Leonardo Spa · MIL:LDO
Leonardo Spa — Finmeccanica — H1 2005 Earnings Presentation
50 slides from Leonardo Spa's earnings presentation, Sep 30, 2005
Slide 1: Finmeccanica First Half 2005 Results Presentation
Finmeccanica First Half 2005 Results Presentation Pier Francesco Guarguaglini Chairman and CEO Alessandro Pansa Co-General Manager Milan, 30 September 2005 1
Slide 2: Introduction: 2005 First Half Results
Pier Francesco Guarguaglini Introduction 2005 First Half Results 2
Slide 3: Contents
Contents 1. Finmeccanica today - Pier Francesco Guarguaglini 2. Financial and Business review - Alessandro Pansa 3. Business strategy and Summary - Pier Francesco Guarguaglini 3
Slide 4: Strategic development of Finmeccanica: completion of Phase 1
Strategic development of Finmeccanica: completion of Phase 1 ` Restructuring and reorganisation phase, which began in 1990s, now completed ` Strategic initiatives fulfilled five key objectives: 1. Pursue growth and increase focus on Aerospace and Defence 2. Look for selective growth in business segm
Slide 5: Our strategic development can now leverage on…
Our strategic development can now leverage on… • Maximising the advantages of more than proportional correlation in A,D&S industry between critical mass and cash flow, profit and investments • Playing a leading role in the consolidation of the industry in Europe - mitigating the risk of marginalisat
Slide 6: Financial and Business review: 2005 First Half Results
Alessandro Pansa Financial and Business review 2005 First Half Results 6
Slide 7: First Half Highlights
First Half Highlights • Value of production up 13% • EBIT up 29% driven by Aeronautics, Helicopters, Space and Ansaldo Signal • Net income triples, excluding STM, due to higher EBIT and lower tax • Order flow more than doubles with backlog (+27% vs 2004) now covering almost 3 years of production • N
Slide 8: First Half Results - P&L/IFRS Impact
First Half Results - P&L/IFRS Impact Eur m. 1H 2005 1H 2004 Change % Revenues 4.721 4.201 12% Value of production 4.958 4.374 13% Cost of goods, services and labour (4.578) (3.954) Depreciation (155) (144) Provisions for risks and charges (10) (17) Restructuring costs (10) (41) Other operating reven
Slide 9: Balance Sheet/IFRS Impact
Balance Sheet/IFRS Impact Eur m 30/06/2005 31/12/2004 Non-current assets 7.397 5.520 Non-current liabilities (2.008) (1.877) 5.389 3.643 Inventories 5.161 4.589 Work in progress 2.671 2.169 Receivables 3.610 3.353 Trade payables (3.024) (2.832) Customer advances (3.713) (3.214) Provisions for risks
Slide 10: Cash Flow Analysis
Cash Flow Analysis Eur m. 1H 2005 1H 2004 CASH AND EQUIVALENTS AT 1 JANUARY 2005 2.055 2.259 CASH FLOW FROM OPERATING ACTIVITIES 527 448 Changes in working capital (402) (591) Changes in other operating assets and liabilities (267) (155) CASH FLOW GENERATED BY (UTILISED IN) OPERATING ACTIVITIES (142
Slide 11: Balance Sheet still strong despite rise in net debt
Balance Sheet still strong despite rise in net debt • Balance sheet remains robust thanks to: – 6.6% financial stake in STMicroelectronics – 59.7m shares worth about Eur 830m* – Lengthened debt maturity to 10.6 years (vs 5.6 years in 2003) • Debt remains under control and within objectives set by th
Slide 12: Transport companies to be floated, Datamat acquired
Transport companies to be floated, Datamat acquired • Decision taken to merge Ansaldo Systems into Ansaldo Signal and list the combined entity on the Italian stock market • Ansaldo Signal is a world leader in rail signalling with revenues in 2004 of Eur 530m and EBIT of Eur 49m. Ansaldo Systems is a
Slide 13: Management Objectives
Management Objectives Orders acquisition, based on our key products, is the main driver of our organic growth INCREASED INDUSTRIAL EFFICIENCY HIGHER PROFITABILITY • Good quality orders acquired • New life cycle and risk management programmes being implemented • All contracts subject to EVA analysis
Slide 14: Acquisitions drive rationalisation and commercial growth benefits
Acquisitions drive rationalisation and commercial growth benefits • Significant integration and commercial benefits from new acquisitions still to be realised and coming to fruition in the m-t, as typical for Defence sector • Return on capital employed (12.2% in 1H05 vs 15.2% in 1H04) reflects rise
Slide 15: First Half Operating Performance and Outlook by Business Division
First Half Operating Performance and Outlook by Business Division 15
Slide 16: Aeronautics: Current growth driven by Military and ATR
Aeronautics: Current growth driven by Military and ATR • Higher Higher volumes volumes in in H2 H2 with with first first C27J C27J deliveries deliveries to to Greece Greece • Good Good military military and and strong strong ATR ATR drive drive higher higher 1H 1H margin margin • Large Large B787 B7
Slide 17: Helicopters: positive outlook
Helicopters: positive outlook … • Large Large domestic domestic and and international international order order wins wins (US101, (US101, Apache Apache targeting targeting systems, systems, Skios, Skios, AB139 AB139 for for Gulf Gulf of of Mexico, Mexico, 109 109 Grand Grand for for EASA EASA )) in
Slide 18: Defence Electronics: exciting growth prospects
Defence Electronics: exciting growth prospects • Small Small temporary temporary decline decline in in profitability profitability in in 1H 1H due due to to delay delay in in acquiring acquiring TETRA TETRA contract contract with with significant significant recovery recovery expected expected in in
Slide 19: Defence systems: short-term weakness
Defence systems: short-term weakness • Revenues Revenues down down in in 1H 1H for for land land armaments armaments and and underwater underwater –– partial partial recovery recovery expected expected in in 2H 2H • Operating Operating profit profit down down for for same same reason reason together
Slide 20: Space: Efficiency gains kicking in
Space: Efficiency gains kicking in • Performance Performance improves improves inin 1H 1H due due to to higher higher volumes volumes onon ISS ISS and and scientific scientific satellite satellite programmes programmes together together with with restructuring restructuring benefits benefits • Signs
Slide 21: Civil activities: Transport and Energy
Civil activities: Strength of Signalling and Systems in Transport unable to offset weak Vehicles Transport • Transport Transport 4 Cost 4 Cost over-runs over-runs on on Vehicle Vehicle programmes programmes in in 1H 1H more more than than offset offset strong strong performance performance byby Sign
Slide 22: Guidance incorporating IFRS impact confirmed
Guidance incorporating IFRS impact confirmed 2005 2006 Revenue / annual change >20% >10% EBITA ~Eur 700m* ~Eur 800m • Cumulative Free Operating Cash Flow of > Eur 600m in next 3 years (2005-07) • Dividend policy: increase together with profits • Optimal capital structure: Net debt/Equity < 35-40% •
Slide 23: Recent developments
Recent developments June • Moody’s raises Finmeccanica’s rating from Baa2 to A3 July • New Finmeccanica-Alcatel space manufacturing and service companies become operational • Re-grouping of shares: 1 for 20 • Ansaldo Signal flotation announced • Acquisition Datamat (specialised in IT and Mission sys
Slide 24: Business strategy and Summary
Pier Francesco Guarguaglini Business strategy and Summary 2005 First Half Results 24
Slide 25: Phase 2 Strategy
Phase 2 Strategy Strengthen global positioning through: Increasing Growth profitability • Integrating and consolidating • Organically and through selected recent acquisitions acquisitions • Enhancing process expertise • Providing integrated defence and security solutions • Pursuing manufacturing • I
Slide 26: Integrating and consolidating recent acquisitions: AgustaWestland
Integrating and consolidating recent acquisitions: AgustaWestland • Integration plan under implementation and ahead of schedule • Approximately 2/3 of the actions approved have been completed To Do: • Complete rationalisation of UK and Italian operations to improve efficiency of new programmes (i.e.
Slide 27: Integrating Selex Sensors and Airborne Systems
Integrating and consolidating acquisitions: Selex Sensors and Airborne Systems • Integration plan to be approved by October 2005 Expected synergies coming from: • Shared procurement, lower material handling costs and production efficiencies (60% synergies) • Integrated product portfolio (15% synergi
Slide 28: Enhancing process expertise
Enhancing process expertise • DESIGN & ENGINEERING: - risk assessment - time-to-market improvement Processes and Governance - product life-cycle design (including logistics and Design customisation) & Production Engineering • PRODUCTION: Life cycle HR - risk mitigation management management - lead t
Slide 29: Pursuing manufacturing localisation - Boeing 787
Pursuing manufacturing localisation - Boeing 787 Charleston state-of-the-art plant for large scale composite sub-assembly allows us to: - scale up the value chain - perform “small prime” role through a pre-integration facility • access 250+ high skilled local workers • carry out almost 26% of worksh
Slide 30: Organic growth: domestic and co-operative programmes
Organic growth: domestic and co-operative programmes Italian VTMS EFA II Tranche TETRA VBC FREMM Securing funding for major and co-operative programmes, thanks to domestic financial sources additional to Italian MoD budget. 30
Slide 31: TETRA – Italian flagship technology
TETRA – Italian flagship technology • A leading technology for high capability Secure Communications • Cornerstone of future needs in Network-Centric Environments and Operations • TETRA - integrated with wireless broadband technologies – The backbone of communication systems for Italy’s police and A
Slide 32: UK: Our second home market for organic growth
UK: Our second home market for organic growth • 10,000 employees in UK (20% of the Group), Eur 2.7bn (£1.8bn) in sales generated by UK businesses (about 25% of expected 2005 A,D&S Revenues), following BAE Avionics and AgustaWestland transactions • Second largest Defence company operating in the UK;
Slide 33: UK Helicopter orders: achievements and outlook
UK Helicopter orders: achievements and outlook • Partnership with UK MoD in current and future helicopter requirements, worth cEur 4.5bn (£3bn) over ten years • Well positioned to obtain UK MoD Future Lynx programme valued at cEur 1.5bn (£1bn) • Eur 440m (£300m) SKIOS five year contract, for the sup
Slide 34: US market penetration supported by strong credentials in Helicopters
US market penetration supported by strong credentials in Helicopters • Helicopters: US101 ‘Marine One’ won on merit: - Initial contract for 8 aircraft worth US$ 1.8bn - 15 additional helicopters worth US$ 2.5bn - ‘Through life’ Product Support contracts still to be awarded • Further opportunities in
Slide 35: Further opportunities for organic growth in the US market
Further opportunities for organic growth in the US market • Tactical military transport aircraft C27-J ready to supply US National Guard and US Army customer, satisfying US DoD requirement for up to 200 military transporters • UK Selex Sensors and Airborne Systems partner of choice for the supply of
Slide 36: Significant opportunities for organic growth in other attractive markets
Significant opportunities for organic growth in other attractive markets • RUSSIA: ATC, postal automation control in Moscow, bidding for Tetra, agreement in Space for satellites, MoU with Sukhoi for regional transport, MoU for rail and equipment technology • INDIA: ATR, Avionics (PAR), underwater sy
Slide 37: Significant order acquisition will drive organic growth
Significant order acquisition will drive organic growth • In 2004 there were orders of Eur 10.8bn, followed by orders for Eur 7.9bn in 1H 2005 – increasing the backlog to Eur 31bn or 2.7 years of production Based on: - 3 key markets - Italy and UK “home” markets and US - and aggressive business and
Slide 38: Acquisition case study - Datamat
Acquisition case study - Datamat • Datamat: an example of an optimal target for selected acquisitions • Reinforces and complements IT and Mission systems’ key competencies for core A, D & S, with significant industrial and commercial integration opportunities in: - Naval command and control systems
Slide 39: Integrated approach to highly promising Security market
Integrated approach to highly promising Security market GLOBAL GLOBAL SECURITY SECURITY Leveraging Group’s Critical Critical National National system integration Transportation Transportation Border Border Infrastructures Infrastructures Security Security Surveillance Surveillance capabilities owned
Slide 40: Integrated Security Solution Provider…
Integrated Security Solution Provider… • 2004 worldwide Homeland Security market worth US$ 42bn, more than 50% of which is in US • EU Commission intends to invest up to Eur 250m p.a. by 2007 in research for security projects • We are leading two of the main EU Projects: 1) reinforcement of security
Slide 41: Improving technological & system content of our offer-portfolio
Improving technological & system content of our offer-portfolio Platforms: Skills enabling integrated Activity in consolidated areas solutions Platforms: Electronics: • Helicopters • Mission systems • Aircraft • Sensors • Satellites • Communication • Land vehicles • Command, control and • Naval plat
Slide 42: Addressing specific solutions for Civil Activities
Addressing specific solutions for Civil Activities • ELSAG: successfully repositioned in Defence Electronics, as the Group’s centre of excellence for growing Security market requirements; defence logistic services and systems, now reinforced by Datamat acquisition Disposal of civil business on track
Slide 43: Addressing specific solutions for Civil Activities
Addressing specific solutions for Civil Activities • ANSALDO SIGNAL and ATSF IPO aimed at extracting value for the companies and raising financial resources for the Group • ANSALDO SIGNAL will benefit from strengthened technology links with Group’s core activities, thanks to ICT (microwave) technolo
Slide 44: Phase 2 Strategy
Phase 2 Strategy Strengthen global positioning Increasing profitability Growth 44
Slide 45: Q&A
A volte la tecnologia supera l'immaginazione. @ | INMECCANICE Q&A A volte la tecnologia supera l'immaginazione. FINMECCANICE HAMECCAN sing A
Slide 46: Appendix
Appendix Migher thinkin rT HINVVECCAMCA
Slide 47: Debt/IFRS Impact
Debt/IFRS Impact 30.06.2005 01.01.2005 31.12.2004 30.06.2004 Short-term financial debt 385 1.079 1.083 1.183 Medium to long term financial debt 1.884 1.443 1.551 1.362 Cash on hand or equivalent (588) (2.055) (2.055) (1.637) NET BANK DEBT 1.681 467 579 908 Government bonds and securities (33) (33) (
Slide 48: FREMM
FREMM • French – Italian programme to jointly develop 27 Multi-Mission Frigates for national Navies • Italian Government funded the development through an initial Eur 400m budget allocation • First deliveries set in 2012 Provides superiority and flexibility to execute European Defence missions and I
Slide 49: 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 Co
Slide 50: 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