Thales Sa · EURONEXT:HO
Thales Sa — Investor Presentation (November 2020)
54 slides from Thales Sa's investor presentation, November 2020
Slide 1: Investor meeting
Investor meeting November 2020 www.thalesgroup.com
Slide 2: Introduction to Thales
Introduction to Thales H1 and 9m 2020 results Key priorities for 2019-23 Outlook www.thalesgroup.com
Slide 3: Thales today: a set of focused, technology-driven businesses
Thales today: a set of focused, technology-driven businesses Pro forma 2019 sales Civil aeronautics: 20% ~11% Commercial 44% 16% customers Military Rest of world 29% customers Aerospace 44% Defense & Product Customer Geographical 52% security 20% Europe mix mix Asia-Pacific mix 21% 17% Private Digit
Slide 4: Thales: a pure player focused on intelligent systems and digital solutions
Thales: a pure player focused on intelligent systems and digital solutions Ground Aeronautics Space Defense Security transportation Addressing some of the most demanding end markets… Critical decision chain Data Data processing …leveraging a Sensing and transmission and decision unique portfolio dat
Slide 5: Thales builds on key strengths
Thales builds on 4 key strengths Connectivity Big data Mobility, IoT 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 digita
Slide 6: H1 and 9m 2020 results
Introduction to Thales H1 and 9m 2020 results Key priorities for 2019-23 Outlook www.thalesgroup.com
Slide 7: H1 and 9m 2020 key figures
H1 and 9m 2020 key figures 9m order intake 9m sales H1 EBIT and EBIT margin(b) €m €m €m and % 820 -57% -5.6% -12% 12,410 11,714 10,445 10.0% 9,181 -10.5%(a) -18%(a) 348 4.5% 9m 2019 9m 2020 9m 2019 9m 2020 H1 2019 H1 2020 H1 adjusted net income(b) H1 free operating cash-flow(b) Net cash (debt) posit
Slide 8: The Covid-19 crisis raises a unique set of challenges
The Covid-19 crisis raises a unique set of challenges Immediate impact on demand dominated by civil aeronautics 2019 sales by operating segment(a) Civil aeronautics: avionics, electrical systems, IFE (~€2.15bn in sales) Civil aeronautics: 11% DIS: identity solutions, automotive IoT connectivity modu
Slide 9: Q3 2020 highlights
Q3 2020 highlights Sales excluding Group sales(a) aeronautics(a) Q1 Q2 Q3 Q1 Q2 Q3 +2% -5% -4% -3% -15% -20% Recovery of internal Significant defense Further commercial productivity enables order pipeline, driven successes in space return to positive sales by continued budget exploration growth excl
Slide 10: 9m 2020 order intake
9m 2020 order intake Order intake by contract unit value Q3 order intake organically up 1.3% €m Reported growth: -12% excluding aeronautics +7% 11,188 -18% 10,445 2 large(a) orders booked in Q3 2020, Unit value > €100m 1,905 9,181 1,905 for a total of 6 in 9m 2020, vs 9 in 9m 2019 859 -55% €10m < 2,
Slide 11: Aerospace: 9m 2020 key figures
Aerospace: 9m 2020 key figures €m Change 9m 2020 9m 2019 total organic Order intake 2,268 2,625 -14% -13% Sales 2,898 3,787 -23.5% -23.3% Order intake affected by significant decline of civil aero market Major Covid-19 impact on civil aero since Q2 Space order intake up 33% against easy comps, thank
Slide 12: Transport: 9m 2020 key figures
Transport: 9m 2020 key figures €m Change 9m 2020 9m 2019 total organic Order intake 805 868 -7% -6% Sales 1,102 1,268 -13.1% -12.3% Order intake impacted by Covid-19 related delays in bid processes Robust mainline orders, offset by delays in urban rail contract awards Sales affected by phasing effec
Slide 13: Defense & Security: 9m 2020 key figures
Defense & Security: 9m 2020 key figures €m Change 9m 2020 9m 2019 total organic Order intake 3,853 5,271 -27% -27% Sales 5,469 5,670 -3.6 % -3.3 % Order intake down due to high comps and Covid-19-related delays in finalizing contracts No significant opportunity lost, catch-up expected during Q4 Retu
Slide 14: Digital Identity & Security: 9m 2020 key figures
Digital Identity & Security: 9m 2020 key figures €m Change 9m 2020 9m 2019 total organic Order intake 2,227 1,620 NM -4% Sales 2,201 1,631 NM -4.2% Order intake structurally aligned with sales for most businesses 9m pro forma sales slightly down (-2%) Biometrics (passports) and IoT still affected by
Slide 15: EBIT: significant impact of cost saving actions already visible in H1
EBIT: significant impact of cost saving actions already visible in H1 €m and % of sales Gross margin decline before Gemalto actions on 820 Q1 2019 829 direct costs Cost saving +10 actions 10.0% 9.4% ~+320 Indirect Equity costs Restructuring affiliates Direct 348 +17 costs -79 +147 Naval Group: -44 4
Slide 16: H1 2020 Free operating Cash Flow
H1 2020 Free operating Cash Flow Strong seasonality of WCR H1 2020 H1 2019 €m Cash management: a key focus Operating cash flow before WCR during the crisis changes, interest and tax 709 1,024 Internal “CASH” project + Change in WCR and reserves for (832) (1,022) contingencies delivering positive out
Slide 17: Key priorities for 2019-23
Introduction to Thales H1 and 9m 2020 results Key priorities for 2019-23 Outlook www.thalesgroup.com
Slide 18: Ambition 10: a solid framework to capitalize on Thales's unique positioning
Ambition 10: a solid framework to capitalize on Thales’s unique positioning, further strengthened in the post Covid-19 world Continued focus on Strong development levers operational performance 1 Reinforce customer-centric 3 Accelerate R&D investments organization and culture to drive technological
Slide 19: Relentlessly optimize operational performance
2 Relentlessly optimize operational performance Group cost structure Focus on 4 high impact initiatives (2018, before Gemalto) 8% Other Procurement performance 17% Project delivery(a) (bids, project management, Engineering competitiveness production, €14.2bn customer service) total costs Support fun
Slide 20: Sustainably deliver on operational performance initiatives
2 Sustainably deliver on operational performance initiatives Significant improvement in gross margin DIS cost synergies fully on track and G&A expenses achieved since 2015 €25m achieved in 2019 Adjusted gross margin(a) Performance culture drives constant and P&L G&A expenses as a percentage of sales
Slide 21: Further R&D step-up to drive technological excellence
3 Further R&D step-up to drive technological excellence Pre Covid-19 crisis targets Self-funded R&D Gemalto drives 27% increase in R&D €m and investments as % of sales ~ +25% 2018 R&D organic increase ahead of plan +27% >1,400 2019-23: continued reinvestment +10% Pre Covid-19 crisis target: further
Slide 22: Digital technology leadership enhances long-term growth profile
Digital technology leadership enhances 4 long-term growth profile Quick adoption of digital Breakthrough innovations technologies inside dream products to support top-line New growth digital services and business Design of new services and models business models delivering more recurring revenues Di
Slide 23: Digital offering: expanding the pipeline of digital innovations
4 Digital offering: expanding the pipeline of digital innovations Big data-enabled Autonomous “Smart” Predictive Drone observation trains radars maintenance management constellation for defence AI-enabled Next generation Spare parts Maritime Connected-car optronics airspace market place intelligence
Slide 24: Gemalto acquisition: accelerating Thales's digital strategy
5 Gemalto acquisition: accelerating Thales’s digital strategy Digital security: a unique differentiator to stay at the forefront of intelligent systems Critical Data Data processing Sensing and decision transmission and decision 3 key technological capabilities chain data gathering and storage makin
Slide 25: Gemalto acquisition: expanding portfolio in highly synergistic growth market
Gemalto acquisition: expanding portfolio in highly 5 synergistic growth market Global leader in fast-growing digital Multiple fast-growing markets identity and security market 2019-23 2023 forecasted Multiple growth engines, addressing market size market growth(a) major societal aspirations Data pro
Slide 26: Cost synergies progressing fully in line with plan
5 Cost synergies progressing fully in line with plan Expected ramp-up Breakdown of expected of cost synergies run-rate cost synergies €m 120 R&D and SG&A optimization ~100 in enterprise Overall SG&A data protection ~60 savings 15% 35% 25 €120m Footprint optimization 2019 2020 2021 2022 and other 20%
Slide 27: Revenue synergy opportunities materializing across Group
5 Revenue synergy opportunities materializing across Group Digital identity - biometrics Secure connectivity - IoT Data protection - encryption Defense & Security Digital Identity & Security Integration of cybersecurity products Integration of cybersecurity products and improved go-to-market and imp
Slide 28: Revenue synergies deliver growth acceleration now and beyond 2023
Revenue synergies deliver growth acceleration now 5 and beyond 2023 Priority actions Significant revenue synergies Immediate portfolio Short-term opportunities 460 individual customer opportunities in 25 countries Top 10 per country/ region closely tracked Total revenue 20+ first wins already in 201
Slide 29: Outlook
Introduction to Thales H1 and 9m 2020 results Key priorities for 2019-23 Outlook www.thalesgroup.com
Slide 30: Pre Covid-19 crisis organic sales growth targets
Pre Covid-19 crisis organic sales growth targets Pre Covid-19 crisis targets Organic sales Market trend growth target Group organic sales growth target 2019-23 3% to 5% growth Aerospace ~+1.5%(a) +2-3% on average over 2019-23 Flat(b) Lower growth in first Progressively part of period • Impact of spa
Slide 31: Civil businesses aligned with major societal trends, amplified by Covid-19 crisis
Civil businesses aligned with major societal trends, amplified by Covid-19 crisis Civil aeronautics Rail transport Space Digital identity & Security Air transport: long-term Rail: a major enabler of Unique position of space Exponential growth in the GDP multiplier, driving green mobility systems to
Slide 32: Defense portfolio aligned with long-term needs
Defense portfolio aligned with long-term needs Unchanged need to invest in MKS180: key Thales mission capabilities defense systems New generation mission and combat management Geopolitical tensions Above water warfare suite Greater variety of threats Cyber-defense and security Connectivity Key custo
Slide 33: Multiple medium-term drivers of margin expansion
Multiple medium-term drivers of margin expansion Groupwide operational Expected ramp-up performance initiatives of Gemalto cost synergies Procurement performance Engineering competitiveness €m Support function efficiency 120 Excellence in delivery ~100 Gemalto synergies ~60 Transformation of transpo
Slide 34: Further significant increase in profitability
Further significant increase in profitability Increase in Additional profitability R&D 11.5% Increase in Additional to 12% profitability R&D Gemalto 10.6% consolidation -30 to 10.0% -50 bps -70 bps -60 bps +200 to 2019: -15 bps +240 bps 8.0% 2019: +70 bps +330 bps 2013 2018 2018 Medium-term EBIT mar
Slide 35: Pre Covid-19 crisis medium-term margin targets by segment
Pre Covid-19 crisis medium-term margin targets by segment Defense & Digital identity Aerospace Transport security & security +0 to +360 to -40 to +520 to +100 +410 +60 +620 bps bps bps bps 12% 12.5% 12.4%(a) to 13% to 13.5%(b) 10% 10.0% to 11% 8% to 8.5% 7.3% 4.4% 2018 2023 2018 2023 2018 2023 2018
Slide 36: Maintaining strong focus on cash flow generation
Maintaining strong focus on cash flow generation Pre Covid-19 crisis targets 2019-23: major increase in underlying Cash conversion free operating cash flow Underlying(a) Reported Assuming no new significant Underlying 2019-23 cash conversion €bn €bn down-payments ~95% comparable to 2014-18 ~85% Mech
Slide 37: A more efficient capital structure to support significant dividend growth
A more efficient capital structure to support significant dividend growth whilst maintaining financial flexibility Strong investment grade 2018 reported After Gemalto acquisition(b) maintained (BBB+, A2) Before IFRS 16 After IFRS 16 Dividend growth in line with adjusted EPS €bn €bn €bn Financial fle
Slide 38: H2 2020 perspectives
H2 2020 perspectives Business environment Global adaptation plan Operations still impacted by sanitary Full impact of cost saving actions, measures targeting ~€750 million in 2020 - Targeting return to close to 100% internal productivity over H2 Continuation of strong focus on cash - Expecting limit
Slide 39: 2020 financial objectives, taking into account the Covid-19 crisis
2020 financial objectives, taking into account the Covid-19 crisis Book-to-bill above 1, driven by solid Order intake dynamics in Defense & Security Sales €16.5 to €17.2 billion(a) EBIT(b) €1,300 to €1,400 million(a, c) (a) Assuming no major step-up in sanitary measures on key markets. Based on July
Slide 40: Summary
Summary Unique portfolio positioning “Intelligent systems” pure player positioning Markets benefiting from solid long-term underlying growth Portfolio expanded into highly synergistic growth market through Gemalto acquisition Continued focus on operational Sustainable performance value creation, New
Slide 41: Appendix
Appendix www.thalesgroup.com
Slide 42: A strong set of focused businesses
A strong set of focused businesses Segment Sub-segment Civil Military 2019 sales(a) (€m) Market position Aerospace Flight avionics #3 worldwide including cockpit avionics, communications, electrical systems, ~2,150 (flight avionics) 29% of 2019 sales(a) training and simulation (of which civil: ~€1,3
Slide 43: Highly diversified Defense & security customer base
Highly diversified Defense & security customer base Defense & security sales by region, 2019 7% Rest of world 11% Middle East 35% France 12% 45% Asia outside Europe 10% Australia/NZ 8% 6% United Kingdom North America 12% Rest of Europe Investor meeting - 43
Slide 44: Historical sales and EBIT performance by segment
Historical sales and EBIT performance by segment Aerospace Transport Defense & Security Total Group Organic sales growth Organic sales growth Organic sales growth Organic sales growth +18% +11% +9% +8% +9% +7% +6% +6% +6.8% +7.2% +5.3% +4% +4% +5% +4.5% +2% +1% +0.8% -4% -6% 2015 2016 2017 2018 2019
Slide 45: Organic sales growth per quarter
Organic sales growth per quarter 2017 2017 2018 2019 2019 2020 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 +1% +2% +9% +2% Aerospace -2% -0% -3% -7% -7% -6% -12% -18% -38% +28% +29% +17% +19% +8% +11% +1% +1% Transport -17% -9% -13% -14% -9% +22% +10% +12% +10% Defense +8% +8% +0% +0% +4% +2% +5% & Secur
Slide 46: 9m 2020 order intake by destination
9m 2020 order intake by destination change €m 9m 2020 9m 2019 total organic ROW France 2,190 2,961 -26% -27% 6% United Kingdom 524 749 -30% -34% Asia France Other European countries 2,185 2,236 -2% -9% 11% 24% Europe 4,899 5,945 -18% -21% Mid-East 6% North America 1,533 1,346 +14% +1% Aust. & NZ UK
Slide 47: 9m 2020 sales by destination
9m 2020 sales by destination change €m 9m 2020 9m 2019 total organic France 2,920 3,281 -11.0% -11.7% ROW United Kingdom 859 887 -3.1% -5.9% 6% Asia France Other European countries 2,679 2,589 +3.5% -2.4% 13% 25% Europe 6,458 6,757 -4.4% -7.4% Mid-East North America 1,461 1,419 +3.0% -9.2% 7% Austra
Slide 48: 2019 EBIT by operating segment
2019 EBIT by operating segment Change 2019 2018 €m / % of sales total organic Aerospace 521 9.3% 580 10.0% -10% -11% Transport 56 2.9% 88 4.4% -37% -35% Defense & Security 1,153 14.0% 992 12.7% +16% +21% Digital Identity & Security 264 10.3% 15 8.0% nm nm EBIT - operating segments 1,994 10.9% 1,675
Slide 49: Thales 2019 + Gemalto Q1 2019 summary adjusted P&L
Thales 2019 + Gemalto Q1 2019 summary adjusted P&L 2019 2019 Thales reported Thales + Q1 Gemalto(a) €m % of sales €m % of sales Sales 18,401 19,052 Gross margin 5,051 27.5% 5,261 27.6% Indirect costs (3,112) -16.9% (3,310) -17.4% o/w R&D expenses (1,097) -6.0% (1,163) -6.1% o/w Marketing & Sales exp
Slide 50: Adjusted EPS and dividend
Adjusted EPS and dividend Adjusted EPS and dividend per share € Adjusted EPS up 14% per year 6.61 since 2015 5.55 4.25 4.64 2020 dividend: €0.60 per share 3.89 Initial amount proposed: €2.65 per share, corresponding to a 40% pay-out ratio 2.65(a) 2.08 Covid-19 crisis: amount limited to €0.60 1.60 1.
Slide 51: Cash conversion before one-offs
Cash conversion before one-offs 2014-18 €m 2014 2015 2016 2017 2018 average 2019(a) Free operating cash flow, before one-offs (A) 501 660 854 965 1,011 798 1,472 + Exceptional down-payments received +450 +100 - Exceptional cut-off effects at 31 December +400 +300 +150 - Gemalto acquisition one-offs
Slide 52: Historical trend in cash conversion
Historical trend in cash conversion Adjusted net income conversion EBIT conversion into into Free operating cash flow Free operating cash flow 2014-19 average: 105% 2014-19 average: 70% €m €m 68% 48% 88% 2,008 98% 139% 70% 137% 69% 91% 1,685 106% 1,405 1,543 1,365 1,372 51% 1,372 1,354 1,365 89% 1,1
Slide 53: 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 54: 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