On the basis of strong financial performance of its continuing operations (Businesses) in Q3 2015, Nokia has raised outlook for the Full-year.
|Nokia Networks||FY15 Net sales||Increase YoY|
|FY15 Non-IFRS op. margin||Around or slightly below the high end of the long-term range of 8% – 11% for the full year (update)||Based on factors including competitive industry dynamics, product and regional mix, expected industry seasonality in the second half of 2015, the timing of major network deployments, and expected continued operational improvement.|
This is an update to the earlier FY15 non-IFRS op. margin outlook of around the midpoint of the long-term range of 8% – 11% for the full year.
|Nokia Technologies||FY15 Net sales||Increase YoY||Excludes potential amounts related to the expected resolution of our arbitration with Samsung. Based on factors including higher investment in licensing activities, licensable technologies and business enablers, including go-to-market capabilities, which target new and significant long-term growth opportunities.|
|FY15 quarterly non-IFRS op. expense||Approx. in line with Q2’15 level|
|Nokia’s continuing operations||FY15 Capital expenditure||Approx. EUR 250 million||Primarily attributable to Nokia Networks.|
|FY15 Financial income and expense||Expense of approx. EUR 160 million||Subject to changes in FX rates and interest-bearing liabilities.|
|FY15 Group Common Functions non-IFRS op. expense||Approx. EUR 120 million|
|Estimated long-term effective tax rate||Approx. 25%|
|Annual cash tax obligation||Approx. EUR 250 million per annum until deferred tax assets fully utilized||May vary due to profit levels in different jurisdictions and amount of license income subject to withholding tax.|
|HERE||FY15 Net sales||No guidance (update)||Nokia is reporting HERE as part of discontinued operations, and is no longer providing guidance for HERE. This is an update to the earlier FY15 net sales outlook to increase YoY and the earlier FY15 non-IFRS op. margin outlook of 9% – 12%.|
|FY 15 Non-IFRS op. margin||No guidance (update)|
Nokia has also announced EUR 7 billion program to optimize capital structure and accelerates EUR 900 million synergy target, ahead of planned public exchange offer for Alcatel-Lucent securities. Read the full press-release below.
Espoo, Finland – Nokia today announced a planned EUR 7 billion program to optimize Nokia’s capital structure and return excess capital to shareholders. This program would consist of approximately EUR 4 billion in shareholder distributions and approximately EUR 3 billion of de-leveraging. In addition, Nokia today accelerated its annual operating cost synergy target related to the Alcatel-Lucent transaction. Nokia now targets to achieve approximately EUR 900 million of operating cost synergies in full year 2018, compared to its earlier target to achieve approximately EUR 900 million of operating cost synergies in full year 2019.
“Nokia is approaching the opening of its public exchange offer for Alcatel-Lucent securities from a position of strength,” said Rajeev Suri, Nokia President and CEO. “We announced strong third quarter results today and raised our outlook for the full year performance of Nokia Networks. I believe that our performance, combined with the announcement of a new capital structure optimization program and accelerated synergy target, will give Alcatel-Lucent shareholders confidence in exchanging their securities for shares of Nokia.”
By combining with Alcatel-Lucent, Nokia expects to create an innovation leader in next generation technology and services for an IP connected world. After the closing of the exchange offer, Nokia’s Networks business would be conducted through four business groups that would provide an end-to-end portfolio of products, software and services: Mobile Networks, Fixed Networks, Applications & Analytics and IP/Optical Networks. Alongside these, Nokia Technologies would continue to operate as a separate business group with a clear focus on licensing and the incubation of new technologies. Each business group would be positioned for clear leadership in its particular market – with exceptional assets and unparalleled capabilities to accelerate industry innovation while creating long-term value for shareholders.
Planned EUR 7 billion capital structure optimization program
Following the closing of the proposed transaction, Nokia expects to have a strong balance sheet, with the financial resources to enable investments in next generation solutions and services over the long-term.
Nokia’s Board of Directors has conducted a thorough analysis of Nokia’s potential long-term capital structure requirements, and is today announcing plans for a two-year, EUR 7 billion program to optimize the efficiency of Nokia’s capital structure, subject to the closing of the Alcatel-Lucent and HERE transactions, as well as the conversion of all Nokia and Alcatel-Lucent convertible bonds. This comprehensive capital structure optimization program would focus on shareholder distributions and de-leveraging, while maintaining Nokia’s financial strength.
The program would consist of the following components:
- Shareholder distributions of approximately EUR 4 billion, calculated assuming ownership of all outstanding shares of Alcatel-Lucent and conversion of all Nokia and Alcatel-Lucent convertible bonds:
- Planned ordinary dividend payments, as follows:
- A planned ordinary dividend for 2015 of at least EUR 0.15 per share, subject to shareholder approval in 2016; and
- A planned ordinary dividend for 2016 of at least EUR 0.15 per share, subject to shareholder approval in 2017;
- A planned special dividend of EUR 0.10 per share, subject to shareholder approval in 2016; and
- A planned two-year, EUR 1.5 billion share repurchase program, subject to shareholder approval in 2016.
- De-leveraging of approximately EUR 3 billion:
- Planned reduction of interest bearing liabilities of the combined company by approximately EUR 2 billion; and
- Planned reduction of debt-like items of the combined company by approximately EUR 1 billion in 2016.
“We are committed to effective deployment of capital to drive ongoing value creation,” said Timo Ihamuotila, Executive Vice President and Group Chief Financial Officer. “We believe our planned EUR 7 billion capital structure optimization program would enable the combined company to make swift and orderly progress towards a more efficient capital structure, in alignment with the long-term interests of the shareholders of the combined company. Longer-term, we continue to target an investment grade credit rating, which would further affirm Nokia’s competitive strength.”
Synergy target accelerated to EUR 900 million in 2018
On April 15, 2015, in conjunction with the announcement of the Alcatel-Lucent transaction, Nokia announced that the combined company would target approximately EUR 900 million of annual operating cost synergies to be achieved on a full year basis in 2019. This target assumed the closing of the transaction in the first half of 2016.
Today, Nokia announced an accelerated target of approximately EUR 900 million of annual operating cost synergies to be achieved on a full year basis in 2018, relative to the combined non-IFRS results of Nokia and Alcatel-Lucent for full year 2015. This target is now subject to the closing of the transaction in the first quarter 2016. The associated restructuring costs are expected to be slightly higher than EUR 900 million, and the related cash outflow is expected to be approximately EUR 900 million.
The operating cost synergies are expected to be derived from a wide range of initiatives related to operating expenses and cost of sales, including:
- Streamlining of overlapping products and services, particularly within the planned Mobile Networks business group;
- Rationalization of regional and sales organizations;
- Rationalization of overhead, particularly within manufacturing, supply-chain, real estate and information technology;
- Reduction of central function and public company costs; and
- Procurement efficiencies, given the combined company’s expanded purchasing power.
The operating cost synergies are expected to create a structural cost advantage and foster a corporate culture that emphasizes execution excellence. This strong foundation would enable the long-term investments that are essential to achieve the combined company’s strategic objectives, serve the changing needs of customers and lead the next wave of technological change in the industry.