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Safran modifies the operational management of its equipment activities. New presentation of segment information at June 30, 2019 .
Corporate
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
| Revenue (in € millions) |
Aerospace Propulsion | Aircraft Equiment, Defense and Aerosystems | Aircraft Interiors | Holding company and other | Total 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 Interiors | Holding company and other | Total 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 Interiors | Holding company and other | Total 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 |
| H1 2018 (in € millions) |
Aerospace Propulsion | Aircraft Equipment, Defense and Aerosystems | Aircraft 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 % |
| FY 2018 (in € millions) |
Aerospace Propulsion | Aircraft Equipment, Defense and Aerosystems | Aircraft Interiors | Total |
|---|---|---|---|---|
| Total self-funded R&D | (546) | (502) | (178) | (1226) |
| % 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
| Q1 2019 (in € millions) |
Aerospace Propulsion | Aircraft Equipment, Defense and Aerosystems | Aircraft Interiors | Holding company and other | Total adjusted 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 €200 million to €250 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:
- above 20% for Aerospace Propulsion;
- 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
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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 21 billion euros 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 1.5 billion euros 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
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