Thales Sa · EURONEXT:HO
Thales Sa — Investor Presentation (December 2022)
60 slides from Thales Sa's investor presentation, December 2022
Slide 1: Investor meeting December 2022
Investor meeting December 2022 www.thalesgroup.com
Slide 2: Introduction to Thales, Key priorities, Outlook
Introduction to Thales Key priorities Outlook Sustainability: safer, greener, more inclusive H1 and 9m 2022 results www.thalesgroup.com
Slide 3: Thales today: a set of focused, technology-driven businesses
Thales today: a set of focused, technology-driven businesses Sales by segment EBIT margin R&D total spend 28% 10.8 to 12% Aerospace 11.1% 10.2% 8.1% Civil aeronautics: ~7% €16.2bn(a) 54% Defense & ~70% Customer- €3.5bn(a) ~30% Self-funded security funded R&D ~20% of sales R&D 19% Digital identity &
Slide 4: Thales builds on 4 key strengths
Thales builds on 4 key strengths Connectivity Big data Mobility analytics Cyber- Artificial security intelligence Cutting Deep domain Large digital Global edge R&D knowledge asset base presence €3.5bn+, ~20% of Top 3 globally or Thales portfolio: Presence in 50+ sales #1 in Europe across digital “by
Slide 5: Key priorities
CHIME: satellite to support sustainable agricultural and biodiversity management (Copernicus, ESA) Introduction to Thales Key priorities Outlook Sustainability: safer, greener, more inclusive H1 and 9m 2022 results www.thalesgroup.com
Slide 6: Executing full-speed on value-maximizing strategy
Executing full-speed on value-maximizing strategy 1 Refocus portfolio on 3 leading and highly synergistic businesses 2 Accelerate R&D investments to reinforce technology leadership 3 Take our sustainability performance to the next level 4 Constantly roll out new operational performance action plans
Slide 7: Portfolio focused on 3 leading and highly synergistic businesses
1 Portfolio focused on 3 leading and highly synergistic businesses Critical decision chain Sensing and Data transmission Data processing and data gathering and storage decision making Aerospace Observation satellites Military communications Flight management systems Defense & Security Digital identi
Slide 8: Accelerate R&D investments to reinforce technology leadership
2 Accelerate R&D investments to reinforce technology leadership Core digital technologies now Self-funded R&D systematically integrated in products % of sales Cybersecurity >6.5% Big data analytics and artificial 6.1% 6.1% 6.3% intelligence Connectivity, IoT 4.9% Digital identity, biometrics Acceler
Slide 9: Take our sustainability performance to the next level
3 Take our sustainability performance to the next level Sustainability drives growth Portfolio addresses major societal issues Double-digit growth in cybersecurity Safer Major satellite projects in navigation, Keep citizens safe in both environmental monitoring, and to reduce physical and digital wo
Slide 10: Constantly roll out new operational performance action plans
4 Constantly roll out new operational performance action plans Groupwide operational Key 2022 priorities performance initiatives Engineering transformation Procurement performance Manufacturing competitiveness, Industry 4.0 Engineering competitiveness Deployment of Sales & Operation Planning (S&OP)
Slide 11: Leverage sustainably high cash generation
5 Leverage sustainably high cash generation Highly cash generative businesses, Balanced capital with diversified cash cycles allocation to support Large projects with downpayments sustainable value creation vs short-cycle flow businesses Commercial vs institutional • Continued investment in customer
Slide 12: Disciplined M&A strategy
5 Disciplined M&A strategy Examples of recent acquisitions Strategic focus on bolt-on acquisitions Reinforcing group technology portfolio RUAG S&T Expanding geographical footprint Simulation & training solutions for security organizations and armed forces ~€90m sales, ~500 employees 4 bolt-on acquis
Slide 13: Outlook
Introduction to Thales Key priorities Outlook Sustainability: safer, greener, more inclusive H1 and 9m 2022 results www.thalesgroup.com
Slide 14: Aerospace: a solid multi-year recovery
Aerospace: a solid multi-year recovery Global air traffic scenarios Pre Covid Avionics and IFE benefiting from forecast Billion RPKs Source: IATA multi-year air transport rebound 8.4 Range of uncertainty Structural cost adaptation completed Margin leverage on sales recovery and 4.8 development of a
Slide 15: Defense & Security: multi-year extension of mid-single digit sales growth outlook
Defense & Security: multi-year extension of mid-single digit sales growth outlook External forecasts for 2021-30 Invasion of Ukraine driving major defense budget growth in key markets(a) changes of political context in Europe +7% +6% +6% +5% Finland and Sweden joining NATO +4% +3% €100bn commitment
Slide 16: DIS: delivering in line with strategic ambition
DIS: delivering in line with strategic ambition Compelling delivery on EBIT and free DIS EBIT and DIS Free operating EBIT margin cash flow operating cash flow Cost synergies above plan +52% 358 ~420 x2.5 ~400 Disciplined focus on cost and cash 236 +4.3 177 pts 11.9% Rigorous management of chip short
Slide 17: Sustained and sustainable cash conversion, driving major upgrade to 2019-2023 target
Sustained and sustainable cash conversion, driving major upgrade to 2019-2023 target 3 factors driving 2021 outperformance Adjusted net income conversion into Free operating cash flow Very strong order intake, especially in emerging markets 185% Internal cash initiatives and positive one-offs 98% 2,
Slide 18: Q4 2022 perspectives and priorities
Q4 2022 perspectives and priorities Business environment Key priorities assumptions Strong market demand across portfolio Focus on short-term operational bottlenecks Supply chain tensions remaining high, - Recruitments notably on semiconductors - Supply chain Soaring inflation in main markets Maximi
Slide 19: 2022 financial objectives
2022 financial objectives Order intake Book-to-bill significantly above 1 Unchanged +3.5% to +5.5% organic growth Now targeted in Sales upper part of range corresponding to €17.2 to €17.6 billion(a) EBIT margin(b) 10.8% to 11.1%(a) Unchanged (a) Based on October 2022 scope and foreign exchange rates
Slide 20: Summary
Summary Focus on 3 leading high tech ESG-aligned businesses Simplified exposure to 3 long-term growth markets Able to sustainably deliver double-digit margins Continued implementation of key Sustainable Ambition 10 strategic levers value creation Further acceleration of R&D investments Constant focu
Slide 21: Sustainability: safer, greener, more inclusive
Introduction to Thales Key priorities Outlook Sustainability: safer, greener, more inclusive H1 and 9m 2022 results www.thalesgroup.com
Slide 22: Sustainability ambitions anchored in our purpose
Sustainability ambitions anchored in our purpose Our purpose Our ambitions “Building a future we can all trust” Maximize the sustainability impact of our portfolio of solutions Embed ambitious sustainability commitments in all processes Working to make the world safer, greener and more inclusive Inv
Slide 23: Addressing major societal issues through a unique portfolio of solutions
Addressing major societal issues through a unique portfolio of solutions Greener: ~20% Design solutions to observe and understand climate phenomena and to reduce the environmental Safer: ~60% impact of our customers • Environmental monitoring and Keep citizens safe in both 28% navigation satellites
Slide 24: Sustainability: a strong space market growth driver, notably in Europe
Sustainability: a strong space market growth driver, notably in Europe Space projects at the heart of European Sustainability-focused European space budgets Union political priorities, driving (€bn per year) significant budget increases Up Unprecedented European Space Agency +5 to +7% to 5.5 and EU
Slide 25: Optimization of aircraft operations: a major CO2 reduction opportunity
Optimization of aircraft operations: a major CO2 reduction opportunity for aviation Major CO2 emission reduction achievable Possible CO2 emission reduction through operations optimization via aircraft operations optimization (avoided emissions, million tons of CO2) 10 to 15% CO2 reduction - CO2-opti
Slide 26: Aircraft operations optimization through innovations in avionics and Air Traffic Control
Addressing aircraft operations optimization through continuous innovations in both avionics and Air Traffic Control PureFlyt Redesign of A320 rudder control system TopSky-ATC TopSky-ATC One One Flight Management System Air Traffic Air Traffic Management Management system Syste • Improve flight traje
Slide 27: Defense is essential to safe, stable and prosperous societies
Defense is essential to safe, stable and prosperous societies We live in a globalised Combining military capability, The protection offered by and increasingly diplomacy and development Defense to wider society unpredictable world, assistance is necessary to achieve provides the foundation for facin
Slide 28: Thales: leading in one of the most regulated global industries
Thales: leading in one of the most regulated global industries Strict export controls What we stand for Committed and certified to stringent export control regulations Processes integrated in day-to-day business through Operating ethically; selling training, audit, and focus on continuous our produc
Slide 29: Solutions deliver enhanced performance and reduced environmental footprint
Thales’ solutions deliver both enhanced performance and reduced environmental footprint Sales to defense customers by product type, 2020 Increased efficiency through improved asset collaboration across all domains Increasing mission performance whilst reducing size, weight, power and logistics Netwo
Slide 30: Cybersecurity: trusted digital identities and data privacy for all
Cybersecurity: trusted digital identities and data privacy for all Cybersecurity product market growth Cybersecurity is key to sustainability (€bn) Increasingly impacting identity thefts, data leaks, ransomware attacks undermine trust +10% 85 in digital transformation CAGR Privacy and sovereignty bu
Slide 31: Step change in ESG governance and organization
Step change in ESG governance and organization ESG governance ESG organization Expansion of Strategy and CSR Creation of Chief Sustainability committee on the board of directors Officer position - Inclusion of 2 additional board members “Integrated” ESG department ESG matters put under the responsib
Slide 32: Sustainability: main targets
Sustainability: main targets Ethics & Health & safety Strategy for a low-carbon future Diversity & inclusion compliance at work Reduction of operational CO2 emissions(a) Anticorruption of management Frequency rate of NET 100% -35% -50% 75% committees with at accidents at work ZERO least 3 women(b) w
Slide 33: Sustainability: 2021 key figures
Sustainability: 2021 key figures Targets Targets 75% of 49% 71% 35% reduction of 0% -36%(b) management operational CO2 committees with emissions(a) 2018 2018 at least 3 women by 2023 2020 result: -35%(b) by 2023 2020 result: 68% Strategy Diversity for a low- 100% of new 0% 20% of women 82% & 16.5% 1
Slide 34: H1 and 9m 2022 results
Introduction to Thales Key priorities Outlook Sustainability: safer, greener, more inclusive H1 and 9m 2022 results www.thalesgroup.com
Slide 35: 9m 2022 order intake
9m 2022 order intake Continued strong commercial activity Order intake by contract unit value Organic growth • Q3 organic growth: +36% +41% • 9m organic growth: +41% €m 4 large(a) orders booked in Q3 2022, for a total of 16 in 9m 2022 • 9 in Defense & Security, 6 in Space, Unit value 1 in Aeronautic
Slide 36: 9m 2022 sales growth
9m 2022 sales growth 9m sales growth drivers Strongly positive currency impact €m Reported growth: +9.6% • Q3: +€126m, 3.5% of sales • 9m: +€282m, 2.5% of sales 9m organic sales growth: +6.4% Organic Currency & • Stellar DIS performance scope growth • Constrained Aerospace growth +3.0% +6.4% Currenc
Slide 37: Aerospace: 9m 2022 key figures
Aerospace: 9m 2022 key figures 9m 9m Change €m 2022 2021 total organic Order intake 3,646 3,676 -1% -3% Sales 3,270 3,108 +5.2% +2.1% Order intake down due to high comps (Galileo jumbo contract booked in 2021) • On-going momentum in Space orders: 2 large contracts booked in Q3 • Avionics orders orga
Slide 38: Defense & Security: 9m 2022 key figures
Defense & Security: 9m 2022 key figures 9m 9m Change €m 2022 2021 total organic Order intake 9,175 4,826 +90% +86% Sales 6,385 5,948 +7.4% +5.2% Continued strong order intake momentum • 1 large order in Q3: second export contract for new generation naval radar SeaFire • Q3 order intake up 34% organi
Slide 39: Digital Identity & Security (DIS): 9m 2022 key figures
Digital Identity & Security (DIS): 9m 2022 key figures 9m 9m Change €m 2022 2021 total organic Order intake 2,584 2,105 +23% +16% Sales 2,584 2,105 +22.7% +16.2% Order intake structurally aligned with sales Strong sales momentum, up double-digit for the 4th quarter in a row • On-going Smart cards mo
Slide 40: H1 2021 to H1 2022 EBIT bridge
H1 2021 to H1 2022 EBIT bridge Gross margin Equity €m affiliates excl. Russia- Marketing H1 2022 and % of sales related one-offs R&D G&A Restructuring excl. Naval & sales Group one-off one-offs expenses expenses -10 -2 -27 +29 Scope, -17 +5 currency and Naval Group: +50 10.8% Russia: -52 pensions +1
Slide 41: H1 2022 Free operating cash-flow
H1 2022 Free operating cash-flow H1 2022 H1 2021 €m Operating cash flow before WCR Robust free operating cash-flow 1,176 1,064 changes, interest and tax performance in H1 + Change in WCR and reserves for 4 (382) contingencies • Strong commercial dynamics, Pension cash out, excluding deficit includin
Slide 42: Focus on strategy execution: solid progress over 9 months
Focus on strategy execution: solid progress over 9 months Portfolio Transport disposal fully on track to close in early 2023 1 refocus Solid progress on DIS revenue synergies Technology New-generation Flight Management System selected by Airbus 2 leadership Captas-4 sonar selected by US navy for Con
Slide 43: Appendix
Appendix www.thalesgroup.com
Slide 44: A strong set of focused businesses
A strong set of focused businesses Segment Sub-segment Civil Military 2021 sales(a) (€m) Market position Aerospace Flight avionics #3 worldwide including cockpit avionics, communications, electrical systems, ~1,500 (flight avionics) 28% of 2021 sales(a) training and simulation (of which civil: ~€900
Slide 45: Aerospace segment: identity card
Aerospace segment: identity card Sales by solutions 2 Global Organic sales growth Business Units 34% +6% Avionics +4% Flight avionics Space and other aircraft +1% 48% equipment Space and services(a) 17,100 employees in 31 countries 6% Connected in-flight -4% -24% 11% entertainment (IFE) 2017 2018 20
Slide 46: Defense & Security segment: identity card
Defense & Security segment: identity card Sales by solutions Organic sales growth 3 Global Business Units Land & Air Systems 23% Military communications 31% Mission systems +9% and networks +6% +6% +6% Defense Mission Systems Secure Communications & Comms Sensors and Information Systems & C2 systems
Slide 47: Digital Identity & Security (DIS) segment: identity card
Digital Identity & Security (DIS) segment: identity card Sales by solutions 1 Global Organic sales growth 12% Business Unit IoT solutions(a) 21% Cloud Digital Identity and Security Protection & Licensing 18% +2% Biometrics n/a n/a n/a 14,700 employees in 53 countries 17% Mobile 32% Banking & -6% con
Slide 48: Global leader in flight avionics and connected in-flight entertainment
Global leader in flight avionics and connected in-flight entertainment Sales by solutions Sales by platform type Commercial sales by activity type Widebody platforms Narrowbody Flight avionics platforms Original Aftermarket €1.8bn and other €1.8bn equipments €1.15bn support aircraft (2021) (2021) (2
Slide 49: Highly diversified Defense & Security customer base
Highly diversified Defense & Security customer base Defense & Security sales by region, 2021 4% Rest of world 10% Middle East 9% Asia 40% 39% France outside 10% Europe Australia/NZ 6% North America 9% 8% Rest of Europe 5% United Kingdom Germany & Netherlands Investor meeting - 49
Slide 50: Thales on board the Rafale
Thales on board the Rafale Investor meeting - 50
Slide 51: Summary adjusted P&L: from sales to EBIT
Summary adjusted P&L: from sales to EBIT H1 2022 H1 2021 Change €m % of sales €m % of sales total organic Sales 8,256 7,669 +7.7% +5.4% Gross margin 2,220 26.9% 2,049 26.7% +8.4% +6.0% Indirect costs (1,416) -17.2% (1,331) -17.4% +6.4% +3.9% o/w R&D expenses (486) -5.9% (465) -6.1% +4.7% +2.1% o/w M
Slide 52: Summary adjusted P&L: from EBIT to adjusted net income
Summary adjusted P&L: from EBIT to adjusted net income H1 2022 H1 2021 €m EBIT 891 722 Cost of net financial debt and other financial results (42) (36) Finance costs on pensions and other employee benefits (15) (15) Income tax (141) (88)(a) Effective tax rate 19.7% 14.0% Adjusted net income - discon
Slide 53: 9m 2022 order intake by destination
9m 2022 order intake by destination 9m 9m Change In € millions 2022 2021 Total Organic ROW France 3,143 2,638 +19% +19% France United Kingdom 656 485 +35% +33% Rest of Europe 2,870 3,445 -17% -17% ME Europe 6,669 6,569 +2% +1% North America 2,147 1,686 +27% +14% UK Australia / NZ 709 415 +71% +63% M
Slide 54: 9m 2022 sales by destination
9m 2022 sales by destination 9m 9m Change In € millions 2022 2021 Total Organic ROW France 3,576 3,282 +8.9% +8.7% ME United Kingdom 736 656 +12.2% +10.4% France Rest of Europe 2,741 2,490 +10.0% +8.6% Asia Europe 7,053 6,429 +9.7% +8.8% North America 1,678 1,326 +26.5% +11.9% Australia / NZ 726 747
Slide 55: H1 2022 EBIT by operating segment
H1 2022 EBIT by operating segment H1 H1 Change €m / % of sales 2022 2021 total organic Aerospace 97 4.4% 69 3.3% +41.6% +39.8% Defense & Security 545 12.4% 497 12.0% +9.7% +9.8% Digital Identity & Security 201 12.3% 152 11.1% +32.6% +21.5% EBIT - operating segments 843 10.3% 717 9.4% +17.6% +15.3% O
Slide 56: Organic sales growth per quarter
Organic sales growth per quarter 2019 2020 2018 2021 2019 2022 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Aerospace Defence & Security Digital Identity & Security Total(a) (a) Excluding Transport in all periods (Transport business classified as "discontinued operations" as of 01/01/2021) Investor meetin
Slide 57: Adjusted EPS and cash returns
Adjusted EPS and cash returns Adjusted EPS and dividend per share 2021 adj. EPS only 3% below 2019 € Up 8% per year since 2017 2021 dividend: €2.56 per share Pay-out ratio confirmed at 40% Up 10% per year since 2017 2022: €0.70 interim dividend to be paid in December 2022 Share buy back program 38%
Slide 58: Movement in net debt over H1 2022
Movement in net debt over H1 2022 €m Free New operating Other (b) leases cash-flow Dividends (IFRS16)(a) paid Deficit +201 payment Acquisitions +112 Of which on UK & disposals(a) share buy-back: pensions(a) +127 +416 -820 +49 +141 Net debt Net debt Of which Net debt at 30 Jun 21 at 31 Dec 21 at 30 J
Slide 59: Definition of non-GAAP measures and other remarks
Definition of non-GAAP measures and other remarks Rounding of amounts in euros In the context of this presentation, the amounts expressed in millions of euros are rounded to the nearest million. As a result, the sums of the rounded amounts may differ very slightly from the reported totals. All ratio
Slide 60: Tour Carpe Diem 31 Place des Corolles 92098 Paris La Défense
Tour Carpe Diem 31 Place des Corolles 92098 Paris La Défense France ir@thalesgroup.com This presentation contains certain forward-looking statements. Although Thales believes that its expectations are based on reasonable assumptions, actual results may differ significantly from these forward-looking