Safran Sa · EURONEXT:SAF
Safran Sa — Non-Deal Roadshow (May 2016)
47 slides from Safran Sa's roadshow presentation, May 2016
Slide 1: Investor roadshows
Investor roadshows May 2016 Investor roadshows | May, 2016 This document and the information therein are the property of Safran. They must not be copied or communicated to a third party without the prior written authorization of Safran.
Slide 2: Leading market positions
Leading market positions Aerospace Defence Security #1 worldwide #1 Europe #1 worldwide Turbofans for single aisle commercial aircraft(1) Optronic systems Biometric ID solutions Helicopter turbines Inertial navigation systems Automated multi-biometric Landing gear, wheels and carbon br
Slide 3: 5 key themes
/ 5 key themes / Financial highlights and 2016 outlook Strategy update Tomorrow’s key challenge : the CFM56 – LEAP transition CFM aftermarket : in the sweet spot 2020 financial ambition Investor roadshows | May, 2016 3 This document and the information therein are the property of Safran. They must n
Slide 4: FY 2015 financial highlights
FY 2015 financial highlights Growing adjusted revenue, including positive $ Adjusted recurring operating income FCF representing 40% of adjusted recurring impact, mainly driven by Aerospace services and at 14.0% of revenue operating income Security +13.4% +16.4% 17,414 2,432 15,355 2,089 +31.6% 974
Slide 5: FY 2015 revenue
FY 2015 revenue (in €M) +13.4% Organic growth: +3.9% 1,399 17,352 62 17,414 Driven by momentum in Aerospace services (notably civil aftermarket up 18.9% in $) and in 598 15,953 Security (+11%) 15,355 Currency impact: +9.1% Significant positive translation effect of USD. +3.9% Positive transl
Slide 6: FY 2015 recurring operating income
FY 2015 recurring operating income (In €M) +16.4% 64 2,436 (4) 2,432 Main profitability drivers 283 2,372 Strong growth of Aerospace services, 2,089 notably civil aftermarket Contribution of CFM56 OE Organic growth in Identification and business solutions activities in Security 13.6% 14.0%
Slide 7: FY 2015 revenue by activity
FY 2015 revenue by activity Holding (In €M) FY 2015 Propulsion Equipment Defence Security & others Revenue 17,414 9,319 4,943 1,266 1,878 8 Year-over-year growth in % 13.4% 14.3% 11.2% 3.7% 22.7% na Recurring operating income 2,432 1,833 466 64 151 (82) as a % of revenue 14.0% 19.7% 9.4% 5.1% 8.0% n
Slide 8: Q1 2016 revenue by activity
Q1 2016 revenue by activity Main growth drivers Civil engines OE, notably CFM56 volumes (+10% vs Q1’15) Military engines OE thanks to higher volumes of M88 and TP400 Adjusted revenue Change Change engines Q1 2015 Q1 2016 Continued momentum in Aerospace services: (in €M) reported organic Prop
Slide 9: 2016 targets – outlook confirmed
2016 targets – outlook confirmed Adjusted revenue expected to increase by a percentage in low single digits at an estimated average rate of USD 1.11 to the Euro Adjusted recurring operating income likely to increase by around 5% and a further increase in margin rate at a hedge rate of USD 1.24 t
Slide 10: 5 key themes
/ 5 key themes / Financial highlights and 2016 outlook Strategy update Tomorrow’s key challenge : the CFM56 – LEAP transition CFM aftermarket : in the sweet spot 2020 financial ambition Investor roadshows | May, 2016 10 This document and the information therein are the property of Safran. They must
Slide 11: Market driving forces for Safran
MARKET DRIVING FORCES FOR SAFRAN The civil aerospace market offers attractive resilient growth perspectives, outperforming world GDP 1 growth Aircraft manufacturers are implementing stepwise product improvement strategies before the next 2 generation aircraft (2030+): incremental innovation is manda
Slide 12: Strategy wrap up
STRATEGY WRAP UP The future of Safran is the aerospace and defence markets The security market has its own characteristics and is becoming more and more digital For the next 25 years, the CFM partnership with GE will remain the core of our strategy in propulsion Outside the scope of this Joi
Slide 13: Strategy wrap up
STRATEGY WRAP UP Opportunities which will reinforce our footprint in aerospace equipment, with a DNA (High Tech / Tier 1 / recurrent services aftermarket) close to ours will be looked at, with appropriate financial discipline Our defence business is a niche business and we are happy with it In
Slide 14: Q1 2016 - Disposal of Morpho Detection
Q1 2016 - Disposal of Morpho Detection Signing of an agreement to sell Morpho Detection LLC and other detection related activities to Smiths Group for enterprise value of $710 million USD The transaction will generate a capital gain before tax at current €/$ exchange rate The transaction is su
Slide 15: 5 key themes
/ 5 key themes / Financial highlights and 2016 outlook Strategy update Tomorrow’s key challenge : the CFM56 – LEAP transition CFM aftermarket : in the sweet spot 2020 financial ambition Investor roadshows | May, 2016 15 This document and the information therein are the property of Safran. They must
Slide 16: Excellent progress of LEAP
Excellent progress of LEAP LEAP development proceeding according to plan LEAP-1A: Engine certified on November 20, 2015 by both the FAA and EASA. Delivery of the first series-production LEAP propulsion systems (including the LEAP-1A and the nacelle) in early April for A320neo, in accordance with
Slide 17: LEAP – Best in class
LEAP – BEST IN CLASS Fuel efficiency NOx Noise Reliability Maint. cost 15% 50% New Same as CFM56 better lower regulation vs. CFM56 vs. CAEP 6 compliant … best in industry (chapter 14) 99.98% Departure reliability Technology Materials • New Composites Performance • New Alloys & reliability Expe
Slide 18: LEAP – Market share
LEAP – MARKET SHARE As of March 31, 2016 CFM LEAP CFM LEAP 5,238 AC • A320neo 1,576 a/c (55% m.s.) 737MAX 74% • 737 MAX 3,145 a/c 737MAX • C919 517 a/c C919 C919 5,238 a/c C-Series C-Series MC-21 MC-21 PW1000G Series A320neo • A320neo 1,264 a/c (45% m.s.) A320neo A320neo A320neo PW1000G 1,843 AC • C
Slide 19: LEAP – Right on track
LEAP – RIGHT ON TRACK 2012 2013 2014 2015 2016 2017 2018 Design 1st engine FTB 1st flight EIS freeze to test LEAP-1A Airbus A320neo Design 1st engine FTB 1st flight EIS freeze to test LEAP-1B Boeing 737 MAX Design 1st engine FTB Roll out 1st flight EIS freeze to test LEAP-1C Comac C919 Engine develo
Slide 20: LEAP – Ramp up
LEAP – RAMP UP NUMBER OF ENGINES PRODUCED CFM56 production record level in 2016 LEAP production will reach a 30% higher rate 2,000+ Everything in place to manage 1,650+ 1,612 a smooth transition and ramp-up Large volumes and steep ramp-up are an opportunity to get costs down faster 2015 2015
Slide 21: LEAP – Ramp up
LEAP – RAMP UP 100% of suppliers are well known vendors and aero suppliers – 80% are common with CFM56 Redundancy and/or buffer stock for 100% of parts 85% of parts are double sourced Suppliers Selection - based on three main criteria: Supply Chain performance, Growth capacity (including fin
Slide 22: 5 key themes
/ 5 key themes / Financial highlights and 2016 outlook Strategy update Tomorrow’s key challenge : the CFM56 – LEAP transition CFM aftermarket : in the sweet spot 2020 financial ambition Investor roadshows | May, 2016 22 This document and the information therein are the property of Safran. They must
Slide 23: CFM installed base evolution
CFM INSTALLED BASE EVOLUTION CFM fleet in service to grow by 4%+ annually Nb of engines CFM Fleet in service over the next decade 40,000 • 25,000 CFM56 engines in operation today • More than 27,000 CFM56 engines will be in 30,000 operation in 2018 20,000 New generation LEAP engines will relay CF
Slide 24: Maintenance activity on CFM56 Gen 2 still growing
MAINTENANCE ACTIVITY ON CFM56 GEN 2 STILL GROWING As of 2015 As of 2020 As of 2025 19,000 + 22,000 + 18,500 + Gen 2 Gen 2 Gen 2 in service in service in service No shop visit performed on engine One shop visit or more 2015: more than 60% of CFM56 Gen 2 in service have never had a shop visit 2025
Slide 25: CFM56: strong prospects until 2025 and beyond
CFM56: strong prospects until 2025 and beyond 35 000 CFM56 spare parts revenue to peak by around 2025E 1 000 900 30 000 800 25 000 CFM56 active installed fleet to peak around 2018E at ~27,100 engines (~32,700 deliveries) 700 20 000 600 500 15 000 400 10 000 300 200 5 000 100 0 0 CFM Gen 1 CFM Gen 2
Slide 26: Prospects for future CFM56 aftermarket
PROSPECTS FOR FUTURE CFM56 AFTERMARKET Expected CFM56 spare parts Main contributors to spare parts Expectedconsumption profile CFM56 spare parts revenue profile consumption are now Gen 2 engine models In 2016, consumption is expected to have CMD'2013 doubled since 2010, supported by a very favor
Slide 27: 5 key themes
/ 5 key themes / Financial highlights and 2016 outlook Strategy update Tomorrow’s key challenge : the CFM56 – LEAP transition CFM aftermarket : in the sweet spot 2020 financial ambition Investor roadshows | May, 2016 27 This document and the information therein are the property of Safran. They must
Slide 28: 2010 – 2015: Consistent growth
2010 – 2015 : CONSISTENT GROWTH Adjusted revenue Adjusted recurring operating income 2 432 17 414 2 089 15 355 1 788 13 560 14 363 1 471 11 736 10 760 1 189 878 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 Dividend R&D and CAPEX (tangible and intangible) 576 500 941 1 258 467 400 701
Slide 29: 2020 financial ambition
2020 FINANCIAL AMBITION MAIN ASSUMPTIONS 2016-2020 VIEW Scope Steady organic revenue growth… • 2016 outlook is applicable to the Group’s structure as • Aerospace: OE production ramp-up (narrowbody & of December 31, 2015 and does not take into account widebody, military, helicopters), growth in s
Slide 30: 2020 financial ambition
2020 FINANCIAL AMBITION CFM56 / LEAP OE contribution Cost of production: to gross margin Learning curve of LEAP CFM56 LEAP - 40% CFM56+LEAP Standard cost of production 2015 2016e 2017e 2018e 2019e 2020+ 2016e 2017e 2018e 2019e 2020e Gradual reduction of CFM56 contribution Initial production cost
Slide 31: Financial ambition
FINANCIAL AMBITION Aircraft Equipment Defence Security 15% 15% 15% 10% 10% 10% 5% 5% 5% 0% 0% 0% 2015 2016e 2017e 2015 2017 2018e 2019e 2019 2020e 2015 2016e 2017e 2015 2017 2018e 2019e 2019 2020e 2015 2016e 2017e 2015 2017 2018e 2019e 2019 2020e Growth in services Push export sales Existing c
Slide 32: Financial ambition
FINANCIAL AMBITION Temporary headwind from LEAP transition Indicative profile of Group gross margin and expensed R&D Offsetting factors: growing contribution of civil aftermarket and other businesses OE CFM56 & LEAP Tailwind from FX Other OE Propulsion margin to remain in the mid SERVICES to
Slide 33: Capital allocation
CAPITAL ALLOCATION R&D spending In €M CAPEX spending In €M 1000 1,000 2000 2,000 €2,100M Total R&D effort 1,500 1500 €1,356M 1,000 1000 500 500 500 Total self-funded €495M R&D Capitalized R&D 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017e 2018e 2019e 2020e 2015 2016e 2017e 2018e 2019e
Slide 34: Capital allocation
CAPITAL ALLOCATION €Bn 2016-2020 trends Realized 2011-2015 WC CFO* Trend 2016-2020 Growth in cash from operations (CFO*) Higher working capital (WC) WC R&D** (0.1) CAPEX Lower capitalized R&D and CAPEX after 2016 R&D** CFO* CAPEX (6.6) FCF conversion rate: FCF 10.2 • above 40% in 2016 Divide
Slide 35: 2016-2020 ambition
2016-2020 AMBITION Revenue target above €21 billion in 2020 • Assuming average spot rate of USD 1.11 to the Euro in 2016 and 1.12 over 2017-2020 Recurring operating margin trending above 15% in 2020 • Including benefits of medium-term FX hedging policy EBIT to Free Cash Flow conversion averagi
Slide 36: Appendix
Appendix Investor roadshows | May, 2016 36 This document and the information therein are the property of Safran. They must not be copied or communicated to a third party without the prior written authorization of Safran.
Slide 37: Free Cash Flow
Free Cash Flow Of which amortization of tangibles and intangibles for (in €M) FY 2014 FY 2015 €681M, provisions (net) for €133M and depreciation for Adjusted net profit 1,248 1,482 €874M Depreciation, amortization and provisions 906 1,688 Healthy increase in cash from operations despite higher Other
Slide 38: Net debt position
Net debt position (in €M) Net debt at Net debt at Cash flow from operations Dec 31, 2014 Dec 31, 2015 equals 1.17x recurring EBIT Change Cash flow in WC R&D from ops (60) and Capex 2014 final dividend (€0.64/share) and 2,813 2015 interim dividend (€0.60/share) (1,779) (1,499) “Acquisitions/Div
Slide 39: Hedging as at April 18, 2016
HEDGING as at April 18, 2016 Yearly exposure: $7.4bn to $8.0bn Estimated impact on recurring operating income Increasing level of net USD exposure for 2016-19 in line of target €/$ hedge rates with the growth of businesses with exposed USD revenue €/$ EBIT impact Target hedge vs previous 2016 & 2017
Slide 40: Equity shareholding
Equity shareholding As of Dec. 31, 2014 As of Dec. 31, 2015 Public French State Public French State 63.5% 22.0% 70.9% 15.4% Employees Employees 14.4% 13.6% Treasury shares Treasury shares 0.1% 0.1% Free float continued to increase Investor roadshows | May, 2016 40 This document and the information t
Slide 41: 2015 dividend
2015 dividend A proposal for a dividend payment to Dividend 1.38 per share 1.20 parent holders of €1.38 at next AGM (€) 1.12 on May 19, 2016 Final Dividend 0.96 distribution 326 €0.60 interim dividend already (€M) 267 267 0.62 paid in 2015 (€250M) 0.50 271 Interim 0.38 dividend 154 €0.78 to be
Slide 42: FY 2015: R&D by activity
FY 2015: R&D by activity (In €M) FY 2015 Propulsion Equipment Defence Security Total self-funded cash R&D (1,356) (875) (229) (119) (133) as a % of revenue 7.8% 9.4% 4.6% 9.4% 7.1% Tax credit 165 66 46 37 16 Total self-funded cash R&D after tax credit (1,191) (809) (183) (82) (117) Gross capitalized
Slide 43: Aerospace OE / Services revenue split
Aerospace OE* / Services revenue split FY 2014 FY 2015 % change Revenue Adjusted data (in Euro million) OE Services OE Services OE Services Propulsion 4,073 4,080 4,334 4,985 6.4% 22.2% % of revenue 50.0% 50.0% 46.5% 53.5% Equipment 3,166 1,280 3,463 1,480 9.4% 15.6% % of revenue 71.2% 28.8% 70.1% 2
Slide 44: Aerospace OE / Services revenue split
Aerospace OE* / Services revenue split Q1 2015 Q1 2016 % change Revenue Adjusted data (in Euro million) OE Services OE Services OE Services Propulsion 911 1,159 1,047 1,254 14.9% 8.2% % of revenue 44.0% 56.0% 45.5% 54.5% Equipment 852 320 844 375 (0.9)% 17.2% % of revenue 72.7% 27.3% 69.2% 30.8% * A
Slide 45: Safe harbor statement
SAFE HARBOR STATEMENT These documents contain forward-looking statements. All statements other than statements of historical fact in this presentation, including, without limitation, those regarding our financial position, business strategy, management plans and objectives for future operations, a
Slide 46: Definitions
DEFINITIONS All figures in this presentation represent Adjusted data Safran’s consolidated income statement has been adjusted for the impact of: Purchase price allocations with respect to business combinations. Since 2005, this restatement concerns the amortization charged against intangible asset
Slide 47: Investor roadshows | May, 2016
Investor roadshows | May, 2016 47 This document and the information therein are the property of Safran. They must not be copied or communicated to a third party without the prior written authorization of Safran.