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CAPITAL MANAGEMENT

KONE aims to manage its capital in a way that supports the profitable growth of operations by securing an adequate liquidity and capitalization of the Group at all times. The target is to maintain a capital structure that contributes to the creation of shareholder value.

The assets employed in KONE’s business consist principally of net working capital, fixed assets, and financial investments which are funded by equity and net debt, as shown in the adjacent table. Due to the business model and the business processes of KONE, the level of total assets employed is relatively low. KONE aims to maintain a negative net working capital to ensure a healthy cash flow even when the business is growing and to maintain a high return on assets employed.

Cash flow from operations is the principal source of KONE’s financing. External funding, as well as cash and financial investments, are managed centrally by KONE Treasury according to the KONE Treasury Policy. Financial investments are made only with counterparties with high creditworthiness and mainly in short term instruments to ensure continuous liquidity.

KONE has not defined a specific target for its capital structure, but the aim is to ensure strong credit quality to provide for ample access to external funding sources and to support the growth ambitions of the business. KONE considers its current capital structure to be a strength, as it allows for capturing potential value creating business opportunities, should such opportunities arise. In the event that significant attractive investment or acquisition opportunities were available, KONE could also utilize its borrowing capacity.

In such cases, the level of debt and financial gearing could be higher for a period of time. At the end of 2021, the funding of KONE was guaranteed by existing committed credit facilities, cash and financial investments.

KONE has not defined a specific target for dividends or share buy-backs. The dividend proposal by the Board of Directors is determined on the basis of the overall business outlook, business opportunities, as well as the present capital structure and the anticipated changes in it.*)

To ensure an efficient internal allocation and utilization of its capital resources, KONE measures the financial results of its business activities after a capital allocation charge. The capital allocation charge is based on the assets employed in the business activity and the weighted average cost of capital (WACC).

The WACC is also used as a hurdle rate when evaluating the shareholder value creation potential of new acquisitions, major capital expenditure and other investments. The valuation methods used are payback time, discounted cash flow and profitability.

KONE - Investors

MEUR20212020201920182017
Assets employed:




Goodwill and shares1,5501,4701,506
1,4771,460
Other fixed assets 1)954933990
658652
Net working capital-1,468-1,160-856
-758-773
Total assets employed1,0351,2431,640
1,3771,339
Capital:




Equity3,1993,1973,193
3,0813,029
Interest-bearing net debt-2,164-1,954-1,553
-1,704-1,690
Total capital1,0351,2431,640
1,3771,339
Gearing-67.6%-61.1%-48.6%
-55.3%-55.8%
Equity ratio41.2%45.5%46.5%
49.9%50.0%
1) Tangible assets, acquired maintenance contracts and other intangible assets.
*) In 2017–2021, the dividend payout ratio has been 88.6–124.0% for class B shares (2021 proposal by the Board of Directors at KONE Corporation).
KONE has adopted the IFRS 16 and IFRIC 23 effective January 1, 2019 using the modified retrospective approach and the comparative amounts have not been restated. Further, KONE has applied IFRS 15 and IFRS 9 standards from January 1, 2018 onwards and 2017 financials are restated retrospectively. Amounts for 2016 are not restated and thus not fully comparable.

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