2017 Half year results 26 July 2017

Transcription

1 2017 Half year results 26 July

2 H business environment Aerospace Avionics: continued positive dynamics for cockpit avionics and in-flight entertainment and connectivity Space: slow start of the year in civil telecom Transport Strong demand in both emerging markets and Europe Defence and security Geopolitical tensions and security threats Improved outlook in mature markets despite ongoing budget pressures Opportunities in emerging markets H results - 2

3 H highlights Solid order intake, driven by multiple large contracts Robust sales growth, ahead of full-year target Significant increase in profitability, supported by all segments Acceleration of R&D investments and digital transformation initiatives Continued focus on profitable and sustainable growth H results - 3

4 H key figures Order intake Sales EBIT and EBIT margin (b) m m 6,846 7,241 m 5,423 5, % (a) +5.9% (a) +17% (a) % +0.9 pts (a) 8.8% H H H H H H Adjusted net income (b) Free operating cash-flow (b) Net cash position +15% m m m , ,366 2,294 1,439 H H (a) Organic: at constant scope and exchange rates (b) The definition of all non-gaap measures can be found in appendix H results - 4 H H Dec 15 June 16 Dec 16 June 17

5 H order intake Good order intake momentum, up 10% 8 large (a) orders booked in H telecommunication satellites In-flight entertainment for a large North American airline 4 advanced defence systems in all milieus (air, naval, ground) Management and support of French MoD headquarter information and communication systems (Balard) Solid base of smaller orders Order intake by contract unit value m 5, % 5,972 Unit value > 100m 10m < 1,180 1,531 Unit value 1,417 < 100m Unit value < 10m 3,371 3,375 H H (a) With a unit value over 100m H results - 5

6 H organic sales growth Confirmed growth in mature markets Continuous high growth in emerging markets +15%, after +14% in H Low sales growth in Q2, as expected Cutoff effects and strong bases of comparison +6.8% +2.2% Mature markets Organic (a) sales growth +15.1% +14.2% Emerging markets +8.9% +5.9% Total (a) In this presentation, "organic" means "at constant scope and exchange rates" H H H results - 6

7 Summary P&L: from sales to EBIT H H change m % of sales m % of sales total organic Sales 7,241 6, % +5.9% Gross margin (a) 1, % 1, % +7% +7% Indirect costs (a) (1,154) -15.9% (1,107) -16.2% +4% +3% o/w R&D expenses (360) -5.0% (325) -4.7% +11% +9% o/w Marketing & Sales expenses (521) -7.2% (515) -7.5% +1% +0% o/w General & Administrative expenses (274) -3.8% (268) -3.9% +2% +2% Restructuring costs (24) -0.3% (34) -0.5% -31% -31% Share of net result of equity-accounted affiliates, excluding Naval Group (ex DCNS) % % -4% +3% EBIT before Naval Group (ex DCNS) % % +15% +17% Share of net result of Naval Group (ex DCNS) % % +37% +37% EBIT % % +16% +17% (a) Gross margin and indirect costs items adjusted for impact of expenses related to acquisitions H results - 7

8 EBIT improvement driven by solid operational performance m 551 Scope, currency & pensions Operational performance Restructuring expenses: down +11 R&D: up -31 Marketing & sales: stable 0 Naval Group (ex DCNS) +7 H1 2016: +20 H1 2017: Scope: -7 Currency: -2 Pensions: -7 H EBIT H EBIT H results - 8

9 EBIT by operating segment m H H total change organic Aerospace % % +10% +11% Transport 6 0.9% (12) -1.6% NM NM Defence & Security % % +12% +14% EBIT operating segments % % +15% +17% Other (34) (29) EBIT excluding Naval Group % % +15% +17% Naval Group EBIT total % % +16% +17% Recovery of Transport on track Solid performance of Aerospace and Defence & Security segments H results - 9

10 Aerospace: H key figures m H H change total organic Order intake 2,238 2,218 +1% +1% Sales 2,872 2, % +7.2% EBIT % +11% in % of sales 9.2% 9.0% +0.2 pts +0.3 pts Good momentum in avionics and in-flight entertainment (IFE) order intake, offset by slowdown in Space Sales growth driven by commercial aircraft avionics, IFE and Space Increase in R&D investments H results - 10

11 Transport: H key figures m H H change Solid order intake total Flat sales growth, due to high comps (H sales organically up 29% compared to H1 2015) Margin recovery on track organic Order intake % +31% Sales % -0.1% EBIT 6 (12) N/M N/M in % of sales 0.9% -1.6% +2.5 pts +2.6 pts H results - 11

12 Defense & Security: H key figures m H H change total organic Order intake 3,035 2, % +14% Sales 3,631 3, % +6.5% EBIT % +14% in % of sales 10.3% 9.8% +0.6 pts +0.7 pts Strong order intake momentum, notably in air and naval systems, and information and communication systems Sales growth driven by wide range of businesses Increased profitability driven by top line growth, savings on structure costs, as well as lower restructuring H results - 12

13 Summary P&L: from EBIT to adjusted net income m H H EBIT Cost of net financial debt and other financial results (18) (2) Finance costs on pensions and other employee benefits (31) (34) Income tax (139) (117) Effective tax rate 27.0% 26.2% Adjusted net income Minorities (26) (31) Adjusted net income, Group share EPS: adjusted net income, Group share, per share (in ) H results - 13

14 H Free operating cash-flow m H H Operating cash-flow before interest, taxes and WCR changes Change in WCR and reserves for contingencies (227) (337) Pension expenses, excluding contributions related to the reduction of the UK pension deficit (62) (52) Net financial interest paid (6) (5) Income tax paid (46) (39) Net cash-flow from operating activities Net operating investments (189) (226) Free operating cash-flow H results - 14

15 Movement in net cash over H High net cash position driven by free operating cash-flow m Free operating cash-flow Deficit payment, UK pensions Acquisitions & disposals Dividends 2, H1 15: -304 H1 16: +45 H1 15: -161 H1 16: -212 Other -34 2,294 Net cash Net cash at 31 Dec 16 at 30 June 17 H results - 15

16 Strategy and outlook

17 Our priorities for 2017 Building a growing, more global and more profitable Thales Steady focus on competitiveness Strengthen culture of competitiveness through groupwide initiatives Accelerate procurement initiatives Transformation plan of support functions well engaged Recovery of transport profitability well underway Sustaining sales growth Leverage growth in civil markets and inflection of defence budgets Build on successful expansion into emerging markets Reinforce technology leadership through focused R&D investment Accelerate innovation thanks to group-wide digital expertise H results - 17

18 Digital innovation: a key growth opportunity in our markets Enhanced products and systems Disruptive solutions and business models Cybersecured signalling systems Connected armored vehicles Autonomydriven Platforms accessing challenging environments Platforms complementing other solutions Artificial intelligenceenhanced reconnaissance Advanced encryption for cloud-based information systems Digital platformdriven Decision support for improved operations Digital platforms of services Strong interest for digital solutions across all our markets H results - 18

19 Guavus acquisition: further strengthening Thales digital leadership Data collection Interpretation Conversion into actionable data Real-time big data platform and data analytics competencies identified as essential to accelerate Thales digital offering Guavus fits perfectly Thales requirements Proven industrialized platform Able to process massive real-time data flows Multiple use cases identified, across all Thales businesses Deal expected to close in Q Continued interest in targets supporting digital strategy in several Group markets H results - 19

20 Digital factory: 150m investment to capitalize on Thales assets Digital center of excellence Bring together critical mass of experts to accelerate key initiatives Digital platform foundry Build common digital platform to maximize economies of scale and synergies Start-up incubator Supply simple environment to host both internal and external start-ups Digital academy Disseminate digital culture and technologies across Group H results - 20

21 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 H results - 21

22 Appendix

23 Upcoming events Q3 and 9m 2017 sales 19 October 2017 Full Year 2017 results 6 March 2018 H results - 23

24 H order intake by destination m H H total change organic France 1,811 1, % +51% United Kingdom % -13% Other European countries 1,143 1,304-12% -13% Europe 3,323 2, % +13% North America % +38% Australia/NZ % +5% Asia % +6% Middle East (a) % +20% Rest of the world (a) % -33% Emerging markets 1,571 1,617-3% -2% Total 5,972 5, % +10% Asia 12% Middle East 9% Australia/ NZ 6% North America 12% RoW 6% H Other European countries 19% France 30% UK 6% (a) 2016 numbers adjusted to take into account transfer of some countries from Middle East to Rest of the world H results - 24

25 H sales by destination m H H total change organic France 1,768 1,661 +6% +7% United Kingdom % +9% Other European countries 1,415 1,417 0% -1% Europe 3,816 3,701 +3% +4% Middle East 11% RoW 6% France 24% North America % -13% Australia/NZ % +13% Asia 1, % +12% Middle East (a) % +28% Rest of the world (a) % +2% Emerging markets 2,283 1, % +15% Total 7,241 6,846 +6% +6% (a) 2016 numbers adjusted to take into account transfer of some countries from Middle East to Rest of the world Asia 15% Australia/NZ 6% North America 10% H Other European countries 19% UK 9% H results - 25

26 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 Aerospace +6% -1% -6% +3% +3% +6% -4% +1% -1% +13% +15% +7% +16% +1% Transport +3% +15% +14% +40% +15% +7% -2% -3% -7% -3% -3% -7% -13% -4% Defence & security -2% -8% +1% +0% -5% +19% +2% +7% +13% +3% +14% -3% +8% +5% Total +1% -5% -3% +2% -2% +11% -0% +6% +7% +10% +15% -1% +11% +3% H results - 26

27 Main programmes in backlog at 30 June 2017 Amount Programme More than 600m London Underground signalling Hawkei (Australia) Rafale (France) Rafale (Qatar) Rafale (India) Between 400m and 600m French military satellite (Comsat NG) Contact Software Defined Radio (France) Rafale (Egypt) H results - 27

28 H adjusted net result m Consolidated P&L H Amortisation of intangible assets (PPA) Expenses related to acquistions Disposal of assets and others Change in fair value of derivative FX instruments Actuarial gains/losses on other long term benefits Adjusted P&L H Sales 7,241 7,241 Cost of sales (5,501) 1 (5,500) R&D (363) 3 (360) SG&A costs (802) 7 (795) Restructuring costs (24) (24) Amortisation of intangible assets (PPA) (54) 54 0 Income from operations Impairment of non-current operating assets Disposal of assets, change in scope and others (9) 9 (0) Share in net income (loss) of equity affiliates Income of operating activities incl. share in net income of equity affiliates 550 EBIT 637 Impairment of non-current operating assets Cost of net financial debt 2 2 Other financial income (expense) (63) 43 (20) Finance costs on pensions and other employee benefits (28) (3) (31) Income tax (104) (19) (3) 1 (15) 1 (139) Net income (loss) (2) 450 Minorities (22) (4) (26) Net income (loss), Group share (2) 424 H results - 28

29 H adjusted net result m H results - 29 Consolidated P&L H Amortisation of intangible assets (PPA) Expenses Disposal of assets related to and others acquisitions Change in fair value of derivative FX instruments Actuarial gains/losses on other long term benefits Adjusted P&L H Sales 6,846 6,846 Cost of sales (5,223) (5,223) R&D (a) (327) 2 (325) SG&A costs (a) (788) 5 (783) Restructuring costs (34) (34) Amortisation of intangible assets (PPA) (40) 40 0 Income from operations Impairment of non-current operating assets Disposal of assets, change in scope and others 95 (95) 0 Share in net income (loss) of equity affiliates Income of operating activities incl. share in net income of equity affiliates 586 EBIT 551 Impairment of non-current operating assets Cost of net financial debt 1 1 Other financial income (expense) (49) 46 (4) Finance costs on pensions and other employee benefits (48) 15 (34) Income tax (80) (14) (3) (0) (16) (5) (117) Net income (loss) (95) Minorities (26) (5) (1) (31) Net income (loss), Group share (95) (a) Provisions for bad debt transferred from SG&A cost to cost of sales

30 Reminder: implementation of IFRS15 revenue accounting standard Primary scope for Thales: construction contracts (50% of sales) Impact strictly limited to the timing of revenue and profit recognition No impact on total revenue and profit of individual contracts No impact on cash flow statement Challenge: 2017 P&L impact not representative of following year impact Implementation timeline Mandatory from 1/1/2018 Communication on estimated impacts expected in conjunction with Q order intake and sales Main areas of attention for Thales 1 Split of contracts among performance obligations Example: build and run contracts 2 3 New requirements to recognize revenue over time: No alternative use Enforceable right to payment Method to measure percentage of completion moved from technical milestones to cost-to-cost Uncertain impact in transition period, no expected long-term impact H results - 30

31 Evolution of net pension provision bn Other countries United Kingdom France 31 Dec Dec Dec Dec Jun 17 Liability discount rate France 3.2% 1.5% 2.0% 1.5% 1.6% UK 4.6% 3.7% 4.0% 2.8% 2.6% H results - 31

32 Q order intake by segment m Q Q change total organic Aerospace 1,300 1,189 +9% +9% Transport % +63% Defence & Security 1,923 1, % +19% Other 22 8 Total 3,692 3, % +20% H results - 32

33 Q sales by segment m Q Q change total organic Aerospace 1,619 1, % +1.1% Transport % -4.4% Defence & Security 2,120 2, % +5.5% Other Total 4,183 4, % +2.5% H results - 33

34 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, ie 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 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 H results - 34

35 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.