8|                  0.8|
|and Modernization  |                    |                     |
+-------------------+--------------------+---------------------+
|Business Consulting|                 7.3|                  7.3|
|and Implementation |                    |                     |
+-------------------+--------------------+---------------------+
|Industry Solutions |                 8.6|                  6.0|
+-------------------+--------------------+---------------------+
|IT services        |                 4.0|                  3.1|
+-------------------+--------------------+---------------------+
|Product Development|                10.5|                 10.5|
|Services           |                    |                     |
+-------------------+--------------------+---------------------+
|Total              |                 4.5|                  3.7|
+-------------------+--------------------+---------------------+

M&A impact by industry group

+--------------------------------+---------------------+---------------------+
|                                |            Growth, %|    Organic growth, %|
|                                |(in local currencies)|(in local currencies)|
|                                |             7–9/2017|             7–9/2017|
+--------------------------------+---------------------+---------------------+
|Financial Services              |                  5.2|                  2.2|
+--------------------------------+---------------------+---------------------+
|Public, Healthcare and Welfare  |                  6.5|                  6.4|
+--------------------------------+---------------------+---------------------+
|Industrial and Consumer Services|                  0.7|                  0.6|
+--------------------------------+---------------------+---------------------+
|IT services                     |                  4.0|                  3.1|
+--------------------------------+---------------------+---------------------+
|Product Development Services    |                 10.5|                 10.5|
+--------------------------------+---------------------+---------------------+
|Total                           |                  4.5|                  3.7|
+--------------------------------+---------------------+---------------------+

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

A teleconference for analysts and media will be held on Tuesday 24 October 2017
at 10.00 am EET (9.00 am CET, 8.00 am UK time). Analysts and media are also
welcome to participate in the conference at Tieto’s office in Stockholm,
address: Fjärde Bassänvägen 15.

Kimmo Alkio, President and CEO, and Lasse Heinonen, CFO, will present the
results online in English. The
presentation (http://webcast.tieto.com/quarterlyreport/?q=241017) can be
followed on Tieto's website (http://www.tieto.com/investors), for which
attendees need Adobe Flash plugin version 10.1.0 or newer. The teleconference
details can be found below.

Teleconference numbers

Finland:          +358 (0)9 7479 0361
Sweden:           +46 (0)8 5033 6574
UK:               +44 (0)330 336 9105
US:               +1 719 457 1036
Conference code:  4404154

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. The teleconference
is recorded and it will be available on demand later during the day.

Tieto publishes its financial information in English and Finnish.

TIETO CORPORATION

DISTRIBUTION
NASDAQ Helsinki
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.  (http://www.tieto.com)www.tieto.com

Attachments:

10237855.pdf