Saab interim report January-March 26 April, 2019 Håkan Buskhe, President and CEO Magnus Örnberg, EVP and CFO
Highlights January-March 2019 Strong organic growth • xxxxxxx • Organic growth of 8 per cent Dynamics strong growth driven by more deliveries • • IPS*, growth in several business units • Aeronautics growth driven by production for deliveries to Sweden and Brazil Improved operating income • Execution of major projects progressing according to plan • Productivity improvement in several business areas Dynamics improved operating margin due to higher utilisation • Cash flow • Increase of working capital due to ongoing preparation of deliveries of Gripen to Sweden and Brazil • Saab estimates that the operational cash flow will be negative for the full year, but on a better level than 2018 Swedish submarine HMS Gotland during sea trials *Business Area Industrial Products and Services 2
Market opportunities • In April, Saab was shortlisted as Combat System Provider for Finnish Squadron 2020 program Gripen E • Saab handed in proposal to Switzerland consisting of options for 30, and 40, Gripen E C2S* • Saab handed in proposal to Finland in January, comprising of 64 Gripen aircraft GlobalEye • Tender process for fighter aircraft in Canada and India on-going Tender process to replace the Walrus- • class submarines in the Netherlands ongoing Carl-Gustaf M4 A26 Submarine *C2S = Command and Control Systems 3
Financial highlights, January-March 2019 Order bookings Sales 10 8 8.5 6.1 7.8 8 6 4.5 6 BSEK BSEK 4 4 2 2 0 0 Jan-Mar 2018 Jan-Mar 2019 Jan-Mar 2018 Jan-Mar 2019 Operating income Operational cash flow 0 800 -500 591 600 447 -1000 MSEK MSEK 400 -1500 EBIT- 200 -2000 5.8 7.0 margin,% -1,923 -2,211 -2500 0 Jan-Mar 2018 Jan-Mar 2019 Jan-Mar 2018 Jan-Mar 2019 4
First quarter development Sales 10000 8,496 9.4% 7,766 2.4% 7,586 12% 8000 6,790 MSEK 6000 4000 2000 0 Q1 2016 Q1 2017 Q1 2018 Q1 2019 Operating income 700 591 539 600 447 MSEK 500 400 294 300 200 EBIT 7.0% 100 4.3% 7.1% 5.8% 5.8% margin,% Giraffe 1X 0 Q1 2016 Q1 2017 Q1 2018 Q1 2019 5
Cash flow development, Jan-Mar 2019 Operational cashflow MSEK 4000 Estimated range for cash flow in period 3000 2,603 2000 1,388 1000 0 2016 2017 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 -1000 -2000 -1,923 -2,424 -3000 6
Strategic focus areas 2019 Market • Pursue focused market strategy and utilize Re-sizing & Re-shaping Update April 2019 Direction installed base to strengthen market position • Technology investments imperative for creating • All re-sizing plans • Employee reduction stronger market position implemented implemented; consultancy reduction on-going Performance Execution of major projects • • Focus portfolio • Portfolio analysis on- going; civil business • Continue implementation of re-sizing and re- • More focused market in South Africa shaping initiatives approach divested • Higher degree of Innovation • Current review of digitalisation and market org. • Forward thinking leadership enabler for simplification of functional processes • New global HR-IT technology development environment launched 7
Outlook 2019 Sales growth in 2019 is expected to be in line with Saab’s long-term financial goal: annual organic sales growth of 5 per cent. The operating margin in 2019, excluding material non-recurring items, is expected to improve compared to 2018, bringing Saab a further step closer to its financial goal: an operating margin of 10 per cent. 8
Financial summary Magnus Örnberg, EVP and CFO 9
Financial summary, January-March 2019 Jan-Mar Jan-Mar Change, MSEK 2019 2018 % Increase of small-sized order bookings by • 33 per cent Order Bookings 4,482 6,135 -26.9 Sales increase by 9 per cent; organic growth 8 • Order Backlog* 97,401 105,712 -7.9 per cent Sales 8,496 7,766 9.4 Operating Income 591 447 Improved operating margin 7.0 (5,8) per cent • 32.2 Operating margin, % 7,0 5,8 Operational cash flow negative with Aeronautics • Net Income 397 251 58.2 preparing for deliveries of Gripen to Sweden and Brazil Operational Cash Flow -1,923 -2,211 Net debt impacted by IFRS16 adjustment of • Free Cash Flow -2,137 -2,411 BSEK 2.2 *Not including order bookings related to serial production of the TX trainer aircraft developed by Boeing and Saab for the U.S. Air Force. The U.S. Airforce has ordered the first phase, the EMD = Engineering and Manufacturing Design, to be followed by production orders. 10
Order backlog duration Order backlog per Business Area Kockums 6% IPS 9% BSEK S&S Aeronautics 31 March 2019 Year End 2018 31 March 2018 10% 46% 2019: 22.2 2019: 28.0 2018: 20.7 Surveillance 2020: 21.6 2020: 20.6 2019: 21.8 15% Dynamics 2021: 17.2 2021: 18.1 2020: 17.7 14% 2022: 14.8 2022: 13.3 2021: 17.1 Order backlog per Region After 2022: 21.6 After 2022: 22.2 After 2021: 28.4 Australia etc Africa Asia 3% 1% 9% Total: 97.4 Total: 102.2 Total: 105.7 Sweden 33% Latin America 35% Rest of Europe North America 12% 7% 11
Order size distribution January-March 2019 50 000 3,5 45 000 3 40 000 27% 2,5 35 000 30 000 MSEK 2 25 000 1,5 20 000 15 000 1 73% 10 000 0,5 5 000 Small order MSEK < 100 0 0 Medium-sized order MSEK 100-1,000 Large orders Small orders Large orders Medium sized orders Small orders = <MSEK 100, Large orders = >MSEK 100 Small orders 12 Book-to-bill ratio calculated as 12 months rolling Small orders = <MSEK 100, Medium sized orders = MSEK 100-1,000, Large orders = >MSEK 1,000
Order bookings per business area Order bookings 2 000 1 500 MSEK • Small orders grew 33 per cent 1 000 500 • Adjustment of backlog with IPS, due to order 0 order cancellation related to Airbus A380 Aeronautics Dynamics Surveillance S&S IPS Kockums program* and currency adjustment Jan-March 2018 Jan-March 2019 • One large order booked in first quarter 2018 Order backlog in Aeronautics 60 50 ** 40 BSEK 30 20 10 0 Aeronautics Dynamics Surveillance S&S IPS Kockums 31 March 2018 31 March 2019 13 *Saab delivers the wingframe for the A380 aircraft. Airbus recently announced that the A380 program will be ceased in 2021, earlier than previously planned. **Not including order bookings related to serial production of the TX trainer aircraft developed by Boeing and Saab for the U.S. Air Force. The U.S. Airforce has ordered the first phase, the EMD = Engineering and Manufacturing Design, to be followed by production orders.
Sales per business area 2 500 • 9 per cent sales growth; +4% 8 per cent organic growth 2 000 Dynamics increased level of deliveries • -3% • IPS saw increased sales within business +13% 1 500 unit Aerostructures, which saw a high +1% +32% delivery rate in the quarter MSEK • Growth also driven by strong activity 1 000 level in major programs in business area +7% Aeronautics and Kockums 500 0 Aeronautics Dynamics Surveillance S&S IPS Kockums 14 Jan-Mar 2018 Jan-Mar 2019
Operating income per business area 197 200 182 174 163 Operating margin improvement as • 150 productivity levels in several business areas improved 113 • Higher level of deliveries in Dynamics – 100 MSEK 90 higher utilization 69 69 • IPS operating margin strengthened due to higher activity level in several areas 46 50 42 34 • Aeronautics saw increased activities in 27 the Gripen projects and lower T-X-spend Operating 8.0 9.3 4.4 8.1 3.9 5.2 1.9 1.0 4.4 5.6 4.3 13.0 13.5 margin,% 0 Aeronautics Dynamics Surveillance S&S IPS Kockums Jan-Mar 2018 Jan-Mar 2019 15
Cash flow development large project Illustrative cashflow and working capital development in a large project Development phase Delivery phase Time Cash in flow Cash out flow (working capital build-up) 16
Operational Cash flow Cash flow from operating activities before Cash flow changes in working capital: 1,127 from 1 500 operations Change in working capital: 1 000 Contract assets and liabilities -2,333 Inventories -230 500 Other current receivables 760 0 Other current liabilities -567 MSEK Provisions -50 -500 -2,420 -1 000 Cash flow from investing activities: Intangible assets -358 Change in -1 500 working Tangible assets -272 capital -2 000 -630 Investing activities Operational cash flow : -1,923 -2 500 17
Financial position 35.4% MSEK Net debt, 31 December 2018 -1,460 Effects related to implementation of IFRS 16 (opening balance) -2,190 Equity/Assets ratio Cash flow from operating activities -1,366 Change in net pension obligation 300 Net investments -630 Other -36 Net debt, 31 March 2019 -5,382 152.1 Net pension obligation, 31 March 2019 3,799 Total interest-bearing assets, 31 March 2019 -524 Equity per share Net debt excluding interest-bearing receivables and net pension -2,107 (SEK) obligation 18
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