Thales Sa · EURONEXT:HO
Thales Sa — Investor Presentation (September 2020)
68 slides from Thales Sa's investor presentation, September 2020
Slide 1: Investor meeting
Investor meeting September 2020 www.thalesgroup.com
Slide 2: Introduction to Thales
Introduction to Thales Covid-19 crisis status update H1 2020 results Key priorities for 2019-23 Outlook
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% Defence & 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 Defence Security transportation Addressing some of the most demanding end markets… Critical decision chain …leveraging a Data Data processing Sensing and transmission and decision unique portfolio dat
Slide 5: Thales builds on 4 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: Covid-19 crisis status update
Introduction to Thales Covid-19 crisis status update H1 2020 results Key priorities for 2019-23 Outlook
Slide 7: The Covid-19 crisis raises a unique set of challenges
The Covid-19 crisis raises a unique set of challenges Immediate impact on demand 2019 sales by operating segment(a) dominated by civil aeronautics Civil aeronautics: avionics, electrical systems, IFE (~€2.15bn in sales) Civil aeronautics: 11% DIS: identity solutions, automotive IoT connectivity modu
Slide 8: Global adaptation plan
Global adaptation plan Implement all necessary measures to preserve the health of 1 employees, their relatives, customers and the overall population Adapt operations to maintain productive capacities at the service of customers 2 Launch cost saving actions to limit financial impact 3 Strengthen liqu
Slide 9: Exceptional mobilization to address an unprecedented situation
1 Exceptional mobilization to address an unprecedented situation Remarkable mobilization of teams Implementation of sanitary guidelines ensuring health protection for employees across more than 400 sites Work from home where possible Work on site: personal protective equipment, organization in separ
Slide 10: Cost saving actions: targeting €800m over Full Year 2020
2 Cost saving actions: targeting €800m over Full Year 2020 Plan addressing all P&L cost lines: ~€750m Hiring freeze in support functions Simplified 2019 adjusted P&L by nature People Implementation of exceptional temporary furlough €m % of sales Impact on management bonuses Sales 18,401 Direct procu
Slide 11: Strengthened liquidity
3 Strengthened liquidity Robust financial position Liquidity position €3.8bn in cash at 30 June 2020 Low leverage: net debt / EBITDA of 0.6x(a) €bn Additional Strong investment grade rating: BBB+/A2 credit facility signed in Undrawn April 2020 6.6 Additional €2bn funding secured in Q2 credit facilit
Slide 12: H1 2020 results
Intoduction to Thales Covid-19 crisis status update H1 2020 results Key priorities for 2019-23 Outlook
Slide 13: H1 2020 highlights
H1 2020 highlights H1 results severely impacted by Covid-19 crisis, in line with framework presented in April 2020 First benefits of global adaptation plan Major commercial successes in Space and naval defense Solid strategic roadmap for both near and long-term Positioning on intelligent systems and
Slide 14: H1 2020 key figures
H1 2020 key figures Order intake Sales EBIT and EBIT margin(b) €m €m €m and % -5.4% 820 -13% 8,190 7,751 -57% 6,995 6,092 -13.6%(a) -23%(a) 10.0% 348 4.5% H1 2019 H1 2020 H1 2019 H1 2020 H1 2019 H1 2020 Adjusted net income(b) Free operating cash-flow(b) Net cash (debt) position €m €m €m 2,971 3,181
Slide 15: H1 2020 order intake
H1 2020 order intake Order intake by contract unit value Order intake marked by Covid-19 crisis €m Reported growth: -13% Lower demand in civil aero Delayed orders in other businesses Organic 6,995 growth: -23% +14% 3 large(a) orders booked in Q2 2020, 6,092 1,653 for a total of 4 in H1 2020, vs 7 in
Slide 16: H1 2020 sales
H1 2020 sales Drivers of sales change €m Reported growth: -5.4% Significant scope and currency impact Organic growth: -13.6% Scope impact (Gemalto Q1): +€697m Currency impact: -€20m Scope Q1 Q2 Covid-19 crisis driving 20% organic -159 (-4.7%) sales decline in Q2 8,190 Currency Civil aeronautics dema
Slide 17: Summary adjusted P&L: from sales to EBIT
Summary adjusted P&L: from sales to EBIT H1 2020 H1 2019 change €m % of sales €m % of sales total organic Sales 7,751 8,190 -5.4% -13.6% Gross margin 1,847 23.8% 2,203 26.9% -16.1% -26.6% Indirect costs (1,470) (19.0%) (1,420) (17.3%) +3.6% -9.2% o/w R&D expenses (491) (6.3%) (476) (5.8%) +3.2% -10.
Slide 18: Significant impact of cost saving actions already visible in H1
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 4.5% -9
Slide 19: EBIT by operating segment
EBIT by operating segment Change H1 2020 H1 2019 €m / % of sales total organic Aerospace (109) -5.6% 270 10.3% nm nm Transport 4 0.6% (42) (5.0%) nm nm Defense & Security 359 10.0% 564 14.5% -36% -36% Digital Identity & Security 140 9.5% 37 4.5% nm nm Other (32) (39) EBIT – excluding Naval Group 363
Slide 20: Aerospace: H1 2020 key figures
Aerospace: H1 2020 key figures H1 2020 H1 2019 Change €m total organic Order intake 1,625 1,758 -8% -8% Sales 1,946 2,609 -25.4% -25.8% EBIT (109) 270 nm nm in % of sales -5.6% 10.3% nm nm Order intake holding well thanks to strong Q1 in avionics, easy comps in space Major Covid-19 impact on civil a
Slide 21: Transport: H1 2020 key figures
Transport: H1 2020 key figures H1 2020 H1 2019 Change €m total organic Order intake 442 556 -21% -20% Sales 717 835 -14.1% -13.7% EBIT 4 (42) nm nm in % of sales 0.6% -5.0% nm nm Order intake affected by delays in bid processes and contract awards Sales affected by phasing down of 4 major projects(a
Slide 22: Defence & Security: H1 2020 key figures
Defence & Security: H1 2020 key figures H1 2020 H1 2019 Change €m Total organic Order intake 2,425 3,809 -36% -36% Sales 3,588 3,882 -7.6% -7.3% EBIT 359 564 -36% -36% in % of sales 10.0% 14.5% -4.5 pts -4.6 pts Order intake down due to high comps and delays in finalizing contracts No significant op
Slide 23: Digital Identity & Security: H1 2020 key figures
Digital Identity & Security: H1 2020 key figures H1 2020 H1 2019 Change €m total organic Order intake 1,587 829 Sales 1,472 829 non meaningful EBIT 140 37 in % of sales 9.5% 4.5% Order intake structurally aligned with sales for most businesses H1 sales flat on pro forma basis Smart card sales growth
Slide 24: Summary adjusted P&L: from EBIT to adjusted net income
Summary adjusted P&L: from EBIT to adjusted net income H1 2020 H1 2019 €m EBIT 348 820 Cost of net financial debt and other financial results (45) (20) Finance costs on pensions and other employee benefits (20) (27) Income tax (66) (184) Effective tax rate -23.2% -26.6% Adjusted net income 218 588 M
Slide 25: H1 2020 Free operating Cash Flow
H1 2020 Free operating Cash Flow Strong seasonality of WCR H1 2020 H1 2019 Cash management: a key focus €m Operating cash flow before WCR changes, during the crisis interest and tax 709 1,024 Change in WCR and reserves for Internal “CASH” project + contingencies (832) (1,022) delivering positive out
Slide 26: Movement in net debt over H1 2020
Movement in net debt over H1 2020 €m Net Debt Net debt at 31 Dec 19 at 30 June 20 Free operating cash-flow Deficit -3,311 payment on UK Acquisitions pensions & disposals Dividends Other -471 -49 -4 0 -94 -3,928 Investor meeting - 26
Slide 27: Key priorities for 2019-23
Introduction to Thales Covid-19 crisis status update H1 2020 results Key priorities for 2019-23 Outlook
Slide 28: Ambition 10: a solid framework to capitalize on Thales's 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 29: 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 30: 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) and P&L G&A expenses Performance culture drives constant as a percentage of sales
Slide 31: 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 32: 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 33: 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 34: 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 35: 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 36: 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 37: Revenue synergy opportunities materializing across Group
5 Revenue synergy opportunities materializing across Group Digital identity - biometrics Secure connectivity - IoT Data protection - encryption Defence & Security Digital Identity & Security Integration of cybersecurity products Integration of cybersecurity products and improved go-to-market and imp
Slide 38: 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 39: Outlook
Introduction to Thales Covid-19 crisis status update H1 2020 results Key priorities for 2019-23 Outlook
Slide 40: 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 2019-23 Group organic sales growth target 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 41: Civil businesses aligned with major societal trends, amplified by Covid-19
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 42: 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 Geopolitical tensions combat management Above water warfare suite Greater variety of threats Cyber-defense and security Connectivity Key custo
Slide 43: 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 25 Transformation of tran
Slide 44: 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 45: Pre Covid-19 crisis medium-term margin targets by segment
Pre Covid-19 crisis medium-term margin targets by segment Defence & 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 46: Maintaining strong focus on cash flow generation
Maintaining strong focus on cash flow generation Pre Covid-19 crisis targets 2019-23: major increase in Cash conversion underlying free operating cash flow Underlying(a) Reported Assuming no new significant €bn €bn Underlying 2019-23 cash conversion down-payments ~95% comparable to 2014-18 ~85% Mech
Slide 47: 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 48: 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 49: 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 Defence & 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 50: Medium-term: structural assets to mitigate effects of crisis
Medium-term: structural assets to mitigate effects of crisis Diversified and robust customer base Capabilities addressing key societal trust-related needs: security, safety, resilience, digital trust Sustainable long-term Leadership in critical technologies, value creation, strengthened thanks to Ge
Slide 51: Appendix
Appendix www.thalesgroup.com
Slide 52: 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 53: Robust customer mix and broad industrial footprint
Robust customer mix and broad industrial footprint Customer mix(a) Headcount by geography Commercial customers: 20% France 39,300 Aircraft OEMs UK 6,500 Commercial satellite operators Germany 3,700 Europe: Industrial customers 74% Airlines Italy 2,800 Military Netherlands 2,000 customers: 44
Slide 54: Highly diversified Defence & security customer base
Highly diversified Defence & security customer base Defence & 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 - 54
Slide 55: Historical sales and EBIT performance by segment
Historical sales and EBIT performance by segment Aerospace Transport Defence & 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% +4% +5% +4.5% +5.3% +4% +2% +1% +0.8% -4% -6% 2015 2016 2017 2018 2019
Slide 56: Organic sales growth per quarter
Organic sales growth per quarter 2017 2017 2018 2018 2019 20192020 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 +16% +1% +2% +9% +2% +1% Aerospace -2% -0% -3% -7% -7% -6% -12% -38% +28% +29% +19% +7% +8% +17% +11% +1% +1% Transport -4% -9% -13% -14% -17% +22% +12% +8% +5% +10% +8% +8% +0% +0% +10% +4%
Slide 57: 2019 order intake by destination
2019 order intake by destination Change €m 2019 2018 Total organic RoW Middle France 5,372 5,183 +4% +1% East 6% United Kingdom 1,730 746 +132% +119% 7% France Other European 28% 4,266 3,872 +10% -1% Asia countries 13% Europe 11,368 9,802 +16% +9% Australia/ North America 2,040 1,501 +36% -9% NZ Aus
Slide 58: 2019 sales by destination
2019 sales by destination change €m 2019 2018 total organic France 4,461 3,985 +12.0% +8.8% RoW United Kingdom 1,297 1,253 +3.5% -6.1% Middle 6% France East Other European 24% 4,040 3,498 +15.5% +2.3% 9% countries Europe 9,798 8,736 +12.2% +4.1% Asia North America 2,102 1,367 +53.7% +6.9% 14% UK Aus
Slide 59: 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% Defence & 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 60: 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 61: Thales H1 2019 + Gemalto Q1 2019 summary adjusted P&L
Thales H1 2019 + Gemalto Q1 2019 summary adjusted P&L Reported Gemalto Reported H1 2019 + = H1 2019 Q1 2019 + Gemalto Q1 2019(a) €m €m €m % of sales Sales 8,190 651 8,841 Gross margin 2,203 210 2,413 27.3% Indirect costs (1,420) (198) (1,617) (18.3%) o/w R&D expenses (476) (66) (542) (6.1%) o/w Mark
Slide 62: 2019 summary adjusted P&L: from sales to EBIT
2019 summary adjusted P&L: from sales to EBIT 2019 2018 Change €m % of sales €m % of sales total organic Sales 18,401 15,855 +16.1% +0.8% Gross margin 5,051 27.5% 4,088 25.8% +23.6% +3.5% Indirect costs (3,112) -16.9% (2,526) -15.9% +23.2% +1.5% o/w R&D expenses (1,097) -6.0% (879) -5.5% +24.8% +3.2
Slide 63: 2019 summary adjusted P&L: from EBIT to adjusted net income
2019 summary adjusted P&L: from EBIT to adjusted net income 2019 2018 €m EBIT 2,008 1,685 Cost of net financial debt and other financial results(a) (55) (15) Finance costs on pensions and other employee benefits (56) (52) Income tax (454) (387) Effective tax rate 26.3% 26.7% Adjusted net income 1,44
Slide 64: Adjusted EPS and dividend
Adjusted EPS and dividend Adjusted EPS and dividend per share € 6.61 5.55 Adjusted EPS up 14% per year 4.64 since 2015 4.25 3.89 2.65(a) 2020 dividend: €0.60 per share 1.75 2.08 Initial amount proposed: €2.65 per 1.60 1.36 share, corresponding to a 40% pay-out ratio Covid-19 crisis: amount limited t
Slide 65: 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 66: 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 2014-18 average: 107% 2014-18 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 67: 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 68: 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 may contain forward-looking statements. Such forward-looking statements are trends or objectives, as the case may be, and shall not be construed as constituting forecasts regarding the Company’s