Thales Sa · EURONEXT:HO
Thales Sa — FY2007 Earnings Presentation
69 slides from Thales Sa's earnings presentation, Mar 7, 2008
Slide 1: 2007 Results
THALES AEROSPACE @) 2007 Results 7 March 2008
Slide 2: 2007 Results agenda
2007 Results Major trends Business trends Financial results Financial situation March 2008 2
Slide 3: 2007 Key figures
2007 Key figures in €m 2007 2006 change Order intake 12,856 10,818 + 19% Order book at year-end 22,675 20,676 + 10% Revenues 12,296 10,264 + 20% Income from operations * 936 755 + 24% in % of revenues 7.6% 7.3% EBIT * (IFO after restructuring costs) 858 562 + 53% in % of revenues 7.0% 5.5% Net incom
Slide 4: 2007: a pivotal year with very good results
2007: a pivotal year with very good results Expanded business portfolio with the successful integration of new businesses Results in line with ambitious objectives strong revenue growth, further improvement in operating performance Net income of €1bn* combining higher operating results with high cap
Slide 5: Highly satisfactory 2007 results
Highly satisfactory 2007 results Strong revenue growth, + 20% to €12.3 bn including + 6.4% in historical businesses Strong improvements in operating performance* IFO, + 24% to €936m Margin up from 7.3% to 7.6% and restructuring costs down to 0.6% of revenues EBIT, + 53% to €858m Margin up from 5.5%
Slide 6: A solid financial position
A solid financial position 2007 acquisitions > €2bn Net debt limited to €291m at end 2007 Net equity of €3.9bn, + €1.6bn Operating cash flow before WCR, + 16% to €1,101m Operating free cash flows, + 23% to €549m representing 64% of EBIT March 2008 6
Slide 7: 2007 Business Trends
2007 BUSINESS TRENDS March 2008 7
Slide 8: Business trends in 2007
Business trends in 2007 change in €m 2007 2006 total organic Revenues 12,296 10,264 + 20% + 6.4% Order intake 12,856 10,818 + 19% + 1% book to bill 1.05 1.05 Order book at year-end 22,675 20,676 + 10% + 2% in months of revenues 22 24 March 2008 8
Slide 9: Core business domains
3 core business domains 2007 Revenues : €12.3bn Aerospace / Space Defence €3.6bn €5.2bn 29.3% 42.5 % 28.2% Security €3.5bn March 2008 9
Slide 10: 20% revenue growth in 2007
20% revenue growth in 2007 Total change + 20% Organic growth + 6.4% Revenues in €m 2006 10,264 Scope impact + 1,583 Acquisitions + 2,072 Disposals - 489 Exchange impact - 162 Organic growth + 611 2007 12,296 March 2008 10
Slide 11: 20% revenue growth in 2007 by domain
20% revenue growth in 2007 change Revenues in €m 2007 2006 total organic Aerospace / Space 3,597 2,492 + 44% + 4.5% Defence 5,222 5,320 - 2% + 6.0% Security 3,415 2,278 + 50% + 8.8% Others and divested businesses 62 174 ns ns Total 12,296 10,264 + 20% + 6.4% March 2008 11
Slide 12: 19% growth in new orders in 2007
19% growth in new orders in 2007 12,856 in €m + 19% 1,092 10,818 2,390 305 1,990 acquired disposed 1,268 9,774 + 6% 9,245 2006 2007 March 2008 Acquisitions < €100m Unit value > €100m Unit value < €100m 12
Slide 13: Order book in months of revenues
An order book worth 22 months of revenues in €bn 22.7 at year-end + 10% 20.7 Security 16 months 5.1 18 months 3.1 Naval France disposed to DCNS 2.8 10.4 Defence 26 months 9.7 24 months Aerospace 7.2 / Space 25 months 5.1 24 months March 2008 2006 2007 13
Slide 14: 2007 Results
2007 RESULTS Income of operating activities Net income March 2008 14
Slide 15: Strong increase in Income from operations
Strong increase in Income from operations Total change + 24% Organic growth + 7.9% IFO in €m 2006 IFO 755 Scope impact + 155 Disposals - 17 Acquisitions + 172 Exchange impact - 30 Organic growth + 56 2007 IFO 936 * March 2008 * before accounting impact of PPA 15
Slide 16: Operating margin of 7.6%
Operating margin* of 7.6% in €m 2007 2006 change total organic Revenues 12,296 10,264 + 20% + 6.4 % Gross margin 2,781 2,381 + 17% + 3.5 % in % of revenues 22.6% 23.2% Indirect costs (1,845) (1,626) + 13% + 1.5% in % of revenues 15.0% 15.8% Income from operations 936 755 + 24% + 7.9% in % of revenue
Slide 17: Indirect costs
Indirect costs in €m 2007 2006 change total organic R & D expenses 443 361 + 23% + 3.4% % of revenues 3.6% 3.5% M & S expenses 841 805 + 4% - 1.3% % of revenues 6.8% 7.8% G & A expenses 561 460 + 22% + 5.1% % of revenues 4.6% 4.5% Total indirect costs 1,845 1,626 + 13% + 1.5% % of revenues 15.0% 15.
Slide 18: Self-funded R&D
Self-funded R&D in €m 2007 2006 variation P&L expense 443 361 + 23% Capitalised R&D 141 157 - 10% Total R&D funding 584 518 + 13% Impact of capitalisation on the P&L 2007 2006 Capitalised R&D 141 157 Amortisation charge (53) (50) Net impact on P&L 88 107 March 2008 Net impact on margin (0.7%) (1.0%)
Slide 19: IFO and margin by business domain
IFO* and margin* by business domain in €m 2007 2006 change Aerospace / Space 255 203 + 26% in % of revenues 7.1% 8.1% Defence 459 424 + 8% in % of revenues 8.8% 8.0% Security 237 168 + 41% in % of revenues 6.9% 7.4% Others & divested businesses (15) (40) Income from operations 936 755 + 24% in % of
Slide 20: Aerospace/Space: 2007 key figures
Aerospace/ Space: 2007 key figures in €m 2007 2006 variation Revenues 3,597 2,492 + 44% Income from operations 255 203 + 26% in % of revenues 7.1% 8.1% EBIT (IFO - restructuring costs) 240 161 + 49% in % of revenues 6.7% 6.5% Order book at year-end 7,228 in months of revenues 23 months Order intake
Slide 21: Defence: 2007 key figures
Defence: 2007 key figures in €m 2007 2006 variation Revenues 5,222 5,320 - 2% Income from operations 459 424 + 8% in % of revenues 8.8% 8.0% EBIT (IFO – restructuring costs) 424 370 + 15% in % of revenues 8.1% 7.0% Order book at year-end 10,333 in months of revenues 24 months Order intake 5,402 Marc
Slide 22: Security: 2007 key figures
Security: 2007 key figures in €m 2007 2006 variation Revenues 3,415 2,278 + 50% Income from operations 237 168 + 41% in % of revenues 6.9% 7.4% EBIT (IFO – restructuring costs) 224 129 + 74% in % of revenues 6.6% 5.7% Order book at year-end 5,098 in months of revenues 18 months Order intake 3,372 Ma
Slide 23: From IFO to EBIT
From IFO to EBIT * in €m 2007 2006 variation Income from operations 936 755 + 24% - Restructuring costs (78) (193) = ’EBIT’ 858 562 + 53% in % of revenues 7.0% 5.5% * EBIT: IFO after restructuring costs & before accounting impact of PPA March 2008 23
Slide 24: Non-recurring items
Non-recurring items In €m 2007 2006 Impairment of non current operating operations (96) (9) Net capital gains 432 23 Cumulated impact on Income of Operating Activities + 336 + 14 Impact of changes in defined-benefit pension schemes 93 21 Total impact on Pre-tax Income + 429 + 35 March 2008 24
Slide 25: Net income: €1bn
Net income*: €1bn in €m 2007 2006 EBIT 858 562 Impairment of non current operating assets (96) (9) Net capital gains 432 23 Income of operating activities 1,194 576 Cost of net financial debt (45) (42) Other financial results (34) (32) Other components of pension charge 65 (19) Income tax (217) (100
Slide 26: DCNS results
DCNS results DCNS 2007 results (at 100%) in €m Revenues 2,821 Operating income * 203 in % of revenues 7.2% Restructuring costs (31) EBIT * 172 in % of revenues 6.1% Net income before PPA 174 Net income 146 Order intake 1,862 Order book at end 2007 8,328 in months of revenues 35 March 2008 Net cash a
Slide 27: Limited sensitivity to the dollar
Limited sensitivity to the dollar % of revenues 1- Limited direct exposure: Sales by businesses located in US $ zone 7% (Sales & purchase in US$) Dollar sales by businesses in other zones 9% - Purchases in dollars by these businesses (4%) = Net dollar impact 5% 2- Additional indirect effects must be
Slide 28: Cash flow table & financial situation at year-end
2007 results CASH FLOW TABLE & FINANCIAL SITUATION AT YEAR-END Cash flows Net debt & Equity at year-end March 2008 28
Slide 29: Free operating cash flows of €549m
Free operating cash flows of €549m in €m 2007 2006 Operating cash flows 1,101 947 change in WCR & contingency reserves 107 (24) payment of pension benefits * (98) (73) income tax paid (56) (29) Net operating cash flows 1,054 821 Net operating investments (505) (373) of which capitalised R&D (141) (1
Slide 30: Net cash flows of €(350)m
Net cash flows of €(350)m in €m 2007 2006 Free operating cash flows 549 448 Net (acquisitions) / disposals (660) 284 Payment to UK defined-benefit schemes (70) (68) Dividends (169) (140) Net cash flows (350) 524 March 2008 30
Slide 31: Financing of acquisitions in 2007
Financing of acquisitions in 2007 in €m Total funding 2,361 Acquisitions Dividends & payment to UK pension schemes 2,122 239 Debt 350 External financing Space Capital 1,350 increase 1,000 Transport. & security Free operating cash flows Company 549 resources 1,011 Disposals 25 % DCNS March 2008 462 3
Slide 32: Equity & Net debt / (cash)
Equity & Net debt / (cash) 3,881 in €m 2,287 2,062 1,710 860 398 291 (91) Jan. 2005 2005 2006 2007 N. D Gearing = 33% 16% ns 7% N.D. + E March 2008 Net equity, Group share Net debt / (net cash) 32
Slide 33: Pension obligations
Pension obligations Unfunded pension status at year-end: reduced by €520m in €m 2007 2006 Externally funded countries United Kingdom (136) (638) Netherlands (51) (68) Total (187) (706) Countries mainly internally funded * France (376) (440) Other (233) (170) Total (609) (610) Total unfunded status b
Slide 34: Outlook for 2008
Outlook for 2008 Confirmation of the ambitious objectives set for 2008 Organic revenue growth of around 6% EBIT* ≥ 7.25% of revenues with income from operations margin* of about 8% March 2008 * before accounting impact of PPA 34
Slide 35: Strategy presentation
Strategy presentation Denis Ranque •14/03/2008 17:23 7 March 2008
Slide 36: Thales: a solid group
Thales: a solid group Expanded scope: successful integration of new Security, Transportation and Space businesses Organic growth increasing: +6.4% in 2007 Steady improvement in performance: Income from Operations at historical high and €1bn net income in 2007 •Revenues Income from Operations 935 Fre
Slide 37: Thales: a well-balanced group
Thales: a well-balanced group Balance between military & civil businesses with three coherent markets Aerospace and Security: 34% Aerospace: 25% Civil Civil % of revenues 1997 2007 Defence: 66% Defence: 50% Security: 25% Balanced geographical distribution of operations •Rest of world: 36% France : 2
Slide 38: A growth strategy
A growth strategy By spanning the entire value chain Equipment: 40% Complete renewal of product portfolio,e.g. radars, IFE, avionics, optronics, tactical radios, etc. Systems and prime contracting: 40% Naval (CVF, integrated modular mast), Land Systems (FRES), ATM (LORADS III), Space (COSMO-SkyMed,
Slide 39: Thales at the heart of globalisation
Thales at the heart of globalisation An increasingly open and interdependent world Movements of people and greater population density Increasing flows of goods, services, data and capital An increasingly fragile world Economic environment more vulnerable to failure of critical infrastructure (transp
Slide 40: Thales offers a complete range of integrated solutions
Thales offers a complete range of integrated solutions… Make reliable and Monitor and control Protect and defend secure • Transport safety • Space-based surveillance • Information, communication Air Observation (radar, optical) and command systems Rail Electromagnetic detection Urban Weather and env
Slide 41: ...by leveraging transverse technologies
...by leveraging Transverse technologies 12,000 engineers dedicated to architecture & development of high-security information systems Mastery of all detection & communication technologies Space applications completing Thales offering in all segments An homogeneous customer base Governments Major in
Slide 42: …serving three markets
…serving three markets Air Land Naval DEFENCE Joint 50% AEROSPACE Ground transportation AND SPACE solutions SECURITY • Critical infrastructure 25% 25% security systems Services for business and government Simulation and training solutions •14/03/2008 17:23 Onboard all major civil and military aerosp
Slide 43: Aerospace and Space
Aerospace and Space •A350 cockpit •In-flight entertainment Air traffic management •14/03/2008 17:23 •Yahsat 43 •Indosat
Slide 44: Civil aerospace: dynamic growth
Civil aerospace: dynamic growth Growth drivers Strong growth in aerospace markets: aircraft manufacturers record level of order New programmes: A380, B787, Sukhoi SSJ 100, A350, etc. Growth in services (leverage of installed base) Growth in global ATM requirements (Asia traffic to double by 2020) Ke
Slide 45: Space: a growth market
Space: a growth market Growth drivers Clear upturn in commercial satellite markets (approx. 20 new satellites ordered per year) Major European civil space programmes: Navigation: Egnos, Galileo, etc. / Environmental monitoring: GMES, etc. / Science: ExoMars, etc. Increased emphasis on military space
Slide 46: Defence
Defence FREMM FRES Watchkeeper •14/03/2008 17:23 ISAF (Afghanistan) Integrated Modular mast 46
Slide 47: Defence: new threats, new needs
Defence: new threats, new needs Growth drivers Priority on development of operational & interoperable capabilities Priority on intelligence, surveillance, threat detection, Priority on communication and command/control capabilities Key assets and achievements Presence on all types of programmes & pl
Slide 48: Security
Security Energy Transport A380 simulator •14/03/2008 17:23 Airports Airport security 48
Slide 49: Security: a fast-growing market
Security: a fast-growing market Growth drivers Ground transportation is a worldwide development priority Growing market demand for safety and security solutions Key assets and achievements Focus on four key development areas: Ground transportation, critical infrastructure (energy, airports, critical
Slide 50: External growth opportunities
External growth opportunities Strong financial position + Refocused portfolio = Room for manoeuvre Refocused portfolio on businesses with potential for world leadership and strong technical and commercial synergies Investments that complete our equipment, systems & services offerings in our three br
Slide 51: Confidence in the future
Confidence in the future Three coherent and well positioned markets Organic growth and potential for acquisitions in each market Strong R&D policy Good financial health Limited dollar effect •14/03/2008 17:23 A major mission: security in a global world 51
Slide 52: 2007 results: Back-up
2007 results Back-up March 2008 52
Slide 53: Broadened scope of operations
Broadened scope of operations Aerospace Consolidation of the Space business acquired from Alcatel-Lucent from 1 April 2007 Defence Sale to DCNS of Thales France-based surface naval businesses & equity accounting of 25% in DCNS from 1 April 2007 Sale of the propulsion business Bayer-Chemie/Protac no
Slide 54: 2007 revenues by destination
2007 revenues by destination Revenues in €m 2007 2006 variation 2007 in % France 3,108 3,064 + 1% 25% United Kingdom 1,584 1,342 + 18% 13% Other Europe 3,276 2,079 + 58% 27% Europe 7,968 6,485 + 23% 65% Asia & Pacific 1,679 1,577 + 6% 14% North America 1,226 1,192 + 3% 10% Near & Middle East 878 617
Slide 55: International presence
International presence 2007 revenues: €12.3bn By origin By destination Rest of World 8% 7% 4% N&M East 7% 10% North America 14% Asia Pacific 47% France 25% United 13% 15% Kingdom 20% Other Europe 27% March 2008 55
Slide 56: Order intake growth of 19% in 2007
Order intake growth of 19% in 2007 variation Orders in €m 2007 2006 totale organic book/bill Aerospace / Space 4,026 2,389 + 69% + 14% 1.12 Defence 5,402 5,573 - 3% + 1% 1.03 Security 3,372 2,684 + 26% - 11% 0.99 Others 56 172 ns Total 12,856 10,818 + 19% + 1% 1.05 March 2008 56
Slide 57: Major new orders in 2007
Major new orders in 2007 in €m Dual telecom satellite-system for Yahsat in the U.A.E. 430 Airborne electronic equipment (M-E) 168 Integrated masts for patrol boats (The Netherlands) 135 Sonars for Barracuda submarines (France) 124 Electronic warfare system (Saudi Arabia) 120 Protected reconnaissance
Slide 58: Order intake by destination
Order intake by destination in €m 2007 2006 variation 2007 in % France 2,756 2,544 + 8% 21% United Kingdom 1,422 1,302 + 9% 11% Other Europe 3,297 2,115 + 56% 26% EUROPE 7,475 5,961 + 25% 58% North America 1,271 1,278 - 10% Asia-Pacific 1,863 1,761 + 6% 15% Near & Middle East 1,680 1,088 + 54% 13% R
Slide 59: Order book by domain
Order book by domain Variation in months in €m 2007 2006 total organic of revenues Aerospace / Space 7,228 5,064 + 43% +3,5% 23 Defence 10,333 12,512 - 17% +2,4% 24 Security 5,098 3,078 + 65% -3% 18 Others 16 22 ns ns ns Total 22,675 20,676 + 10% +2% 22 March 2008 59
Slide 60: Major programmes in order book at end December 2007
Major programmes in order book at end December 2007 17 programmes = 27% of total order book (€22.7bn) in €m FSAF phase 3 (missile system) France/ Italy 887 Watchkeeper (tactical surveillance) United Kingdom 642 FREMM (frigates) France/ Italy 620 Rafale France 566 London Underground (signalling) Unit
Slide 61: Aerospace and Space: 2007 key figures
Aerospace and Space: 2007 key figures In €m Aerospace in 2007 Space in 2007 * Revenues 2,531 Revenues 1,066 IFO 199 IFO 56 in % of revenues 7.9% in % of revenues 5.3% Order book at end 2007 * 5,133 Order book at end 2007 2,095 in months of revenues 24 in months of revenues 20 Order intake 2,671 Orde
Slide 62: Space segment in 2007
Space segment in 2007 Pro-forma key figures in the full year in €m Revenues 1,290 IFO 59 in % of revenues 4.6% Order intake 1,525 Order book at end 2007 2,095 in months of revenues 20 March 2008 62
Slide 63: EBIT and margin by domain
EBIT* and margin* by domain variation in €m 2007 2006 total Aerospace / Space 240 161 + 49% in % of revenues 6.7% 6.5% Defence 424 370 + 15% in % of revenues 8.1% 7.0% Security 224 129 + 74% in % of revenues 6.6% 5.7% Others & divested businesses (30) (98) ns EBIT * 858 562 +53% in % of revenues 7.0
Slide 64: Pension obligations UK / Netherlands
Pension obligations UK / Netherlands in €m 31/12/06 31/12/07 Variation Obligations, including: 3,784 3,171 - 613 Interest cost + 190 Actuarial adjustment mainly increase in discount rates - 454 update of Netherlands mortality tables + 30 2007 Scheme amendments in the U.K. - 100 Exchange variation -
Slide 65: Pension obligations in the United Kingdom
Pension obligations in the United Kingdom in €m 31/12/06 31/12/07 Variation Obligations, including 3,025 2,461 -564 Interest cost + 154 Actuarial adjustment, especially increase in discount rates - 327 2007 scheme amendments - 100 Exchange variation - 217 Plan assets, including (2,388) (2,326) - 62
Slide 66: PPA impact on 2007 results
PPA* impact on 2007 results PPA 2007 results in €m before PPA impact after PPA Revenues 12,856 - 12,856 Gross margin 2,781 (46) 2,735 Indirect costs (1,845) (128) (1,973) Income from operations 936 (174) 762 Restructuring costs (78) - (78) EBIT (IFO after restructuring costs) 858 (174) 684 Impairmen
Slide 67: Impact of Purchase Price Allocation
Impact of "Purchase Price Allocation“* in €m Acquisition cost of ex-Alcatel-Lucent businesses 1,670 - Net assets acquired (book value) (455) = Goodwill acquired 1,215 Allocation to acquired assets (923) Deferred tax impact 314 Impact on Net Income (609) Impact on consolidated P&L* from 2007 to 2010
Slide 68: Consolidated Net Income increase of 129% to €887m
Consolidated Net Income increase of 129% to €887m in €m Results after « PPA » * impact 2007 2006 IFO 762 755 Restructuring costs (78) (193) EBIT (IFO after restructuring costs) 684 562 Impairment of non current oper. assets (96) (9) Gain on disposals 432 23 Income of operating activities 1,020 576 C
Slide 69: Shareholding in 2007
Shareholding in 2007 At 31 December 2006 At 31 December 2007 GIMD Alcatel-Lucent Alcatel-Lucent 5.7% 9.5% 21% 53.5% 52% 31.3% 27% Float French Float * French State State 172 million shares 198 million shares * including 2% of employees March 2008 69