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Tietos Interim Report 3/2016 Solid profitability well positioned for future growth and competitiveness

(October 25, 2016)


  · Modest growth  good order intake with significant contracts won towards theend of the quarter  · Operating structure aligned with the new strategy  temporary transitionimpact addressed  · Investments in automation and future high-growth businesses continuedThe full interim report with tables is available at the end of this releaseKey figures for the third quarterIT services  · Sales growth totalled 2.6%, sales in local currencies up by 3.1%  · Adjusted operating profit amounted to EUR 33.7 (36.8) million, 10.7% (12.0)of salesThe Group  · Sales growth totalled 1.6%, sales in local currencies up by 2.2%  · Adjusted operating profit amounted to EUR 35.4 (38.6) million, 10.4% (11.5)of sales  · Order intake (Total Contract Value) at EUR 406 (490) million, order backlogat EUR 1 722 (1 864) million  book-to-bill 1.2+------------------------+--------+--------+---------+---------+|                        |79/2016|79/2015| 19/2016| 19/2015|+------------------------+--------+--------+---------+---------+|Net sales, EUR million  | 340.5  | 335.1  |1 089.0  |1 064.5  |+------------------------+--------+--------+---------+---------+|   Change, %            |   1.6  |  -3.2  |    2.3  |   -4.9  |+------------------------+--------+--------+---------+---------+|   Change in local      |   2.2  |  -0.6  |    3.1  |   -2.4  ||currencies, %           |        |        |         |         |+------------------------+--------+--------+---------+---------+|Operating profit        |  38.6  |  44.5  |  105.9  |   87.9  ||(EBITA), EUR million 1) |        |        |         |         |+------------------------+--------+--------+---------+---------+|Operating margin        |  11.3  |  13.3  |    9.7  |    8.3  ||(EBITA), %              |        |        |         |         |+------------------------+--------+--------+---------+---------+|Operating profit (EBIT),|  35.1  |  41.4  |   95.7  |   78.4  ||EUR million             |        |        |         |         |+------------------------+--------+--------+---------+---------+|Operating margin (EBIT),|  10.3  |  12.4  |    8.8  |    7.4  ||%                       |        |        |         |         |+------------------------+--------+--------+---------+---------+|Adjusted2) operating    |  35.4  |  38.6  |  102.7  |   99.4  ||profit (EBIT), EUR      |        |        |         |         ||million                 |        |        |         |         |+------------------------+--------+--------+---------+---------+|Adjusted2) operating    |  10.4  |  11.5  |    9.4  |    9.3  ||margin (EBIT), %        |        |        |         |         |+------------------------+--------+--------+---------+---------+|Profit after taxes, EUR |  27.3  |  29.6  |   73.0  |   56.1  ||million                 |        |        |         |         |+------------------------+--------+--------+---------+---------+|EPS, EUR                |  0.37  |  0.40  |   0.99  |   0.76  |+------------------------+--------+--------+---------+---------+|Net cash flow from      |  13.8  |  16.4  |   47.0  |   65.5  ||operations, EUR million |        |        |         |         |+------------------------+--------+--------+---------+---------+|Return on equity, 12    |  24.4  |  13.8  |   24.4  |   13.8  ||-month rolling, %       |        |        |         |         |+------------------------+--------+--------+---------+---------+|Return on capital       |  22.6  |  14.8  |   22.6  |   14.8  ||employed, 12-month      |        |        |         |         ||rolling, %              |        |        |         |         |+------------------------+--------+--------+---------+---------+|Capital expenditure and |  53.3  |  81.8  |   74.5  |  104.0  ||acquisitions, EUR       |        |        |         |         ||million                 |        |        |         |         |+------------------------+--------+--------+---------+---------+|Interest-bearing net    | 136.4  |  57.7  |  136.4  |   57.7  ||debt, EUR million       |        |        |         |         |+------------------------+--------+--------+---------+---------+|Net debt/EBITDA         |   0.7  |   0.4  |    0.7  |    0.4  |+------------------------+--------+--------+---------+---------+|Book-to-bill            |   1.2  |   1.5  |    1.0  |    1.2  |+------------------------+--------+--------+---------+---------+|Order backlog           | 1 722  | 1 864  |  1 722  |  1 864  |+------------------------+--------+--------+---------+---------+|Personnel on 30         |13 758  |13 179  | 13 758  | 13 179  ||September               |        |        |         |         |+------------------------+--------+--------+---------+---------+1) amortization of all intangible items; previously, only acquisition-relatedintangible items2) adjusted for restructuring costs, capital gains/losses, goodwill impairmentcharges and other items (see page 15)Full-year outlook for 2016 unchangedTieto expects its adjusted1) full-year operating profit (EBIT) to increase fromthe previous years level (EUR 150.8 million in 2015).1) adjusted for restructuring costs, capital gains/losses, goodwill impairmentcharges and other itemsCEOs commentComment regarding the interim report by Kimmo Alkio, President and CEO:?We ended the third quarter with good order intake and solid profitability whilegrowth was modest. The significant agreements won during the quarter welldemonstrate our competitiveness and support our growth ambition.Our aim is to help customers renew their business: to provide truly innovativeservices and to constantly increase operational efficiency. As part of ourrenewed strategy, we adopted a new operating structure in July. While wetransitioned to a new operating model and experienced temporarily lowerefficiency, I am pleased how swiftly this was addressed. We believe that the newstrategy combined with targeted investments will accelerate our performance andhelp us achieve our long-term financial objectives. To further strengthen ourposition in the attractive financial services market, we are pleased to havecompleted the acquisition of Emric, the Nordic market leader in software andservices for credit processing. We are happy to welcome our new colleagues tojoin Tieto to accelerate our customers business renewal.I believe that our existing investments, close co-innovation with our customersand continuous productivity improvements will provide us with a good basis forcompetitiveness and value creation in the future as well.Financial performance by service line+-------------------+---------+---------+-------+---------+---------+|EUR million        | Customer| Customer|Change,|Operating|Operating||                   |sales    |sales    |%      |profit   |profit   ||                   |79/2016 |79/2015 |       |79/2016 |79/2015 |+-------------------+---------+---------+-------+---------+---------+|Technology Services|      179|      177|      1|     24.2|     22.9||and Modernization  |         |         |       |         |         |+-------------------+---------+---------+-------+---------+---------+|Business Consulting|       30|       28|      5|     -0.2|     -0.5||and Implementation |         |         |       |         |         |+-------------------+---------+---------+-------+---------+---------+|Industry Solutions |      106|      101|      4|     13.0|     22.7|+-------------------+---------+---------+-------+---------+---------+|Product Development|       26|       29|     -9|      1.7|      0.6||Services           |         |         |       |         |         |+-------------------+---------+---------+-------+---------+---------+|Support Functions  |         |         |       |     -3.5|     -4.3||and Global         |         |         |       |         |         ||Management         |         |         |       |         |         |+-------------------+---------+---------+-------+---------+---------+|Total              |      341|      335|     2 |     35.1|     41.4|+-------------------+---------+---------+-------+---------+---------+Operating margin by service line+-------------------+---------+---------+-----------------+----------------+|%                  |Operating|Operating|Adjusted1)       |Adjusted1)      ||                   |margin   |margin   | operating margin|operating margin||                   |79/2016 |79/2015 |79/2016         |79/2015        |+-------------------+---------+---------+-----------------+----------------+|Technology Services|    13.5 |     12.9|             13.4|            13.2||and Modernization  |         |         |                 |                |+-------------------+---------+---------+-----------------+----------------+|Business Consulting|     -0.6|     -1.6|             -4.9|            -0.1||and Implementation |         |         |                 |                |+-------------------+---------+---------+-----------------+----------------+|Industry Solutions |     12.3|     22.3|             12.5|            16.4|+-------------------+---------+---------+-----------------+----------------+|Product Development|      6.4|      2.1|              6.5|             6.2||Services           |         |         |                 |                |+-------------------+---------+---------+-----------------+----------------+|Total              |     10.3|     12.4|             10.4|            11.5|+-------------------+---------+---------+-----------------+----------------+1) adjusted for restructuring costs, capital gains/losses, goodwill impairmentcharges and other itemsCustomer sales by industry group+--------------+-----------------------+-----------------------+---------+|EUR million   |Customer sales 79/2016|Customer sales 79/2015|Change, %|+--------------+-----------------------+-----------------------+---------+|Financial     |                     88|                     83|        6||Services      |                       |                       |         |+--------------+-----------------------+-----------------------+---------+|Public,       |                    106|                     98|        8||Healthcare and|                       |                       |         ||Welfare       |                       |                       |         |+--------------+-----------------------+-----------------------+---------+|Industrial and|                    121|                    126|       -4||Consumer      |                       |                       |         ||Services      |                       |                       |         |+--------------+-----------------------+-----------------------+---------+|IT services   |                    315|                    306|        3|+--------------+-----------------------+-----------------------+---------+|Product       |                    26 |                     29|       -9||Development   |                       |                       |         ||Services      |                       |                       |         |+--------------+-----------------------+-----------------------+---------+|Total         |                    341|                    335|        2|+--------------+-----------------------+-----------------------+---------+M&A impact by service line+-------------------+--------------------+---------------------+|                   |Growth, % (in local |Organic growth, % (in||                   |currencies) 79/2016|local currencies)    ||                   |                    |79/2016             |+-------------------+--------------------+---------------------+|Technology Services|                 1.3|                  1.3||and Modernization  |                    |                     |+-------------------+--------------------+---------------------+|Business Consulting|                 5.4|                 -6.2||and Implementation |                    |                     |+-------------------+--------------------+---------------------+|Industry Solutions |                 5.0|                 -1.0|+-------------------+--------------------+---------------------+|IT services        |                 3.1|                  0.1|+-------------------+--------------------+---------------------+|Product Development|                -7.9|                 -7.9||Services           |                    |                     |+-------------------+--------------------+---------------------+|Total              |                 2.2|                 -0.6|+-------------------+--------------------+---------------------+ M&A impact by industry group+--------------+--------------------+---------------------+|              |Growth, % (in local |Organic growth, % (in||              |currencies) 79/2016|local currencies)    ||              |                    |79/2016             |+--------------+--------------------+---------------------+|Financial     |                 6.8|                  4.7||Services      |                    |                     |+--------------+--------------------+---------------------+|Public,       |                 8.1|                  3.5||Healthcare and|                    |                     ||Welfare       |                    |                     |+--------------+--------------------+---------------------+|Industrial and|                -3.5|                 -6.0||Consumer      |                    |                     ||Services      |                    |                     |+--------------+--------------------+---------------------+|IT services   |                 3.1|                  0.1|+--------------+--------------------+---------------------+|Product       |                -7.9|                 -7.9||Development   |                    |                     ||Services      |                    |                     |+--------------+--------------------+---------------------+|Total         |                 2.2|                 -0.6|+--------------+--------------------+---------------------+For further information, please contact:Lasse Heinonen,CFO, tel.+358 2072 66329, +358 50 393 4950, lasse.heinonen (at) tieto.comTanja Lounevirta,Head of Investor Relations, tel.+358 2072 71725 (http://calltotel+358207271725),+358 50 321 7510, tanja.lounevirta (at) tieto.comPress conference for analysts and media will be held at Tietos premises inStockholm, address: Fjärde Bassänvägen 15, on 25 October at 11.00 am EET (10.00am CET, 9.00 am UK time). The results will be presented in English by KimmoAlkio, President and CEO, and Lasse Heinonen, CFO.The conference will bewebcasted (http://webcast.tieto.com/quarterlyreport/?q=251016) and can be viewedlive on Tieto's website (http://www.tieto.com/investors). To join theconference, attendees need Adobe Flash plugin version 10.1.0 or newer. Themeeting participants can also join a telephone conference that will be held atthe same time. The telephone conference details can be found below.Telephone conference numbersFinland: +358 (0)9 7479 0361Sweden: +46 (0)8 5033 6574UK: +44 (0)203 043 2002US: +1 719 325 2131Conference code: 6304748To ensure that you are connected to the conference call, please dial in a fewminutes before the start of the press and analyst conference. An on-demand videowill be available after the conference.Tieto publishes financial information in English and Finnish.TIETO CORPORATIONDISTRIBUTIONNASDAQ HelsinkiNASDAQ StockholmPrincipal MediaTieto aims to capture the significant opportunities of the data-driven world andturn them into lifelong value for people, business and society. We aim to becustomers first choice for business renewal by combining our software andservices capabilities with a strong drive for co-innovation and ecosystems.Headquartered in Finland, Tieto has over 13 000 experts in close to 20countries. Tietos turnover is approximately EUR 1.5 billion and shares listedon NASDAQ in Helsinki and Stockholm.  www.tieto.com

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