Leonardo Spa · MIL:LDO
Leonardo Spa — Finmeccanica — H1 2007 Earnings Presentation
50 slides from Leonardo Spa's earnings presentation, Sep 13, 2007
Slide 1: Finmeccanica First Half 2007 Results Presentation
Finmeccanica First Half 2007 Results Presentation Pier Francesco Guarguaglini Chairman and CEO Alessandro Pansa Co-General Manager Milan, 13 September 2007
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: On track to achieve our strategic objectives
On track to achieve our strategic objectives Growth and Focus on A,D&S Strengthen & Consolidate Global Positioning Innovation Value Creation 5
Slide 6: Not separate and independent objectives…
Not separate and independent objectives… Growth & Focus on A,D&S ¾ Key Markets ¾ Key products ¾ Key Technologies Effectiveness ¾ Selected acquisitions Strengthen & Innovation Consolidate Investment to compete Global Positioning ¾ Integrate assets and extract synergies ¾ Improve processes Efficiency
Slide 7: 1H07: delivering on our commitments (1/2)
1H07: delivering on our commitments (1/2) • Total Revenues up 7% to €6.1bn in 1H07 Growth & Focus on • A,D&S Revenues €4.8bn in 1H07, ca. 80% of total Revenues A,D&S • A,D&S EBIT €280mln, ca. 90% of total EBIT • C27J JCA programme awarded in partnership with L3 and Boeing Strengthen & • Partnership
Slide 8: 1H07: delivering on our commitments (2/2)
1H07: delivering on our commitments (2/2) • R&D investment accounts for ca.14% of total Innovation Revenues • Capex and R&D investments €601mln • EBITA* up 7% to €325mln Value Creation 9 of which A,D&S €292mln, ca.90% of total EBITA* 9 Net profit – excluding capital gain - up 12% YoY to €177mln *EBI
Slide 9: 1H07 Major Achievements vs. Strategic Objectives
1H07 Major Achievements vs. Strategic Objectives Aerospace Worldwide Order Intake Demo BA609 at Le for AW139 Bourget C-27J JCA for USAF and US Army Launch COSMO SkyMed Partnership with Sukhoi for SuperJet 100 Value Creation 9
Slide 10: 1H07 Major Achievements vs. Strategic Objectives
1H07 Major Achievements vs. Strategic Objectives Security and Defence Electronics Maritime Patrolling Air Traffic Systems (Australian Control System Coast Guard) Vessel Traffic (South Asia) Management System (Yemen) Manhattan Security Project (NYPD) Patrol Support System (UK Police) Value Creation 1
Slide 11: 1H07 Major Achievements vs. Strategic Objectives
1H07 Major Achievements vs. Strategic Objectives Transport and Energy Partnership with Power Generation Russian Railways (Algeria, Finland) Value Creation 11
Slide 12: Financial & Business Review
Alessandro Pansa Financial & Business Review 12
Slide 13: H1 2007 Financial Highlights
H1 2007 Financial Highlights H1 2007 Results vs H1 2006 • Revenues up 7% to Eur 6.1 bn • Ebit up 3% to Eur 313 mln • Net profit up 12% to Eur 177 mln (excluding capital gain from Ansaldo STS of Eur 417 mln in H1 2006) • Net debt up to Eur 2.3 bn from Eur 1.5 bn in 1H 06 • Backlog at Eur 36.2 bn, equ
Slide 14: H1 2007 Main Economic Results
H1 2007 Main Economic Results (Eur mln) H1 07 H1 06 FY 06 Revenues 6,079 5,706 12,472 EBITA* 325 305 902 Margin 5.3% 5.3% 7.2% EBIT 313 305 878 Margin 5.1% 5.3% 7% Net income 177 575 1,020 Excluding capital gain 158 313 EPS** (cents) 37 34 68 New orders 6,478 7,973 15,725 Order Backlog 36,245 35,185
Slide 15: H1 2007 Main Financial Results
H1 2007 Main Financial Results (Eur mln) H1 07 H1 06 FY 06 Working Capital 531 249 (434) FOCF (1,244) (508) 506 Net financial debt 2,268 1,462 858 Debt/Equity 42% 17 % 16% ROI 14.8% 14.2 % 35,185 17.7% EVA (32) (30) 257 15
Slide 16: Helicopters: strong UK market and international successes
Helicopters: strong UK market and international successes.. 1H 1H 2007 2007 • Revenue Revenue growth growth driven driven by by increase increase in in commercial commercial volumes volumes (AW109, (AW109, AW AW 139, 139, AW AW 119) 119) presidential presidential helicopter helicopter and and UK UK
Slide 17: Defence Electronics: bedrock legacy programmes support growth
Defence Electronics: bedrock legacy programmes support growth 1H 2007 • Revenues driven by avionics (EFA), Command & Control (Naval), Communication Systems (TETRA, IT and Security). Some order slippage impacts volumes • Operating profit impacted by decrease in volumes, weaker mix in Command & Contro
Slide 18: Aeronautics: international successes support growth targets
Aeronautics: international successes support growth targets 1H 1H 2007 2007 • US US Joint Joint cargo cargo aircraft aircraft tender tender awarded; awarded; program program value value worth worth 66 bn bn (first (first tr. tr. ca. ca. 22 bn bn for for 78 78 a/c). a/c). First First order order expe
Slide 19: Space: new applications emerging for services
Space: new applications emerging for services 1H 1H 2007 2007 • Created Created aa new new Space Space Alliance Alliance between between Thales Thales and and Finmeccanica Finmeccanica in in two two joint joint ventures ventures (Telespazio (Telespazio Holding Holding andand Thales Thales Alenia Ale
Slide 20: Defence Systems: robust performance
Defence Systems: robust performance 1H 2007 • Revenues Revenues stable stable across across all all businesses businesses • Margin Margin improvement improvement inin Missiles Missiles offset offset by by some some additional additional activities activities on on light light torpedo torpedo program
Slide 21: Civil Activities: Transport and Energy
Civil Activities Transport: to benefit from expansion into new markets Transport 1H 1H 2007 2007 •• Revenue Revenue growth growth driven driven by by both both Signalling Signalling and and Vehicles Vehicles •• Strong Strong operating operating profit profit by by Signalling Signalling & & Systems S
Slide 22: Roadmap for improving profitability on track
Roadmap for improving profitability on track Complete review of industrial processes and launch detailed efficiency programmes for procurement, production & logistics Complete integration plans Further reductions in G&A, IT, commercial costs etc Increase Reduce profitability industrial and Simplify
Slide 23: Streamlining and strengthening management structures
Streamlining and strengthening management structures • Helicopters: new integrated organisational model approved to become One Global Company focussed on Business and Operations and with centralised management of infrastructure and services to manage strong increase in orders • Aeronautics: new indu
Slide 24: Restructuring and cost reduction programmes underway
Restructuring and cost reduction programmes underway Restructuring measures approved for: 9Aircraft modification and maintenance • Significant restructuring planned to adapt sites to new industrial mission 9Military Communications • Conversion of production processes to supply new digital technologi
Slide 25: Current restructuring plan on track
Current restructuring plan on track Integration targets • Helicopters: following savings already achieved for Eur 50 mln of additional EBIT, further benefits expected of ca. Eur 10 mln in next 2-3 years due to IT integration plan • Avionics: target of Eur 50 mln of additional EBIT annually by 2009.
Slide 26: Development costs capitalised in Intangible Assets at 1H 2007
Development costs capitalised in Intangible Assets at 1H 2007* Qualifying for Self Funded Total Eur Mln funding Dir N 28 1 Jan 2007 Opening balance 693 284 977 Reclassified from inventories - - - Investments 223 74 297 Depreciation (18) (14) (32) Other movements (3) 2 (1) 30 June 2007 closing balanc
Slide 27: Guidance for 2007 and 2008 on track
Guidance for 2007 and 2008 on track 2007 2008 Revenues €13.1-13.7bn €14-14.7bn (not Value of Production) EBIT €950-1,000mln €1,050-1,170mln • Average Free Operating Cash Flow per Year (2006-08) of ca. €300 mln • Dividend policy: increase together with profits • Optimal capital structure: Net debt/Eq
Slide 28: Business Strategy
Pier Francesco Guarguaglini Business Strategy 28
Slide 29: On track to achieve our strategic objectives
On track to achieve our strategic objectives Growth and Focus on A,D&S Strengthen & Consolidate Global Positioning Innovation Value Creation 29
Slide 30: Confirm world leadership in Helicopters
Confirm world leadership in Helicopters 9 Maintain and complete state of art product range through launch of new models (AW149, XX9) and finalisation of BA609 9 Strengthen footprint in USA both in military and commercial leveraging on Presidential programme and AW139 successes 9 Enlarge footprint in
Slide 31: Grow as a global player in Aeronautics
Grow as a global player in Aeronautics 9 World leadership in tactical airlift and advanced trainers leveraging on • C27J success in US for JCA • Italian Air Force’s intention to acquire M346 and exploiting fully owned internal capabilities in system development and integration 9 Major role in larges
Slide 32: Become a leading player for Defence and Security solutions
Become a leading player for Defence and Security solutions 9 Grow as leading prime for naval combat systems and battlespace systems leveraging on domestic opportunities (i.e. FREMM and Forza NEC) 9 Strengthen positioning as system integrator & equipment/solution provider for Security leveraging on s
Slide 33: Further commercial success of our products: Forza NEC
Further commercial success of our products will be boosted by developing our strategy 2007: crucial year for launching large defence systems initiatives Forza NEC Forza NEC is our offering for Italian Army Battlespace Digitalisation Finmeccanica leader for large battleground systems starting from do
Slide 34: Strengthen positioning in Defence Systems
Strengthen positioning in Defence Systems 9 Consolidate leading role in weapon systems as reference supplier for Italian Armed Forces and grow both in UK and abroad through competitive, high-tech, niche products 9 In underwater systems strengthen positioning in light weight and heavy weight Torpedoe
Slide 35: Consolidate our role as value added service provider in Space
Consolidate our role as value added service provider in Space 9 Leverage on Space Alliance to further exploit our competencies and complementary assets in satellite systems and services to significantly strengthen positioning as major European Space player 9 COSMO-SkyMed (innovative programme for Ea
Slide 36: Grow as a significant player in Energy & consolidate positioning in Transport
Grow as a significant player in Energy & consolidate positioning in Transport 9 Achieve leadership position in Energy as Independent Service Provider (i.e. recent awards of gas turbine contracts in Algeria and Finland) with increasing focus and investments on renewables 9 Energy Target Revenue growt
Slide 37: Revenue growth targets underpinned by backlog growth
Revenue growth targets underpinned by backlog growth, maintaining an average visibility of 3 years of production To be acquired To be acquired To be acquired over 2007 over 2007-2008 over 2007-2009 100% 80% 60% ca. 90% 40% ca. 70% ca. 50% 20% 0% 2007 2008 2009 Firm orders at end 2006 Orders to be ac
Slide 38: Human Resources and Innovation basis for creating value
Human Resources and Innovation basis for creating value 9 Human Resources are key to achieve objectives and results. Therefore, continuous investments in learning and enhancements of our HR capabilities is a strategic priority for Finmeccanica 9 Strategic priority is also utilisation of Cash Flow re
Slide 39: Strategy delivering results
Strategy delivering results 9 Recent success reinforces our global positioning in USA and worldwide thus boosting further expansion in the markets 9 New international partnerships in place to grow both in A,D&S and in Transport 9 Continued focus on technological innovation to strengthen product perf
Slide 40: Growth and Focus on A,D&S Strengthen &
Growth and Focus on A,D&S Strengthen & Consolidate Global Positioning Innovation Value Creation 40
Slide 41: Appendix
a) “7 FINMECCANICA Appendix 41
Slide 42: New Directive on State Incentives for Research & Development
New Directive on State Incentives for Research & Development ¾ The Italian Government, through Directive N 28 of the Interministerial Committee for Economic Planning, on 22 March 2006 (Gazzetta Ufficiale n.146 of 26 June 2006) ruled that projects “aiming to enhance the technological endowment necess
Slide 43: Update on impact of state incentives Directive N 28 on balance sheet
Update on impact of state incentives Directive N 28* on Finmeccanica balance sheet Development costs for “National Security” programmes are no longer recorded in working capital under “Work in Progress” and “Other Liabilities” but capitalised in “Intangible Assets” and netted off against the amount
Slide 44: Consolidated Profit and Loss Account
CONSOLIDATED PROFIT AND LOSS ACCOUNT CONSOLIDATED PROFIT AND LOSS ACCOUNT EUR m 1H07 1H06 % chg. Y/Y Revenues 6,079 5,706 7% Changes in work in progress, semi-finished and finished goods 37 259 Cost of goods, services and labour -5,592 -5,508 Depreciation and amortisation -204 -182 Previsions for ri
Slide 45: Consolidated Balance Sheet
CONSOLIDATED BALANCE SHEET CONSOLIDATED BALANCE SHEET EUR m 30.06.2007 31.12.2006 Non-current assets 10,337 9,897 Non-current liabilities (3,191) (3,275) 7,146 6,622 Inventories 3,353 3,095 Contract work in progress 3,278 2,823 Trade receivables 4,135 3,856 Trade payables (3,529) (3,561) Customer ad
Slide 46: Debt
DEBT DEBT EUR m 30.06.2007 31.12.2006 30.06.2006 Short-term financial debt 506 159 145 Medium- to long-term financial debt 1,842 1,865 1,851 Cash on hand or equivalent (411) (2,003) (680) NET BANK DEBT 1,937 21 1,316 Government bonds and securities (16) (21) (20) Loans from subsidiary and affiliated
Slide 47: Cash Flow
CASH FLOW CASH FLOW EUR m 1H07 1H06 Cash and cash equivalents at 1 January 2,003 1,061 Cash flow from operations 669 626 Changes in working capital (956) (710) Changes in other operating assets and liabilities (365) (145) Cash flow generated (used) by operating activities (652) (229) Investment in t
Slide 48: Share Data
SHARE DATA SHARE DATA 1H07 1H06 % chg. Y/Y Average number of shares in period (thousands) 424,328 423,635 0.2% Net profit excluding minorities (EUR m) 159 564 Profit of continuing operations excluding minorities (EUR m) 159 564 BASIC EPS (EUR) 0.38 1.33 -71% BASIC EPS of continuing operations (EUR)
Slide 49: Divisions
DIVISIONS 1H07 (EUR million) Helicopters Defence Aeronautics Space Defence Energy Transport Other activities Eliminations TOTAL electronics systems Revenues 1,478 1,607 953 377 497 477 725 135 -170 6,079 EBITA* 154 85 64 12 24 30 16 -60 325 EBITA* margin (%) 10.4% 5.3% 6.7% 3.2% 4.8% 6.3% 2.2% n.m.
Slide 50: IR Contacts
IR Contacts Investor Relations Finmeccanica investor_relations@finmeccanica.com Website: http://www.finmeccanica.com/Investor Relations John D. Stewart Raffaella Luglini VP Investor Relations Investor Relations Officer +39 06 32473.290 +39 06 32473.066 john.stewart@finmeccanica.com raffaella.luglini