SAFRAN (EPA:SAF) - Safran - New presentation of segment information at June 30, 2019

Transparency directive : regulatory news

01/07/2019 17:45

PRESS RELEASE

* Safran modifies the operational management of its equipment activities
* New presentation of segment information at June 30, 2019

Paris, July 1st, 2019

Safran has decided to group together business activities with identified
strategic and commercial complementarities in order to further boost the
synergies to be derived from the integration of the Aerosystems and Aircraft
Interiors activities purchased within the scope of the Zodiac Aerospace
acquisition.

This new legal and operational organization will be accompanied by a change in
presentation of segment information with effect from the publication of the
2019 interim consolidated financial statements on September 5, 2019. The
Group's activities will be organized into three operating segments:

- Aerospace Propulsion;
- Aircraft Equipment, Defense and Aerosystems;
- Aircraft Interiors.

The 2019 outlook as announced at the first-quarter 2019 revenue release, and
the 2018-2022 financial framework presented at the November 2018 Capital
Markets Day, are not impacted by the new presentation of segment information.

Change in operational organization

The changes in operational management are designed to accelerate the
implementation of the Group's development strategy, particularly as regards
more electric aircraft and connected cabins. They will promote
knowledge-sharing by bringing together teams working in similar areas, the
development of new customer offerings and the optimization of costs.

The changes in organization reflect the synergies identified between the
various activities:
- Combining electrical power generation and distribution systems with
electrical interconnection systems in Safran Electrical & Power.
- Grouping together avionics, electronics and defense in Safran Electronics &
Defense.
- Focusing Safran Aerosystems on safety and fluid management systems.
- Creating Safran Passenger Solutions for complex cabin equipment and solutions
focused on passenger comfort (Water and Waste management systems and In Flight
Entertainment).

Change in presentation of segment information

With effect from the 2019 interim consolidated financial statements, segment
information will be presented based on three segments: Aerospace Propulsion;
Aircraft Equipment, Defense and Aerosystems; and Aircraft Interiors.
Comparative information with the former presentation of segment information in
place since the takeover of Zodiac Aerospace is set out in the appendix.

The new presentation of segment information brings together comparable
activities in terms of financial performance, products, services and customers
within three segments:
- Aerospace Propulsion now includes Safran Transmission Systems, given its
close relationship with engine activities.
- The new Aircraft Equipment, Defense and Aerosystems segment combines the
former Safran Aircraft Equipment activities with part of the former Zodiac
Aerospace Aerosystems and Safran Defense businesses. Given the prevalence of
equipment activities and civil customers in the former Defense segment, Safran
has decided to combine with the aircraft equipment businesses.
- In view of their complementarity with the Cabin and Seats businesses, the
activities arising from the creation of Safran Passenger Solutions are included
in the Aircraft Interiors segment.

Segment information restated in line with the new organization

Segment information restated in line with the new organization is provided
below for the purposes of monitoring and comparing performance. As a reminder,
the former Zodiac Aerospace Aerosystems and Aircraft Interiors activities were
included in Safran's consolidated financial statements as from March 1, 2018.

2018 segment information restated in line with the new organization

                                  Aircraft
                                 Equipment,              Holding    Total
Revenue            Aerospace    Defense and  Aircraft    company  adjusted
(in EUR millions)  Propulsion   Aerosystems  Interiors  and other   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

                                  Aircraft
                                 Equipment,              Holding    Total
H1 2018            Aerospace    Defense and  Aircraft    company  adjusted
(in EUR millions)  Propulsion   Aerosystems  Interiors  and other   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

                                  Aircraft
                                 Equipment,              Holding    Total
FY 2018            Aerospace    Defense and  Aircraft    company  adjusted
(in EUR millions)  Propulsion   Aerosystems  Interiors  and other   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

                                              Aircraft
                                              Equipment,
H1 2018                          Aerospace   Defense and  Aircraft
(in EUR millions)               Propulsion   Aerosystems  Interiors   Total

Total self-funded R&D              (261)        (234)       (70)      (565)
% of revenue                        5.4%         6.3%       7.1%       5.9%
Research tax credit                  30           41          1         72
Total self-funded R&D after
tax credit                         (231)        (193)       (69)      (493)
Gross capitalized R&D                42           80         17        139
Amortization and depreciation
of R&D                              (53)         (42)        (9)      (104)
Impact on recurring operating
income                             (242)        (155)       (61)      (458)
% of revenue                        5.0%         4.1%       6.2%       4.8%

                                              Aircraft
                                              Equipment,
FY 2018                          Aerospace   Defense and  Aircraft
(in EUR millions)               Propulsion   Aerosystems  Interiors   Total

Total self-funded R&D              (546)        (502)       (178)    (1,226)
% of revenue                        5.2%         6.3%        7.1%      5.8%
Research tax credit                  62           86           3        151
Total self-funded R&D 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%

2019 segment information restated in line with the new organization

                                  Aircraft
                                 Equipment,              Holding    Total
Q1 2019            Aerospace    Defense and  Aircraft    company  adjusted
(in EUR millions)  Propulsion   Aerosystems  Interiors  and other   data

Revenue              2,771         2,201        806         3       5,781

2018-2022 financial framework (presented at the November 2018 Capital Markets
Day)

The operational reorganization and change in presentation of segment
information have no impact on Safran's revenue, operating margin and free cash
flow growth ambitions for 2018-2022, which included an upward revision to the
Zodiac Aerospace synergy ambition (from EUR200 million to EUR250 million in
2022).

The effect of the new organization on segment operating margins ambitions in
2022 is set out below:

* The operating margin ambitions for Aerospace Propulsion and Aircraft
  Interiors remain unchanged from those announced at the Capital Markets Day:
   o above 20% for Aerospace Propulsion;
   o up to 13% for Aircraft Interiors.
* The operating margin ambition for the new Aircraft Equipment, Defense and
  Aerosystems segment above 14% in 2022 reflects the integration of the Defense
  activities and the improvements across all businesses as presented at the
  November 2018 Capital Markets Day.

Appendix

Aerospace Propulsion
Safran Aircraft Engines
Safran Helicopter Engines
Safran Aero Boosters
Ariane Group**

Aircraft Equipment
Safran Landing Systems
Safran Electrical & Power
Safran Nacelles
Safran Transmission Systems

Defense
Safran Electronics & Defense

Aerosystems
Safran Aerosystems

Aircraft Interiors
Safran Cabin
Safran Seats

New segment organization* as of H1 2019

Aerospace Propulsion
Safran Aircraft Engines
Safran Helicopter Engines
Safran Aero Boosters
Safran Transmission Systems
Ariane Group**

Aircraft Equipment, Defense and Aerosystems
Safran Landing Systems
Safran Electrical & Power
Safran Nacelles
Safran Electronics & Defense
Safran Aerosystems

Aircraft Interiors
Safran Cabin
Safran Seats
Safran Passenger Solutions

*  Operating segments correspond to the organization of subsidiaries around
   tier-one operating companies
** Accounted for using the equity method at 50%

Safran is an international high-technology group, operating in the aircraft
propulsion and equipment, space and defense markets. Safran has a global
presence, with more than 92,000 employees and sales of
EUR21 billion in 2018. Working alone or in partnership, Safran holds world or
European leadership positions in its core markets. Safran undertakes Research &
Development programs to meet fast-changing market requirements, with total R&D
expenditures of around EUR1.5 billion in 2018.
Safran is listed on the Euronext Paris stock exchange, and is part of the CAC
40 and Euro Stoxx 50 indices.

For more information : www.safran-group.com / Follow @Safran on Twitter

Press contacts
Catherine Malek: catherine.malek@safrangroup.com / T +33 1 40 60 80 28

Investor Relations
Cécilia Matissart: cecilia.matissart@safrangroup.com / +33 1 40 60 82 46
Jean-François Juery: jean-françois.juery@safrangroup.com / + 33 1 40 60 27 26
Florent Defretin: florent.defretin@safrangroup.com / + 33 1 40 60 27 30

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