saab year-end report2018 · 2019-02-15 · saab year-end report2018 håkan buskhe, president and...
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Saab Year-End report 2018
Håkan Buskhe, President and CEOMagnus Örnberg, EVP and CFO
15 February, 2019
Giraffe4A multi-functionradar
Highlights 2018• Boeing and Saab advanced pilot training aircraft,
T-X1, selected by the U.S. Air Force• Strong increase in midsized and small orders• Sweden order Giraffe 4A multi-function radar• Several orders for Carl-Gustaf M4 weapon
system• Sales increase and operating margin
improvement• Major milestones in large projects achieved• HSwMS2 relaunched after mid-life upgrade and
first missile firing by Gripen E completed• Proposed dividend per share at SEK 4.50 (4.403)• Oversubscribed right issue to support further
growth journey
2
HSwMS Gotland
Carl-Gustaf M4
T-X aircraft
1) Boeing is the designated prime contractor for the Advanced Pilot Training Program to the U.S. Air Force. Saab is a risk-sharing partner with Boeing in the development of the T-X aircraft.
2) HSwMS Gotland is a Swedish Gotland-class submarine 3) Total dividend 2017 MSEK 588 divided by the amount of outstanding shares on 31 December 2018.
3
Market informationGlobal defence spendDefence spend $1.78trn2018 Growth (%) 4.9%2019-24 CAGR (%) 2.0%
North America
% of def. spend 40.4%
2018 Growth (%) 6.7%
2019-24 CAGR (%) 0.3%
Latin America
% of def. spend 3.5%
2018 Growth (%) 10.4%
2019-24 CAGR (%) 1.6%
Sub-Saharan Africa
% of def. spend 0.7%
2018 Growth (%) -5.8%
2019-24 CAGR (%) 4.0%
Asia-Pacific
% of def. spend 26.1%
2018 Growth (%) 3.6%
2019-24 CAGR (%) 4.4%
Russia & CIS
% of def. spend 3.1%
2018 Growth (%) 2.1%
2019-24 CAGR (%) 1.5%
Europe
% of def. spend 15.8%
2018 Growth (%) 3.2%
2019-24 CAGR (%) 1.7%
MENA
% of def. spend 10.3%
2018 Growth (%) 3.7%
2019-24 CAGR (%) 2.6%
Source: Janes by IHS Markit, December 2018
Market trends• Growth in global defence expenditure in
2018 driven by improved economic outlookand increased NATO investment; growthhas slowed down in emerging markets
• Investment spending of defence spending* growing slightly faster than overall spendingin the short term
• Highly competitive environment• Demand for interoperability as well as local
capability and capacity• Demand for shorter lead time and cost-
efficient solutions• Discussions regarding co-operation for
future major defence systems• Strong demand for high-tech products
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*Investment spending = procurement and research, development, test and evaluation. Source: Janes by IHS Markit, December 2018
Strategic focus 2019Market• Pursue focused market strategy and utilize
installed base to strengthen market position • Technology investments imperative for
creating stronger market positionPerformance• Execution of major projects• Continue implementation of re-sizing and
re-shaping initiativesInnovation• Forward thinking leadership enabler for
technology development
5
30.8 28.0
0
20
40
60
80
100
Order bookings
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
Financial highlights, FY 2018
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114 108 107 102*
020406080
100120
Order backlog
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
1,900 1,7972,250
2,564
0500
10001500200025003000
Operating income
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
7.7-500
2,6031,388
-2,424-4000
-2000
0
2000
4000
Operational cash flow
FY 2014 FY 2015 FY 2016 FY 2017 FY 2018
BSEK
BSEK
MSE
K
MSE
K
Adj. EBIT-margin,%EBITmargin,% 6.87.1
Adjustedoperating income
2,266
Non-recurring items
81.2
22.6
-1,197
21.8
60
1,659
6.37.07.1
*The order backlog includes the first order related to the advanced pilot training aircraft, T-X The T-X programme is divided into multiple phases. This order concerns the first phase, EMD (Engineering and Manufacturing development) in which Saab and Boeing industrialise the T-X aircraft together with the customer. The EMD phase will be followed by a serial production phase. .
Fourth quarter development
7
MSE
KM
SEK
Gripen E
9,01610,150 11,018
02000400060008000
1000012000
Q4 2016 Q4 2017 Q4 2018
Sales
Q4 2016 Q4 2017 Q4 2018
960 995
1,442
0
500
1000
1500
2000
Q4 2016 Q4 2017 Q4 2018
Operating income
Q4 2016 Q4 2017 Q4 2018
EBITmargin,% 10.6% 9.8% 12.9%
Cash flow development
8
-500
2,603
1,388
-2,424-3000
-2000
-1000
0
1000
2000
3000
Operational cash flow
FY 2015 FY 2016 FY 2017 FY 2018
653 681
2,146
2,773
0500
10001500200025003000
Q4 2015 Q4 2016 Q4 2017 Q4 2018
Operational cash flow
Q4 2015 Q4 2016 Q4 2017 Q4 2018
MSE
KM
SEK
Gripen E
Market opportunities
9
Gripen E
Remote Tower A26 Submarine
GlobalEye
Carl-Gustaf M4
Efficiency measures in 2019
10
Res
hapi
ngR
esiz
ing
All re-sizing plans implemented
Focus product portfolio to further increaseprofitability
Increase cost-efficiencyand improved hit-rate of marketing efforts
Higher degree of digitalisation and simplification of functional processes
Ambition 2018
Initiate employee reduction withapproximately 300 and 550 consultants;
Employees across the company and consultants mainly in development area
Analysis of product portfolio; areas closed & divested in 2018
More focused market approach
Several initiatives for higher degree ofdigitalisation of internal processes
Improve efficiency to: 1) support long-term operating margin target of 10 per cent; and 2) create room for investments in research and development
Ambition 2019
Ambition coming 2-3 years
Status major projects• Gripen E development
- Started serial production of Gripen E- First flight with second Gripen E- Test flight with Meteor Beyond Visual Range Air-to-Air Missile (BVRAAM)
• GlobalEye- Flight test & verification of first aircraft 2018- First flight of second aircraft 3 January 2019
• Kockums- Submarine A26 initial customer system verification
review- Submarine HSwMS Gotland sea trials after mid-life
upgrade
• T-X - Ramp-up of project and EMD phase started- Planning on-going for production facility in the US
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Gripen E
Total development spend
25%
26% 23%23%
5
5,5
6
6,5
7
7,5
8
Total spend on R&D
Total development spend
FY 2015 FY 2016 FY 2017 FY 2018
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Aeronautics AdvancedWeaponSystems
Command and Control Systems
Sensors Underwatersystems
• Focus in the coming years will be on developing areas where Saab has a market leading position; or
• A niche position with strong growth potential
Core technology areas
BSEK
%-age of sales
Strengthened market position
Long-term targets:
Organic sales growth:Average 5 per cent per year over a business cycle.
Operating margin:Average at least 10 per cent over a business cycle.
Equity/asset ratio:Exceed 30 per cent.
Rights issue made in 2018 of apprSEK 6 billion: to enableparticipation in opportunities for future strengthened market position
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Outlook 2019
Sales growth in 2019 is expected to be in line with Saab’s long-term financial goal: annual organic sales growth of 5 per cent.
The operating margin in 2019, excludingmaterial non-recurring items, is expected to improve compared to 2018, bringing Saab a further step closer to its financial goal: an operating margin of 10 per cent.
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15
Financial summary
Magnus Örnberg, EVP and CFO
Financial summary, FY 2018
• Strong increase of small and medium-sized order bookings
• Sales increased by 5 per cent; organic growth 4 per cent
• Adjusted operating margin 7.7 per cent; non-recurring items of MSEK 298
• Operational cash flow strong in fourth quarter as a result of deliveries and achieved milestones
• Financial net impacted by changes in market values of derivatives related to hedged tenders in USD
• Proposed dividend of SEK 4.50 (4.40*) per share
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MSEK FY 2018 FY 2017 Change, %
Order Bookings 27,975 30,841 -9Order Backlog 102,184 107,233 -5Sales 33,156 31,666 5Operating Income 2,266 2,250 1Operating margin, % 6.8 7.1Adjusted op. Income 2,564 2,250 14Adjusted op. margin, % 7.7 7.1Net Income 1,366 1,508 -9
Operational Cash Flow -2,424 1,388
Free Cash Flow -3,195 852
*Total dividend 2017 MSEK 588 divided by the amount of outstanding shares on 31 December 2018.
Order backlog duration
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Year End 2018 Year End 2017 Year End 2016 2019: 28.0 2018: 25.4 2017: 24.5
2020: 20.6 2019: 20.0 2018: 17.0
2021: 18.1 2020: 17.0 2019: 13.5
2022: 13.3 2021: 17.0 2020: 15.8
After 2022: 22.2 After 2021: 27.8 After 2020: 36.8
Total: 102.2 Total: 107.2 Total: 107.6
Aeronautics46%
Dynamics13%
Surveillance14%
S&S11%
IPS9%
Kockums7%
Order backlog per Business Area
Sweden33%
Rest of Europe
12%North America7%
Latin America
34%
Asia10%
Africa1%
Australia etc3%
Order backlog per Region
BSEK
Order size distribution
0
0,5
1
1,5
2
2,5
3
3,5
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
50 000
Small orders* Large and medium-sized ordersMedium-sized order Book-to-bill ratio**
January-December 2018
MSE
K
*Small orders = <MSEK 100**Book-to-bill ratio calculated as 12 months rolling
18
43%
48%
9%
Small order MSEK < 100Medium-sized order 100-1,000Large order > 1,000
Large order
• Strong increase in order bookings of medium-sized and small orders
• Major order received for operational support for Gripen from Sweden
• Several orders for RBS70 new generation and Carl-Gustaf M4 new generation
• Order for Giraffe 4A from Sweden
• Saab to supply CMS*, FCS*, RWS* and the New Lightweight Torpedo to the FinnishNavy’s Squadron 2000 Mid-Life Upgradeprogramme
0 1 2 3 4 5 6 7 8 9
10
Aeronautics Dynamics Surveillance S&S IPS Kockums
Order bookings
FY 2017 FY 2018
Order backlog and order bookings
BSEK
0
10
20
30
40
50
60
Aeronautics Dynamics Surveillance S&S IPS Kockums
Order backlog
FY 2017 FY 2018
BSEK
19 *CMS=Combat Management System, FCS=Fire Control System, RWS=Remote Weapon Station
• Sales growth of 5 per cent; 4 per cent organic growth
• Growth driven by high activity level in major projects, as well as command and control systems and naval vessels
• Q4 development saw strong salesincrease in many areas
0
1
2
3
4
5
6
7
8
9
10
Aeronautics Dynamics Surveillance S&S IPS Kockums
FY 2017 FY 2018
Sales per business area
20
+11%
-5%
+12%
-6%+8%
+21%BSEK
Operating income per business area
21
MSE
K
• Adjusted operating margin at 7.7 per cent, non-recurring items of MSEK 298
• Efficiency improvement measures initiated; non-recurring items recorded in thirdquarter
• Aeronautics saw increased activities in the Gripen projects and lower T-X-spendleading to increased operating margin
• Fewer deliveries in Dynamics compared to 2017
0 50
100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900 950
1 000
Aeronautics Dynamics Surveillance S&S IPS Kockums
FY 2017 FY 2018
Operatingmargin,% 8.46.6 10.112.1 8.5 12.512.1 3.31.0 5.35.89.5 2.1
Adjusted operating income shown for FY2018
Adjustedoperating margin %
13.49.110.2
22
Quarterly free cash flow
-3500
-2500
-1500
-500
500
1500
2500
3500
Free cash flow by Q
MSE
K
-3 000
-2 000
-1 000
0
1 000
2 000
3 000
4 000
5 000
MSE
K
23
Operational Cash flowCash flow from operating activities beforechanges in working capital: 4,026
Change in working capital:
Contract assets and liabilities -3,039
Inventories -1,057
Other current receivables -1,044
Other current liabilities 1,965
Provisions -479
-3,654
Cash flow from investing activities:
Intangible assets -1,338
Tangible assets -1,458
Operational cash flow : -2,424
Cash flow from
operations
Change in workingcapital
Investing activities
MSEKNet debt, 31 December 2017 -1,834Cash flow from operating activities -490Change in net pension obligation -1,453Net investment -2,796Rights issue 5,967Repurchase of shares -203Dividend -588Dividend to and transactions with non-controlling interest -38Currency impact and unrealised results from financial investments -73Net debt, 31 December 2018 -1,460Net pension obligation, 31 December 2018 4,099Total interest-bearing assets, 31 December 2018 -449Net debt excluding interest-bearing receivables and net pension obligation
2,190
35.0%Equity/Assets
ratio
145.4Equity per share
(SEK)
24
Financial position
• Build order backlog in selected areas and markets
• Continued focus on execution of large projects –project management
• Drive efficiency to improvemargins
Focus 2019
Important information
This presentation may contain forward-looking statements which reflect Saab AB’s current view on future events and financial and operational development. Words such as “intend”, “expect”, “anticipate”, “may”, “believe”, “plan”, “estimate” and other expressions which imply indications or predictions of future development or trends, and which are not based on historical facts, are intended to identify forward-looking statements. Forward-looking statements inherently involve both known and unknown risks and uncertainties as they depend on future events and circumstances. Forward-looking statements do not guarantee future results or development and the actual outcome could differ materially from the forward-looking statements.