tier 1 supplier in aerospace, defence & security€¦ · paris airshow / june 2015 / continuing...

Ce document et les informations qu’il contient sont la propriété de Safran. Ils ne doivent pas être copiés ni communiqués à un tiers sans l’autorisation préalable et écrite de Safran.

0 / PARIS AIRSHOW / JUNE 2015 /Q3 REVENUE 2011 / OCTOBER 21, 2011 /

/ June 2015 /

Tier 1 supplier inAerospace, Defence & Security

Paris Airshow

1 /


PARIS AIRSHOW / JUNE 2015 /

2014 revenue by activities

�Revenue €15,355M�Recurring op. income €2,089M (13.6% of revenue)

�Net income - Group share €1,248M (€3.00/share)

�Free Cash Flow €740M�Net debt position (Dec. 31) €1,503M (23% gearing)

29%

8%

53%

10%

Aircraft Equipment

DefenceAerospacePropulsion

Security

Tier 1 supplier in Aerospace - Defence - Security

FY 2014 (adjusted)

€15.4Bn

2 /



Leading market positions

#1 worldwide� Turbofans for single aisle commercial aircraft (1)

� Helicopter turbines� Landing gear, wheels and carbon brakes (2)

� Aircraft electrical interconnection system� Power transmission � Space launchers (3)

#2 worldwide� Engine nacelles

#4 worldwide� Military engines

Aerospace SecurityDefence

#1 Europe� Optronic systems� Inertial navigation systems

#1 worlwide� Flight control systems for

helicopters� Engine control systems (4)

#1 worldwide� Biometric ID solutions� Automated multi-biometric

ID systems� CTX (tomographic explosive

detection) systems for checked baggage

#4 worldwide� Smart cards

~80% of revenue coming from civil activities

(1) Through CFM International (50-50 JV with GE) (3) Through Airbus Safran Launchers (50-50 JV with Airbus) (2) >100 passengers aircraft

(4) For civil aircraft, in partnership with BAE systems


3 / PARIS AIRSHOW / JUNE 2015 /

FY 2014 financial highlights

Growing adjusted revenue driven by strong performance in Aerospace and Security

FY 13* FY 14

14,363 15,355+6.9%

Adjusted recurring operating income at 13.6% of revenue

FY 14

1,7802,089

+17.4%

Higher adjusted net profit (group share) at €3.00 per share (€2.87 in FY 13 including €0.31

from the sale of Ingenico shares)

FY 13* FY 14

1,193 1,248+4.6%

(€M) (€M)

(€M)

FY 13*

2014 dividend up 7.1%

FY 13 FY 14

1.12 1.20

(€)

+7.1%

Moderate net debt level (23% gearing)

Dec. 31, 2013* Dec. 31, 2014

(1,220) (1,503)

(€M)

€(283)M

FCF was 35% of adjusted recurring operating income

FY 13* FY 14

699 740+5.9%

(€M)

* 2013 has been restated to reflect the changes induced by IFRS11

4 /



FY 2014 results by activity

(In €M) FY 2014 Propulsion Equipment Defence SecurityHolding & others

Revenue 15,355 8,153 4,446 1,221 1,530 5

Year-over-year growth in % 6.9% 7.4% 8.7% 2.0% 3.2% na

Recurring operating income 2,089 1,633 426 71 134 (175)

as a % of revenue 13.6% 20.0% 9.6% 5.8% 8.8% na



/ 4 key themes /Q1 2015 highlights & FY 2015 outlook

Positive trends in civil aftermarket

LEAP update

Capital allocation in line with Group strategy

6 /



Q1 2015 revenue by activity

Adjusted revenue(in €M)

Q1 2014 Q1 2015Changereported

Changeorganic

Aerospace Propulsion 1,825 2,070 13.4% 3.7%

Aircraft Equipment 1,016 1,172 15.4% (0.5)%

Defence 257 278 8.2% (1.2)%

Security 345 414 20.0% 6.1%

Others - 1 na na

Total revenue 3,443 3,935 14.3% 2.4%

Main growth drivers� Significant positive currency impacts from USD

� Continued momentum in Aerospace services:

� Propulsion: services up 25.6% (in €), driven by civil aftermarket (up 17.8% in USD). Healthy contribution from military services and helicopter support activities

� Equipment: services up 19% (in €) supported by continuing momentum in carbon brakes as well as increased contribution from landing gear

� Ramp up of A350 programme (landing gear, wiring)

� Security: Identification activities as well as smartchip telco and banking segments in Enterprise Solutions

� Avionics: higher deliveries of infrared seekers and flight control system

Offsetting impacts� Lower military engines deliveries (M88) as expected

� Lower helicopter turbines volumes due to production delays and soft OE demand.

� Lower large nacelles deliveries. A320 thrust reversers deliveries should catch up

� Optronics: lower volumes, notably with the end of FELIN equipment deliveries to the French army

� Detection: phasing of deliveries skewed toward H2 On track to meet targets

7 /



Q1 2015 revenue

� Organic growth: +2.4%

� Driven by continuing momentum in Aerospace services and in Security activities

� Currency impact: +10.9%

� Significant positive translation effect of USD. Positive translation impact from GBP

� Positive effect of improved hedged rate

� External growth: +1.0%

� Acquisitions : Eaton, Hydrep, Colibrys, Dictao…

Q1 2015Currency

impact

Q1 2015

at Q1 2014

perimeter

Acquisitions &

activities newly

consolidated;

disposals

Q1 2014 Organic

variation

Q1 2015 at

Q1 2014

perimeter and

exchange rate

+2.4%organic

+14.3%

3,443 82 3,525374 3,899 36 3,935

8 /



2015 key assumptions

� Healthy increase in aerospace OE deliveries� Airbus A350, A320, Boeing 737

� Civil aftermarket growth by approximately 10%� Mainly driven by recent CFM56 and GE90 engines

� Reduction of self-funded R&D of the order of € 100 M - € 150M with a lower level of capitalisation� Less spending on LEAP, A350, helicopters, as they come closer to certification and

entry into service

� Sustained level of tangible capex, around € 700 M, as requested by production transitioning and ramp-up

� Profitable growth for the security business

� On-going Safran+ plan to further improve direct costs and reduce overhead

9 /



2015 targets – outlook confirmed

� Adjusted revenue expected to increase by a percentage in high singledigits at an estimated average rate of USD 1.20 to the Euro.

� Adjusted recurring operating income expected to increase b y a percentagein low double digits at a hedge rate of USD 1.25 to the Euro.The hedging policy isolates adjusted recurring operating income from currentEUR/USD variations except for the part generated in USD by activities located inthe US, subject to the translation effect when converted into Euro.

� Free cash flow expected to represent 35% to 45% of the adjustedrecurring operating income subject to usual uncertainties on the timing ofadvance payments.

Safran’s 2015 outlook is applicable to the Group’s current structure and does not take into account any potential impact in 2015of notably the finalisation of the regrouping of its space launcher activities with those of Airbus Group in their joint venture,Airbus Safran Launchers.





LEAP update


11 /



Continuing momentum in civil aftermarket

� Civil aftermarket up 17.8%* in Q1 2015� Growth driven by first overhauls of recent CFM56 and GE90 engines� On track to meet civil aftermarket guidance in 2015

� Growth drivers� More, higher value shop visits on recent CFM56 engines� Positive trend in GE90 aftermarket� Catch-up of deferred maintenance as airlines’ financial health improves

� Positive global outlook for the airline industry in 2015� Passenger demand expected to be up 6.7% according to IATA� Lower oil price� Confirms CFM56 fleet potential for spares revenue to double from 2010

dip before 2020e

*In USD

Civil aftermarket to grow by approximately 10%* in 2015

12 /



� Dedicated project decided in 2011� Analysis concluded that

maintenance behaviour could differ from one airline to another, impacting new spare parts sales

� Segment behaviour also varies according to economic context and air traffic

� New model based on airlines segmentation� Differentiate segments according to

maintenance behaviour� Simulate airlines’ reaction to

changing macro-economic environment

Forecasting spare parts business opportunity:the new “ behaviour ” model

CustomerEconomics

Engine constraints

Air traffic forecast

Airlines maintenance behaviour

Maintenance contracts

Theoretical aging

13 /



Forecasting spare partsOutcome of the new model (CFM56 spare parts forecast)

Expected CFM56 spare parts revenue profile

� CFM56 spare parts revenue to increase consistently and to peak by around 2025E

� Revenue should double from 2010 dip before 2020E

� 1st generation CFM56 spare parts potential to fade out within 5 years from now

The new model confirms 2025 horizon“Behaviour” model adds increased visibility on the sh ort term

2007 2010 2013 2016 2019 2022 2025 2028

2x3x

2010 dip

14 /



0

100

200

300

400

500

600

700

800

0

5 000

10 000

15 000

20 000

25 000

30 000

CFM Gen 1 CFM Gen 2 Global spare parts revenue (in $ - 100 base in 2000)

CFM56: strong prospects until 2025 and beyond

CFM56 active installed fleet to peak around 2018E at ~26,800 engines (~32,000 deliveries)

CFM56 spare parts revenue to peak by around 2025E

15 /



� T&M: Time & Material� CFM is paid at the time of the actual shop visit on the basis

of an agreed-upon scope of material and labour⇒ income, expenses and cash impact coincide

� MSA: Material Service Agreement� CFM guarantees commercial conditions of parts supply

to airline/MRO providers

� RPFH: Rate Per Flight Hour � CFM receives a fixed sum per flight hour based on estimated cost to

perform engine maintenance to meet performance and availability guarantees⇒ decoupling of revenue & cash-in with costs & cash-out

� ESPO (Engine Service Per Overhaul): fraction of revenue booked progressively and remainder booked at the time of SV

� ESPH (Engine Service Per Hour): revenue booked progressively

Service agreementsA variety of aftermarket options tailored to needs

Service programmes aiming to support airlines on a predictable cost per engine flight hour basis, to enable accurate forecasting of operating costs, reduced cost of ownership, and improved asset utilisation

16 /



0

5 000

10 000

15 000

20 000

25 000

30 000

CFM56 GE90 LEAP

T&M

RPFH

Slow transition in business model

2015 to 2025: P&L will remain dominated by current model Impact of RPFH will be gradual

Active installed fleet of engines in 2020E (estimate)

� Strong adoption of LEAP customers of RPFH but LEAP fleet will represent ~10% of combined CFM fleet (by 2020E)

� CFM56 is mostly based on Time & Material

� Therefore, no material change expected from RPFH accounting by 2020E

~25,000

~3,000~2,700





LEAP update


18 /



Outstanding commercial success for LEAP

Market share exceeding 70% on next-generation singl e-aisle commercial jets:

� More than 8,900 engines orders and commitments at May 31,2015

� 56% market share on the A320neo

A320neo1,254

LEAP4,428 aircraft*

75%737 MAX

2,724

Comac450

* Excluding spare engines

First flight of LEAP-1A powered A320neo

First flight of LEAP-1B on flying test bed

19 /



LEAP development on track

Flight tests:28 development engines and 32 engines for tests on the three aircraft.

Flight-hours on flying testbed (FTB): nearly 400 hours to date.

LEAP-1A: flight tests on A320neo 13 flights, 50 hours(at June 5).

LEAP-1B: first flight on 747 flying testbed

(April 29).

20 /



CFM56 lives longer, LEAP sells better

� Increasing assembly rates for narrowbodies

� Faster LEAP ramp up

� Outstanding commercial success: More than 8,900 engines in backlog (May 31, 2015)

� 1,800+ LEAP in 2020, 100 engines per year more than 2013 CMD forecast

� Higher CFM56 volumes over 2015-20� Strong backlog of more than 4,100

engines (May 31, 2015) reflects sustaining demand and healthy order intake rate YTD

� Increasing market share on A320ceo

� More than 400 additional CFM56 engines to be delivered in 2015-20compared to 2013 CMD forecast

1,80

0+

1,56

0# deliveries

Capturing positive momentum of narrowbody segment

(e) (e) (e) (e) (e) (e)





LEAP update


22 /



Investing in our future

� 2014 total R&D effort of €2bn

� Self-financed R&D increased to €1.46bn (9.5% of sal es)� Intensification and acceleration of LEAP development and

testing� Start-up of GE9X development� Silvercrest spending plateau

� Split of programs reflects upcoming opportunities� c.50%: LEAP (3 applications) and Silvercrest (2 applications),

A350� c.25%: helicopter next gen turbines, GE9X, flight control,

infrared matrix, biometric ID engines…� c.25%: R&T in preparation of the future (mostly next gen

engines and electrical technologies)

� Self-financed R&D to decrease in 2015 with a lower level of capitalisation

� Decrease in LEAP� End of development spending on A350� Stable R&T

R&D spending peaked in 2014

In €M

Total self-funded R&D

Capitalized R&D

€693M

Total R&D effort

€1,289M

€1,809M

€1,464M

€644M

€1,990M

23 /



Airbus Safran Launchers

� Safran and Airbus Group join forces in launcher acti vities� 2-stage plan to boost sector competitiveness and provide customers with more

cost-efficient solutions

� Stage 1 completed: January 2015 start of joint operations

� During stage 2: contribution of launchers and space propulsion assets (excluding satellite propulsion) to jointly owned company*

� Safran would need to make an economic compensation of €800M* to Airbus Group in order to obtain 50% of the JV, representing approximately 9x the proforma supplemental EBITA in 2014 or approximately 6x to 7x proformasupplemental estimated EBITA in 2016

� Ariane 6� Modular launcher family to serve institutional and

commercial needs

� Strong synergies with VEGA and the re-use of Ariane 5ME programme assets and main components

� Airbus Safran Launchers is an enabler for streamlining Ariane 6 development and launch service operations

A62 – 2 boosters A64 – 4 boostersModular launcher will be available in two

versions

*Subject to the finalisation of the principal conditions to the second phase (including notably adjustments regarding working capital positions and the nature and timing of the compensation) and customary approvals and formalities..

24 /



Cash allocation in line with Group strategy

� Research & Development� Create a distinctive difference through technological innovation (long term)� Spending reflects winning some attractive new business (medium term)

� Capital expenditure� Modernize existing sites and strengthen the international scope

� Acquisitions� Accelerate or establish positions in critical areas at justified price

� Dividend payments� Grow cash returns to shareholders� 40% payout of adjusted net income since 2007

Bus

ines

sS

hare

hold

ers

25 /



Acquisitions: objectives & criteria

HLP Electrical Power Systems

RTM322 programme

Buy “installed base” & “customer access”

Buy “technology assets”

M&A financial criteria

� Cover cost of capital within 3 years (RoCE)

� A deal should be EPS accretive in year 1 ideally. I f not, in year 2

� ROI in the range of 10 to 12%Per

form

ance

Bal

ance

sh

eet � Net debt/EBITDA around 2.0x. 2.5x max at peak for a limited period of time

� Interest cover ratio at 6x (= EBIT / Interest expen se)

Colombia/Peru

Post-tax cost of capital of 8% (aerospace & defence) and 9.5% (security)

26 /



2014 dividend

€1.20/share dividend in 2014; almost doubled in 3 y ears

152 202 256 400 467 500Totaldividenddistribution(€M)

152

154

202

0.50

0.38

0.62

102

Final Dividenddistribution(€M)

Dividendper share(€)

Interimdividenddistribution(€M)

0.96

129

271

200

267

1.121.20

267

233



/Annexe /Additional information

28 /



FY 2014 income statement

* Based on 416,292,736 shares** Based on 416,413,368 shares

FY 2014 net profit up 17.5%, excluding gain on Inge nico shares in 2013

(In €M) FY 2013Restated for IFRS 11

FY 2014

Revenue 14,363 15,355

Other recurring operating income and expenses (12,635) (13,311)

Share in profit from joint ventures 52 45

Recurring operating income% of revenue

1,780

12.4%

2,089

13.6%

Total one-off items (34) (107)

Profit from operations

% of revenue

1,746

12.2%

1,982

12.9%

Net financial income (expense) (138) (165)

Income tax expense (529) (522)

Share in profit from associates 15 18

Gain on disposal of Ingenico shares 131 -

Profit for the period attributable to non-controlling interests (32) (65)

Profit attributable to owners of the parent

EPS (in €)

1,193

2.87*

1,248

3.00**

Of which cost of debt of €(42)M

Drop in effective tax rate to 28.7% mainly due to the

reduced tax base at Techspace Aero after

deduction of revenue from patents for 2013 and 2014

29 /



Research & Development

� Self-funded cash R&D effort at peaklevel of 9.5% of sales

� Ramp up of LEAP development and testing; A350 and helicopters higher; start-up of GE9X development; Silvercrest spending plateau

� Decrease of capitalized costs asexpected: €(49)M; Silvercrest fullyexpensed since April 1, 2014

(In €M)FY 2013

Restated for IFRS 11

FY 2014 Variation

Total R&D (1,809) (1,990) (181)

External funding 520 526 6

Total self-funded cash R&D (1,289) (1,464) (175)

as a % of revenue 9.0% 9.5% 0.5 pt

Tax credit 136 151 15

Total self-funded cash R&D after tax credit (1,153) (1,313) (160)

Gross capitalized R&D 693 644 (49)

Amortised R&D (76) (78) (2)

P&L R&D in recurring EBIT (536) (747) (211)

as a % of revenue 3.7% 4.9% 1.2 pt



FY 2014: R&D by activity

(In €M) FY 2014 Propulsion Equipment Defence Security

Total self-funded cash R&D (1,464) (894) (308) (133) (129)

as a % of revenue 9.5% 11.0% 6.9% 10.9% 8.4%

Tax credit 151 58 46 35 12

Total self-funded cash R&D after tax credit (1,313) (836) (262) (98) (117)

Gross capitalized R&D 644 475 122 26 21

Amortised R&D (78) (25) (37) (11) (5)

P&L R&D in recurring EBIT (747) (386) (177) (83) (101)

as a % of revenue 4.9% 4.7% 4.0% 6.8% 6.6%

31 /



Free Cash Flow

(in €M)FY 2013*Restated

FY 2014

Adjusted net profit 1,193 1,248

Depreciation, amortization and provisions 653 906

Others 100 314

Cash from operating activities before change in WC

1,946 2,468

Change in WC 174 (111)

Capex (tangible assets) (489) (674)

Capex (intangible assets)** (932) (943)

Free cash flow 699 740

Increased Capex to prepare the production transition and face higher volumes, including 2 new plants in Rochester and Commercy

to produce 3D woven composite parts for LEAP

Increase in WC to cope with rising assembly rates in

aerospace

* 2013 is presented in a comparable format to 2014 ** Of which €644M capitalised R&D in 2014 vs €693M capitalised in 2013

Of which amortization of tangibles and intangibles for €538M and provisions

(net) for €231M

+27%

Strong increase in cash from operations despite higher expensed R&D

32 /



Net debt position

� Cash flow from operationsequals 1.18x recurring EBIT

� Modest increase in WC requirements (rising assembly rates in Aerospace)

� 2013 final dividend (€0.64/share) and 2014 interim dividend (€0.56/share)

� “Acquisitions & Others” includes:

� Eaton: €(197)M

� Dictao; extension to full ownership in Hydrep…

(in €M)

(1,220)

Dividends**

Net debt at Dec 31, 2013*

Cash flowfrom ops

Acquisitions & others

Net debt atDec 31, 2014

Changein WC

R&Dand

Capex

€740M Free Cash Flow

*Restated for the application of IFRS11** Includes €(11)M of dividends to minority interests

(319)

(1,617)

(511)

(512)

(1,797)

(1,220) (1,503)

2,468

(111)

33 /



Aerospace OE* / Services revenue split

Revenue

Adjusted data(in Euro million)

Q1 2014 Q1 2015 % change

OE* Services OE* Services OE* Services

Propulsion

% of revenue

902

49.4%

923

50.6%

911

44.0%

1,159

56.0%

1.0% 25.6%

Equipment

% of revenue

747

73.5%

269

26.5%

851

72.7%

320

27.3%

13.9% 19.0%

Revenue

Adjusted data(in Euro million)

FY 2013 FY 2014 % change

OE Services OE Services OE Services

Propulsion

% of revenue

3,923

51.7%

3,666

48.3%

4,073

50.0%

4,080

50.0%

3.8% 11.3%

Equipment

% of revenue

2,901

70.9%

1,190

29.1%

3,166

71.2%

1,280

28.8%

9.1% 7.6%

* All revenue except services

34 /



Quantities of major aerospace programmes

Number of units delivered

2013 2014%

change

CFM56 engines 1,502 1,560 4%

High thrust engines 619 690 11%

Helicopter engines 934 832 (11)%

M88 engines 20 26 30%

787 landing gear sets 61 118 93%

A380 nacelles 108 112 4%

A330 thrust reversers 166 162 (2)%


Small nacelles (biz & regional jets) 605 688 14%

Number of units delivered

Q1 2014 Q1 2015 %

CFM56 engines 402 402 Stable

High thrust engines 182 160 (12)%

Helicopter engines 180 159 (12)%

M88 engines 6 3 (50)%

A350 landing gear - 6 na

787 landing gear 29 31 7%

A380 nacelles 28 25 (11)%



Small nacelles (biz & regional jets)

149 156 5%

35 /



Achieved

Target

1.26 1.25

1.25

1.25

1.25

1.25

1.25

1.18

<1.20

Fx hedging: $24.2bn Hedge portfolio* (April 10, 2015)

($bn)

€/$ hedge rate

*Approx. 45% of Safran US$ revenue are naturally hedged by US$ procurement

2015 & 2016 fully hedged; 2017 almost achieved

Higher yearly exposure: $7.3bn to $8.0bnHigher expected level of net USD exposure for 2015-20 due to

strong growth of businesses with exposed USD revenue

2017: Increased coverage at $1.25

� $6.1bn achieved at $1.25 (including knock out option strategies) to rise to $7.7bn at $1.25 through accumulators as long as €/$<1.42 up to end 2015

� Knock out options barriers set at various levels above 1.38

2018: Increased and improved coverage

� $6.0bn achieved at $1.18 through forward sales and short dated knock out option strategies to rise to a maximum of $8.0bn at an improved target rate below $1.20 through accumulators as long as €/$<1.28 up to end 2015

� Knock out options barriers set at various levels between 1.12 and 1.45 with maturities ranging between 1 month and 2 years

Taking advantage of current €/$ spot rate to hedge and improve rates in years 2019 - 2020

2015 / 2016: Increased coverage at $1.25

NEW

36 /



Definition

� Civil aftermarket (expressed in USD)� This non-accounting indicator (non audited) comprises spares and MRO

(Maintenance, Repair & Overhaul) revenue for all civil aircraft engines for Snecmaand its subsidiaries and reflects the Group’s performance in civil aircraft engines aftermarket compared to the market.

37 /



Disclaimer

The forecasts and forward-looking statements described in this document are based on the data, assumptions and estimates considered as reasonable by the Group as at the date of this document. These data, assumptions and estimates may evolve or change as a result of uncertainties related in particular to the economic, financial, competitive, tax or regulatory environment. The occurrence of one or more of the risks described in the registration document (document de référence) may also have an impact on the business, financial position, results and prospects of the Group and thus affect its ability to achieve such forecasts and forward-looking statements. The Group therefore neither makes any commitment, nor provides any assurance as to the achievement of the forecasts and forward-looking statements described in this document

tier 1 supplier in aerospace, defence & security€¦ · paris airshow / june 2015 / continuing...

Documents