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Full-Year 2017 results: Airbus overachieved on all key performance indicators

 

 

Full-Year 2017 results: Airbus overachieved on all key performance indicators

 

  • Strong underlying business performance
  • Revenues €67bn; EBIT Adjusted €4.3bn; EBIT (reported) €3.4bn; EPS (reported) €3.71
  • Proposed 2017 dividend €1.50 per share, up 11 percent from 2016
  • Solid commercial environment: book-to-bill of 1.5, record backlog supporting ramp-up
  • Free cash flow before M&A and customer financing € 2.9 bn
  • A400M charge € 1.3 bn in 2017; clear roadmap mitigating future risk
  • Airbus expects around a 20 percent increase in EBIT Adjusted in 2018

15 Feb 18 . Airbus SE (stock exchange symbol: AIR) reported 2017   financial results and provided an outlook for 2018.  It overachieved on its 2017 guidance for all key performance indicators, driven by a strong underlying performance.

“We overachieved on all our 2017 KPIs thanks to a very good operational performance, especially in the last quarter,” said Airbus Chief Executive Officer Tom Enders. “Despite persistent engine issues on the A320neo, we continued the production ramp-up and finally delivered a record number of aircraft. On A400M, we made progress on the industrial and capabilities front and agreed a re-baselining with government customers which will significantly reduce the remaining programme risks. This is reflected in a substantial one-off charge. Overall, the strength of our 2017 achievements is reflected in our dividend proposal which is up 11 percent against last year. This also endorses our earnings and cash growth story for the future.”

Order intake(1) increased to € 158bn (2016: € 134bn) with the order book(1) valued at € 997bn as of 31 December 2017 (year-end 2016: € 1,060bn). A total of 1,109 net commercial aircraft orders were received (2016: 731 aircraft), with a book-to-bill ratio of 1.5. The backlog by units reached a record year-end level of 7,265 commercial aircraft. Net helicopter orders totalled 335 units (2016: 353 units), including 48 Super Puma Family rotorcraft and 17 H175s. By value in euros, the book-to-bill ratio in Helicopters was around 1. At Defence and Space, good momentum was seen in military aircraft with the order intake including 22 light and medium transport aircraft, five A330 MRTT tankers and the Eurofighter contract with Kuwait. Two all-electric telecommunication satellites were booked in the fourth quarter despite a soft market environment. Defence and Space’s perimeter changes had a negative impact of € 1.9 bn on the order book and € 1.5 bn on order intake.

Revenues were stable at € 66.8bn (2016: € 66.6bn) with higher aircraft deliveries offset by a reduction in revenues of around € 2bn from the perimeter changes. Commercial Aircraft revenues rose by 3.5 percent with record deliveries of 718 aircraft (2016: 688 aircraft) comprising 558 A320 Family, 78 A350 XWBs, 67 A330s and 15 A380s. Helicopters’ revenues were slightly lower with deliveries of 409 units (2016: 418 units). Revenues at Defence and Space reflected the Division’s perimeter changes of around € 1.7bn but were seven percent higher on a comparable basis driven mainly by military aircraft.

EBIT Adjusted – an alternative performance measure and key indicator capturing the underlying business margin by excluding material charges or profits caused by movements in provisions related to programmes, restructuring or foreign exchange impacts as well as capital gains/losses from the disposal and acquisition of businesses – increased to € 4,253 m (2016: € 3,955 m).

Commercial Aircraft’s EBIT Adjusted of € 3,554 m (2016: € 2,811 m) reflected the strong delivery performance supported by improved foreign exchange rates.

A total of 181 A320neo Family aircraft were delivered, up from 68 during 2016. Supplier Pratt & Whitney introduced new engine fixes in the fourth quarter which have been certified. A new issue has arisen recently, the impact of which is under assessment with respect to 2018 deliveries. CFM International meanwhile experienced some maturity issues in 2017 on some batches of the LEAP-1A engine. The A320neo ramp-up remains challenging and requires that the engine suppliers deliver in line with commitments. On the A350, good progress was made with the industrial ramp-up, recurring cost convergence and the reduction of outstanding work in the Final Assembly Line, which has been significantly reduced. The A350 programme is preparing to reach the targeted monthly production rate of 10 by the end of 2018. Meanwhile, Emirates Airline’s latest order provides increased visibility on the A380 programme for the years to come.

Helicopters’ EBIT Adjusted declined to € 337m (2016: € 350m) but was broadly stable on a comparable basis. Lower deliveries, an unfavourable mix and lower commercial flight hours in services were compensated by transformation efforts which have globally supported the Division’s competitiveness in a challenging market. The sale of the maintenance, repair and overhaul business Vector Aerospace was closed in November.

Defence and Space’s EBIT Adjusted amounted to € 872m (2016: € 1,002m), reflecting the perimeter changes but was broadly stable on a comparable basis.

On the A400M programme, good progress was made on the industrial side with 19 aircraft delivered compared to 17 in 2016. The production rate was adjusted to recalibrate inventory levels while the military capability roadmap was re-baselined. In 2017, Airbus entered into discussions with OCCAR and the customer Nations that resulted in the signature of a Declaration of Intent (DoI) in February agreeing on a global re-baselining of the contract, including a revised aircraft delivery schedule, an updated technical capability roadmap and a revised retrofit schedule. The DoI represents an important step towards reaching a contractually binding agreement also mitigating the commercial exposure while satisfying customer needs with regard to capabilities and availability of the aircraft. With a clear roadmap in place, Airbus’ remaining exposure going forward is expected to be more limited. A detailed review of the programme concluded in the fourth quarter of 2017 including an estimate of the financial impact of the adaptions on schedule, capabilities and retrofit resulted in an update of the Loss Making Contract provision of € 1,299 m for the year.

Group self-financed R&D expenses declined to € 2,807 m (2016: € 2,970 m).

EBIT (reported) increased to € 3,421 m (2016: € 2,258m) including Adjustments totalling a net € -832m compared to net Adjustments of € -1,697m in 2016. The 2017 Adjustments mainly comprised:

  • The total charge of € 1,299m related to the A400M programme, including € 1,149m in the fourth quarter;
  • A negative impact of € 117m related to compliance, comprising an administrative penalty notice connected to the termination of the Eurofighter Austria investigation by the Munich Public Prosecutor and some legal costs incurred in the fourth quarter related to ongoing investigations;
  • A net loss of € 20m related to other M&A activities;
  • A net capital gain of € 604m from the divestment of the Defence Electronics business, which is unchanged from the Nine-Month 2017 disclosure.

Net income(2) increased to € 2,873m (2016: € 995m) after the EBIT Adjustments with earnings per share of € 3.71 (2016: € 1.29). EPS also included a strong positive impact mainly from the revaluation of financial instruments and balance sheet items, reflecting the euro/dollar rate evolution as well as an adjustment on the A380 Refundable Launch Investment following a review of the commercial assumptions. The finance result was € 1,149m (2016: € -967m).

 

The Board of Directors will propose to the Annual General Meeting the payment of a 2017 dividend of € 1.50 per share on 18 April 2018 (2016: € 1.35 per share). The date of record is 17 April 2018.

Free cash flow before M&A and customer financing improved significantly to € 2,949m (2016: € 1,408m), supported by the earnings performance and record aircraft deliveries although the A400M continued to weigh significantly. Free cash flow of € 3,735m (2016: € 3,181m) included net proceeds of around € 600m from the Defence Electronics disposal and around € 400m from the Vector Aerospace sale.

The aircraft financing environment remains healthy with a high level of liquidity available in the market at good rates for Airbus aircraft. In 2017, Export Credit Agency (ECA) financing had not been made available to Airbus but Airbus and the ECAs have now reached agreement on a process under which Airbus is able to resume making applications for     ECA-backed financing for its customers across the group on a case-by-case basis. Airbus anticipates a return to ECA cover in 2018 for a limited number of transactions while the level of appetite for commercial financing remains high.

The net cash position on 31 December 2017 was € 13.4bn (year-end 2016: € 11.1 bn) after the 2016 dividend payment of € 1.0bn and around € 500m in pension fund contributions. The gross cash position was € 24.6bn (year-end 2016: € 21.6bn).

Airbus’ 2018 guidance is issued considering the full implementation of IFRS 15, which is now the standard for revenue recognition(4).

 

Outlook

As the basis for its 2018 guidance, Airbus expects the world economy and air traffic to grow in line with prevailing independent forecasts, which assume no major disruptions.

Airbus’ 2018 earnings and Free Cash Flow guidance is based on a constant perimeter, before M&A.

  • Airbus expects to deliver around 800 commercial aircraft, which depends on engine manufacturers meeting commitments.

Based on around 800 deliveries:

  • Compared to 2017 EBIT Adjusted of € 4,253m, Airbus expects, before M&A:
    • An increase in EBIT Adjusted of approximately 20 percent.
    • IFRS 15 is expected to further increase EBIT Adjusted by an estimated € 0.1bn.
  • 2017 Free Cash Flow before M&A and Customer Financing was € 2,949m.
  • Free Cash Flow is expected to be at a similar level as 2017, before M&A and Customer Financing.

 

 

 

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