27 Feb 15. Airbus Group (stock exchange symbol: AIR) reported strong 2014 results, reflecting an improved operational performance with record commercial aircraft deliveries, revenues and order backlog.
*Revenues increase five percent to €60.7bn
*Reported EBIT* up 54 percent to €4.0bn with a 6.7% return on sales
*Earnings per share up 61 percent to €2.99, despite A400M charge
*Free cash flow positive at €2.0bn, including €0.9bn proceeds from divestments
*Proposed 2014 dividend €1.20 per share, up 60% from €0.75 in 2013
*Airbus Group targets slight increase in EBIT* before one-off in 2015
*Production rate adjustments: A320 family production up to 50 aircraft a month from Q1 2017; A330 production down to six aircraft per month from Q1 2016
*Airbus order backlog 6,386 aircraft, providing solid platform for growth
“We achieved a significant improvement in profitability and cash generation in 2014 thanks to a record order book and strong operational performance in most areas,” said Tom Enders, Airbus Group Chief Executive Officer. “We delivered more commercial aircraft than ever before, including the first A350, and our net orders were, once again, more than twice the number of deliveries. Due to strong demand for single aisle aircraft we have decided to increase production of our A320 family to 50 aircraft per month from 2017 onwards. At the same time, we have decided to temporarily reduce A330 production to six aircraft per month in 2016.
Most importantly, we confirm the A380 break-even for 2015. We are focused on tackling our various operational challenges, including the A350 and A400M ramp-up and costs, first A320neo deliveries, boosting helicopter sales, and continuing the reshaping of our defence and space portfolio.”
Group order intake(2) in 2014 was €166.4bn (FY 2013: €216.4bn(1)), with the order book(2) worth a record €857.5bn at year-end (year-end 2013: €680.6bn(1)). Airbus received 1,456 net commercial aircraft orders (FY 2013: 1,503 net orders), with a net book-to-bill ratio above 2 and a backlog of 6,386 aircraft at year-end. Net order intake at Airbus Helicopters was 369 units (FY 2013: 422 units), including a backlog adjustment of 33 NH90s. Airbus Defence and Space’s order intake by value rose four percent, driven by continuing strong momentum in space systems and good order flow in light and medium (L&M) military aircraft.
Group revenues increased five percent to a record €60.7bn (FY 2013: €57.6bn(1)). Commercial Aircraft revenues rose seven percent, driven by the overall increase in deliveries to a record 629 aircraft (FY 2013: 626 deliveries) and a more favourable delivery mix including 30 A380s compared to 25 in 2013. In the fourth quarter, the first A350 XWB was delivered to Qatar Airways as planned and IAS 11 accounting standards were implemented for limited launch customer contracts. Revenues at Helicopters rose four percent, mainly driven by government programmes including the ramp-up in NH90 activity. Helicopter deliveries totalled 471 units (FY 2013: 497 units), including the successful entry-into-service (EIS) of the EC175 in the fourth quarter following the EIS of the EC145 T2 and EC135 T3 earlier in the year. Defence and Space’s revenues were broadly stable, with eight A400M deliveries in total to four nations and six Ariane 5 launches during the year.
Group EBIT* before one-off(4) – an indicator capturing the underlying business margin by excluding material non-recurring charges or profits caused by movements in provisions related to programmes and restructurings or foreign exchange impacts – improved to €4,066m (FY 2013: €3,537m(1)). Commercial Aircraft EBIT* before one-off increased to €2,529m (FY 2013: €2,214m(1)), reflecting a solid underlying performance.
Helicopters’ EBIT* before one-off rose slightly to €413m (FY 2013: €397m), despite higher research and development (R&D) expenses and a less favourable revenue mix. Defence and Space’s EBIT* before one-off was stable at €920m (FY 2013: €911m(1)). Group self-financed R&D expenses totalled €3,391m (FY 2013: €3,118m(1)). Group EBIT* before one-off return on sales improved to 6.7 percent (FY 2013: 6.1 percent(1)).
Reported EBIT*(4) increased 54 percent to €4,040m (FY 2013: €2,624m(1)) with a low level of net one-offs amounting to €-26m in total, composed of:
- A fourth quarter net charge of €551m due to delays on the A400M programme as outlined in the nine month 2014 results. The sequence of progressive military enhancements and associated deliveries are under negotiation with customers to reflect the revised programme baseline and delivery schedule. In the last quarter of 2014, management reviewed the programme evolution mostly driven by military functionality challenges and industrial ramp-up together with associated mitigation actions. Significant management actions have been launched to secure future deliveries and the programme continues to be closely monitored;
- A positive €142m contribution from the dollar pre-delivery payment mismatch and balance sheet revaluation;
- A total of €383m in capital gains linked to the divestment of eight percent of the company’s Dassault Aviation participation and the sale of the stake in Patria.
In January 2015, Airbus Group and Safran completed the initial phase of the integration of their respective space launcher businesses. The Airbus Safran Launchers Joint Venture has now entered its operational phase and will focus primarily on the development of the new Ariane 6 launcher and the continuation of production of Ariane 5 launchers. In the second phase, all remaining activities and industrial assets of Airbus Group and Safran dealing with civil space launchers and military launchers will be integrated into the Joint Venture. Given the relative size of the businesses to be contributed by Airbus Group and Safran respectively, an economic compensation of €800m will be made by Safran to Airbus Group in order to attain the 50/50 shareholding in the Joint Venture in the second phase. Key terms and conditions of the implementation of the second phase, including usual adjustments notably regarding working capital positions and the nature and timing of the compensation, are still to be finalized between the parties. The implied multiple for the activities contributed to the JV by Airbus Defence and Space is 12x 2014 EBITA(7).
Net income(5) rose to €2,343m (FY 2013: €1,473m(1)), while earnings per share (EPS) increased to €2.99 (FY 2013: €1.86(1)). Net income and EPS increased strongly despite the finance result of€-778m (FY 2013: €-610m(1)), which included a negative foreign exchange valuation of €341m linked to the weakening of the euro in the fourth quarter. Free cash flow before mergers and acquisitions improved significantly to €1,109m (FY 2013: €-811m(1)), reflecting a strong fourth quarter performance and efforts to improve cash flow across the Group during the year and proceeds from divestments further boosted free cash flow to €2,002m (FY 2013: €-827 m). The net cash position at the end of 2014 was €9.1bn (year-end 2013: €8.5bn(1)) after the 2013 dividend payment o €587m and €462m pension plan contribution. The gross cash position on December 31, 2014 was €16.4bn.
Based on EPS of € 2.99, Airbus Group’s Board of Directors will propose to the Annual General Meeting the payment of a 2014 dividend of €1.20 per share on 3 June 2015 (FY 2013: € 0.75 per share). The record date shall be 2 June 2015. “To reflect the good financial progress we made last year and the outlook for 2015, we are proposing a payment in line with the top end of our stated dividend policy. At €1.20 per share, it implies growth of 60 percent compared to 2013 and a payout ratio of 40 percent,” said Harald Wilhelm, Airbus Group Chief Financial Officer.
As the basis for its 2015 guidance, Airbus Group expects the world economy and air traffic to grow in line with prevailing independent forecasts and assumes no major disruptions. Airbus deliveries should be slightly higher than in 2014, and the commercial aircraft order book is again expected to grow. In 2015, before mergers & acquisitions (M&A), Airbus Group expects an increase in revenues and targets a slight increase in EBIT* before one-off. Based on its current view of the industrial ramp-up, Airbus Group targets breakeven free cash flow in 2015 before M&A. Airbus Group targets its EPS and dividend per share to increase further in 2015.
* Airbus Group uses EBIT pre-goodwill impairment and exceptionals as a key indicator of its economic performance. The term “exceptionals” refers to such items as depreciation expenses of fair value adjustments relating to the former EADS merger, the Airbus Combination and the formation of MBDA, as well as impairment charges thereon.