Q order intake and sales 19 October 2017

Transcription

1 Q order intake and sales 19 October

2 Q3 order intake and sales Update on implementation of IFRS 15 standard 2017 outlook

3 Q highlights New London underground signaling successfully tested for the first time Acquisition of real-time Big Data platform Guavus closed Launch of new Artificial Intelligence research center in Montreal DJSI: Thales ranked No. 1 worldwide in the aerospace and defence sector Q order intake and sales - 3

4 Key figures m 9m m 2016 change Q Q change total organic total organic Order intake 8,833 10,216-14% -13% 2,861 4, Sales 10,336 10, % 3,095 3, % -1.6% Order intake in line with expectations Negative Q3 sales growth driven by phasing effects Q order intake and sales - 4

5 9m 2017 order intake Order intake down due to high comps 9m 2016 included Indian Rafale jumbo contract 11 orders over 100m, including 3 contracts recorded in Q3 Additional contract linked to French FTI frigates Digital military communications (CONTACT) Air defence system in Asia Solid dynamics in mature markets: +12% Order intake by contract unit value m 10,216-14% 3,057 Unit value > 100m 10m < 1,745 2,346 Unit value 2,208 < 100m Unit value < 10m 8,833 4,813 4,880 9m m 2017 Q order intake and sales - 5

6 9m 2017 organic sales growth Continuous high growth in emerging markets +1, after +17% in 9m 2016 Organic (a) sales growth +17.1% Slower growth in mature markets High comps in 9m % +10.1% +10.8% Negative growth in Q3 driven by phasing effects +0.8% +3.5% Mature markets Emerging markets Total (a) In this presentation, "organic" means "at constant scope and exchange rates" 9 m m 2017 Q order intake and sales - 6

7 Aerospace: 9m 2017 key figures m 9m m 2016 change total organic Order intake 3,049 3,735-18% -18% Sales 4,068 3, % +4.5% Order intake down due to high comps in in-flight entertainment (IFE) and slowdown of Space Sales growth driven by aircraft avionics and Space Q order intake and sales - 7

8 Transport: 9m 2017 key figures m 9m m 2016 change total organic Order intake % +43% Sales 1,060 1, % +2.3% Solid order intake momentum, driven by both main lines and urban rail signaling Low sales growth, due to high comps 9m 2017 sales organically up 27% compared to 9m 2015 Q order intake and sales - 8

9 Defence & Security: 9m 2017 key figures m 9m m 2016 change total organic Order intake 4,766 5,748-17% -17% Sales 5,163 5, % +3.5% Order intake down due to high comps Rafale for India booked in Q Broad-based sales growth Q order intake and sales - 9

10 Q3 order intake and sales Update on implementation of IFRS 15 standard 2017 outlook

11 IFRS15: implementation schedule IASB issues IFRS 15 standard Formal adoption of standard by EU FY 2017 results Financial statements under current standard 2017 order intake, sales and EBIT by segment under new standard Q Oct July 2018 Q Q March 2018 H results Thales IFRS 15 implementation project launched Disclosure of restated H key metrics Financial statements under new standard Restated H financial statements under new standard Q order intake and sales - 11

12 IFRS15 for Thales: 3 main areas of attention 1 New requirements to recognize revenue over time: and No alternative use Enforceable right to payment for performance to date 2 3 Method to measure percentage of completion moved from technical milestones to cost-to-cost Split of contracts among performance obligations No impact on total revenue and profit of individual contracts No impact on cash flows Q order intake and sales - 12

13 1 Contracts no longer fulfilling over time recognition criteria Under current standard Recognition according to milestones 10 75% 5 25% Contract completion (cumulative % of sales recognized) 38% 73% 97% 89% 10 1 Y1 2 Y2 3 Y3 4 Y4 5 Y5 6 Sales recognized in each year 100 = total contract sales Y1 Y2 Y3 Y4 Y5 IFRS 15 impact on sales Potentially large impact, significantly delaying sales recognition +97 Under IFRS 15 Recognition upon delivery 10 75% 5 25% 1 Y1 2 Y2 3 Y3 4 Y4 5 Y Y1 Y2 Y3 Y4 Y Y1 Y2 Y3 Y4 Y5 For Thales: after analysis, very few contracts fall in this category Q order intake and sales - 13

14 2a Over time contracts moving to cost-to-cost method, with costs incurred later than milestones Under current standard Recognition according to milestones 10 75% 5 25% Contract completion (cumulative % of sales recognized) Milestones 38% 73% 89% Costs 97% 10 1 Y1 2 Y2 3 Y3 4 Y4 5 Y5 6 Sales recognized in each year 100 = total contract sales Y1 Y2 Y3 Y4 Y5 IFRS 15 impact on sales Small impact, positive or negative depending on year Impact over entire duration of contract: Under IFRS 15 Recognition according to costs 10 75% 5 25% Milestones 3 62% Costs 82% 10 92% 1 Y1 2 Y2 3 Y3 4 Y4 5 Y Y1 Y2 Y3 Y4 Y Y1 Y2 Y3 Y4 Y5 For Thales: largest impact, aggregation of effect on thousands of contracts Q order intake and sales - 14

15 2b Over time contracts moving to cost-to-cost method, with costs incurred earlier than milestones Under current standard Recognition according to milestones 10 75% 5 25% Contract completion (cumulative % of sales recognized) Costs 3 62% 82% 10 92% Milestones Y1 2 Y2 3 Y3 4 Y4 5 Y5 6 Sales recognized in each year 100 = total contract sales Y1 Y2 Y3 Y4 Y5 IFRS 15 impact on sales Small impact, positive or negative depending on year Impact over entire duration of contract: Under IFRS 15 Recognition according to costs 10 75% 5 25% 38% Costs 73% 97% 89% 10 Milestones 1 Y1 2 Y2 3 Y3 4 Y4 5 Y Y1 Y2 Y3 Y4 Y Y1 Y2 Y3 Y4 Y5 For Thales: slightly less frequent, aggregation of effects on thousands of contracts Q order intake and sales - 15

16 3 Split of over time contracts among performance obligations Under IFRS 15 Single performance obligation 10 75% 5 25% Contract completion (cumulative % of sales recognized) 3 62% 82% 10 92% 1 Y1 2 Y2 3 Y3 4 Y4 5 Y5 6 Sales recognized in each year 100 = total contract sales Y1 Y2 Y3 Y4 Y5 Impact on sales of split into 2 POs Small impact, positive or negative depending on year Impact over entire duration of contract: Under IFRS 15 2 performance obligations (PO) with different margins* 10 75% 5 25% 37% 76% 1 st PO 10 56% 10 2 nd PO 1 Y1 2 Y2 3 Y3 4 Y4 5 Y5 6 1 st PO (lower margin) nd PO (higher margin) Y1 Y2 Y3 Y4 Y5 * Example with 2 performance obligations defined as follows: first PO (lower margin): first 3 years, 82% of costs, 75% of sales; second PO (higher margin): last 2 years, 18% of costs, 25% of sales see detailed calculations in appendix Y1 Y2 Y3 Y4 Y5 For Thales: limited impact, coming on top of the 2 previously mentioned impacts Q order intake and sales - 16

17 Restated H adjusted P&L H Under IFRS 15 As reported Difference m % of sales m % of sales m % of sales Sales 7,118 7,241 (123) Gross margin 1, % 1, (40) -0.1 pt Indirect costs (1,163) -16.3% (1,154) -15.9% (9) -0.4 pt o/w R&D expenses (360) -5.1% (360) pt o/w Marketing & Sales expenses (530) -7.4% (521) -7.2% (9) -0.3 pt o/w General & Administrative expenses (274) -3.8% (274) -3.8% pt Restructuring costs (24) -0.3% (24) -0.3% - - Share of net result of equity-accounted affiliates EBIT % % (50) -0.5 pt Low impact on gross margin Slight increase in indirect costs Move of bid costs from cost of sales to marketing and sales Negative operating leverage on indirect costs Q order intake and sales - 17

18 H EBIT margin impact driven by operating leverage on postponed sales 8.8% Negative operating leverage from lower sales points 8.5% Other IFRS 15 impacts -0.2 points 8.3% Reported EBIT margin On 7,241m reported sales Pro forma EBIT margin assuming 7,118m sales IFRS 15 EBIT margin Q order intake and sales - 18

19 Restated H sales by operating segment H Under IFRS 15 As reported Difference m m % Aerospace 2,797 2,872 (75) -3% Transport % Defence & Security Operating segments 3,533 3,631 (99) -3% 7,090 7,214 (124) -2% Other Total 7,118 7,241 (123) -2% Aerospace: negative impact Technical milestones reached in H1 with fewer costs (phasing effect) Transport: positive impact More costs incurred than technical milestones reached in H1 (phasing effect, consumption of provisions related to loss-making contracts) Defence & Security: negative impact Technical milestones reached in H1 with fewer costs (phasing effect) Split among performance obligations, with higher margins in later phases Some impact from contracts no longer fulfilling over time recognition criteria Q order intake and sales - 19

20 Restated H EBIT by operating segment H Under IFRS 15 As reported Difference m m Margin% Aerospace % % (3) +0.1 pt Transport 8 1.1% 6 0.9% pt Defence & Security % % (49) -1.1 pt EBIT operating segments % % (50) -0.6 pt Other (33) (34) 1 EBIT excl. Naval Group % % (49) -0.5 pt Naval Group (1) EBIT total % % (50) -0.5 pt Q order intake and sales - 20

21 IFRS 15: key messages A broad standard with far-reaching accounting consequences Thales impact dominated by timing of sales and profit on long-term contracts Very few contracts no longer fulfill over time recognition criteria Phasing effects, with no impact on total revenues and profits of individual contracts, and no impact on cash flow 2% negative impact on H sales, with negative operating leverage affecting EBIT margin Impact in a given period not reflective of impact in other periods Q order intake and sales - 21

22 Q3 order intake and sales Update on implementation of IFRS 15 standard 2017 outlook

23 2017 financial objectives Order intake Around 14bn Sales Mid-single digit organic growth EBIT (a) 1,480-1,500m (b) (a) Non-GAAP measure: see definition in appendix (b) Based on February 2017 scope and foreign exchange rates Q order intake and sales - 23

24 Appendix

25 Upcoming events Ex-interim dividend date 6 December 2017 Interim dividend payment 8 December 2017 Full Year 2017 results 6 March 2018 (before market) Q order intake and sales 3 May 2018 (before market) Q order intake and sales - 25

26 Split among 2 performance obligations: detailed example Single performance obligation Sales: 100 Costs: 75 Gross margin: 25% Total sales: 100 Total costs: 75 Gross margin: 25% Two performance obligations Example with 2 successive performance obligations First PO: Years 1 to 3, sales: 75 costs: 61.5 gross margin: 18% Second PO: Years 4 and 5, sales: 25 costs: 13.5 gross margin: 46% 10 75% 5 25% Contract completion (cumulative % of costs) 3 62% 82% 10 92% 1 Y1 2 Y2 3 Y3 4 Y4 5 Y5 6 Sales recognized in each year 100 = total contract sales 10 75% 5 25% Contract completion (cumulative % of costs) 37% 76% 1 st PO 10 56% 10 2 nd PO 1 Y1 2 Y2 3 Y3 4 Y4 5 Y5 6 Sales recognized in each year 1 st PO 2 nd PO First performance obligation 3 % completion end Y1 = = 37% 82% 62% % completion end Y2 = = 76% 82% Sales Y1 = 37% x 75 = 27.4 (rounded to 28) Sales Y2 = (76% - 37%) x 75 = 29 Sales Y3 = (10-76%) x 75 = 18 Second performance obligation 92% - 82% % completion end Y4 = = 56% 10-82% Sales Y4 = 56% x 25 = 14 Sales Y5 = (10-56%) x 25 = 11 Y1 Y2 Y3 Y4 Y5 Q order intake and sales - 26 Y1 Y2 Y3 Y4 Y5

27 Organic sales growth per quarter Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Aerospace +6% -1% -6% +3% +3% +6% -4% +1% -1% +13% +15% +7% +16% +1% -2% Transport +3% +15% +14% % +7% +8% -2% -3% -7% -3% -3% -7% -13% -4% Defence & security -2% -8% +1% + -5% +19% +2% +7% +13% +3% +14% -3% +8% +5% -3% Total +1% -5% -3% +2% -2% +11% - +6% +7% % -1% +11% +3% -2% Q order intake and sales - 27

28 9m 2017 order intake by destination m 9m m 2016 total change organic France 2,899 1, % +5 United Kingdom % +9% Other European countries 1,737 2,038-15% -15% Europe 5,181 4, % +16% North America % +1 Australia/NZ % -14% Asia 1,175 2,880-59% -59% Middle East Rest of the world % -31% Emerging markets 2,268 4,346-48% -47% Total 8,833 10,216-14% -13% Asia 13% Middle East 8% Australia/ NZ 5% North America 1 RoW 5% 9m 2017 Other European countries 2 France 33% UK 6% Q order intake and sales - 28

29 9m 2017 sales by destination m 9m m 2016 total change organic France 2,517 2, % +3.2% United Kingdom % +8.9% Other European countries 2,086 2, % -0.1% Europe 5,511 5, % +2.8% Middle East 11% RoW 6% France 24% North America 967 1, % -12. Australia/NZ % Asia 1,501 1, % +8.9% Middle East 1, % +15.8% Rest of the world % +4.4% Emerging markets 3,233 2, % +10.1% Total 10,336 10, % Asia 15% Australia/ NZ 6% N America 9% 9m 2017 Other European countries 2 UK 9% Q order intake and sales - 29

30 Q order intake by segment m Q Q change total organic Aerospace 812 1,516-46% -46% Transport % +78% Defence & Security 1,731 3,078-44% -43% Other 4 19 Total 2,861 4, Q order intake and sales - 30

31 Q sales by segment m Q Q change total organic Aerospace 1,197 1, % -1.6% Transport % +7.6% Defence & Security 1,532 1, % -3.1% Other Total 3,095 3, % -1.6% Q order intake and sales - 31

32 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 ratios and variances are calculated based on underlying amounts, which feature in the consolidated financial statements. Definitions Organic: at constant scope and exchange rates; Book-to-bill ratio: ratio of orders received to sales; Mature markets: All countries in Europe excluding Russia and Turkey, North America, Australia and New Zealand; Emerging markets: All other countries, i.e. Middle East, Asia, Latin America and Africa. Non-GAAP measures This presentation contains non-generally Accepted Accounting Principles (GAAP) financial measures. Thales regards such non-gaap financial measures as relevant operating and financial performance indicators for the Group, as they allow non-operating and non-recurring items to be excluded. Thales definitions for such measures may differ from similarly titled measures used by other companies or analysts. EBIT: income from operations; plus the share of net income or loss of equity affiliates less: amortization of acquired intangible assets (PPA). From 1 January 2016, it also excludes expenses recorded in the income from operations that are directly related to business combinations (H impact: +10m, 2016 impact: +19m, H impact: +7m). See also notes 14-a and 2.1 of the consolidated financial statements at 31 December Adjusted net income: net income, less the following elements, net of the corresponding tax effects: (i) amortization of acquired intangible assets, (ii) expenses recorded in the income from operations which are directly related to business combinations, which by their nature are unusual (H impact: +7m, 2016 impact: +12m, H impact: +5m), (iii) disposal of assets, change in scope of consolidation and other, (iv) change in fair value of derivative foreign exchange instruments (recorded in "other financial results" in the consolidated accounts), (v) actuarial gains or losses on long-term benefits (accounted within the "finance costs on pensions and employee benefits" in the consolidated accounts). See note 14-a of the consolidated financial statements at 31 December Adjusted EPS: ratio of adjusted net income (as defined above) to average number of shares outstanding. See note 14-a of the consolidated financial statements at 31 December Net cash (net debt): cash and other short-term financial assets, less: long-term and short-term financial debt, less: fair value of interest rate derivatives. See notes 14-a and 6.2 of the consolidated financial statements at 31 December Free operating cash-flow: net cash flow from operating activities, less: capital expenditures, less: deficit payments on pensions in the United Kingdom. See notes 14-a and 11.1 of the consolidated financial statements at 31 December Q order intake and sales - 32

33 Thales Tour Carpe Diem 31 Place des Corolles Paris La Défense France 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 results or any other performance indicator. These statements are by nature subject to risks and uncertainties as described in the Company s registration document ("Document de référence") filed with Autorité des Marchés Financiers. These statements do not therefore reflect future performance of the Company, which may be materially different.