first-half 2019 earnings
TRANSCRIPT
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FIRST-HALF 2019 EARNINGS
This document and the information therein are the property of Safran. They must not be copied or communicated to a third party without the prior written authorization of Safran
> FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements relating to Safran, 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, 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 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 ability to successfully implement and complete its plans and strategies and to meet its targets; the benefits from Safran’s 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 does 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
Disclaimer
2 Safran / H1 2019 earnings / September 5, 2019
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Safran / H1 2019 earnings / September 5, 20193
H1 2019 HIGHLIGHTS
Philippe PETITCOLIN - CEO
1
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H1 2019 overview
Safran / H1 2019 earnings / September 5, 20194
Operations
Strong sales organic growth
CFM56-LEAP transition on track. New orders and commitments for more than 1,150 LEAP
engines, along with long-term services agreement, announced during 2019 Paris Air Show
Reorganization of the Equipment businesses, reflecting ex-Zodiac Aerospace integration
Finance
Significant increase in profitability across all divisions
2019 outlook raised for revenue and recurring operating income. Updated FCF conversion
rate based on an assumption of return to service for Boeing 737MAX in Q4
New strategic partnerships
Safran and MTU Aero Engines join forces for the next-generation European fighter engine
Daher, Airbus and Safran team-up to develop EcoPulseTM, a distributed hybrid propulsion
aircraft demonstrator
LEAP-1A at Paris Air Show
Next-generation European fighter
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H1 2019 financial highlights
Safran / H1 2019 earnings / September 5, 20195
Adjusted revenue(1) growth of 27.3%Strong organic growth of 14.2%
H1 18 H1 19
(€M)
9,506
12,102
Adjusted recurring operating income(1) growth of 35.9%
H1 18 H1 19
(€M)
1,386
1,883
Strong free cash flow generation at €1,177M
H1 18 H1 19
(€M)
1,177
Net debt position
12/31/2018 06/30/2019
(3,269)
(€M)
(3,970)
1/1/2019
(incl. IFRS16)
(3,798)
+27.3% +35.9%
820+43.5%
Adjusted net profit(1) (group share)
H1 18 H1 19
(€M)
932
1,353
+45.2%2.17
Basic earnings per share (group share)
H1 18 H1 19
(€)
3.13
(1) See slide 14
for bridge with
consolidated
figures
To be noted:
Safran H1 2018
earnings includes
four months of
earnings from
Aerosystems and
Aircraft Interiors+44.2%
+14.2%
org
+34.6%
org
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0
50
100
150
200
250
300
350
400
450
500
Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
6
CFM56-LEAP transition update
LEAP strong commercial success
1,573 orders and commitments logged in H1 2019
Total backlog (orders and commitments) of 15,997 engines at July 31, 2019
61% market share on A320neo family at July 31, 2019
LEAP production ramp-up
861 LEAP delivered in H1 2019 compared to 438 engines in H1 2018
LEAP-1A: 44 airlines are operating 454 aircraft powered by LEAP-1A engines totaling
over 3.3 million flight hours so far
LEAP-1B: 54 airlines were operating 389 aircraft powered by LEAP-1B engines totaling
over 1.7 million flight hours until March 13, 2019
Production cost reduction program on going
CFM56 engines demand ramping down as planned
258 units delivered in H1 2019 compared with 591 units in 2018
1 billion engine flight hours for the CFM56
LEAP ramp-up (deliveries)
Safran / H1 2019 earnings / September 5, 2019
2016 2017 2018 2019
LEAP final assembly
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7 Safran / H1 2019 earnings / September 5, 2019
H1 2019 business highlights (1/2)
Propulsion
Good momentum continues for the civil aftermarket indicator: +10.2% (in $), supported by
spare parts sales of CFM56 latest generation
New certifications for Helicopter turbines: Arrano-1A (powering the Airbus Helicopters H160) by
EASA; Arriel 2H (powering the Avic AC312E) by Civil Aviation Administration of China
Aircraft Equipment, Defense and Aerosystems
Nacelles: Delivery of the 1,000th nacelle system for the A320neo; continuing ramp up : +108
units vs. H1 2018
Landing systems: successful flight tests of the first Safran & Michelin connected aircraft tire,
PresSense
Electrical systems: signature of several contracts (incl. Electrical wiring contract for Airbus
Helicopters H160; Electrical harnesses contract for the 777X and renewed collaboration on the
787 Dreamliner); Saab chooses Safran's Auxiliary Power System for the Boeing T-X military
training aircraft
Defense:
> Patroller tactical drone undertakes qualification test flights
> Support services for the Royal Australian Navy's Infrared Search and Track (IRST) VAMPIR
systems.
MRO on CFM56
787 wire harness
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8 Safran / H1 2019 earnings / September 5, 2019
H1 2019 business highlights (2/2)
Aircraft Interiors
Cabin:
> A US private jet company to supply their 175 Cessna Longitude aircraft with Safran ovens
> A major Middle East airline to equip their 787 & A320 with Safran inserts
> Mitsubishi SpaceJet Family to incorporate Safran full scale integrated interiors (galleys,
lavatories, overhead bins, passenger service units, sidewalls, ceiling panels)
Seats:
> First delivery of a “Cirrus NG” business seat order for 12 A350 in April
> First delivery of a "S-Lounge" business seat order for 75 Boeing 777X in May
> First delivery of a “Fusio" business seat order for 12 Boeing 777-300ER in May
> First delivery of an “Optima Prime” business seat order for 10 A350 in July
Passenger Solutions:
> 1st 787 IFE contract for Line Fit installation from a major Middle Eastern Airlines. Since then,
two other RAVE IFE 787 Line Fit contracts secured from two different customers
> 1st A350 RAVE IFE system delivered to a Chinese Airline operator
> Sustained Aftermarket business supported by sales of Air Management’s Health Monitoring
Products and Water & Waste Sales to the Military
NUVO Series, suite of galley
electrical inserts
IFE and Z300 Seats
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Complete the LEAP ramp-up and deliver on 2019 commitments
in an uncertain context
Continue to manage a large installed fleet of civil engines and
ensure the transition towards Rate Per Flight Hour (RPFH)
contracts
Leverage on the Aerosystems portfolio to strengthen our
equipment positions
Continuing recovery work for Aircraft Interiors
Maintain innovation and operational excellence across all
divisions
Key priorities
Safran / H1 2019 earnings / September 5, 20199
Carbon brakes aftermarket
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Safran / H1 2019 earnings / September 5, 201910
H1 2019 RESULTS
Bernard DELPIT – Group CFO
2
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Foreword
Safran / H1 2019 earnings / September 5, 201911
(1) See slide 14 for bridge with consolidated and adjusted income statements
Adjusted data
All revenue figures in this presentation represent adjusted data(1) (except
where noted). 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 programs revalued at the time of the Sagem-Snecma
merger. With effect from the first half 2010 interim financial statements, the
Group decided to restate:> the impact of purchase price allocations for business combinations, particularly
amortization and depreciation charged against intangible assets and property,
plant and equipment recognized or remeasured at the time of the transaction and
amortized or depreciated over extended periods due to the length of the Group’s
business cycles and the impact of remeasuring inventories, as well as
> gains on remeasuring any previously held equity interests in the event of step
acquisitions or asset contributions to joint ventures;
Safran has also applied these restatements to the acquisition of Zodiac
Aerospace with effect from 2018
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 instruments hedging future cash flows are
neutralized
The resulting changes in deferred tax have also been adjusted.
Consolidation of Zodiac Aerospace
Aerosystems and Aircraft Interiors (former Zodiac Aerospace
activities) are fully consolidated in Safran’s financial statements
starting March 1, 2018.
Safran H1 2019 results include six months of revenue from
Aerosystems and Aircraft Interiors.
New presentation of segment information as of June 30, 2019.
Organic growth
Organic variations were determined by excluding the effect of
changes in scope of consolidation (notably the contribution of
Aerosystems and Aircraft Interiors in January and February 2019) and
the impact of foreign currency variations.
Recurring operating income
Operating income before capital gains or losses on disposals /impact
of changes of control, impairment charges, transaction and integration
costs.
2019 Outlook
2019 outlook is established considering the application of the new
IFRS16 standard.
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FX (1/2)
Safran / H1 2019 earnings / September 5, 201912
Translation effect: foreign currencies translated into €
Positive impact mainly from USD
Impact on Revenues and Return on Sales
Transaction effect: mismatch between $ sales and € costs is hedged
Mark-to-Market effect
€353M gain on fair value of financial instruments in consolidated accounts
H1 2018 H1 2019
$1.21 $1.13
H1 2018 H1 2019
$1.18 $1.18
06/30/2018 12/31/2018 06/30/2019
$1.17 $1.15 $1.14
Average spot rate
Hedge rate
Spot rate at close
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8.9 9.4 9.3 8.9
6.0
0.3 0.9
3.5
2018 2019e 2020e 2021e 2022e
FX (2/2) - $28.9bn hedging portfolio (August 23, 2019)
13
Average annual exposure estimated at $9.4bn to $10.0bn going
forward reflecting the growth of USD-exposed businesses2019
$9.4bn is hedged at a target rate of $1.18
o Knock out options barriers set at various levels between $1.17 and
$1.31 with maturities up to end 2019
2020
Firm coverage of $9.3bn achieved through forward sales and
knock out options to rise to $9.6bn at a target rate between
$1.16 and $1.18
o Knock out options barriers set at various levels between $1.20 and
$1.32 with maturities up to mid 2020
2021
Firm coverage of $8.9bn achieved through knock out options
to rise to $9.8bn at a target rate between $1.15 and $1.18
o Knock out options barriers set at various levels between $1.20 and
$1.33 with maturities up to mid-2020
2022
Firm coverage of $6.0bn achieved through knock out options
to rise to $9.5bn at a target rate between $1.15 and $1.18
o Knock out options barriers set between $1.20 and $1.25 with maturities
up to mid-2020
€/$ hedge
rate target1.18 1.18 1.16-1.18 1.15-1.18 1.15-1.18
Safran / H1 2019 earnings / September 5, 2019
(in $Bn)
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Consolidated and adjusted income statements
Safran / H1 2019 earnings / September 5, 201914
H1 2019 reconciliation (In €M) Consolidated data
Currency hedging Business combinations
Adjusted
dataRe-measurement of
revenue
(1)
Deferred hedging
(loss)/gain
(2)
Amortization
of intangible assets -
Sagem/Snecma merger
(3)
PPA impacts - other
business
combinations
(4)
Revenue 12,315 (213) 12,102
Other operating income and expenses (10,502) (2) 25 176 (10,303)
Share in profit from joint ventures 64 20 84
Recurring operating income 1,877 (215) 25 196 1,883
Other non-recurring operating income and expenses 32 32
Profit (loss) from operations 1,909 (215) 0 25 196 1,915
Cost of debt (21) (21)
Foreign exchange gains (losses) 150 215 (353) 12
Other financial income and expense (23) (23)
Financial income (loss) 106 215 (353) (32)
Income tax expense (550) 113 (8) (51) (496)
Profit (loss) from continuing operations 1,465 (240) 17 145 1,387
Attributable to non-controlling interests (33) (1) (34)
Attributable to owners of the parent 1,432 (240) 16 145 1,353
(1) Remeasurement of foreign-currency denominated revenue net of purchases (by currency) at the hedged rate (including premiums on unwound options) through the reclassification of changes in the fair value of
instruments hedging cash flows recognized in profit or loss for the period.
(2) Changes in the fair value of instruments hedging future cash flows that will be recognized in profit or loss in future periods (negative €353 million excluding tax), and the impact of taking into account hedges when
measuring provisions for losses on completion (zero at June 30, 2019).
(3) Cancelation of amortization/impairment of intangible assets relating to the remeasurement of aircraft programs resulting from the application of IFRS 3 to the Sagem-Snecma merger.
(4) Cancellation of the impact of remeasuring assets at the time of the Zodiac Aerospace acquisition for €156 million excluding deferred tax and cancellation of amortization/impairment of assets identified during other
business combinations.
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H1 2019 income statement
Safran / H1 2019 earnings / September 5, 201915
(In €M) H1 2018 H1 2019
Revenue 9,506 12,102
Other recurring operating income and expenses (8,202) (10,303)
Share in profit from joint ventures 82 84
Recurring operating income
% of revenue
1,386
14.6%
1,883
15.6%
Total one-off items (26) 32
Profit from operations
% of revenue
1,360
14.3%
1,915
15.8%
Net financial income (expense) (114) (32)
Income tax expense (272) (496)
Profit for the period 974 1,387
Profit for the period attributable to non-controlling interests (42) (34)
Profit attributable to owners of the parent 932 1,353
EPS (basic in €) 2.17* 3.13**
EPS (diluted in €) 2.11*** 3.09****
* Based on the weighted average number of shares of
428,935,570 as of June 30, 2018
** Based on the weighted average number of shares
of 432,218,259 as of June 30, 2019
*** Based on the weighted average number of shares
after dilution of 441,222,853 as of June 30, 2018
**** Based on the weighted average number of shares
after dilution of 437,834,002 as of June 30, 2019
Mainly capital gains on a building
disposal
Apparent tax rate of 26.3%
Of which cost of debt of €(21)M
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1,346 10,852
9,506
410
840 12,102
+14.2%
H1 2019 revenue
Safran / H1 2019 earnings / September 5, 201916
Organic growth H1 2019 at H1
2018 scope
and exchange
rates
Currency
impact
Changes in
scope
H1 2019 at
H1 2018
scope
11,262
+27.3%
H1 2019H1 2018
Organic growth: +14.2%
Propulsion: +19.0%
Aircraft Equipment, Defense &
Aerosystems: +8.6%
Aircraft Interiors: +11.9%
Currency impact: €410M
Positive translation impact mainly from the
strengthening of the USD versus the Euro
in H1 2019
Changes in scope: €840M
Contribution of €781M from former Zodiac
Aerospace activities (2 months)
Taking into account ElectroMechanical
Systems previously a part of Rockwell
Collins (€59M)
In €M
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480 1,866
1,386
(18)
35 1,883
H1 2019 recurring operating income
Safran / H1 2019 earnings / September 5, 201917
Variation
excluding
currency impact
and changes in
scope
H1 2019 at H1
2018 scope
and exchange
rates
Currency
impact
Changes in
scope
H1 2019 at
H1 2018
scope
1,848
+35.9%
H1 2019H1 2018
Main organic drivers
Positive volume effect in all activities, both
from OE (ramp up of new programs, M88
deliveries) and services (civil aftermarket)
Productivity gains and cost reductions
Negative impact of the CFM56-LEAP
transition on profitability
Higher R&D impact in P&L as planned
Scope
Contribution from former Zodiac
Aerospace activities (€40M) and
ElectroMechanical Systems activities
In €M
+34.6%
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Research & Development
Safran / H1 2019 earnings / September 5, 201918
(In €M) H1 2018 H1 2019 Change
Total R&D (726) (851) (125)
R&D sold to customers 161 200 39
R&D expenses (565) (651) (86)
as a % of revenue 5.9% 5.4% (0.5)pt
Tax credit 72 83 11
R&D expenses after tax credit (493) (568) (75)
Gross capitalized R&D 139 152 13
Amortisation and depreciation of R&D (104) (144) (40)
P&L R&D in recurring operating income (458) (560) (102)
as a % of revenue 4.8% 4.6% (0.2)pt
R&D expenses
€(651)M in H1 2019
Increase mainly related to Zodiac
Aerospace (6 months vs 4 months in
2018)
Gross capitalized R&D
€152M in H1 2019 up €13M compared to
H1 2018
P&L R&D in recurring operating
income
€(560)M in H1 2019
Increase mainly driven by the
consolidation of Zodiac Aerospace (2
months)
R&D in P&L remains rather stable as a %
of sales (4.6% in H1 2019 vs. 4.8% in H1
2018)
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H1 2019 results by activity
Safran / H1 2019 earnings / September 5, 201919
(In €M) H1 2019Aerospace
Propulsion
Aircraft
Equipment,
Defense &
Aerosystems
Aircraft
Interiors
Holding
& others
Revenue 12,102 5,902 4,553 1,640 7
Year-over-year growth in % 27.3% 22.8% 22.7% 67.3% na
Year-over-year organic growth in % 14.2% 19.0% 8.6% 11.9% na
Recurring operating
income1,883 1,227 588 85 (17)
as a % of revenue 15.6% 20.8% 12.9% 5.2% na
Recurring operating margin variation
(vs H1 2018)+1.0pt +1.8pt +1.0pt +1.9pt na
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Aerospace Propulsion
Safran / H1 2019 earnings / September 5, 201920
(In €M) H1 2018 H1 2019 ChangeOrganic
Change
Revenue 4,805 5,902 22.8% 19.0%
Recurring operating income 915 1,227 34.1%
% of revenue 19.0% 20.8% +1.8pt
One-off items (1) -
Profit (loss) from operations 914 1,227
% of revenue 19.0% 20.8%
Revenue
Higher volumes of narrowbody engines (CFM56 and LEAP): +8.7% to 1,119 units driven by LEAP ramp up (+423 deliveries) partially offset
by CFM56 progressive ramp down (-333 deliveries)
Positive contribution of military OE sales notably driven by higher volumes of M88 deliveries
Growth in services sales thanks to civil aftermarket (+10.2% in $) and military and helicopter turbines maintenance activities
Recurring operating income
Positive drivers: civil aftermarket; military activities (OE and services); helicopter turbines maintenance activities
Headwind of €(107)M on profitability from the CFM56-LEAP transition in H1 2019 vs. H1 2018
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Aircraft Equipment, Defense and Aerosystems
Safran / H1 2019 earnings / September 5, 201921
(In €M) H1 2018 H1 2019 ChangeOrganic
Change
Revenue 3,711 4,553 22.7% 8.6%
Recurring operating income 442 588 33.0%
% of revenue 11.9% 12.9% +1.0pt
One-off items 5 (1)
Profit (loss) from operations 447 587
% of revenue 12.1% 12.9%
Revenue
OE (+7.6% org): higher volumes of nacelles for LEAP-1A powered A320neo grew by 108 units to 280 nacelles in H1 2019. Continuing ramp up of
A330neo nacelles deliveries (51 units) whereas A380 nacelles was a headwind. Growth also supported by the ramp up of the wiring and landing gear
deliveries for the Boeing 787 program
Services (+10.9% org.): growth mainly driven by nacelles as well as landing gear support activities and the growing contribution of carbon brakes.
Defense and Aerosytems support activities also contributed positively
Recurring operating income
Higher volumes (notably in services)
Cost reduction and productivity actions
Partially offset by higher R&D impact on P&L
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Aircraft Interiors
Safran / H1 2019 earnings / September 5, 201922
Revenue
OE (+10.2% org.): growth mainly coming from business seats programs, toilets and floor to floor activities for Cabin and Connected Cabin for Passenger
Solutions
Services (+16.8% org.): mainly driven by Seats aftermarket activities
Recurring operating income
Positive organic growth for all activities
Cabin: higher volumes (notably in services) and benefits of cost reduction and productivity actions
Seats: growth mainly coming from services
Passenger Solutions: cost reduction and productivity actions for Water & Waste and IFE
(In €M) H1 2018 H1 2019 ChangeOrganic
Change
Revenue 980 1,640 67.3% 11.9%
Recurring operating income 32 85 165.6%
% of revenue 3.3% 5.2% +1.9pt
One-off items (2) (1)
Profit (loss) from operations 30 84
% of revenue 3.1% 5.1%
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H1 2019 Free Cash Flow
Safran / H1 2019 earnings / September 5, 201923
(in €M) H1 2018 H1 2019
Recurring operating income 1,386 1,883
One-off items (26) 32
Amortization, provisions and depreciation (excl. financial) 449 517
EBITDA 1,809 2,432
Income tax and non cash items (90) 162
Cash from operating activities before change in WC 1,719 2,594
Change in WC (299) (863)
Cash from operating activities after change in WC 1,420 1,731
Capex (tangible assets) (387) (332)
Capex (intangible assets)* (213) (222)
Free cash flow 820 1,177
Increase of working capital
requirements in the context of the
ramp-up of new programs
Of which
• Amortization €513M
• Provisions €(17)M
• Depreciation €21M
* Of which €139M capitalised R&D in H1 2018 vs €152M capitalised in H1 2019
Stability of Capex spendings;
exceptional cash-in from the
disposal of a building
34% increase in EBITDA, driven
by strong organic growth and
margin improvements in all
businesses
Including H1 2019 regularisations
on tax paid in H2 2018 in France
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Net debt position
Safran / H1 2019 earnings / September 5, 201924
IFRS16 impact
> €(529)M of liabilities in net debt
position, corresponding to the
value of the rents still to be paid
2018 dividend of €1.82 per share
to parent holders
> €785M entirely paid in May
2019
Share buybacks
> Repurchased a total amount of
€458M worth of shares during
H1 2019
> Between July 1st, and August
30, 2019, execution of a new
tranche of €400M worth of
shares
> To date, the 2017 program is
executed for a total of €2.08bn
(a 90% completion rate)
(3,798)
(529)
2,594(554)
(815)
(76)
(in €M)
(3,269)
Dividends(1)
Net debt at Dec 31, 2018
Cash flowfrom ops
Share buybacks
Net debt atJune 30, 2019
Changein WC
R&Dand
Capex
€1,177M Free Cash Flow(1) Includes €(30)M of dividends to minority interests
(863)
(401)
3,044(721)
(3,970)
(1,290)
3,098
(4,536)
(522)
2,000
(458)
IFRS16 impact Others
Net debt at Jan 1, 2019
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Balance sheet highlights as of June 30, 2019
Safran / H1 2019 earnings / September 5, 201925
(In €M) Dec 31, 2018June 30,
2019
Goodwill
Tangible & Intangible assets and right of use
Investments in joint ventures and associates
Other non current assets
Operating Working Capital
Net cash (debt)
5,173
14,211
2,253
811
(2,131)
(3,269)
5,182
14,611
2,253
736
(1,243)
(3,970)
Shareholders’ equity - Group share
Minority interests
Non current liabilities (excl. net cash (debt))
Provisions
Other current liabilities / (assets) net
11,955
346
2,249
2,777
(279)
12,116
347
2,143
2,875
88
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Safran / H1 2019 earnings / September 5, 201926
2019 OUTLOOK
Philippe PETITCOLIN - CEO
3
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2019 key assumptions adjusted
27 Safran / H1 2019 earnings / September 5, 2019
2019 outlook is based notably on the following assumptions:
Increase in aerospace OE deliveries and notably of military engines;
Civil aftermarket growth around 10% (previously in the high single digits);
Transition CFM56 – LEAP: overall negative impact on Propulsion adjusted recurring operating income variation in the
range Euro 50 to 100 million:
> Lower CFM56 OE volumes;
> Negative margin on LEAP deliveries.
Aircraft Interiors: 2019 to show stronger organic revenue growth. Continuing improvement of recurring operating
income margin;
Increase of R&D expenses in the range of Euro 150 to 200 million. Negative impact on recurring operating income
after activation and amortisation of capitalized R&D;
Increase in tangible investments.
2019 outlook is established considering the full application of the new IFRS16 standard. As reminder IFRS16 main impacts are:
- Euro (529) million impact of liabilities that are included in net debt position and that represent discounted future lease payments on the 2019 opening balance
sheet;
- Euro 47 million impact on cash from operations in H1 2019 and Euro (47) million impact on cash from financing activities in H1 2019.
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FY 2019 guidance revised upwards for revenue and recurring operating income;
FCF refined in a context of uncertainty
28 Safran / H1 2019 earnings / September 5, 2019
Safran raises its FY 2019 revenue and recurring operating income outlook:
At an estimated average spot rate of $1.13 to the Euro in 2019, adjusted revenue is expected to grow by around 15% in 2019
compared with 2018 (previously in the range 7% to 9%). On an organic basis, based on our assumption for LEAP-1B deliveries
to Boeing, adjusted revenue is expected to grow by around 10% (previously by around 5%).
Adjusted recurring operating income is expected to grow comfortably above 20% (previously in the low teens) at a hedged
rate of USD 1.18 to the Euro.
Safran refines its free cash flow outlook:
From June 30, 2019, Safran revises the free cash flow impact of the Boeing 737MAX situation to approximately €(300)M per
quarter to reflect the decrease of pre-payments for future deliveries.
Based on an assumption of return to service for Boeing 737MAX in Q4 2019, free cash flow is expected to be in the range 50%
to 55% of adjusted recurring operating income (previously around 55%) as recurring operating income outlook is raised.
In case of a grounding of the Boeing 737MAX until the end of 2019, free cash flow to adjusted recurring operating income should be
below 50%. Current Boeing 737Max grounding’s impact on Safran free cash flow and any extension in 2019 is a deferral in cash
collection and should reverse in the following quarters.
2019 guidance is established considering the full application of the new IFRS16 standard and is based on continuing operations (Aerospace propulsion;
Aircraft Equipment, Defense & Aerosystems; Aircraft Interiors ; Holding & Others) at the Group’s scope as of January 1, 2019.
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Safran / H1 2019 earnings / September 5, 201929
Q&A
4
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Safran / H1 2019 earnings / September 5, 201930
APPENDIX
5
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Segment information restated in line with the new organization
Safran / H1 2019 earnings / September 5, 201931
* Operating segments correspond to the organization of subsidiaries around tier-one operating companies
** Accounted for using the equity method at 50%
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2018 segment information restated in line with the new organization (1/2)
Safran / H1 2019 earnings / September 5, 201932
Revenue
(in € millions)Aerospace
Propulsion
Aircraft Equipment,
Defense and
Aerosystems
Aircraft InteriorsHolding company and
otherTotal adjusted data
Q1 2018 revenue 2,319 1,641 256 6 4,222
Q2 2018 revenue 2,486 2,070 724 4 5,284
Q3 2018 revenue 2,524 2,052 769 3 5,348
Q4 2018 revenue 3,250 2,179 762 5 6,196
H1 2018
(in € millions)Aerospace
Propulsion
Aircraft Equipment,
Defense and
Aerosystems
Aircraft InteriorsHolding company and
otherTotal adjusted data
Revenue 4,805 3,711 980 10 9,506
Recurring operating income 915 442 32 (3) 1,386
% of revenue 19.0% 11.9% 3.3% N/A 14.6%
Free cash flow 687 103 (30) 60 820
FY 2018
(in € millions)Aerospace
Propulsion
Aircraft Equipment,
Defense and
Aerosystems
Aircraft InteriorsHolding company and
otherTotal adjusted data
Revenue 10,579 7,942 2,511 18 21,050
Recurring operating income 2,030 992 81 (80) 3,023
% of revenue 19.2% 12.5% 3.2% N/A 14.4%
Free cash flow 1,418 406 (67) 24 1,781
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2018 segment information restated in line with the new organization (2/2)
Safran / H1 2019 earnings / September 5, 201933
FY 2018
(in € millions)Aerospace
Propulsion
Aircraft Equipment,
Defense and
Aerosystems
Aircraft Interiors Total
R&D expenses (546) (502) (178) (1,226)
% of revenue 5.2% 6.3% 7.1% 5.8%
Research tax credit 62 86 3 151
R&D expenses after tax credit (484) (416) (175) (1,075)
Gross capitalized R&D 103 172 45 320
Amortization and depreciation of R&D (106) (99) (13) (218)
Impact on recurring operating income (487) (343) (143) (973)
% of revenue 4.6% 4.3% 5.7% 4.6%
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2019 segment information restated in line with the new organization
Safran / H1 2019 earnings / September 5, 201934
Revenue
(in € millions)Aerospace
Propulsion
Aircraft Equipment,
Defense and
Aerosystems
Aircraft InteriorsHolding company and
otherTotal adjusted data
Q1 2019 revenue 2,771 2,201 806 3 5,781
Q2 2019 revenue 3,131 2,352 834 4 6,321
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Shareholding status 06/30/19 (versus 12/31/18)
35 Safran / H1 2019 earnings / September 5, 2019
Voting rights as of December 31, 2018
Number of exercisable voting rights: 522,668,418
French State
18.4%
Public
71.0%
Employees
10.6%
Equity as of December 31, 2018
Number of shares: 435,767,951
French State
11.0%
Public
81.8%
Employees
6.9%
Treasury shares
0.3%
Voting rights as of June 30, 2019
Number of exercisable voting rights: 537,232,526
Equity as of June 30, 2019
Number of shares: 435,782,157
French State
17.9%
Public
71.0%
Employees
11.1%
French State
11.0%
Public
80.9%
Employees
6.9%
Treasury shares
1.2%
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H1 2019: Research & Development by activity
Safran / H1 2019 earnings / September 5, 201936
(In €M) H1 2019Aerospace
Propulsion
Aircraft
Equipment,
Defense and
Aerosystems
Aircraft
Interiors
R&D expenses (651) (265) (274) (112)
as a % of revenue 5.4% 4.5% 6.0% 6.8%
Tax credit 83 32 47 4
R&D expenses after tax credit (568) (233) (227) (108)
Gross capitalized R&D 152 44 78 30
Amortised R&D (144) (55) (82) (7)
P&L R&D in recurring operating income (560) (244) (231) (85)
as a % of revenue 4.6% 4.1% 5.1% 5.2%
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H1 2018: Research & Development by activity
Safran / H1 2019 earnings / September 5, 201937
(In €M) H1 2018Aerospace
Propulsion
Aircraft
Equipment,
Defense and
Aerosystems
Aircraft
Interiors
R&D expenses (565) (261) (234) (70)
as a % of revenue 5.9% 5.4% 6.3% 7.1%
Tax credit 72 30 41 1
R&D expenses after tax credit (493) (231) (193) (69)
Gross capitalized R&D 139 42 80 17
Amortised R&D (104) (53) (42) (9)
P&L R&D in recurring operating income (458) (242) (155) (61)
as a % of revenue 4.8% 5.0% 4.2% 6.2%
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OE / Services revenue split
Safran / H1 2019 earnings / September 5, 201938
Revenue
Adjusted data(in Euro million)
H1 2018 H1 2019 % change
OE Services OE Services OE Services
Propulsion
% of revenue
2,076
43.2%
2,729
56.8%
2,492
42.2%
3,410
57.8%20.0% 25.0%
Equipment, Defense &
Aerosystems
% of revenue
2,531
68.2%
1,180
31.8%
3,084
67.7%
1,469
32.3%21.8% 24.5%
Aircraft Interiors
% of revenue
721 (1)
73.6%
259
26.4%
1,193 (1)
72.7%
447
27.3%65.5% 72.6%
(1) Retrofit is included in OE
To be noted: H1 2018 revenue includes four months of revenue from Aerosystems and Aircraft Interiors
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Quantities of major aerospace programs
Safran / H1 2019 earnings / September 5, 201939
Number of units delivered
H1 2018
(March to
June)
H1 2019
Lavatories A350 241 400
Spaceflex V2 A320 (lavatories + galleys) 178 197
Business class seats 1,495 2,537
Emergency slides A320 1,296 2,398
Primary power distribution system 787 296 561
Number of units delivered H1 2018 H1 2019 %
LEAP engines 438 861 97%
CFM56 engines 591 258 (56)%
High thrust engines 201 234 16%
Helicopter engines 335 335 -
M88 engines 4 22 x4.5
787 landing gear sets 74 84 14%
A350 landing gear sets 40 41 2%
A380 nacelles 20 12 (40)%
A330neo nacelles 0 51 n/s
A320neo nacelles 172 280 63%
A320 thrust reversers 176 105 (40)%
Small nacelles (biz & regional jets) 309 304 (2)%
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<1 year 1 to 5 years >5 years
€2,577M
€3,704M
€195M
Gross debt and liquidity
Safran / H1 2019 earnings / September 5, 201940
Gross debt repayment schedule(June 30, 2019)
Gross
debt
€6,476M (1)
Cash & equiv.
€2,470M
+
Debt hedging
instruments €36M
Net debt
€3,970M
Committed & undrawn financing resource:
Credit line - €2.52Bn, maturity Dec. 2022 – no covenant
The floating rate notes of €500M issued in June 2017 was repaid
at maturity in June 2019
The USD 155 million 7-year tranche of the USD 1.2Bn 2012 US
Private Placement was repaid at maturity in February 2019
(1) Incl. an IFRS16 impact of €(529)M
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Definition
Safran / H1 2019 earnings / September 5, 201941
Civil aftermarket (expressed in USD)
This non-accounting indicator (non-audited) comprises spares and MRO (Maintenance, Repair & Overhaul) revenue for all civil
aircraft engines for Safran Aircraft Engines and its subsidiaries and reflects the Group’s performance in civil aircraft engines
aftermarket compared to the market.
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 non-operational items.
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.
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Safran / H1 2019 earnings / September 5, 201942