Thales Sa · EURONEXT:HO
Thales Sa — FY2010 Earnings Presentation
50 slides from Thales Sa's earnings presentation, Feb 24, 2011
Slide 1: 2010 Full Year Results
2010 Full Year Results 24 February 2011 February 2011
Slide 2: Agenda
2 / Agenda 1. 2010 financial results 2. 2010: launch of the transformation 3. Outlook 4. Strategy 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
Slide 3: 2010 financial results
2010 financial results February 2011
Slide 4: 2010 overview
4 / 2010 overview Order intake: better than expected An exceptional year for space activities A progressive upturn of commercial aeronautics Confirmed pressure on European defence markets Order book at year-end in excess of €25bn Coming to grips with difficult programmes A400M, Meltem, ticketing: re
Slide 5: Key figures
5 / Key figures in €m 2010 2009 change reported organic Order intake 13,081 13,927 -6% -9% Order book at 31 December 25,418 24,731 +3% +0% Revenues 13,125 12,881 +2% -1% EBIT (*) (92) 151 in % of revenues -0.7% 1.2% Net income, Group share (*) (45) (128) per share in € (0.23) (0.65) Dividend per sha
Slide 6: Main orders
6 / Main orders Book-to-bill rat io Unit value > €100m: 2007 Iridium satellite constellation (US) 2008 2009 2010 (restat ed) CSO military observation satellite (France) 1.04 1.13 1.08 1.00 Secured communication network (NATO) O3b satellite constellation (UK) €1,092m €2,412m Yamal satellite payloads
Slide 7: EBIT bridge
7 / EBIT bridge 535 -721 151 51 -12 -85 40 -51 -92 FY09 EBIT (* ) Negativ e cost Negativ e cost Scope & FX Contract mix & Add'l P&L Other SG&A Add'l restruct. FY10 EBIT (* ) v ariances on v ariances on other expensed R&D charges projects - FY09 projects - FY10 (organic) (* * ) (* * ) (*) Before purc
Slide 8: Removal of the main uncertainties
8 / Removal of the main uncertainties Still significant provisions on some complex, pre-2009 programmes Meltem, naval electronic warfare A400M Avionics Ticketing (incl. Denmark) and other security (T3S) Lorads III More than €700m of charges on these programmes February 2011
Slide 9: R&D
9 / R&D Capitalised R&D costs (€m) 160 129 Total self funded R&D (€m) 113 120 664 655 80 569 43 600 40 450 0 2008 2009 2010 300 Net P&L impact of capitalised R&D costs (€m) 150 73 75 0 62 2008 2009 2010 50 25 -18 0 2008 2009 2010 -25 Sustaining the self funded R&D effort Reducing R&D capitalisation
Slide 10: Net Result
10 / Net Result in €m 2010 2009 EBIT (*) (92) 151 Impairment of non-current operating assets (10) (260) Net capital gains (losses) and others (22) (1) Income of operating activities (*) (124) (110) Cost of net financial debt (57) (66) Other financial results (15) (45) Other components of pension cha
Slide 11: Defence & Security: 2010 key figures
11 / Defence & Security: 2010 key figures in €m 2010 2009 change reported organic Order intake 6,173 8,372 -26% -28% Order book at 31 December 14,310 15,223 -6% -9% in months of revenues 23 months 24 months Revenues 7,515 7,492 +0% -3% EBIT (*) 153 329 -54% -56% in % of revenues 2.0% 4.4% (*) Before
Slide 12: Aerospace & Transport: 2010 key figures
12 / Aerospace & Transport: 2010 key figures in €m 2010 2009 change reported organic Order intake 6,845 5,439 +26% +23% Order book at 31 December 11,022 9,408 +17% +14% in months of revenues 24 months 21 months Revenues 5,539 5,317 +4% +1% EBIT (*) (221) (105) in % of revenues -4.0% -2.0% (*) Before
Slide 13: Cash flow – Net debt
13 / Cash flow – Net debt Free operating cash flow (in €m) (* ) Net cash position (in €m) 800 31/12/08 31/12/09 31/12/10 750 191 500 377 271 -91 250 0 -456 2008 2009 2010 A strong cash generation (2008-2010: €1.4bn) (*) FOCF = Operating cash flow plus changes in working capital requirement (WCR) and
Slide 14: 2010: launch of the transformation
2010: launch of the transformation February 2011
Slide 15: A necessary reform
15 / A necessary reform Thales is not delivering its full potential Insufficiently controlled risks taken to fuel the growth An organisation not allowing to take full advantage of internal synergies A decade without delivering a level of profitability in line with our European peers Thales is facing
Slide 16: Thales needs to become…
16 / Thales needs to become… … more dynamic and reactive Focused on growth markets Acceleration of innovation … more integrated Reinforcement of accountability Reinforcement of team spirit … more efficient Rigorous management of bids and projects Probasis performance plan For a profitable growth Feb
Slide 17: More dynamic and reactive
17 / More dynamic and reactive Growth Global rollout of Key Account Management More responsibility for local subsidiaries A stronger international footprint Innovation Appointment of Group CTO, member of the ExCom Develop transverse technological synergies Accelerate and rationalise global product p
Slide 18: More integrated
18 / More integrated More accountability Increased accountability of management of subsidiaries Clearer rules for responsibility sharing between entities More team spirit Adjustment of bonus rules: 20% tied to team performance New rules for intra-group trading 'Solidarity' mechanisms between subsidi
Slide 19: More efficient
19 / More efficient Bids & projects New procedures risk control and collective decision-making Stronger reporting Increased control Involvement of corporate general management More power granted to Quality and Financial Control Launch of Probasis €1.3bn of gross savings implemented by 2014 February
Slide 20: Outlook
Outlook February 201 THALES
Slide 21: Objectives for 2011 and 2012
21 / Objectives for 2011 and 2012 A book-to-bill ratio around 1 Underpinned by export Slightly growing revenues Stable in Defence & Security Confirmed progressive upturn in Aerospace & Transport EBIT(*) 2011 objective: 5% after restructuring charges of about 1.5% 2012 objective: 6% after restructuri
Slide 22: 2011-2012: profitability upturn
22 / 2011-2012: profitability upturn 2011 First significant impacts of Probasis Increased control over complex contracts 2012 Ramp-up of Probasis Lower restructuring charges vs. 2011 Objectives: 5% operational margin (*) in 2011, 6% in 2012 (*) Before purchase price allocation impact (PPA) February
Slide 23: Probasis: key principles
23 / Probasis: key principles Sustain efficiency Offsetting competitive pressure through recurring cost savings Offer affordable solutions to our governmental customers Bridge the profitability gap with European peers Through structural measures Non-quality costs (reduce cost overruns on projects):
Slide 24: Probasis in 2010: first results
24 / Probasis in 2010: first results Supply Chain Re-negotiation with suppliers Standard building blocks Acceleration of lean manufacturing actions SG&A Site optimisation UK (4 sites closed) Australia, Belgium, Singapore Implementation of shared service centres: UK New travel policy 20% savings Rati
Slide 25: Probasis: implementation of savings actions
25 / Probasis: implementation of savings actions Progress of Probasis Close to 25% of actions 0% 25% 50% 75% 100% implemented in 2010 2010 70% of actions implemented 2011 by 2012 2012 2013 Confirmation of a €1.3bn gross savings target by 2014 2014 Probasis progress is on track February 2011
Slide 26: Probasis: impact of gross savings
26 / Probasis: impact of gross savings Time lag between Gross sav ings (in €m) before impact of the competitiv e pressure 35% 65% Implementation of savings 1200 actions… 1000 … and gross impact on EBIT – before external factors 800 (competitive pressure, 600 volume, scope, FX…) 400 Increased impact
Slide 27: Strategy
Strategy February 201 THALES
Slide 28: Strengthen our technological leadership
28 / Strengthen our technological leadership Avionics & IFE Growing installed base Rail traffic control Combined approach : Signalling / Communication & Supervision Civil telecom satellites Competitiveness of our products ATM and radars Development of future systems (SESAR, NextGen…) Optronics Elect
Slide 29: Develop our positions
29 / Develop our positions Security Cyber-security : cryptography, highly secured data centres, secured cloud computing Urban security, airports, borders Drones Airborne (Male…) Naval (UUV, AUV, Espadon project…) Services: target 25% of revenues by 2020 Space : continue the development of institutio
Slide 30: Sustain our positions on key domestic markets (France, UK)
30 / Sustain our positions on key domestic markets (France, UK) Confirmed budgetary pressures Strong assets Thales: a key player on large national programmes France: Rafale, FREMM frigates, Scorpion, FSAF air defence systems… UK: QE-class aircraft carriers, FSTA air tankers, Watchkeeper UAV… Renewal
Slide 31: Capture growth on international markets
31 / Capture growth on international markets Target areas: growth markets Emerging economies Rail, ATM, Avionics, defence export Our assets A reputation and a significant record of sale in these regions Local subsidiaries already in position on flagship products Our strategy Develop existing subsidi
Slide 32: Ability to grow
32 / Ability to grow Revenues by destination Emerging markets RoW 6% = 30% of revenues Middle East 10% France 22% 30% In line with market expectations: Asia 10% less traditional export, UK more local added value Australia 4% 11% N America 10% Civil = 45% of revenues Rest of Europe 27% Growth of reve
Slide 33: A value creating strategy
33 / A value creating strategy Customer-centric Boost Strict financial policy Probasis plan organisation innovation Non-quality cost reduction on projects Develop transverse Sales organisation technological synergies Supply chain simplification WCR discipline performance Key Technical Domains Local
Slide 34: Annexes
Annexes February 201 THALES
Slide 35: 2011 Agenda
35 / 2011 Agenda Q1 2011 Revenues 11 May 2011 General Meeting 18 May 2011 Paris Air Show 20-26 June 2011 H1 Results 27 July 2011 February 2011
Slide 36: Area A: key figures
36 / Area A: key figures in €m 2010 2009 change reported organic Order intake 3,637 3,797 -4% -12% Order book at 31 December 8,325 8,441 -1% -7% Revenues 4,370 4,135 +6% -2% EBIT (*) 92 192 -52% -57% in % of revenues 2.1% 4.6% (*) Before purchase price allocation impact (PPA) February 2011
Slide 37: Area B: key figures
37 / Area B: key figures in €m 2010 2009 change reported organic Order intake 2,561 3,019 -15% -17% Order book at 31 December 4,250 4,393 -3% -5% Revenues 2,764 2,590 +7% +5% EBIT (*) 111 228 -51% -54% in % of revenues 4.0% 8.8% (*) Before purchase price allocation impact (PPA) February 2011
Slide 38: France: key figures
38 / France: key figures in €m 2010 2009 change reported organic Order intake 6,880 7,105 -3% -3% Order book at 31 December 12,843 11,897 +8% +8% Revenues 5,987 6,150 -3% -3% EBIT (*) (291) (216) in % of revenues -4.9% -3.5% (*) Before purchase price allocation impact (PPA) February 2011
Slide 39: Pensions
39 / Pensions in €m 2010 2009 Externally funded UK (354) (405) Netherlands (23) (9) Total (377) (414) Mainly internally funded France (552) (486) Others (268) (247) Total (820) (733) Total unfunded status before tax (1,197) (1,147) Gross obligations UK (2,402) (2,192) Netherlands (760) (669) Februar
Slide 40: Free operating cash flow
40 / Free operating cash flow in €m 2010 2009 Operating cash flow 331 485 Change in WCR & contigency reserves 462 925 Payment of pension benefits and scheme (106) (99) settlements Income tax paid (107) (98) Net operating cash flow 580 1,213 Net operating investments (309) (413) o/w capitalised R&D (
Slide 41: Net cash flow – Net debt
41 / Net cash flow – Net debt in €m 2010 2009 Free operating cash flow 271 800 Net (acquisitions) / disposals 87 (148) Deficit payments on pensions in the UK (57) (58) Dividends (98) (205) Net cash flow 203 389 in €m (Net debt) / Net cash - 31 December 2009 (91) Net cash flow 203 Sale / (Acquisition
Slide 42: R&D
42 / R&D in €m 2010 2009 2008 P&L expense 612 551 440 Capitalised R&D 43 113 129 Total R&D funding 655 664 569 Impact of capitalisation on the P&L in €m 2010 2009 2008 Capitalised R&D 43 113 129 Amortisation charge (61) (52) (56) Net impact on EBIT (*) (18) 61 73 Net impact on margin -0.1% 0.5% 0.6%
Slide 43: PPA impact
43 / PPA impact in €m 2010 PPA 2010 before PPA (*) impact reported Order intake 13,081 0 13,081 Order book at 30 June 25,418 0 25,418 Revenues 13,125 0 13,125 EBIT (92) (82) (173) in % of revenues -0.7% -1.3% Income tax 193 28 221 Equity in unconsolidated affiliates 63 (8) 55 Net income (Group share
Slide 44: Order intake by destination
44 / Order intake by destination change in €m 2010 2009 Order intake by destination reported organic France 3,083 3,792 -19% -19% UK 1,301 1,350 -4% -7% RoW Middle East 5% Rest of Europe 3,462 3,639 -5% -6% 7% France 24% Asia Europe 7,846 8,781 -11% -12% 8% Australia North America 2,226 1,092 +104%
Slide 45: Revenues by destination
45 / Revenues by destination change in €m 2010 2009 Revenues by destination reported organic France 2,931 3,019 -3% -3% UK 1,500 1,467 +2% -1% RoW 6% Rest of Europe 3,419 3,464 -1% -2% Middle East 10% France 22% Europe 7,850 7,950 -1% -2% Asia 10% North America 1,315 1,158 +14% +7% Australia 584 525
Slide 46: Q4 2010 orders
46 / Q4 2010 orders in €m Q4 2010 Q4 2009 change reported organic Defence & Security 2,471 3,488 -29% -31% Aerospace & Transport 3,199 1,892 +69% +64% Others 26 58 Total 5,696 5,438 +5% +2% in €m Q4 2010 Q4 2009 change reported organic Area A 1,196 1,580 -24% -30% Area B 935 1,017 -8% -11% France 3,
Slide 47: Q4 2010 revenues
47 / Q4 2010 revenues in €m Q4 2010 Q4 2009 change reported organic Defence & Security 2,619 2,692 -3% -6% Aerospace & Transport 1,822 1,832 -1% -3% Others 23 27 Total 4,464 4,551 -2% -5% in €m Q4 2010 Q4 2009 change reported organic Area A 1,347 1,375 -2% -10% Area B 1,020 940 +9% +7% France 2,097
Slide 48: 2010: Key figures by sector
48 / 2010: Key figures by sector Defence & Aerospace & in €m Other Total Security Transport Order intake 6,173 6,845 63 13,081 Order book at 31 December 14,310 11,022 86 25,418 Revenues 7,515 5,539 71 13,125 EBIT(*) 153 (221) (24) (92) in % of revenues 2.0% -4.0% -0.7% (*) Before purchase price allo
Slide 49: Main programmes in backlog
49 / Main programmes in backlog Amount Programme More than €600m Iridium (USA) Rafale (France) Fremm Frigates (France/Italy) Between €400 and €600m London Underground signalling (UK) Watchkeeper (UK) CVF aircraft carrier (UK) Between €200 and €400m FSAF air defence systems (France/Italy) Sentinel 3
Slide 50: www.thalesgroup.com
www.thalesgroup.com THALES - 45, rue de Villiers – 92526 Neuilly-sur-Seine Cedex – France February 2011