Ericsson (NASDAQ: ERIC) will outline revised strategic growth ambitions and new long-term financial targets at its Capital Markets Day 2020 on November 10, 2020.
Executives from across the business will join President and CEO, Börje Ekholm, to share insights from the company’s three-year focused turnaround, and articulate ambitions to strengthen the Group, with a particular emphasis on long-term growth in the enterprise market.
Since the launch of the focused business strategy in 2017, the company has restored profitability, delivered organic growth and is on track towards its 2020 financial targets. With global technology leadership and growing market share in 5G the company is now turning to the next phase of its journey – growing the business through incremental core business growth and acceleration of enterprise focus.
Börje Ekholm, President and CEO, says: “The execution on our focused strategy has delivered a turnaround which creates a robust base for the future and delivered global leadership in 5G today. The Covid-19 pandemic is a humbling reminder that wireless connectivity fundamentally underpins future global growth and so urgent deployment is critical. It will support a global innovation opportunity for consumers and enterprise which touches every corner of our world and every sector of the economy. Our future value is inextricably linked to wider economic growth and we are well-positioned to play a lead role in the ecosystem of operators, businesses, and decision-makers on whose combined shoulders 5G’s full success rests.”
Beyond 2022, the long-term profitability target is an EBITA margin excluding restructuring charges of 15% – 18% for the Group. The company aims to achieve this through improvement activities across the Group. Growth as well as gross margin improvements, driven by software sales and operational leverage, will be the cornerstones in reaching the long-term targets.
The company will continue its focus on free cash flow (before M&A) with a target of 9% – 12% of sales.
2022 profitability targets
The 2022 profitability target for the Group remains unchanged with an operating margin of 12% – 14%, excluding restructuring charges. Each segment target for 2022 is updated with operating margin targets per segment detailed in the table below.
The increased target in segment Networks is mainly driven by our foot-print gains in the market. The 2022 operating margin target for Networks is raised to 16% – 18% (15% – 17%).
In segment Digital Services, the priority continues to be restoring profitability. Due to the increase in R&D spend in combination with the decline in legacy sales the Operating Margin target is adjusted to 4% – 7% (10% – 12%) in 2022.
In segment Managed Services, expected margin growth will be achieved through R&D investments in Artificial Intelligence and automation. The 2022 target for Managed Services is raised to 9% – 11% (8% – 10%).
In segment Emerging Business and Other focus continues to be on establishing new businesses which drive organic growth. Revenue growth will be targeted through the rapid and disciplined product deployment in 5G and IoT as well as the recent acquisition of Cradlepoint.
Financial targets 2022 and long-term
Investor Update 2019 numbers in brackets.
|% of sales||Networks||Digital Services||Managed Services||Emerging Business and Other||Group|
|2022 EBIT excluding restructuring||16% – 18%|
(15% – 17%)
|4% – 7%|
(10% – 12%)
|9% – 11%|
(8% – 10%)
|Long-term target EBITA excluding restructuring||15% – 18%|
|Long-term Free Cash Flow (before M&A)||9% – 12%|
Addition to Risk Factors (as published in Annual and Quarterly Reports)
Ongoing geopolitical and trade uncertainty from a range of factors may have a material adverse impact on Ericsson’s business, operations, business prospects and consequently on operating results, financial conditions and our ability to meet its targets. These uncertainties, include the effects from ongoing trade disputes – notably between the US and China, and the uncertainty on how the change in US administration following the result of the 2020 Presidential Election may impact that trade dispute; and uncertainties for the future bilateral trading relationship between Sweden and China as a result of the decision of the Swedish Post and Telecom Authority to exclude Chinese vendors from participation in 5G.
Speakers and details of the event
Börje Ekholm, President and CEO, and Carl Mellander, CFO, will be joined by members of the company’s Executive Team. The speakers include Erik Ekudden, CTO, Fredrik Jejdling, Head of Business Area Networks, Jan Karlsson, Head of Business Area Digital Services, Peter Laurin, Head of Business Area Managed Services, Åsa Tamsons, Head of Business Area Technologies and New Businesses, Niklas Heuveldop, Head of Market Area North America, and Chris Houghton, Head of Market Area North East Asia.