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Ericsson Capital Markets Day 2018

Vlad Poptamas

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Photo source: recode.net - Börje Ekholm
Reading Time: 4 minutes
  • Focused company strategy remains unchanged, solid progress in strategy execution, updated financial targets and sales ambitions
  • 2020 operating margin target, excluding restructuring, of more than 10% remains with increased sales ambition to SEK 210 – 220 b. for the Group (based on USD/SEK of 8.70)
  • The operating margin target for segment Managed Services is increased to 5% – 8%, and sales ambitions for segment Networks increased to SEK 141 – 145 b. in 2020
  • Long term target of more than 12% operating margin, excluding restructuring, to be reached no later than 2022, operating margin targets 2022 per segment presented

On November 8, Ericsson (NASDAQ: ERIC) will hold its Capital Markets Day 2018 in New York. The company will give an overview of its turnaround, strategy, and plans for future growth as well as details about its business segments and market trends.

Over the past seven quarters, focus has been on simplifying and stabilizing the business, including stopping the topline decline. Accelerated cost reduction activities and contract reviews have been implemented. There is good traction in the ongoing portfolio review. Moreover, the company’s increased investments in R&D for future growth combined with efficient cost control has proven successful with improved profitability as a result.

Börje Ekholm, President and CEO, says: “With our focused strategy we have created a strong foundation of stability and profitability. Our strengthened portfolio and competitive cost structure have enabled us to grow in the third quarter 2018, for the first time since 2014, on a constant currency basis, despite headwind from exited contracts and businesses. As the industry moves to 5G and IoT we are now preparing to take the next step to generate profitable growth in a selective and disciplined way.”

Group profitability target and net sales ambition 2020

The ambition for net sales is increased to SEK 210 – 220 (190-200) b. by 2020, mainly driven by Networks. Of the increase in the sales ambition, SEK 5 b. is explained by currency and SEK 2 b. is explained by the inclusion of Red Bee Media, previously not included in the sales ambition.

In Networks, increased investments in R&D for technology and cost leadership will continue. Growth is expected to come from a stronger market, selective market shares gains, and expansion of the product portfolio into close adjacent markets. In 2019, investments in 5G trials will continue. The operating margin target for 2020 is unchanged at 15% – 17%.

In Digital Services, the top priority is returning to profitability. Continued cost reductions and efficiency improvements will contribute to reaching the target of a low single digit operating margin by 2020. Investments in a 5G-ready and cloud-native product portfolio continue. There is a strong market demand for the new portfolio driven by virtualization and 5G acceleration. At the same time, the legacy product sales decline faster than the new portfolio uptake. The lower net sales ambition for the segment is fully explained by the internal transfer of a business line to Managed Services.

In Managed Services, where a turnaround has been completed, focus is shifting to further improving profitability through investments in automation and Artificial Intelligence. Consequently, the operating margin target 2020 is increased to 5% – 8%.

In Segment Emerging Business and Other focus is on establishing new businesses for organic growth. The strategy is to capture new revenues through rapid and disciplined innovation building on 5G and IoT. For the current business portfolio, the target of break-even by 2020 is unchanged. However, in case of attractive new business opportunities, we may decide to scale up investments. We will manage emerging business initiatives for growth, based on positive NPV case-by-case and within 2022 Group targets.

Long-term profitability

As previously communicated the long-term profitability target for the Group is an operating margin of more than 12% excluding restructuring. While the target level remains unchanged, the timing is now set to 2022 at the latest. Operating margin targets per segment for 2022 are found in the table below:

Financial targets and sales ambitions

(CMD 2017 numbers in brackets, when changed)

SEK b. Networks Digital Services Managed Services Emerging Business and Other Group
2020 Net sales ambition 141 – 145(128 – 134) 41 – 43 23 – 25 5 – 7 210 – 220
2020 Operating margins 15% – 17% Low single digit 5% – 8%(4% – 6%) Break-even(current business)  >10%
Operating margin by 2022, at the latest 15% – 17% 10% – 12% 8% – 10%  >12%

Note: All financial targets are based on USD/SEK at 8.70. Operating margin targets are all excluding restructuring charges.

Market development

Ericsson’s total addressable market is expected to grow between 2% – 3% CAGR from 2018 to 2022, broken down as follows: Radio Access Network 1% – 3%, Managed Services 2% – 4%, and Digital Services 1% – 4%.

Planning assumptions for all key segments are based on external sources.

Planning assumptions Q4 2018

The planning assumptions as stated in the third quarter report for 2018 remain. However, following the announcement to accelerate edge computing through a partnership with Limelight, we plan to reset Ericsson EdgeGravity, formerly known as Ericsson UDN, allowing for a leaner set-up of content delivery. These actions are expected to generate annual cost savings of SEK 0.2 b. starting from 2019. Related to this, Q4 2018 will be negatively impacted by SEK -0.5 b., of which SEK -0.2 b. of restructuring charges impacts cashflow.

Speakers and details of the event

President and CEO Börje Ekholm and CFO Carl Mellander, will be joined by members of the company’s Executive Team. The speakers include Erik Ekudden, CTO, Fredrik Jejdling, Executive Vice President and Head of Business Area Networks, Jan Karlsson, Head of Business Area Digital Services, Peter Laurin, Head of Business Area Managed Services, and Åsa Tamsons, Head of Business Area Technologies and New Businesses, Niklas Heuveldop, Head of Market Area North America, Arun Bansal, Head of Market Area Europe and Latin America, and Chris Houghton, Head of Market Area North East Asia.

Ericsson’s Capital Markets Day event can be accessed via the Ericsson website https://www.ericsson.com/en/investors/events-and-presentations/CMD2018. Presentation materials can also be downloaded from the website once the webcast has started.

Editor - With a passion photo photography, webdesign and content, it made sense for me to also integrate news editing and press release publishing. I am also passionate about the car industry, so you will surely find some exciting news reporting from my side about the automotive industry.

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Accounting News & Issues

Volvo Group Venture Capital Invests in Wireless Electric Charging

Vlad Poptamas

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Photo source: ft.com
Reading Time: 2 minutes

 

Volvo Group Venture Capital AB, a subsidiary of the Volvo Group, today announced an investment in Momentum Dynamics Inc – a leading company in high power wireless charging of electric vehicles.

Momentum Dynamics is a Philadelphia-based company developing and commercializing high power inductive charging for the automotive and transportation industries, especially suitable for commercial electric, autonomous and connected vehicles.

“Momentum Dynamics’ technology and competence within inductive bi-directional transmission of electrical energy and information safely through air, water and ice will fit the harsh conditions under which our customers operate. High capacity charging up to 300 kW for trucks, buses, construction equipment, industrial and marine applications will support the electrified transition,” according to Per Adamsson, Vice President at Volvo Group Venture Capital.

Wireless electric charging allows any type of vehicle to automatically and without supervision connect to the electrical power grid without the use of wires or cables. Without the need for a driver to plug in their vehicle to a charging station, automatic and bi-directional “electric fueling” may occur frequently and opportunistically – resulting in efficient use of battery capacity, longer driving ranges and improved uptime.

Momentum Dynamics is conducting pilots in Europe and North America with both fleets and vehicle manufacturers of cars, buses, trucks and trains.

“For Volvo Group we are strengthening our competence and knowledge of charging and electricity distribution within the ecosystem around electric transportation and energy supply. We see partnership, cooperation and investments as the way forward in a fast-changing environment,” according to Stefan Söderling, Investment Director at Volvo Group Venture Capital.

Volvo Group Venture Capital is constantly on the look-out for new investments with innovative and entrepreneurial companies supporting the Volvo Group business and its transformation – especially in the areas of electromobility, autonomous vehicles and connectivity. With the objective of accelerating new business growth, Volvo Group Venture Capital invests in companies driving product, service and solutions in the transport and infrastructure industries.

The transaction has no significant impact on the Volvo Group’s earnings or financial position.

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Accounting News & Issues

Hansa Medical AB Provides Regulatory Update for Imlifidase in Kidney Transplantation

Vlad Poptamas

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Photo source: blog.rackspace.com
Reading Time: 2 minutes

 

Hansa Medical AB (Nasdaq Stockholm: HNSA) (“Hansa Medical” or the “Company”), a biopharmaceutical company focused on inhibition of immunoglobulin G (IgG)-mediated immunopathologies, today provided an update following the Company’s regulatory interactions with the European Medical Agency (EMA) and the U.S. Food and Drug Administration (FDA) for imlifidase in kidney transplantation.

“We have had very productive meetings with the EMA and FDA, during which both agencies provided positive feedback on the data generated on imlifidase to date and acknowledged the high unmet medical need of highly sensitized patients who currently can’t access kidney transplantation,” said Søren Tulstrup, President and CEO of Hansa Medical AB.

“In Europe, we continue to expect to file a Marketing Authorization Application with the EMA this quarter. The dialogue with the FDA to determine the path forward for regulatory approval in the U.S. will continue in a subsequent meeting in the coming months per the agency’s request for additional information regarding imlifidase treatment in the context of the new U.S. Kidney Allocation System (KAS). We will provide updated guidance regarding expected timeline for a potential BLA filing after this meeting has taken place. Our highest priority is getting imlifidase to market to enable lifesaving kidney transplants for highly sensitized patients, who currently can’t receive this standard of care treatment,” continued Mr. Tulstrup.

The U.S. Kidney Allocation System was updated in 2014 in order to increase equity in allocation, reduce kidney discard rates and reduce organ/recipient longevity mismatches. While the KAS has improved the possibility for highly sensitized patients to receive a kidney transplant, thousands of highly sensitized patients remain unable to be successfully matched.

In September 2018, Hansa successfully completed two Phase 2 clinical studies evaluating imlifidase for kidney transplantation in highly sensitized patients, with imlifidase enabling transplantation in all 35 patients. Imlifidase met all primary and secondary endpoints in each study. Imlifidase has received Fast Track designation from the FDA and has been selected for Priority Medicines (PRIME) by the EMA. Imlifidase has received Orphan Drug Designation from the EMA and FDA.

This is information that Hansa Medical AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below at 08:00am CET on January 15, 2019.

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Accounting News & Issues

CREDI Indicates Tightened Access to Debt for Property Companies

Vlad Poptamas

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Reading Time: 2 minutes

 

In the December issue of the Catella Real Estate Debt Indicator (CREDI), the Main index falls slightly from 49.6 to 48.6, as credit availability has worsened noticeably over the past two quarters. Property companies did experience slightly improved credit terms as interest rates fall to a record low, but uncertainty looms as credit margins appear to rise in the future.

“This year’s fourth CREDI survey appear to confirm a shift in the credit market, where access to credit has continued to gradually worsen. Debt is still attractively priced when it is available, but the access to debt is tightening. Furthermore, we have observed a trend since September last year where surveyed banks and property companies have held a fairly positive view of the current credit climate, but their view of the future development has been more pessimistic. However, this anticipated negative development has yet to materialise. In fact, the average interest rate of listed property companies has continued to fall to a record low 2 per cent,” says Martin Malhotra, Project Manager at Catella.

“We will see the effects of the central banks reducing their stimulus programs and tightening up liquidity, which will also affect the Swedish bond market. In particular, the market will demand higher returns for risk, which will make debt financing more expensive for small actors that are perceived to have higher risk. Large actors with low-risk business models, on the other hand, will still be able to find attractively priced debt,” says Arvid Lindqvist, Head of Research at Catella.

“While it has been a good year for property companies on the stock market, the average dividend for property-related preference shares increased by 50 bps on the back of investors’ fear of a steeper yield curve. At the same time, the recently introduced class D common share is increasingly being viewed as a replacement for the preference share,” Martin Malhotra concludes.

The twenty-fifth edition of the Catella Real Estate Debt Indicator (CREDI) is attached and can also be downloaded from catella.com/en/news-and-pressreleases/research. CREDI consists of two parts: one is an index based on a survey of listed property companies and active banks, and the other a set of indices and analyses based on publicly available data.

Catella is a leading specialist in property investments, fund management and banking, with operations in 14 countries. The group has assets under management of approximately SEK 180 billion. Catella is listed Nasdaq Stockholm in the Mid Cap segment. Read more online at catella.com.

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