kone q4 2019€¦ · 1-12/2019 income statement eur 0.1 million positive impact on ebit in...

KONEResult presentation 2019JANUARY 28, 2020

HENRIK EHRNROOTH, PRESIDENT & CEO

ILKKA HARA, CFO

Q4 2019 Highlights

▪ Continued good growth in all

regions and all businesses

▪ Improved adjusted EBIT margin

▪ Important strategic milestone:

launch of DX Class elevators

▪ Dividend proposal EUR 1.70

per class B share

January 28, 2020 Results presentation for 2019 | © KONE Corporation3

SOLID SALES GROWTH AND IMPROVED MARGIN

Q4/2019 Key figures

Q4/2019 Q4/2018 ChangeComparable

change

Orders received MEUR 1,988.3 1,937.9 2.6 % 0.7 %

Order book MEUR 8,051.5 7,950.7 1.3 % -0.6 %

Sales MEUR 2,684.6 2,443.4 9.9 % 7.9 %

Operating income (EBIT) MEUR 356.4 292.5 21.8 %

Operating income margin (EBIT %) % 13.3 12.0

Adjusted EBIT MEUR 367.5 319.6 15.0 %

Adjusted EBIT margin % 13.7 13.1

Cash flow from operations

(before financing items and taxes)MEUR 385.7 331.6

0.54 0.45Basic earnings per share EUR


SOLID EARNINGS GROWTH WITH STRONG CASH CONVERSION

1-12/2019 Key figures

1-12/2019 1-12/2018 ChangeComparable

change

Orders received MEUR 8,399.8 7,797.0 7.7 % 5.9 %

Order book MEUR 8,051.5 7,950.7 1.3 % -0.6 %

Sales MEUR 9,981.8 9,070.7 10.0 % 8.2 %

Operating income (EBIT) MEUR 1,192.5 1,042.4 14.4 %

Operating income margin (EBIT %) % 11.9 11.5

Adjusted EBIT MEUR 1,237.4 1,112.1 11.3 %

Adjusted EBIT margin % 12.4 12.3

Cash flow from operations

(before financing items and taxes)MEUR 1,549.6 1,150.1

1.80 1.63Basic earnings per share EUR


▪ Customer focus and continued investments in

differentiation drive improved margins and value per

unit

– New services and solutions

– KONE’s reputation as a reliable partner

▪ Opening of the new factory in Chennai, India

▪ Recognition for continuous improvements in

sustainability

– CDP A

– Global 100 most sustainable corporations - Corporate

Knights

Winning with Customers is taking us towards our strategic targetsBUSINESS HIGHLIGHTS IN 2019

New equipment ordersunits

Maintenance basemillions of units

0

50 000

100 000

150 000

200 000

20122011 2013 2014 2015 2016 2017 2018 2019

~166k ~173k

4%

0,0

0,5

1,0

1,5

2017201420122011 2013 2015 2016 2018 2019

~1.3 >1.3

5%

Growth in service

sales*, MEUR

7%

Growth in new

equipment

orders*, MEUR

6%

* At comp. FX, service sales includes maintenance and modernization

KONE DX ClassA NEW ERA FOR ELEVATORS – UPGRADEABLE SOLUTION THROUGHOUT THE LIFECYCLE OF A BUILDING

Create value with connected

people flow solutions

Connecting elevators with new

services using KONE’s digital

platform and secure APIs

Partner for

smarter buildings

Next-generation planning tools,

sustainable materials and expert

support in building smarter and

greener and keeping projects on

track

Differentiating with a

redefined user experience

Customizable, multisensory

experiences and enhancements like

anti-stain, -scratch and -bacterial

surfaces materials


Split-adjusted dividend per class B shareEUR, 2006-2019

▪ Dividend payout in

2019: 94% of earnings

per share

▪ Effective dividend

yield, 2019: 2.9%

Adjusted for share splits in 2008 (1:2) and 2013 (1:2)* Board’s proposal

Dividend proposal: EUR 1.70 per class B share

0.330.25

1.70

1.20

2006

0.75

0.330.33

2007

1.55

2008

0.33

2009

0.45

2010

0.70

2011

0.88

0.65

2012

1.00

2013 2014

1.40

2015 2016

1.65

2017

1.65

2018 2019*

Ordinary dividend

Extraordinary dividend

+16%

Market development


NEW EQUIPMENT MARKET GREW SLIGHTLY

New equipment market development in Q4/2019

EMEA market Asia-Pacific marketNorth American market

>2/3 of

global

market

(in units)

~20% of

global

market

(in units)

<5% of

global

market

(in units)

Stable

▪ Market was stable on a high

level

▪ Market grew slightly with mixed

development across the

different countries

▪ In China, the market grew

slightly in units

▪ In the rest of Asia-Pacific, the

new equipment market returned

to slight growth

- - - Significant decline (>10 %), - - Clear decline (5-10 %), - Slight decline (<5 %), Stable, + Slight growth (<5 %), + + Clear growth (5-10 %), + + + Significant growth (>10 %). Based on KONE’s estimate.

+ +


CONTINUED POSITIVE DEVELOPMENT

Service market development in Q4/2019

North American market

<10% of

global market

(in units)

+ +Maintenance Modernization

>25% of

global market

(in monetary value)

EMEA market

~40% of

global market

(in units)

Maintenance

+ +

>1/3 of

global market

(in monetary value)

Modernization

Asia-Pacific market

>40% of

global market

(in units)

>15% of

global market

(in monetary value)

++ +++Maintenance Modernization

- - - Significant decline (>10 %), - - Clear decline (5-10 %), - Slight decline (<5 %), Stable, + Slight growth (<5 %), + + Clear growth (5-10 %), + + + Significant growth (>10 %). Based on KONE’s estimate.


GOVERNMENT CONTINUES TO BALANCE BETWEEN SUPPORTING THE ECONOMY AND RESTRICTIONS IN THE RESIDENTIAL MARKET

Chinese property market in Q4/2019

▪ In units ordered, the new equipment market grew slightly y-o-y

▪ Pricing environment was fairly stable

▪ Government continued to support the economic activity through infrastructure investments

while maintaining restrictions in the residential market

▪ Construction activity stayed at a high level

▪ Improved liquidity situation in the market towards the end of the year

▪ Real estate investment +7.3% y-o-y in December

▪ Residential sales volume +0.1% y-o-y and new starts +8.3% y-o-y in Q4

▪ New home prices in the 70 biggest cities +6.8% y-o-y in December

▪ Consolidation among property developers continues

Q4 and 2019 Financials

January 28, 202013

MEUR

CONTINUED CLEAR GROWTH IN THE VOLUME BUSINESS, LESS MAJOR PROJECT ORDERS IN Q4

▪ In Q4, the margin of

orders received

improved slightly

Orders received

3,000

2,000

0

5,000

1,000

4,000

7,000

6,000

8,000

9,000

2018201720112010 2012 2013 2014 2015 2016

1,938

1,988

2019

Q4 growth

2.6%

37

Gro

wth

at

co

mp

. F

X

Q4

/20

18

FX

Q4

/20

19

1,938

1,988

0.7%

2019 growth

7.7%

Results presentation for 2019 | © KONE Corporation

January 28, 202014

MEUR

STRONG SALES GROWTH IN ALL BUSINESSES

KONE has applied new IFRS 15 and IFRS 9 standards from January 1, 2018 onwards and 2017 financials are restated retrospectively. Figures for 2010-2016 are not restated and thus not fully comparable.

Sales

7,000

4,000

0

5,000

8,000

1,000

3,000

2,000

6,000

9,000

10,000

2,443

20132010

2,685

2011 2012 201920152014 2016 2017 2018

Q4 growth

9.9%

44

2,685

Q4

/20

19

New

equ

ipm

ent

Q4

/20

18

Ma

inte

nan

ce

Mo

de

rniz

atio

n

FX

2,443

Growth at comp. FX

7.9%

8.7%

6.0%

9.5%

EMEA 8.0%

APAC 5.4%

Americas 12.7%

Results presentation for 2019 | © KONE Corporation

2019 growth

10.0%


Adjusted EBIT* and adjusted EBIT marginMEUR; %

STRONG PROFITABLE GROWTH

▪ In Q4, restructuring

costs related to the

Accelerate program:

EUR 11.1 million

* Adjusted EBIT was introduced in September 2017. Adjusted EBIT excludes restructuring costs related to the Accelerate program** KONE has applied new IFRS 15 and IFRS 9 standards from January 1, 2018 onwards and 2017 financials are restated retrospectively. Figures for 2010-2016 are not restated and thus not fully comparable.KONE has adopted the new IFRS 16 effective January 1, 2019 using the modified retrospective approach and the comparative figures have not been restated..

Adjusted EBIT

320

0

2

4

6

8

10

12

14

0

200

600

1,200

800

400

1,400

1,000

2010 2011 2012 20192013 2014 2015 2017**2016

13.1%

2018

367

13.7%

Q4 growth

15.0%

8

Gro

wth

Q4

/20

18

Pro

fita

bili

ty

FX

IFR

S 1

6

Q4

/20

19

367

3202019 growth

11.3%

Q4 adj.

EBIT margin

0.1


Cash flow from operations*MEUR

STRONG CASH CONVERSION

▪ Net working capital

contributed positively

to the cash flow in

1-12/2019, driven by

strong development in

advances received and

progress payments

▪ Adoption of IFRS 16

had a positive impact

of EUR 119 million on

cash flow from

operations* in

1-12/2019

* Before financing items and taxes

Cash flow

332

386

600

0

200

400

800

1,200

1,000

1,400

1,600

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

1,150

1,550

Market and business outlook for 2020

Market outlook for 2020

New equipment markets

▪ The new equipment market is expected to be relatively stable or to grow

slightly. However, the coronavirus outbreak creates uncertainty to the

outlook

▪ In China, the market is expected to be relatively stable or to grow slightly,

while in the rest of the Asia-Pacific, the market is expected to grow slightly

▪ The new equipment markets in North America and the Europe, Middle East

and Africa region are expected to be rather stable

Maintenance markets

▪ Maintenance markets are expected to see the strongest growth rate in Asia-

Pacific and to grow slightly in other regions

Modernization markets

▪ The modernization market is expected to grow slightly in North America and

in the Europe, Middle East and Africa region and to develop strongly in Asia-

PacificJanuary 28, 202018


Sales

▪ In 2020, KONE’s sales is estimated to grow by

0–6% at comparable exchange rates as

compared to 2019

Adjusted EBIT

▪ The adjusted EBIT is expected to be in the range

of EUR 1,250–1,400 million, assuming that

foreign exchange rates would remain at the

January 2020 level. Foreign exchange rates are

estimated to impact EBIT positively by around

EUR 15 million

Business outlook for 2020

Burdening our resultBoosting our performance

Labor and

subcontracting cost

increases

Investing in our

capability to sell and

deliver digital services

and solutions

Impact of coronavirus

outbreak

Improved margin of

orders received

Services business

growth

Accelerate savings

(MEUR ~50)

Summary

▪ Strategy execution on track –

strong competitiveness

▪ Continued profitable growth

expected in 2020

▪ We continue to invest in

renewing ourselves to be able

to deliver better outcomes to

our customers every day

Appendix

By business By area


1-12/2018 figures in brackets. Figures in charts are rounded and at historical exchange rates.

1-12/2019 Sales split

53%

(53%)32%

(33%)

15%

(14%)

39%

(38%)

41%

(42%)

21%

(20%)

New equipment

Modernization

Maintenance

Asia-Pacific

EMEA (Europe, Middle East and Africa)

Americas


IMPACT IN Q4 AND 2019

IFRS 16

Balance sheet

▪ EUR 358 million increase in the 2019

opening interest-bearing debt

▪ EUR 83 million increase in capital

expenditure on lease agreements in

1-12/2019

Income statement

▪ EUR 0.1 million positive impact on

EBIT in 10-12/2019. In 1-12/2019, the

positive impact was EUR 6 million

▪ EUR 3 million increase in financing

expenses in 10-12/2019. In

1-12/2019, the increase was EUR 11

million

Cash flow statement

▪ EUR 32 million positive impact on cash

flow from operations (before financing

items and taxes) in 10-12/2019. In 1-

12/2019, the positive impact was EUR

119 million

▪ EUR 3 million negative impact on cash

flow from financing items and taxes in

10-12/2019. In 1-12/2019, the negative

impact was EUR 11 million

▪ EUR 29 million negative impact on

cash flow from financing activities in

10-12/2019. In 1-12/2019, the negative

impact was EUR 108 million

New equipment marketNew equipment orders received in units vs. market development

China’s share of KONE’s orders received and salesMonetary value


KONE in China

-5

0

5

10

15

20

25

30

35

40

45

50

Q2/

2019

2006-

2014

CAGR

20182015 Q3/

2019

2016 2017 Q1/

2019

Q4/

2019

>35%

<20%

<5%>5%

~-5%

<5%

~5%

<5%

>10%

<5%

>10%

<5%

-<5%

<5%

KONE

Market>30%

1-12/2018 1-12/2019

<35%<30%

1-12/2018

>25%

1-12/2019

% of sales% of orders received

~-5%

stable

The market grew slightly in units

New equipment orders declined

slightly in units and grew clearly

in monetary value


Housing inventoriesNewly built area for sale / monthly sales 3-m MVA

Housing salesSales area growth, change Y-o-Y

E&E market

Sources: China NBS, E-house, CREIS, KONE estimates

Chinese property market

11,9%

8,9%

24,1%

0

10

20

30

40

50

Q3

18

Q1

17

Q3

15

Q1

15

Q1

16

Q3

16

Q3

19

Q3

17

Q1

18

Q1

19

Tier-1

Tier-2

sample of lower tier cities

12/2019:

-1,7%

-20

0

20

40

60

Q1

15

Q3

16

Q3

15

Q1

17

Q1

16

Q3

17

Q1

18

Q3

18

Q1

19

Q3

19

12/2019: 8,2%

-10

0

10

20

30

Q1

16

Q1

18

Q1

15

Q3

16

Q3

15

Q1

17

Q3

18

Q3

17

Q1

19

Q3

19

E&E market Y-o-Y in units

REI Y-o-Y

Q4/2019:

Sales area growth

Slight

growth

Sales by currencies 1-12/2019 Currency impact


Currencies

Main currencies

EUR

RMB

USD

Others

MEUR Q4/2019 1-12/2019

Sales 44 153

EBIT 8 23

Orders

received37 134

2019

average

2018

average

Dec 31,

2019 spot

EUR /

RMB7.7353 7.8148 7.8205

EUR /

USD1.1214 1.1809 1.1234

EUR /

GBP0.8773 0.8861 0.8508

EUR /

AUD1.6090 1.5794 1.5995

Balance sheet – assets employed


MEUR Dec 31, 2019 Dec 31, 2018

Assets employed

Goodwill 1,366.5 1,333.4

Other intangible assets 248.2 260.2

Tangible assets 742.2 397.4

Investments 139.2 143.3

Net working capital -856.0 -757.8

Assets employed total 1,640.0 1,376.6

Financed by

Equity 3,192.9 3,080.6

Net debt -1,552.9 -1,704.0

Equity and net debt total 1,640.0 1,376.6

The adoption of IFRS 16 increased the 2019 opening tangible assets and interest-bearing net debt by EUR 358 million

Net working capital


MEURDec 31, 2019 Dec 31, 2018

Net working capital

Inventories 648.6 624.1

Advance payments received and deferred revenue -1,753.8 -1,562.2

Accounts receivable 2,232.3 1,988.3

Other non-interest-bearing assets 669.6 660.5

Other non-interest-bearing liabilities -1,848.0 -1,647.3

Provisions -127.1 -139.4

Accounts payable -809.8 -786.7

Net deferred tax assets / liabilities 132.1 105.0

Net working capital total -856.0 -757.8

Consolidated statement of cash flows


MEUR 1-12/2019 1-12/2018

Operating income 1,192.5 1,042.4

Change in working capital before financing items and taxes 115.7 -11.2

Depreciation and amortization 241.5 118.9

Cash flow from operations before financing items and

taxes1,549.6 1,150.1

Financing items and taxes -279.9 -180.2

Cash flow from operating activities 1,269.7 969.8

Investing activities -121.8 -121.1

Purchase of own shares - -

Increase in equity (option rights) 37.5 23.1

Profit distribution -851.7 -849.2

Changes in non-controlling interest -3.7 -3.1

Free cash flow 330.0 19.6The adoption of IFRS 16 had a positive impact of EUR 119 million on cash flow from operations before financing items and taxes

kone q4 2019€¦ · 1-12/2019 income statement eur 0.1 million positive impact on ebit in...

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