LISI GROUP - 2018 Financial report

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2.2 ILISI AEROSPACE
■■-6.7% drop in sales revenue compared to 2017, with a strong change
inmix;
■■The fourth quarter of 2018 surpassed the same period in 2017, with
an upturn in Europe;
■■Trends observed over the end of the period: confirmed recovery
in demand on the helicopter and business and regional aircraftmarket,
as well as a clear resurgence in the United States;
■■Margin pressure in Europe, impacted by a declining volume effect and
anadversemixeffectduringtheentireyear,nonethelesspartiallyoffset
by the adjustment in production costs at the end of the period;
■■Free Cash Flow remains clearly positive;
■■Acquisition of all LISI AEROSPACE Additive Manufacturing shares.
(1) Source: IATA
Market
Visibility in the commercial aircraft segment remained very solid in an
environment in which global air traffic experienced sustained annual
growth(+6.6% (1) ).TheothermarketsegmentsservedbyLISIAEROSPACE,
notably helicopters, business and regional aircraft, have been showing
perceptible signs of recovery since the first half of the year, which
solidified during the second half.
The twomain aircraft manufacturers in the world deliveredmore planes
thanin2017.Airbusdelivered800(718in2017)andBoeing806(763in2017).
Both companies are benefiting from the ramp-up of the new programs
and their solid order books totaling over 13,000 aircraft. As expected,
the impact of increases in delivery rates of single-aisles (from 1,087 to
1,226) and of the A350, which accelerated from 78 to 93 deliveries, will
continue in 2019.
Engine manufacturers, for their part, continue to benefit from the
significant ramp-up in new engine generations such as the LEAP
(1,118 engines delivered in 2018 amounting to 2.5 times more than in 2017)
with an order book containing over 17,000 engine orders. The technical
issues involving the Pratt & Whitney GTF engine seem well on their way
to being resolved.
Activity
In millions of euros 2018 2017 Changes
Sales revenue 934.0 1,000.9 -6.7%
Current operating profit (EBIT) 96.8 128.1 -24.4%
Operating cash flow 116.8 129.9 -10.1%
Net CAPEX -75.6 -91.4 -20.9%
Free cash flow* 29.6 61.6 -€32.0 million
Registered employees at period end 7,214 7,251 -0.5%
Average full time equivalent headcount** 7,979 8,223 -3.1%
*Free Cash Flow: operating cash flowminus net capital expenditure and changes in working capital requirements.
** including temporary workers
LISI AEROSPACE sales revenue totaled €934.0 million in 2018 (-6.7%
compared to 2017). The dollar effect remained unfavorable for the year,
even if it reverted to being positive during the second half of the year. All
division activities saw steady improvement in sales with fourth quarter
growth up by 1.9% compared to 2017. In Europe, the “Fasteners” activity
is still weighed down by the effects of adjustments in the supply chain of
its main European aircraft manufacturer customer. This issue seems to
have reached its nadir during the second half of the year. The “Fasteners”
activity in theUnitedStates experienced a clear recovery during the year
(Q4: +16.0%) supported by the market shares gained over the past few
years with Boeing, and by the recovery in business and regional aircraft,
helicopters,anddefense.The“StructuralComponents”activitycontinued
todisplaygoodmomentumduringthewholeyear(Q4:+6.2%),particularly
thanks to the continued increase in the pace of new programs, including
for the LEAP engine. At constant scope and exchange rates, the LISI
AEROSPACE division achieved the same results in Q4 2018 as in Q4 2017.
This resulted in a better start to 2019 than 2018.
Results
At €96.8 million, current operating profit is down by -€31.3 million from
2017. At 10.4%, the operating margin lost -2.4 points from the prior
financial year.
The production facilities for the “Fasteners” activity in Europe suffered
from a declining volume effect for the entire financial year. The proper
adjustment of production costsmade it possible to limit adverse effects
on operating profit at year-end. The operating profit for the “Fasteners”
activity in the United States benefited from the improvement in the
activity levels of its main customers at the end of the period. In addition,
and in accordance with the established roadmap, the “Structural
Components” activity continued to reduce its production cost overruns
during the intense ramp-up phase of the new programs, and thus
improved its operatingmargin.
The current operating profit takes into account the following operating
charges in particular:
■■€2.7 million of extra costs identified in the “Structural Components”
activity (reduced by half from2017 and by a factor of four from2016);
■■€3.3 million increase in depreciation due to the investment plan.