Leonardo Spa · MIL:LDO
Leonardo Spa — Finmeccanica — FY2005 Earnings Presentation
46 slides from Leonardo Spa's earnings presentation, Mar 29, 2006
Slide 1: Finmeccanica 2005 Results: Business Review & Outlook
Finmeccanica 2005 Results Business Review & Outlook Alessandro Pansa Co-Director General/CFO Milan, 29 March 2006 1
Slide 2: Safe Harbor Statement
Safe Harbor Statement NOTE: Some of the statements included in this document are not historical facts but rather statements of future expectations, also related to future economic and financial performance, to be considered forward- looking statements. These forward-looking statements are based on C
Slide 3: Transport companies floated successfully
Transport companies floated successfully • Smooth execution of the flotation process for Ansaldo STS announced in September 2005, earlier than the committed timeframe (Q106 vs. 1H06) • In 2005 Ansaldo STS reported revenues of €840m (+8%), EBIT of €80m (+31%) and net income of €44m (+69%) • Ansaldo S
Slide 4: Contents
Contents 1. Finmeccanica today 2. 2005 Results 3. Business Review & Outlook 4. Business Strategy 4
Slide 5: Finmeccanica today
Contents 1. Finmeccanica today 5
Slide 6: 2005 strong commercial success underpins future organic growth
2005 strong commercial success underpins future organic growth… Growth ORDER INTAKE 2004: ORDER INTAKE 2005: EUR 10.5bn A &D EUR 15.4bn C i vi l A&D 20% Civil Average Margin 18.2% Average Margin 20.3% * 29% A &D A&D M i l i t ar y Average Margin 16.4% O t her Milit ary Average Margin 19.7% * 58% 22%
Slide 7: Growth based on increased exposure to faster growing international markets
…based on increased exposure to faster growing international markets Growth 21% 81% Order intake 57% 9% 6% 5% 8% 1% ITALY UK 7% 5% ITALY UK REST OF EU NORTH AM ERICA REST OF EU NORTH AM ERICA REST OF WORLD REST OF WORLD 2004 2005 71% 11% 20% 66% Revenues 13% 10% 4%1% 1%3% ITALY UK ITALY UK REST OF E
Slide 8: Delivering on all our strategic commitments
Delivering on all our strategic commitments: GROWTH • Provide integrated defence and security solutions: missions of subsidiaries reviewed to enable joint solutions to be found, R&D expenditure committed to programmes with highest integration potential; role of prime attributed to Selex Sistemi Inte
Slide 9: Ranking among top world AD&S players by size and profitability
Ranking among top world AD&S players by size and profitability 2005 revenues (€mln)* Boeing 44.050 EADS 33.000 Lockheed Martin 29.890 AD&S revenues (€mln)* Northrop Grumm an 24.675 Space 7% BAE Systems 22.530 Helicopters Raytheon 17.585 20% Defence Helicopters Defence Electronics 24% Electronics Gen
Slide 10: 2005 Results
Contents 2. 2005 Results 10
Slide 11: 2005: a record year for order intake and cash flow generation
2005: a record year for order intake and cash flow generation 2005 results vs. 2004 • Order intake up 46% at €15.4bn securing future growth • Backlog up 32% at €32.1bn now covering almost 3 years of production • Value of production up 25% to €11.5bn (+4% like for like) • EBIT up 58% to €735mln (+22%
Slide 12: Return on Capital improves despite strategic acquisitions
Return on Capital improves despite strategic aquisitions • ROI 17.5% (15.5% in 2004) despite ca. €800mln of strategic acquisitions • ROE 9.6% (17.2% in 2004) • EVA €217mln (52 mln in 2004) • Net debt rises to €1.1bn, D/E = 0.24 well within company guidelines Average loan maturity increased from 5 to
Slide 13: Business Review & Outlook
Contents 3. Business Review & Outlook 13
Slide 14: Helicopters: positive outlook
Helicopters: positive outlook 2005 2005 • Customer Customer support support and and integration integration benefits benefits drive drive higher higher profitability profitability (€mln) 2005 %change* Outlook Outlook 2006 2006 –– 08 08 Revenues 2,490 71 EBIT 272 n.s • Integration Integration plan pl
Slide 15: Extracting integration benefits - AgustaWestland
Extracting integration benefits – AgustaWestland - Helicopters Completed: • Reduction of headcount / Rationalisation of offices and sites • Introduction of a new “one integrated company” organisation model • Compensation schemes linked to savings Underway: Underway: • •Initiation Initiation of share
Slide 16: Defence Electronics: wide range of capabilities ready to exploit
Defence Electronics: wide range of capabilities ready to exploit… 2005 2005 • Revenues Revenues up up 14% 14% organically organically thanks thanks to to good good performance performance from from all all businesses businesses • EBIT EBIT up up 23% 23% organically organically thanks thanks to to co
Slide 17: Extracting integration benefits - SELEX Sensors & Airborne Systems
Extracting integration benefits - SELEX Sensors & Airborne Systems - Avionics Competitiveness Enhancement Program approved in order to achieve savings through: • Commercial opportunities: complementary markets, wider and rationalised product portfolio, improved time to market • Shared investments in
Slide 18: Elsag and Datamat combining forces to grow
Elsag and Datamat combining forces to grow… • Newly acquired Datamat – key domestic player in IT for Defence, Space and PA software – provides Elsag with access to defence logistics business and is a further step towards Elsag strategic repositioning in AD&S as the Group’s centre of excellence for g
Slide 19: Aeronautics: growth supported by strong order backlog and outlook
Aeronautics: growth supported by strong order backlog and outlook 2005 2005 • Growth Growth in in revenues revenues and and EBIT EBIT driven driven by by strong strong performance performance from from ATR ATR and and compensation compensation from from Boeing Boeing on on B757 B757 line line closur
Slide 20: Space: institutional and commercial TLC outlook improving
Space: institutional and commercial TLC outlook improving 2005 2005 • Profitability Profitability improves improves following following significant significant reduction reduction in in headcount headcount over over last last two two years years (€mln) 2005 %change 2006- 2006- 08 08 Revenues 736 (5)
Slide 21: Space: leveraging critical mass with Alcatel
Space: leveraging critical mass with Alcatel… Services – Telespazio (67% stake): ready to exploit recently approved Galileo programme. • Constellation & Mission Control Centre and Performance Centre of the European satellite navigation system Galileo will be completed in Italy in Fucino and Rome are
Slide 22: Defence Systems: better than expected performance
Defence Systems: better than expected performance in 05 but… 2005 2005 • Higher Higher profitability profitability comes comes from from improved improved contract contract margin margin in in Missiles Missiles and and benefits benefits from from previous previous restructuring restructuring (€mln)
Slide 23: Civil Activities: Transport to benefit from investments in high speed and safety
Civil Activities: Transport to benefit from investments in high speed and safety Transport 2005 2005 • Strong Strong performance performance by by Signalling Signalling & & Systems Systems (now (now listed listed on on Milan Milan stock stock market) market) with with combined combined EBIT EBIT ofo
Slide 24: Vehicles: recovery plan now underway
Vehicles: recovery plan now underway • Restructuring plan started by new Management end 2005, aimed at improving production value chain and programme performance: – Short term, profitability recovery actions and process optimisation – Long term, detailed programme focussed on commercial policy, indu
Slide 25: Energy: successful strategic decisions
Energy: successful strategic decisions… Energy sales 2005A 2005A 2008E 2008E 2012E 2012E 20% 35% 48% 52% 65% 80% Manufacturing & other Service • Strategy to achieve technological autonomy and transform into high margin “independent service provider” rewarded by clients through strong order inflow (i
Slide 26: Delivering on our financial commitments
Delivering on our financial commitments 2003 (ITALIAN GAAP) 2004 (ITALIAN GAAP) 2005 (IAS) Outcome Guidance Reported Guidance Reported Guidance Reported Revenue growth YoY 9-10% 11% 7% 9% 20% 25% 999 ü EBIT 6-6,5% low end 6,4% €>550mln €614 mln ca.€700mln €735mln 999 ü Net Debt/Equity <35-40% 8% <35
Slide 27: Guidance
Guidance 2006 2007 Revenues €12.7-13bn €13.6-14bn EBIT €840-860mln €960-1,000mln • Average Free Operating Cash Flow per Year (2006-08) of ca. €300mln • Dividend policy: increase together with profits • Optimal capital structure: Net debt/Equity < 35-40% • Net bank debt/EBITDA <2.0 27
Slide 28: Business Strategy
Contents 4. Business Strategy 28
Slide 29: Implementing our Strategy to achieve our economic and financial goals
Implementing our Strategy to achieve our economic and financial goals Strengthen global positioning Increasing through: Growth Profitability and its CF conversion • Exploiting international commercial • Integrating recent cross border success of our key products and acquisitions through targeted acq
Slide 30: Organic growth mainly driven by export opportunities
Organic growth mainly driven by export opportunities Order intake 2005 2006 2008 5% 14% 16% 8% 9% 38% 41% 11% 14% 57% 21% 15% 15% 19% 17% ITALY UK REST OF EUROPE NORTH AMERICA REST OF WORLD • Helicopters: Orders expected from UK MoD over 2006-08 ca. €5bn, including €1.4bn for Future Lynx. Additional
Slide 31: UK: significant opportunities in a growing domestic market
UK: significant opportunities in a growing domestic market • In recently published “Defence Industrial Strategy” (DIS), UK MoD confirms Helicopters as a strategic national sector and recognises AgustaWestland’s helicopter capability as a significant part of the UK’s defence supply base, together wit
Slide 32: 2006 a decisive year for market penetration goals in North America
2006 a decisive year for market penetration goals in North America • US DoD will take crucial decisions on some key programmes involving Group companies • C27J military tactical transport a/c: higher potential (300-400 a/c) following USAF and US ARMY agreement on a common requirement. Decision expec
Slide 33: Pursuing strategic strengthening through targeted acquisitions
Pursuing strategic strengthening… • Consolidating our leadership in domestic markets (Italy, UK) • Strengthening our presence in Europe • Building a solid footprint in US in Defence Electronics – through our valuable UK assets and possible targeted acquisitions – in Helicopters and in Aeronautics …a
Slide 34: Enhancing process expertise and efficiency measures
Enhancing process expertise and efficiency measures… New team set up to monitor most profitable and strategic programmes under leadership of Caporaletti, former CEO and current Chairman of AgustaWestland • Industrial coordination mechanisms strengthened, to optimise resource allocations and their ec
Slide 35: Roadmap in place to further improve
Roadmap in place to further improve… Finmeccanica in its role of industrial holding is pursuing an aggressive industrial, technological, commercial process integration strategy throughout the Group, in order to secure and/or improve its growth and profitability targets Objectives • increase EBIT ste
Slide 36: Our strategic objectives
Our strategic objectives Strengthen global positioning Increasing Growth Profitability and its CF conversion 36
Slide 37: Appendix
5. Appendix 37
Slide 38: Financial Highlights 2005 vs 2004
Financial Highlights 2005 vs 2004 (€mln) 2005 2004 Change % Value of Production 11,469 9,158 25 Orders 15,383 10,543 46 Backlog 32,114 24,315 32 EBIT 735 465 58 Margin 6.4% 5.1% Net Income 396 585 (32) Free Operating cash flow 501 129 n.s. EPS (€) 0.88 1.33 (34) DPS (€) 0.31 0.26 19 Extraordinary DP
Slide 39: FY 2005 Results – Profit & Loss
FY 2005 Results – Profit & Loss €mln 2005 2004 Change % Revenues 10,952 8,834 24% Value of production 11,469 9,158 25% Cost of goods, services and labour (10,330) (8,198) Depreciation (347) (277) Provisions for risks and charges (18) (78) Restructuring costs (32) (124) Other operating revenues (cost
Slide 40: Balance Sheet
Balance Sheet €mln 31/12/2005 31/12/2004 Non-current assets 7,671 5,520 Non-current liabilities (2,018) (1,877) 5,653 3,643 Inventories 5,511 4,589 Work in progress 2,538 2,169 Receivables 3,600 3,353 Trade payables (3,431) (2,832) Customer advances (4,389) (3,214) Provisions for risks and charges s
Slide 41: Cash Flow Analysis
Cash Flow Analysis €mln 2005 2004 Cash and equivalents at 1 January 2005 2,055 2,259 Cash Flow from operating activities 1,398 1,051 Changes in working capital 204 (193) Changes in other operating assets and liabilities (647) (388) Cash Flow generated by (utilised in) operating activities 955 470 Ne
Slide 42: Pursuing international manufacturing delocalisation of key programmes
Pursuing international manufacturing delocalisation… • Boeing 787 - Charleston (USA) More than €1bn of new orders expected over 06-08, in addition to €1.2bn awarded in 2005, for a total of 350 series Stronger than expected commercial success will pay back more rapidly for planned €600mln gross inves
Slide 43: Providing integrated defence and security solutions
Providing integrated defence and security solutions… • Targeting several opportunities for Homeland Protection large systems in domestic (Crisis Management, Civil Protection, Security, Defence initiatives (NCW), Transportation, Utilities) and export markets (Border Protection, Large Events’ Protecti
Slide 44: Improving technological & system content of our offer/portfolio
Improving technological & system content of our offer/portfolio Platforms: Skills enabling Activity in consolidated areas integrated solutions Platforms: Electronics: • Helicopters • Mission systems • Aircraft • Sensors • Satellites • Communication • Land vehicles • Command, • Naval platforms contro
Slide 45: Transport Signalling and Systems: majority listing of Ansaldo STS
Transport Signalling and Systems : majority listing of Ansaldo STS… • Benefits of listed Ansaldo STS : – operational autonomy, without losing advantages of industrial and technology links with Group’s core activities (i.e. ICT) and Vehicles – possibility to raise financial resources autonomously to
Slide 46: IR Contacts
IR Contacts Investor Relations Finmeccanica: Piazza Monte Grappa 4, 00195 Rome – Italy E-mail: investor_relations@finmeccanica.it Website: www.finmeccanica.it • John Douglas Stewart • Emilia Iannicelli Vice President Investor Relations IR Event Coordinator Tel. +39 06 32473.290 Tel. +39 06 32473.520