Leonardo Spa · MIL:LDO
Leonardo Spa — Finmeccanica — H1 2006 Earnings Presentation
42 slides from Leonardo Spa's earnings presentation, Sep 13, 2006
Slide 1: Finmeccanica First Half 2006 Results Presentation
Finmeccanica First Half 2006 Results Presentation Pier Francesco Guarguaglini Chairman and CEO Alessandro Pansa Co-Director General/ CFO London, 13 September 2006
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
Slide 3: Contents
Contents Introduction Pier Francesco Guarguaglini Financial & Business Review Alessandro Pansa Business Strategy Pier Francesco Guarguaglini Appendix 3
Slide 4: Introduction
Pier Francesco Guarguaglini Introduction 4
Slide 5: One new single Brand for the whole Group
One new single Brand for the whole Group One integrated systems solutions provider, leveraging multiple specific competencies in Aerospace, Defence & Security 5
Slide 6: 1H Results and current initiatives in line with our strategic commitments
1H Results and current initiatives… Growth Focus on A,D&S Internationalisation Increase Profitability Further extract Value from Civil Activities … in line with our strategic commitments 6
Slide 7: Pursuing consistently our strategic commitments (1/2)
Pursuing consistently our strategic commitments… (1/2) 1H06/1H05 revenues up: • Organic 9% like for like Growth • External 11% from external acquisitions Focus on • 1H06 A,D&S A,D&S c.80% of order intake more than 80% of revenues • Agreement with Alcatel/Thales in Space about Internationalisation to
Slide 8: Pursuing consistently our strategic commitments (2/2)
Pursuing consistently our strategic commitments… (2/2) Increase • Enhancing efficiency 1H06/1H05 Ebit up 22% profitability AgustaWestland integration process on track: c.Eur 30mln of savings achieved by end of June 06 • Ansaldo STS: 1H06 results in line with flotation plan Extract Value (Revenues an
Slide 9: Financial Review
Alessandro Pansa Financial Review 9
Slide 10: 1H 2006 Financial Highlights
1H 2006 Financial Highlights • Value of production up 20% to Eur 6.0 bn (+9% like for like) • Ebit up 22% to Eur 305 mln (+15% like for like) driven by Aeronautics, Helicopters, Defence Electronic, Energy and by cost cutting measures • Net profit, excluding Ansaldo capital gain, increases to Eur 170
Slide 11: 1H 2006 Main Financial Results
1H 2006 Main Financial Results (Eur mln) H1 06 H1 05 %change FY 05 Value of Production 5,965 4,958 +20 11,469 EBIT 305 251 +22 735 EBIT Margin 5.1% 5.1% 6.4% Net income 575 105 n.s. 396 FOCF (508) (361) - 41 501 New orders 7,973 7,872 +1 15,383 Working Capital 249 1,102 n.s. 17 Net financial debt 1,
Slide 12: Resizing our stake in Avio to unlock hidden value
Resizing our stake in Avio… to unlock hidden value… • August 2006: agreement reached with the Carlyle Group to sell both the stakes to Cinven private equity, based on an enterprise value - for 100% of Avio - of €2.57Bn. • Under the agreement Finmeccanica – will sell its 30% stake to the Cinven inves
Slide 13: Pursuing our medium term financial objectives
Pursuing our medium term financial objectives • Deliver higher returns on capital employed (ROI: 14.2% in 1H06 vs. 12.2% in 1H05; ROE: 18.5% vs 15.0%) • Align NOPAT and Free Operating Cash Flow • Achieve steady increase in distributable net income (Ordinary Dividend + 19% in 2005 vs. 2004) • IRR on
Slide 14: Business Review
Alessandro Pansa Business Review 14
Slide 15: Helicopters – Performing well
Helicopters – Performing well H1 H1 2006 2006 •• Strong Strong order order intake intake for for military military in in UK UK and and civil civil (128 (128 a/c a/c vs vs 70 70 in in 1H05) 1H05) worldwide worldwide •• Increased Increased production production due due to to AW139 AW139 ramp-up ramp-u
Slide 16: Defence Electronics – Good prospects in UK
Defence Electronics – Good prospects in UK H1 H1 2006 2006 •• Increased Increased Value Value ofof Production Production and and Ebit Ebit come come substantially substantially from from consolidation consolidation impact impact of of British British avionics avionics and and Datamat. Datamat. •• Im
Slide 17: Aeronautics – Prospects improving for Eurofighter export
Aeronautics – Prospects improving for Eurofighter export H1 H1 2006 2006 •• Order Order increase increase (+10%) (+10%) due due toto higher higher civil civil intake. intake. Further Further orders orders for for 29 29 ATR ATR inin Q2 Q2 brought brought 1H 1H total total intake intake to to 47. 47.
Slide 18: Space – Outlook improving for services
Space – Outlook improving for services H1 H1 2006 2006 •• Orders Orders improve improve due due toto higher higher civil civil TLC TLC intake, intake, production production down down due due to to weaker weaker manufacturing. manufacturing. (€mln) 1H 06 1H05 FY05 •• Synergies Synergies from from com
Slide 19: Defence Systems – Missile performance improves
Defence Systems – Missile performance improves H1 H1 2006 2006 •• Missiles Missiles drive drive volumes volumes and and improvement improvement in in operating operating profits profits offsetting offsetting lower lower profits profits in in armaments. armaments. (€mln) 1H 06 1H05 FY05 Revenues 512
Slide 20: Civil Activities – Signalling and Energy performing well
Civil Activities – Signalling and Energy performing well Transport H1 H1 2006 2006 & & Outlook Outlook •• Vehicles: Vehicles: H1 H1 operating operating performance performance improves, improves, outlook outlook remains remains challenging. challenging. (€mln) 1H 06 1H05 FY05 Revenues 689 586 1,230
Slide 21: High quality international order acquisition underpins growth
High quality international order acquisition underpins… 2005A: Avg gross Margin 19.3% 2006E: Avg gross Margin 19.5% 2008E: Avg gross Margin 20.3% 5% 14% 8% 16% 9% 41% 38% 11% 14% 57% 21% 15% 15% 19% 17% ITALY UK REST OF EUROPE NORTH AMERICA REST OF WORLD • Helicopters: Orders expected from UK MoD ov
Slide 22: Offsetting a weak domestic defence budget
…offsetting a weak domestic defence budget 2005 Defence Budget (US$ bn)* FNM Orders FNM Revenues Italian Proc & R&D Budget Procurement R&D France 41.6 11.1 4.1 Eur bn 18 15 Germany 30.2 5.0 1.0 12 UK 54.8 11.7 3.8 9 Italy 17.0 2.6 0.4 6 Sweden 5.6 2.0 0.1 3 Spain 8.8 2.0 0.2 0 USA 400.1 78.1 68.8 20
Slide 23: 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% ü EBIT 6-6,5% low end 6,4% €>550mln €614 mln ca.€700mln €735mln ü Net Debt/Equity <35-40% 8% <35-40%% 10
Slide 24: Confirming our Guidance for 2006 and 2007
Confirming our Guidance for 2006 and 2007 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 de
Slide 25: Business Strategy
Pier Francesco Guarguaglini Business Strategy 25
Slide 26: Implementation of our strategic commitments: Growth & Focus on A,D&S
Implementation of our strategic commitments: Growth & Focus on A,D&S Upcoming opportunities for key products in key markets Addressing requirements of UK Organic MoD Defence Industrial Strategy Growth Confirming R&D investments to further improve Large Systems GROWTH & applications for Defence and F
Slide 27: International commercial success of our key products
International commercial success of our key products… • C-27J Usa JCA, Canada, Eastern Europe, Middle East & Australia • US101 Usa CSAR-X, Europe, Middle East, Japan & Malaysia Upcoming Organic • A129 Turkey opportunities for key Growth products in key markets • Eurofighter Turkey, Greece, Denmark •
Slide 28: UK MoD Defence Industrial Strategy: an opportunity for organic growth
UK MoD Defence Industrial Strategy: an outstanding opportunity for organic growth… Addressing requirements of UK MoD Defence Industrial Strategy • AgustaWestland confirmed as the MoD Strategic Partner • Selex S&AS is pursuing also this role, due to other key technologies acknowledged as strategic fo
Slide 29: Strengthened position as integrated Large Systems provider
Strengthened position as integrated Large Systems provider will strongly support our organic growth and focus in A,D&S 1.Establishing a competitive offering of integrated Large Systems for Homeland Protection 2. Aimed at satisfying urgent and sophisticated needs of our customers (military and civil)
Slide 30: A,D&S selected acquisitions will drive external growth
A,D&S selected acquisitions will drive external growth Bolt-on investments in core A,D&S necessary to further strengthen: product range and technological competencies exposure to international markets relationships with US and UK defence ministries All this while respecting strict financial return c
Slide 31: Our internationalisation strategy in attractive growth markets
Our internationalisation strategy in attractive growth markets relies on • Long term commercial and industrial commitment • Local investments aimed at exploiting domestic skills • Partnerships with domestic industries • Contribution of our know how and technologies Some current initiatives of manufa
Slide 32: Increasing profitability through integration of cross border acquisitions
Increasing profitability through integration of cross border acquisitions • AgustaWestland: target of Eur 50 mln of additional EBIT by 2006 well on track. Italian and UK operations reorganised with greater focus on: creation of one single company concentration of operations under one single responsi
Slide 33: Increasing profitability through process expertise and efficiency
Increasing profitability through enhancement of process expertise and efficiency Objectives confirmed • Achieve efficiencies through more effective contract management. New team set up in March has surveyed the strategic programmes of the first five companies, highlighting approx. Eur35 mln of poten
Slide 34: Further enhancing value of civil activities
Further enhancing value of civil activities • Ansaldo STS (signalling and transport systems): a good showcase of our ability to extract value from civil activities in the interest of our shareholders. Performance increasing in line with floatation plan Good performance and successful flotation under
Slide 35: Growth, Focus on A,D&S, Internationalisation, Profitability, Civil Value
Growth Focus on A,D&S Internationalisation Increase Profitability Further extract Value from Civil Activities 35
Slide 36: Appendix
, “7 FINMECCANICA Appendix 36
Slide 37: 1H 2006 Results – Profit & Loss
1H 2006 Results – Profit & Loss €mil. 1H 2006 1H 2005 Change % Revenues 5.706 4.721 21% Value of production 5.965 4.958 20% Cost of goods, services and labour (5.508) (4.578) Depreciation and amortization (182) (155) Provisions for risks and charges (5) (10) Restructuring costs (15) (10) Other opera
Slide 38: Balance Sheet
Balance Sheet €mil. 30/06/2006 31/12/2005 Non-current assets 8.082 7.671 Non-current liabilities (2.100) (2.018) 5.982 5.653 Inventories 5.910 5.511 Construction contracts 2.756 2.538 Receivables 3.711 3.600 Trade payables (3.226) (3.431) Customer advances (4.581) (4.389) Provisions for risks and ch
Slide 39: Cash Flow Analysis
Cash Flow Analysis €mil. 1H 2006 1H 2005 CASH AND EQUIVALENTS AT 1 JANUARY 1.061 2.055 CASH FLOW FROM OPERATING ACTIVITIES 626 527 Changes in working capital (710) (402) Changes in other operating assets and liabilities (145) (267) CASH FLOW GENERATED BY (UTILISED IN) OPERATING ACTIVITIES (229) (142
Slide 40: Divisions
Divisions H1 2006 (in Eur mln) Helicopters Defence Aeronautics Space Defence Energy Transport Other Activities Eliminations Total Electronics Systems and Corporate Value of production 1.348 1.737 968 349 512 426 689 104 (168) 5.965 EBIT 135 99 61 16 22 18 27 (73) 305 EBIT margin (%) 10,0% 5,7% 6,3%
Slide 41: AgustaWestland’s comprehensive up-to-date product range
AgustaWestland’s comprehensive up-to-date product range 41
Slide 42: 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 Vice President Investor Relations • Emilia Iannicelli Tel. +39 06 32473.290 IR Event Coordinator Tel. +39 06 32473.520