FULL YEAR 2017 EARNINGS

Transcription

1 FULL YEAR 2017 EARNINGS

2 Disclaimer IMPORTANT INFORMATION This document is not intended to and does not constitute an offer to buy or a solicitation of an offer to sell any securities in any jurisdiction in connection with the acquisition of Zodiac Aerospace or otherwise. This document must not be published, released or distributed, directly or indirectly, in any jurisdiction where the distribution of such information is restricted by law. This document and the information it contains do not, and will not, constitute an offer to purchase or the solicitation of an offer to sell securities of any entity in the United States of America or any other jurisdiction where restrictions may apply. The distribution of this document may be subject to legal or regulatory restrictions in certain jurisdictions. Any person who comes into possession of this document must inform him or herself of and comply with any such restrictions. > FORWARD-LOOKING STATEMENTS This document contains forward-looking statements relating to Safran, Zodiac Aerospace and their combined businesses, which do not refer to historical facts but refer to expectations based on management s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those included in such statements. These statements or disclosures may discuss goals, intentions and expectations as to future trends, synergies, value accretions, plans, events, results of operations or financial condition, or state other information relating to Safran, Zodiac Aerospace and their combined businesses, based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as anticipate, believe, plan, could, would, estimate, expect, forecast, guidance, intend, may, possible, potential, predict, project or other similar words, phrases or expressions. Many of these risks and uncertainties relate to factors that are beyond Safran s or Zodiac Aerospace s control. Therefore, investors and shareholders should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: uncertainties related in particular to the economic, financial, competitive, tax or regulatory environment; the risks that the new businesses will not be integrated successfully or that the combined company will not realize estimated cost savings and synergies; Safran s or Zodiac Aerospace s ability to successfully implement and complete its plans and strategies and to meet its targets; the benefits from Safran s or Zodiac Aerospace s (and their combined businesses) plans and strategies being less than anticipated; and the risks described in the registration document (document de référence). The foregoing list of factors is not exhaustive. Forward-looking statements speak only as of the date they are made. Safran and Zodiac Aerospace do not assume any obligation to update any public information or forward-looking statement in this document to reflect events or circumstances after the date of this document, except as may be required by applicable laws. > USE OF NON-GAAP FINANCIAL INFORMATION This document contains supplemental non-gaap financial information. Readers are cautioned that these measures are unaudited and not directly reflected in the Group s financial statements as prepared under International Financial Reporting Standards and should not be considered as a substitute for GAAP financial measures. In addition, such non-gaap financial measures may not be comparable to similarly titled information from other companies. 2

3 SUMMARY 2017 HIGHLIGHTS 2017 RESULTS IFRS15 TRANSITION 2018 OUTLOOK Q&A ADDITIONAL INFORMATION 3

4 2017 HIGHLIGHTS Philippe PETITCOLIN - CEO 4

5 2017 wrap up Operations: strong execution 2017 financial targets exceeded across the board: revenue, recurring operating income and free cash flow Executing on CFM56-LEAP transition LEAP ramp up on track: 459 deliveries in 2017 (consistent with target of more than 450 deliveries in 2017 ) LEAP production cost reduction program on track Continuing profitability improvements in Aircraft Equipment and Defense Aircraft Equipment recurring operating margin: 12.6% in 2017 / 11.0% in 2016 / 9.4% in 2015 Defense recurring operating margin: 7.1% in 2017 / 6.1% in 2016 / 5.1% in 2015 Sustained investment spending to meet rising demand and prepare for the future R&D: focus on R&T spending to boost innovation and prepare next gen products Industrial capex: focus on increasing capacity, modernizing facilities, improving industrial performance Aerospace propulsion Aircraft Equipment Portfolio: refocus on core A&D markets Disposal of Security activities for 3Bn Acquisition of Zodiac Aerospace for an EV of 8.2Bn as of 01/31/2018 ( 7.1Bn equity + 1.1Bn debt) to create of a global leader in Aerospace (#3 worldwide*) and Aircraft Equipment (#2 worldwide) Defense *Excluding airframers Delivering on financial and operational roadmap Portfolio refocus to increase footprint on growing, core A&D markets 5

6 Acquisition of Zodiac Aerospace Success of the tender offer initiated by Safran (February 6, 2018) Combining the shares tendered, treasury shares and commitments from Zodiac Aerospace s family shareholders, Safran holds more than 88% of the shares and voting rights The calendar for the subsequent tender offer has been published by the AMF and is available separately Renewal of Zodiac Aerospace s governing bodies (February 13, 2018) 5 new members proposed by Safran and appointed to the Supervisory Board Appointment of 3 new Management Board members proposed by Safran o/w the Chairman, Vincent Mascré, former CEO of Safran Landing Systems Integration team in place and already hard at work with mission to: Implement the actions necessary to ensure business continuity Deliver the synergies Deploy Safran processes and methodologies Optimize the processes and support functions Guidance 2018 for Safran including Zodiac Aerospace provided in early September with the publication of H results 6

7 FY 2017 financial highlights Broad-based growth in adjusted revenue (+7.4% organic) 15,781 16,521 Adjusted recurring operating income at 15.0% of revenue, with strong improvements in Aircraft Equipment and Defense 2,404 2, % +2.7% 2.9% Free cash flow generation representing 58% of adjusted recurring operating income 1, % 1, % org ( M) FY 16 FY 17 Adjusted net profit (group share) % 822 1,689 1,801 Discontinued activities Continuing activities ( M) FY 16 FY 17 FY 2017 dividend per share of 1.60 per share % 1.60 ( M) FY 16 FY 17 Positive net cash thanks to free cash flow generation and the proceeds of the sale of the Security activities 12/31/2016 ( M) 294* 12/31/ ( M) ( ) FY 16 FY 17 FY 16 FY 17 (1,383) *Excluding 2Bn of securities pledged during the period of the tender offer for the acquisition of Zodiac Aerospace

8 LEAP program LEAP commercial success 2,870 orders and commitments received in 2017 Total backlog (orders and commitments) of 13,728 engines at December 31, % market share on A320neo family at December 31, 2017 Executing on production ramp-up 459 LEAP delivered in FY 2017 compared to 77 engines in FY 2016, in line with ramp-up target LEAP production cost decreased by around 30% on average for LEAP-1A and LEAP-1B in 2017 Targeting around 1,100 deliveries LEAP in 2018 and further cut in production cost LEAP-1A In operations at 17 airlines with more than 530,000 flight hours accumulated to date First A319neo equipped with CFM International LEAP-1A engines completed its maiden flight on 31 March minute ETOPS certification granted by FAA and EASA on June 19, 2017 A321neoLR (Long Range) maiden flight on January 31, 2018 LEAP-1B 737 MAX entry into commercial service at Malindo/Lion Air on May 23, MAX 9 first flight in April 13, minute ETOPS certification granted by FAA and EASA in June 19, 2017 In operations at 16 airlines with more than 80,000 flight hours accumulated to date LEAP-1C October 2017: delivered the two integrated propulsion systems (engine+nacelle) for COMAC s 2 nd flight test aircraft 63 hours of test flights to date LEAP pulse line LEAP module fan 8

9 Aerospace propulsion business highlights CFM56 production ramping down in line with assembly rates at airframers 1,444 engines CFM56 deliveries (down from 1,693 in 2016) Strong demand for the CFM56 > 474 orders and commitments received in 2017 > Backlog of 1,106 engines at December 31, 2017 Civil aftermarket up 11.2% in 2017 (in $) Growth driven by latest generation CFM56, GE90 engines spares and services Favorable environment: > Passenger demand up 7.6%* in 2017 and expected to grow 6.0%* in 2018 > Sustaining profitability of airlines CFM56 pulse line Villaroche, France Purchase of 12 additional Rafale aircraft by Qatar New order following on from the contract signed in 2015, thus raising the number of Rafale aircraft for Qatar to 36 Helicopter turbines Presentation of the Aneto high-power engine family designed for super-medium and heavy helicopters > Aneto-1K (first 2,500 shp model) selected by Leonardo to power its twin-engine AW189K Development making progress > Ardiden 3G for the Ka-62: maiden flight and EASA certification in 2017 > Arrius-2R for the Bell Jet Ranger 505 X: FAA certification in 2017 New Aneto engine family *Source: IATA 9

10 Aircraft Equipment - business highlights Nacelles for A320neo Continuing successful ramp up: Safran supplies the nacelles for LEAP-1A (+170 units) Signature of the continuation of the contract with Airbus for the supply of the nacelle for LEAP-1A powered A320neo Supporting rising assembly rates of A350 Deliveries: Landing gear (+45%), wiring systems (+38%), accessory drive trains (+66%) First flight of A330neo Safran supplies the nacelle, landing gear, wheels and carbon brakes*, cabling and electrical systems Leadership in carbon brakes Installed base of close to 9,000 aircraft at end 2017, up 9.8% New contracts awarded in 2017 covering 1,300 aircraft** including: > United Airlines: MAX and NG; Norwegian: MAX; Lion Air: 113 A320neo and MAX; GOL: MAX and NG; Singapore Airlines: 47 A350 First flight of A330neo Positive momentum in services Aircraft Equipment services up 7.0% (in ) in 2017, driven by carbon brakes and nacelles services Electric taxiing The electric taxiing solution received Authorisation To Market approval by Airbus and Safran for an application on the A320 family Depending on airline feedback, the actual program could subsequently be launched in the near future *developed by Goodrich-Messier, a Joint-Venture of Safran Landing Systems with UTC Aerospace Systems **Aircraft>100pax Integration of the propulsion system for A320neo 10

11 Defense business highlights Resumption of organic growth: portfolio of products meeting customers requirements Patroller tactical drone system : development on track; first deliveries expected in 2019 Scorpion program for the French Army > Notification from the DGA of a first order of 319 Griffon and 20 Jaguar armored land vehicles for which Safran supplies the sighting system (PASEO) and the navigation equipment First deliveries of next-generation target locator (LTLM II) to the US army Continuing ramp up of FADEC 4*, notably for LEAP engines Rafale Supplying key systems and equipment on Rafale fighters Engine control unit, inertial navigation and gyros for the fly-by-wire flight control systems AASM Hammer missiles as part of the Rafale s weapons suite for Egypt and Qatar Innovation: combat of the future The DGA awarded Safran the Furious advanced technology study to build demonstrators that integrate three types of robots into an infantry squad, as part of the Scorpion modernization program Safran unveiled its new-generation Euroflir 410 optronic system at the 2017 Paris Air Show erider tactical robot *Developed jointly by Safran and BAE Systems through the joint venture FADEC International 11

12 Investing in our future 2000 In M (continuing operations) 1,857M 1,909M 1,708M Full Year self-funded R&D decreased by 53M Lower spending on LEAP Total R&D 1,335M 1,367M 1,223M 1,106M 1,053M 2017 split of spending in line with business roadmap: c.55%: development of new programmes c.45%: Research and Technology in preparation of the future (mostly next generation engines and hybrid electrical technologies) M Total self-funded R&D 479M 343M Capitalized R&D 275M Full Year 2018 trends 2018 self funded R&D trending downwards Continuing upward trend for R&T 12

13 2017 dividend Dividend per share ( ) Final Dividend distribution ( M) A proposal for a dividend payment to parent holders of 1.60 at next AGM on May 25, per share to be paid entirely in 2018: > Ex-dividend date: May 29, 2018 > Payment date: May 31, 2018 Interim dividend distribution ( M) Total dividend distribution ( M) Holders of ordinary shares and of class A preference shares of record on the ex-date of May 29, 2018 will be eligible for the dividend 1.60/share dividend payment subject to shareholders approval, up 5.3% 13

14 2017 RESULTS Bernard DELPIT Group CFO 14

15 Foreword All figures represent adjusted data (1), continuing operations (2) and are presented in application of prevailing accounting standards for the 2017 period 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 assets relating to aircraft programmes revalued at the time of the Sagem-Snecma merger. With effect from the first-half 2010 interim financial statements, the Group has decided to restate the impact of purchase price allocations for business combinations. In particular, this concerns the amortization of intangible assets recognized at the time of the acquisition, and amortized over extended periods, due to the length of the Group's business cycles, along gains or losses remeasuring the Group s previously held interests in an entity acquired in a step acquisition or assets contributed to a JV. the mark-to-market of foreign currency derivatives, in order to better reflect the economic substance of the Group's overall foreign currency risk hedging strategy: > revenue net of purchases denominated in foreign currencies is measured using the effective hedged rate, i.e., including the costs of the hedging strategy, > all mark-to-market changes on foreign currency derivatives hedging future cash flows are neutralized. The resulting changes in deferred tax have also been adjusted. Recurring operating income Operating income before capital gains or losses on disposals /impact of changes of control, impairment charges, transaction and integration costs and other items. (1) See slide 17 for bridge with consolidated P&L (2) Continuing operations: Aerospace Propulsion, Aircraft Equipment, Defense, Holding and others Discontinued operations: Safran Identity & Security 15

16 Reminder: impacts of Safran Identity & Security disposal In application of IFRS 5, all the businesses comprising the Security activities were classified as discontinued operations for 2016 and 2017 In H1 2017, Safran completed the sale of all the Security activities Sale of the detection activities to Smiths Group completed in April Sale of the identity and security activities to Advent International completed in May Contribution to FY 2017 adjusted net income 3 months for detection activities and 5 months for identity and security activities (recurring operating income : (1)M) Capital gain on assets sale: 824M Net cash proceeds from the transactions: 3Bn 16

17 Consolidated and adjusted income statements 2017 reconciliation (continuing operations) (In M) Consolidated data Currency hedging Re-measurement of revenue Deferred hedging loss/gain Business combinations Amortization of intangible assets - Sagem/Snecma merger PPA impacts - other business combinations Adjusted data Revenue 16,940 (419) ,521 Other operating income and expenses (14,323) (19) (14,228) Share in profit from joint ventures Recurring operating income 2,771 (438) ,470 Other non-recurring operating income and expenses (90) (90) Profit (loss) from operations 2,681 (438) ,380 Cost of debt (57) (57) Foreign exchange gains (losses) 3, (3,476) Other financial income and expense (22) (22) Financial income (loss) 3, (3,476) Income tax expense (1,716) - 1,215 (39) (2) (542) Profit (loss) from continuing operations 4,029 - (2,254) ,864 Profit (loss) from discontinued operations Attributable to non-controlling interests (62) - - (2) - (64) Attributable to owners of the parent 4,790 - (2,254) ,623 17

18 adjusted income statement (In M) Revenue 15,781 16,521 Other recurring operating income and expenses (13,476) (14,228) Share in profit from joint ventures Recurring operating income % of revenue 2, % 2, % Total one-off items (18) (90) Profit from operations 2,386 2,380 % of revenue 15.1% 14.4% Net financial income (expense) (144) 26 Income tax expense (498) (542) Profit from continuing operations 1,744 1,864 Profit from discontinued operations Profit for the period 1,861 2,687 Profit for the period attributable to non-controlling interests (57) (64) Profit attributable to owners of the parent 1,804 2,623 From continuing operations From discontinued operations EPS (basic in ) 4.34* 6.39** From continuing operations From discontinued operations EPS (diluted in ) 4.26*** 6.28**** From continuing operations From discontinued operations 1, , Including the contribution of the ArianeGroup JV Including (47)M of transaction charges related to the acquisition of Zodiac Aerospace Of which cost of debt of (57)M Apparent tax rate of 23% (change in corporate tax rate in France in 2017 and in deferred taxes reflecting continuing falls in future corporate tax rates enacted in legislation in 2017 in France, Belgium and the United-States) Including the capital gain on the sale of the Security activities: 824M * Based on the weighted average number of shares of 416,325,118 as of Dec 31, 2016 ** Based on the weighted average number of shares of 410,241,043 as of Dec 31, 2017 *** Based on the weighted average number of shares after dilution of as of Dec 31, 2016 **** Based on the weighted average number of shares after dilution of 417,518,248 as of Dec 31, 2017

19 2017 adjusted revenue (in M ) +4.7% 15,781 1,162 16,943 (124) 16,819 (298) 16,521 Organic growth: +7.4% Driven by Aerospace and Defense Currency impact: (0.8)% Negative translation impact from USD spot rate +7.4% Changes in scope: (1.9)% Contribution of Safran s space launcher activities to ArianeGroup starting July 1, 2016: (312)M in H Organic growth 2017 at 2016 scope and exchange rates Currency impact 2017 at 2016 scope Changes in scope

20 2017 adjusted recurring operating income +2.7% 2,404 (125) 2, , ,470 Main profitability drivers Growth in civil aftermarket in Propulsion Increased profitability of Aircraft Equipment and Defense Productivity gains and cost reductions Positive impact of hedged $ Offsetting factors (5.2)% CFM56-LEAP transition including 2016 Organic growth 2017 at 2016 scope and exchange rates Currency impact 2017 at 2016 scope Changes in scope 2017 > Negative margin on LEAP > Lower CFM56 volumes > Costs related to actions to ensure time on wing Lower helicopter turbines contribution Higher R&D charged to EBIT 20

21 Research & Development (In M) Change Total R&D (1,708) (1,367) 341 Customer funded R&D (288) Total self-funded R&D (1,106) (1,053) 53 as a % of revenue 7.0% 6.4% (0.6) pt Tax credit Total self-funded R&D after tax credit (967) (913) 54 Gross capitalized R&D (68) Amortisation and depreciation of R&D (104) (177) (73) P&L R&D in recurring EBIT (728) (815) (87) Decrease of self-funded R&D intensity at 6.4% of 2017 revenue Decline of self-funded R&D (LEAP, A350) Falling capitalization of costs and increased amortization, driven by LEAP: > Capitalization for LEAP-1B ceased on February 2017 and amortization commenced > Capitalization for LEAP-1A ceased on April 2016 and amortization commenced R&D: (87)M to recurring EBIT as a % of revenue 4.6% 4.9% 0.3 pt 21

22 2017 results by activity (In M) 2017 Aerospace Propulsion Aircraft Equipment Defense Holding & others Revenue 16,521 9,741 5,415 1, Year-over-year reported growth in % 4.7% 3.7% 5.2% 8.6% ns Year-over-year organic growth in % 7.4% 7.5% 6.5% 8.9% ns Recurring operating income 2,470 1, (36) as a % of revenue 15.0% 17.7% 12.6% 7.1% ns recurring operating margin evolution (0.2)pt (1.3)pt +1.6pt +1pt ns (vs 2016) 22

23 Aerospace Propulsion Revenue (In M) Change Organic Change Revenue 9,391 9, % +7.5% Recurring operating income 1,786 1,729 (3.2)% % of revenue 19.0% 17.7% (1.3)pt One-off items 3 (40) Profit (loss) from operations 1,789 1,689 % of revenue 19.0% 17.3% Services grew 7.0% driven by civil aftermarket (+11.2% in USD) Civil engines sales up: production ramp up of LEAP (+382 units vs 2016) partially offset by lower CFM56 shipments (-249 units vs 2016) and high thrust engines modules volumes (GE90 and GP7000) Higher military engines deliveries: 33 M88 deliveries compared to 11 units in 2016 Helicopter turbine revenues down 5%: lower volumes in OE and services Recurring operating income Positive contributions: civil aftermarket; military OE; space; improved $ hedge rate Offsetting factors: headwind from CFM56-LEAP transition of 342M compared to 2016; increased R&D charged to P&L; lower helicopter turbines contribution 23

24 Aircraft Equipment Revenue (In M) Change Organic Change Revenue 5,145 5, % +6.5% Recurring operating income % % of revenue 11.0% 12.6% +1.6pt One-off items (5) (14) Profit (loss) from operations % of revenue 11.0% 12.3% Services up 7.0% driven by carbon brakes, MRO for landing gear and nacelles services OE grew by 4.4%: higher shipments for A350, A330, A320 family (neo and ceo) partially offset by lower A380 volumes Recurring operating income Higher volumes in OE and services Cost reduction and productivity actions Improved hedged rate Higher R&D charged to recurring operating income 24

25 Defense (In M) Change Organic Change Revenue 1,238 1, % 8.9% Recurring operating income % % of revenue 6.1% 7.1% +1pt One-off items (7) (14) Profit (loss) from operations % of revenue 5.6% 6.0% Revenue Strong increases in guidance kits, drone and sighting systems Lower volumes of flight control systems notably for helicopters Recurring operating income Positive contribution of increased volumes Continuing benefits of cost control and productivity measures Higher R&D charged to recurring operating income; sustained self-funded R&D level (9.1% of sales) to support the development of newly awarded contracts 25

26 ($bn) FX Hedging: $21.4bn hedge portfolio* (February 15, 2018) Yearly exposure: $7.7bn to $8.0bn Increasing level of net USD exposure for in line with the growth of businesses with exposed USD revenue 2018 fully hedged 7,3 7, /$ hedge rate NEW NEW NEW Target ,3 6,7 *Approx. 45% of Safran US$ revenue are naturally hedged by US$ procurement 2.8 5,2 2, $6.7bn achieved through forward sales and knock out option strategies to rise to a maximum of $8.0bn at a target rate between $1.16 and $1.18 Knock out options barriers set at various levels between $1.26 and $1.31 with maturities up to 18 months 2020 $5.2bn achieved through forward sales and knock out option strategies to rise to a maximum of $8.0bn at a target rate between $1.16 and $1.18 Knock out options barriers set at various levels between $1.26 and $1.32 with maturities up to end $2.5bn achieved through knock out option strategies (Knock out options barriers set at various levels between $1.26 and $1.32 with maturities up to end 2019) 26

27 FX hedging: impact over 2018e-2021e Estimated impact on recurring operating income of targeted /$ hedge rates /$ hedge rate 1,3 EBIT impact vs previous year (in M) 700 1, ,2 1,15 1,1 1,05 50M M 1, , M Up to 100M Up to 100M Up to 100M Up to (100)M e 2019e 2020e 2021e (100) New range of targeted hedge rates at February 27, 2018 Estimated potential tailwind / (headwind) to recurring operating income of the new range of targeted hedge rates at February 27, 2018 Reminder: lower bound of the former range of targeted hedge rates (October 19, 2017) 27

28 2017 Free Cash Flow (in M) Adjusted attributable net profit 1,804 2,623 Depreciation, amortization, provisions and others 847 (213) Cash from operating activities before change in WC 2,651 2,410 Change in WC (168) 316 Cash from operating activities after change in WC 2,483 2,726 Capex (tangible assets) (704) (740) Capex (intangible assets)* (688) (548) Free cash flow 1,091 1,438 Free cash flow generation 32% higher than in 2016 Including : (990)M of profit from discontinued activities and disposal gain (before tax) 697M of amortization of tangibles and intangibles, 198M of provisions (net) and 73M of depreciation Increase of taxes paid Good control of working capital, including advance payments Sustained tangible CAPEX to support production transition and ramp-up Lower intangible CAPEX driven by decrease in capitalised R&D *of which 286M capitalised R&D in 2017 vs 364M capitalised in

29 Net debt position (in M) 2016 final dividend of 0.83 per share to parent holders Net debt at Dec 31, 2016 (1,383) Cash flow from ops 2,410 Change in WC 316 (1,288) R&D and Capex (604) Dividends* (372) (395) Acquisitions/ Disposals Share buybacks (401) & others Pledged Securities 3,006 (2,000) Net cash at Dec 31, Share buybacks > Started in December 2016 and completed in June 2017 > 6.4M shares bought back and classified in treasury shares Acquisitions, divestments > Net proceeds from the sale of the Security activities 2Bn of securities pledged for the period of the tender offer related to the acquisition of Zodiac Aerospace 1,438M Free Cash Flow * Includes (32)M of dividends to minority interests 29

30 Balance sheet highlights (In M) Dec 31, 2016 Dec 31, 2017 Goodwill 1,864 1,831 Tangible & Intangible assets 8,347 8,759 Investments in joint ventures and associates 2,175 2,119 Other non current assets Operating Working Capital 1, Good control of Operating Working Capital Net cash (debt) Assets available for sale (1 383) 2, Finalization of the disposal of Security activities in 2017 Shareholders equity - Group share 6,521 10,321 Minority interests Non current liabilities (excl. net cash (debt)) 1,691 1,599 Provisions 3,264 3,403 Other current liabilities / (assets) net 4,112 (1,622) 30

31 IFRS 15 Bernard DELPIT Group CFO 31

32 IFRS 15 for SAFRAN Main accounting changes for the Group: 1. Fly by the hour / Per landing maintenance contracts : sales will be recognized on a cost-to-cost basis and not at billing anymore. Timing is changed, margin are unchanged over the life of the contract. 2. Combined contracts (development and series): In most contracts, development will not be a separate performance obligation Revenue related to customer financed development will be recognized over product delivery 3. Separation of contracts into performance obligations: The contract transaction price is split over the different performance obligations : reallocation of some contract prices, concessions and warranties Each performance obligation has its timing of revenue recognition 4. Performance warranties granted to customers and penalties deducted from revenue whereas previously recognized in expenses. No impact on EBIT 32

33 IFRS 15 for SAFRAN Safran has chosen the full retrospective method of implementation: Estimated impact on consolidated equity at Jan 1, 2017 in the region of (0.8)Bn Impact on FY 2017 restated Adjusted figures (In M) Published IFRS 15 Restated Change Revenue 16,521 15,953 (568) Recurring operating income 2,470 2,192 (278) % of revenue 15.0% 13.7% No impact on cash flows No impact on cumulative margins of the contracts 33

34 Impact on 2017 Group revenue by nature of activity Adjusted Revenue in M Published IFRS 15 Restated Change OE and Equipment 8,166 8,047 (119) Services 7,809 7,452 (357) Sales of studies (RTDI) (102) Others Total 16,521 15,953 (568) OE and Equipment: Performance warranties granted to customers, extended warranties and penalties deducted from revenue. Separation of some contracts into different performance obligations: Services: Re allocation of the contract transaction price to each performance obligation Change of the timing in which revenue is recognized Maintenance contracts per flight-hour/landing: revenue recognized on a cost to cost basis Performance warranties granted to customers and penalties deducted from revenue 34 Sales of studies (RTDI): Revenue of customer financed development recognized on product delivery as «OE and Equipment revenue» instead of «sales of studies»

35 Impact on 2017 Group revenue and recurring operating income by business line IFRS 15 Aerospace Propulsion (In M) Published Change restated Revenue 9,741 9,357 (384) Recurring operating income 1,729 1,516 (213) % of revenue 17.7% 16.2% Aerospace Propulsion : Maintenance contracts per flight-hour (RPFH, SBH, MCO) recognized on a cost to cost basis Warranties and penalties deducted from revenue Re-allocation of the total contract transaction price over the different performance obligations in some contracts 35 IFRS 15 Aircraft Equipment (In M) Published Change restated Revenue 5,415 5,260 (155) Recurring operating income (63) % of revenue 12.6% 11.8% IFRS 15 Defense (In M) Published Change restated Revenue 1,345 1,316 (29) Recurring operating income (2) % of revenue 7.1% 7.1% Aircraft Equipment : Maintenance contracts per landing recognized on a cost to cost basis Customer financed development recognized on product deliveries in combined contracts Concessions for landing equipments recognized as a deduction of revenue and on a different timing. Defense: Separation of contracts into different performance obligations : reallocation of the contract price and change in the pattern in which revenue is recognized

36 2018 OUTLOOK Philippe PETITCOLIN - CEO 36

37 2018 key assumptions Reminder 2018 assumptions are established considering the full application of the new IFRS15 revenue recognition standard and is based on continuing operations (Aerospace Propulsion, Aircraft Equipment, Defense, Holding & Others) at the group s scope as of January 1, Increase in aerospace OE deliveries despite a fall in high thrust engines modules Civil aftermarket growth in the high-single digits Transition CFM56 LEAP: overall negative impact on Propulsion adjusted recurring operating income variation in the range 150 to 200 million, which represents a significant reduction compared to 2017 Lower CFM56 OE volumes Negative margin on LEAP deliveries Reduction of self-funded R&D (1) of around 150M Positive impact on recurring operating income after activation and amortisation of capitalized R&D Capex outflows of a similar level to 2017 Continued benefits from productivity improvements (1) In application of IFRS 15, self-funded R&D for the period includes some development spending to be funded by customers and recognized in OE revenue at a later date. 37

38 Full-year 2018 outlook Reminder: 2018 guidance is established considering the full application of the new IFRS15 revenue recognition standard and is based on continuing operations (Aerospace Propulsion, Aircraft Equipment, Defense, Holding & Others) at the group s scope as of January 1, Compared to its 2017 estimated restated key metrics for the application of IFRS15, Safran expects for the full year 2018: Adjusted revenue to grow on an organic basis in the range 2% to 4%. At an estimated average spot rate of USD 1.23 to the Euro in 2018, adjusted revenue is expected to be flat. Adjusted recurring operating income to grow between 7% and 10% compared to 2017 (at a hedged rate of USD 1.18 to the Euro) Free cash flow to be above 50% of adjusted recurring operating income, an element of uncertainty being the rhythm of payments by state-clients 38

39 Q&A 39

40 Safran financial communication agenda February 27, 2018 Safran 2017 Earnings IAS 18 and key metrics restated for IFRS Guidance IFRS 15 01/01/2018 scope End of April, 2018 Zodiac Aerospace H Earnings IAS18 (09/01/2017 to 2/28/2018) Safran Q1 revenue (IFRS 15 including 1 month of Zodiac Aerospace) 2017 revenue by quarter and H1 adjusted recurring operating income restated for the application of IFRS 15 Early September, 2018 Safran H1 Earnings (IFRS 15 including 4 months of Zodiac Aerospace) Updated guidance for 2018 (including 10 months of Zodiac Aerospace) Comparable H full P&L and balance sheet restated for IFRS 15 Q Capital Market Day February, 2019 Safran 2018 Earnings (12 months Safran + 10 months Zodiac Aerospace) 40

41 ADDITIONAL INFORMATION 41

42 Equity shareholding As of December 31, 2017 As of February 22, 2018 Public 76.7% French State 14.0% Public 78.2% French State 13.2% Employees 7.4% Employees 6.9% Treasury shares 1.9% Treasury shares 1.7% 42

43 2017: R&D by activity (In M) 2017 Aerospace Propulsion Aircraft Equipment Defense Total self-funded R&D (1,053) (748) (182) (123) as a % of revenue 6.4% 7.7% 3.4% 9.1% Tax credit Total self-funded R&D after tax credit (913) (690) (137) (86) Gross capitalized R&D Amortisation and depreciation of R&D (177) (78) (77) (22) P&L R&D in recurring EBIT (815) (593) (158) (64) as a % of revenue 4.9% 6.1% 2.9% 4.8% 43

44 2016: R&D by activity (In M) 2016 Aerospace Propulsion Aircraft Equipment Defense Total self-funded R&D (1,106) (775) (218) (113) as a % of revenue 7.0% 8.3% 4.2% 9.1% Tax credit Total self-funded R&D after tax credit (967) (716) (174) (77) Gross capitalized R&D Amortisation and depreciation of R&D (104) (46) (41) (17) P&L R&D in recurring EBIT (728) (544) (133) (51) as a % of revenue 4.6% 5.8% 2.6% 4.1% 44

45 Aerospace OE / Services revenue split Reported change of Propulsion OE revenue From July 1, 2016, the space launcher business no longer contributes to Aerospace propulsion OE revenue whereas it had done so in 2016 (Euro 312 million in H1 2016) Revenue Adjusted data (in Euro million) Aerospace Propulsion % of revenue Aircraft Equipment % of revenue % change OE Services OE Services OE Services 4,041 5,350 4,015 5,726 (0.6)% 7.0% 43.0% 57.0% 41.2% 58.8% 3,510 1,635 3,666 1, % 7.0% 68.2% 31.8% 67.7% 32.3% 45

46 Quantities of major aerospace programs Number of units delivered % change CFM56 engines 1,693 1,444 (15)% LEAP engines x6 High thrust engines (29)% Helicopter engines (6)% M88 engines x3 A350 landing gear sets % 787 landing gear sets % A380 nacelles (51)% A330 thrust reversers % A320neo nacelles x3.6 A320 thrust reversers (8)% Small nacelles (biz & regional jets) (21)% 46

47 FX effects Translation effect: foreign currencies translated into Impact on Revenues and Return on Sales Average spot rate $1.11 $1.13 Transaction effect: mismatch between $ sales and costs is hedged Positive impact from hedged $ as planned Impact on Profits Hedge rate $1.24 $1.21 Mark-to-Market effect 3,476M of change in fair value of financial instruments Impact on consolidated statutory accounts Spot rate at close 12/31/ /31/2017 $1.05 $

48 Gross debt and liquidity Gross debt repayment schedule (December 31, 2017) 1,390M 2,552M 694M Gross debt 4,636M Cash & equiv. 6,914M* + Debt hedging instruments 16M Net cash 2,294M* <1 year 1 to 5 years >5 years OCEANE (issued on January 8, 2016) - 650M, maturity 2020, zero coupon Dual tranche offering of floating rate notes (issued on June 28, 2017) - 1bn *Including 2Bn of marketable securities pledged in the context of the public tender offer for the acquisition of Zodiac Aerospace Committed & undrawn financing resource: Credit line B, maturity Dec no covenant Cancellation of the bridge loan ( 1B - maturity March 2019) effective as of February 27,

49 Customer financial guarantees (In $M) Dec. 31, 2016 Dec.31, 2017 Total guarantees Estimated value of pledges 7 16 Net exposure on these guarantees Provisions 14 6 Total guarantees remaining at a historically low level 49

50 Definition Recurring operating income In order to better reflect the current economic performance, this subtotal named recurring operating income excludes income and expenses which are largely unpredictable because of their unusual, infrequent and/or material nature such as: impairment losses/reversals, capital gains/losses on disposals of operations and other unusual and/or material nonoperational items. Civil aftermarket (expressed in USD) This unaudited performance indicator comprises spares and MRO (Maintenance, Repair & Overhaul) revenue for all civil aircraft engines for Safran Aircraft Engines and its subsidiaries only and reflects the Group s performance in civil aircraft engines aftermarket. Free cash flow Free cash flow represents cash flow from operating activities less any disbursements relating to acquisitions of property, plant and equipment and intangible assets. 50